NVIDIA's $500B Compute Deal, Paramount Threatens to Bounce, Record Europe Tourism | Ernie Garcia, Alex Edelson, Nico Simko, Ian McGinley, Conor Sen

(00:28) - NVIDIA's $500B Compute Deal (10:46) - Paramount Threatens to Bounce (14:30) - Tesla Deal Could Shortcut Musk's Pay (31:34) - Europe Gets Record US Tourists (45:17) - Ernie Garcia, founder and CEO of Carvana, discusses building the online used-car retailer, navigating its volatile growth through COVID and the 2022 downturn, and strengthening its vertically integrated business model. He also highlights Carvana’s focus on operational improvement, nationwide expansion, AI-enabled customer experiences, and the resilience required to lead through shifting investor sentiment. (01:13:23) - Alex Edelson discusses his role as founder and GP of Slipstream Investors, a fund of funds that backs emerging venture managers and helps LPs build venture portfolios. He explains Slipstream’s disciplined approach to market cycles, manager selection, diversification, and co-investments, emphasizing patience and long-term returns over rapid deployment or fund growth. (01:38:29) - Nico Simko, co-founder and CEO of Clair, discusses building an embedded payroll platform that gives employees early access to earned wages and recently surpassed a $100 million revenue run rate. He explains how his own difficulty accessing credit inspired Clair and how the company pivoted from a standalone digital bank to integrating its services directly into trusted payroll systems. (01:44:26) - Ian McGinley discusses his experience as a Sidley Austin partner and former CFTC enforcement chief. He examines prediction markets’ growing popularity, regulatory status, benefits, and risks, including insider trading, manipulation, sports betting, and the CFTC’s evolving oversight. (01:58:40) - Conor Sen discusses his background in housing and financial markets, including his decade at Bloomberg and the launch of his Substack, The Housing Frame. He argues that the housing market may be bottoming while examining affordability, development financing, regulation, demographic shifts, institutional buyers, and the divide between wealthy cash buyers and mortgage-dependent households. (02:11:41) - 𝕏 Timeline Reactions TBPN is made possible by: Ramp - https://ramp.com Public - https://public.com Cisco - https://www.cisco.com Console - https://www.console.com CrowdStrike - https://www.crowdstrike.com Figma - https://www.figma.com MongoDB - https://www.mongodb.com NYSE - https://www.nyse.com Railway - https://railway.com Shopify - https://www.shopify.com Codex - http://openAI.com/codex Follow TBPN: https://TBPN.com https://x.com/tbpn https://open.spotify.com/show/2L6WMqY3GUPCGBD0dX6p00?si=674252d53acf4231 https://podcasts.apple.com/us/podcast/tbpn/id1772360235 https://www.youtube.com/@TBPNLive

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

• 0:00John Coogan?

  You're watching TVP and today's Tuesday, August 11, 2026. We are live from the TVP and I'm the temple of technology, the fortress of finance.

• 0:08Jordi Hays?

  We are back.

• 0:10John Coogan?

  Capital, capital. Let me tell you about ramp.com. Time is money. Save both. He's used corporate cards, bill pay, accounting and a whole lot more all in one place. Is that the Nvidia compute deal alarm? Huge deal. Hit, hit the wire yesterday, but on the cover of the Financial Times today, Wall Street, big names join Nvidia to build $500 billion AI financing package, a landmark lending plan. Jensen really lined up the murderers row of financiers for his new AI financing package.

• 0:43Jordi Hays?

  Legendary setup over on CNBC, too.

• 0:46John Coogan?

  Legendary. Becky was.

• 0:47Jordi Hays?

  One of the greatest roundtables of all time.

• 0:49John Coogan?

  Yeah, incredible. Only Larry Fink was remote. They got David Solomon, CEO of Goldman Sachs in studio, John Gray from Blackstone, Jim Zelter from Apollo, Bruce Flat from Brookfield, and of course, Johnson breaking it all down for everyone. I'm sure the Hollywood starlets were pounding on the glass outside looking for some new arm candy, don't you think?

• 1:09Jordi Hays?

  A hundred percent.

• 1:10John Coogan?

  One hundred percent because it's very rare to see that many individuals.

• 1:14Jordi Hays?

  Allocators.

• 1:15John Coogan?

  Capital allocators, specifically capital allocators, put it on, put it all on the line every day in the markets.

• 1:19Jordi Hays?

  Some would call them bad boys.

• 1:21John Coogan?

  Some might, some might, some have. So I'm sure they were lined up, but it's a great segment. I mean, they went for maybe 45 minutes or something. I wanted to play this one clip of them discussing just the profitability, why they see this as an investable asset. There were a couple of quotes. The interesting one from Jim Zelter, the sheer size of the AI infrastructure build out is unprecedented. The president of Apollo said more than $8 trillion of capital is expected to be invested, a staggering sum. We see an enormous opportunity for private capital to finance a portion of this along with public capital. So Wall Street's not taking their foot off the gas. Before we play you the clip, let me tell you about Figma. Agents, meet the canvas. Your AI agents can now create

• 2:05John Coogan?

  and modify your Figma files with design system context.

• 2:08Jordi Hays?

  Yeah, very interesting. David in the X chat says, time will tell if Jamie Dimon not being with them on the desk might be smart in hindsight, or if he.

• 2:16John Coogan?

  It's very interesting that he was missing.

• 2:17Jordi Hays?

  Out.

• 2:18John Coogan?

  Yeah. I don't know. I mean, at the same time, it feels like there's so many different deals happening and like this is like this consortium, there's, there's going to be multiple ways to participate. If this winds up being some sort of fund or vehicle, I'm sure it can be offered to his clients in some way downstream. It's more just like he wasn't in the press circuit, but I don't know. It is a really good point. He was notably absent, which was interesting. At, at a certain point, you get so many of the, of the finance guys together, you start noticing who's not there more than who is. Anyway, let's play this clip from CNBC. More of your margin of safety advantage.

• 2:57Speaker 02

  So are these concerns about whether we can meet this demand over, overdone at this point? Do, do you think Jensen, that from where you see things, the demand level and how we're building up around it, that it's going to be okay? It'll all work out?

• 3:10Speaker 03

  We're going to be constrained for some time and pretty much across the board from chips to memories to packaging, to systems, photonics, connectors, land, power, construction workers, the whole thing, the entire supply chain up and down, behind, behind me upstream, all the way downstream. And this is happening at a time when AI has become useful because it's starting to do productive work and it's happening all over, all over the world. And AI tokens are profitable, incredibly profitable. When you have something profitable, everybody wants to make more of it.

• 3:49Speaker 02

  Yes.

• 3:50Speaker 03

  Great demand, great profitability. The conditions are exactly right for the work that we're doing right now.

• 3:56Speaker 02

  Jensen, why these companies? And did you go to any partners who said no?

• 4:01Speaker 03

  No one said no, but this is the sixth premier, world's premier institutional financiers for infrastructure. This is the best of the best.

• 4:12Speaker 02

  What John said, that right now you're, you're, you'll be less likely to have public capital that comes into this because a lot of these are companies that aren't making money yet. Is he right on that? Or are there going to be big banks and others that kind of step?

• 4:28Speaker 03

  I believe within months, you're going to realize that these companies are extremely profitable. These are the fastest growing technology companies in history.

• 4:36Speaker 02

  Your customers, you mean?

• 4:37Speaker 03

  That's right. These are fastest growing technology companies in history, and the tokens they're generating are incredibly profitable. You know, if, if the wafers that we buy from TSMC are incredibly profitable, there's incredible demand for it, I'm going to want to buy a lot more.

• 4:51Speaker 02

  By the way, who are we talking about? Your customers? Which customers will have access to?

• 4:55Speaker 03

  AI labs, AI labs.

• 4:56Speaker 02

  AI labs are the ones, that's the ones that you think are profitable, but this, will this?

• 5:00Speaker 03

  AI labs, AI startups, you know, as you know, this last six months, the world put in about $500 billion in AI startups. $500 billion, the largest investing, investing period, probably in recent history. And these companies need compute. And so we now have the vehicle to do so.

• 5:21John Coogan?

  That's great stuff. Five hundred billion, huge number. But it feels a lot smaller when he lays out the actual compute calculation, 50 billion per gigawatt.

• 5:32Jordi Hays?

  Fifty to sixty.

• 5:34John Coogan?

  Fifty to sixty. So you're looking at 10 billion or 10 gigawatts of powered compute, which is, you know, the labs are at like three combined across a few of them. And we've been on this three X scaling. So this is really just like next year's compute. Basically, I think Meta individually has a 10 gigawatt plan or something like that. So.

• 5:54Jordi Hays?

  Yeah.

• 5:54John Coogan?

  Definitely.

• 5:55Jordi Hays?

  Yeah. And the reason he's having to talk about profitability and the profitability of incremental tokens. And I think one of the reasons that a lot of people are just very uncomfortable with this is that the two leading companies in the space are private and their various numbers leak out from time to time, but you definitely don't get a complete picture. And it's very unusual to have, you know, two, the two companies that are effectively driving the private markets, or sorry, the two companies driving the public markets are actually private.

• 6:28John Coogan?

  Yes. Well, there is the SpaceX factor here too, which recently announced that they're going all in on Nvidia. But again, they are turning into a Neo cloud in many ways and licensing out compute. So there's this world where you might see Wall Street.

• 6:45Jordi Hays?

  Yeah, but I look, but I, but I, but I'm looking at SpaceX more on this, on the supply side, right? Not, not driving.

• 6:51John Coogan?

  No, exactly. So, so it's like a six layer cake and you're seeing the, you're seeing the, the finance guys there, then Nvidia making the chips, marshalling all this capital. A lot of it's going to go to a Colossus five data center and then be rented by a lab. Like, like that will be one of the potential outcomes. But then they're, they're just in the supply chain. Because I don't think, I don't think the, like the semi analysis forecast was for like Grok token demand specifically. It was just overall inference and compute demand because they're capable of building data centers very quickly. Anyway, Jensen also took to X to post a, a long essay, 12,000 likes. He's like fully on X now. He's, I haven't, I haven't seen him.

• 7:34Jordi Hays?

  It's almost like he was lurking, studying.

• 7:38John Coogan?

  The whole time? Well, I don't know if he was studying enough because people are getting mad at him about for, for using the, the forbidden phrase. He says Nvidia compute is not just a chip. It is a complete AI factory platform, including accelerator computing, networking, system, software, AI frameworks, and global develop, and a global developer ecosystem. That doesn't sound that AI to me. I don't know. Somebody will run this through Pangram and we'll, we'll get to the bottom of it. But Prakash over here.

• 8:04Jordi Hays?

  Isn't it, isn't it somewhat fair for him to just, to just slop it up a little bit?

• 8:09John Coogan?

  Yeah, there is an element where if you're a believer in AI, you sort of can use it and it's okay because that's the whole point. Like I would expect, I would expect like Suno's marketing to use AI.

• 8:22Jordi Hays?

  Yeah. I just, and, and he's, and he's just communicating what's effectively just a.

• 8:29John Coogan?

  Yeah. Like you watched him on CNBC, clearly not reading from a teleprompter, clearly not doing AI stuff. So if he repurposes that into a blog post for other people that want to read it in that format, and then if he turns it into a series of tweets or anything else, like go for it, I say. Anyway, some are here. Jensen is completing the circle, says Prakash. Bankers don't like GPUs as collateral because the depreciation is unpredictable. It's unpredictable because a new GPU can obsolete an old one, but Jensen knows his own roadmap. So he's offering depreciation insurance to the banks. The depreciation insurance up to 25% helps the banks get marginal deals over time. Speculation here from Prakash. Nvidia will also advise the banks on reference designs for data centers that will make them

• 9:13John Coogan?

  fungible. So you will know this is a one gigawatt data center, but it's the, in this particular class, this particular configuration. So it's on, it's Blackwell data center, it's powered this way. And so if you can put it in this bucket, you can underwrite it a particular way because it's, it, it's, it becomes more fungible. Having them be fungible means the debt can be repackaged into asset backed securities, collateralized loan obligations and collateralized debt obligations, ABS, CLOs and CDOs from 2008. Ha ha. I'm sure there will be a lot of, a lot of folks upset about all of the comparisons to the mortgage, the mortgage backed security build out in 2008. This allows tranching to get investment grade ratings on the debt. So it can be sold and resold to pension funds and insurance

• 9:58John Coogan?

  firms. It also allows the banks to trade idiosyncratic project specific credit risk for sector wide credit risk. So Jensen is trying to get his customers the same cost of financing as real estate rather than venture equity. This is going to move the data center game out of the V season into the big leagues. And so. I'm sure people will be, you know, speculating all sorts of different things on what happens next here. But let me tell you about Shopify. Shopify is the commerce platform that grows with your business and lets you sell in seconds, online, in-store, on mobile, on social, on marketplaces, and now with AI agents. There are some other stories. Paramount is threatening to leave California by October 1st if the state refuses to negotiate a settlement in the legal fight over its Warner Brothers Discovery merger. We've been covering the

• 10:43John Coogan?

  story back and forth for a while. But according to Variety, Paramount CEO David Ellison wants a quick resolution to the antitrust lawsuit brought by 12 state attorneys general seeking to block the deal. He has now told senior executives that Paramount is prepared to begin the process of moving its operations out of California if Attorney General Rob Bonta doesn't enter settlement talks. Ellison reportedly told his leadership team last week that the Paramount Skydance board has already approved the relocation plans. If negotiations with Bonta haven't begun by August 1st, the company would start preparing its exit with Paramount's Los Angeles headquarters potentially moving out of the state as early

• 11:24John Coogan?

  as October. The threat dramatically raises the stakes in Paramount's fight with Bonta, who has emerged as a leading opponent of the Warner Brothers Discovery acquisition. Bonta hasn't publicly detailed what Paramount would need to offer to resolve the case, but he has said that any acceptable remedies would likely need to be structural, such as asset divestitures rather than behavioral commitments like maintaining certain levels of production. So it's not going to be enough for Ellison to say, hey, we're still going to do 12 movies a year, 24 movies a year. It needs to be something specific about the actual structure of the company. Paramount is also racing against an expensive clock. Beginning October 1st, the company will owe Warner Brothers Discovery shareholders

• 12:07John Coogan?

  a $7 million, $7 million per day ticking fee until the transaction closes. The state's antitrust trial isn't scheduled to begin until May 2nd of 2027, so almost nine months from now, meaning Paramount could rack up roughly $1.2 billion in payments by the time the case is expected to conclude. Ellison is effectively putting pressure on California from the other direction. If the state won't help find a path to closing the merger, Paramount is prepared to take, start taking jobs elsewhere.

• 12:39Jordi Hays?

  Yeah, so, so he's, he's trying to force the issue. This gets extremely painful for the Ellison's. If this antitrust thing just drags on, you could imagine it dragging on for a couple of years. That puts a pause on all of their integration plans. It just makes everything a lot harder. And yeah, I don't think he has, this, this seems like his one option, right? It's kind of the nuclear option. It, it's going to piss off a lot of the industry here in LA.

• 13:19John Coogan?

  It is the most symbolic move because according to Variety, the company's LA headquarters would be the first operation to leave. And Ellison already has a five-year plan to move most studio jobs out of California. No destination has been selected, but Georgia, Texas, and Tennessee reportedly under consideration. So it's like, if you're moving the LA headquarters, the iconic Paramount headquarters, you've, everyone's seen the water tower, that is a, a huge shot across the bow, as opposed to something that might actually be more economically impactful, like just, oh, for this production, we were going to make it in, in LA, we're going to do it in, in Atlanta. That might actually move more dollars around, but maintaining that headquarters is so symbolic, right? So Ellison and much of Paramount's senior

• 14:04John Coogan?

  leadership currently work from the historic Paramount Pictures studio lot in Hollywood, but maybe it will be moving to Georgia, Texas, or Tennessee. I wonder where they will go. Anyway.

• 14:15Jordi Hays?

  We'll work on getting, we're working on getting a few folks on the show ASAP to break down the deal.

• 14:22John Coogan?

  Yeah. Let me tell you about the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange. So, speaking of publicly traded companies, Elon Musk may have found a shortcut to unlocking a trillion-dollar payday. He needed a win.

• 14:39Jordi Hays?

  You asked for it. He's delivering.

• 14:42John Coogan?

  Yeah. The idea is having SpaceX buy Tesla. This has been rumored for a long time. Lots of speculation on when these two companies will merge, if they will merge. But the Wall Street Journal on the front page outlines a very odd scenario where Elon could wind up making an incremental $1 trillion. It's really complicated and it's not, it's not as simple as just, oh, he'll just buy the companies and then he just gets another trillion dollars. It's more, it's more complicated, but there is a potential outcome, but there's some mitigating factors. But it's worth, it's worth understanding the mechanics of the deal or the mechanics of potential deal as it might play out over the next few years.

• 15:24John Coogan?

  Because this is something that couldn't happen right now, but in the future it is possible. So the Wall Street Journal reports that there's an obscure provision in Musk's 2025 Tesla pay agreement that's already been approved by the shareholders. And it was that crazy one we talked about where it was like a million robot taxis by this time and like the optimist needs to be shipping. And it was a lot of really bold claims. But if he hits all those and, and the stock goes to like 10 trillion, then he gets a huge unlock of new stock. And it was all like, okay, well, like, it's a lot of money, but that's a lot of progress for this company. Because there's a lot of projects at Tesla that just

• 16:05John Coogan?

  are sort of slow and steady, not really advancing that quickly. And so he was sort of throwing down the gauntlet, saying, okay, give me another couple of years and I'm going to deliver in a really big way. And if I do, I want to be compensated for that and the shareholders approved. But the obscure provision is, it, it basically, there's an obscure provision in the already approved Tesla pay agreement that could eliminate half of those performance requirements attached to the stock award if Tesla is acquired. So change of control affects those, those pay packages. What are you laughing about?

• 16:40Jordi Hays?

  Mark in the chat says, talk about Zuckerberg again. I like Feisty Jordy. Feisty Jordy is based AF. Yeah, I guess I woke up on the wrong side of the bed yesterday. I had some strong opinions.

• 16:55John Coogan?

  We'll see.

• 16:56Jordi Hays?

  Somebody had to say it.

• 16:57John Coogan?

  Hey, hey, he fired back. He called out he, Alex Heath. He said something big is coming. He was vague posting directly to Alex Heath.

• 17:03Jordi Hays?

  And again, I just felt like that was so memetic with all the people that are actually at the frontier. And it's just the whole thing. I'm like, yeah, I'll, I'll believe it when I see it.

• 17:15John Coogan?

  Yeah, yeah. It's kind of.

• 17:17Jordi Hays?

  What was the actual, see, see, Mark, now you got me started.

• 17:21John Coogan?

  I snapped him.

• 17:23Jordi Hays?

  I snapped. Let's see what Alex.

• 17:27John Coogan?

  Rear naked choke if you don't watch out.

• 17:29Jordi Hays?

  Over the weekend, Zuck called me via his Meta glasses while fishing to discuss the 6,000-word pro-AI manifesto he published this morning. Yeah, so he's, he's trying to balance.

• 17:41John Coogan?

  I love that aesthetically. That's, that's fantastic.

• 17:44Jordi Hays?

  Good old American, American, American Mark. He told me the immediate reason he decided to publish his philosophy now is that he believes Meta is very close to having substantially stronger models.

• 18:00John Coogan?

  Probably true.

• 18:00Jordi Hays?

  And he wants people to understand his values before those models arrive. We know your values. We know your values, which are.

• 18:13John Coogan?

  Connecting the world. It's fine. Instagram's fine.

• 18:17Jordi Hays?

  No, I mean, the, the, whatever, whatever the stated values versus the, the lived values. The lived values are if there is a hot product.

• 18:27John Coogan?

  Helps small businesses grow. What about that value? Come on. Instagram has birthed so many companies. We know so many people that their companies would not exist if not for Meta Platforms.

• 18:38Jordi Hays?

  How about great hours of enjoyable content?

• 18:40John Coogan?

  Yes, yes.

• 18:41Jordi Hays?

  For everyday Americans to watch every day.

• 18:42John Coogan?

  Would we be even remotely familiar with Professor Sendy and the creation of the Wamba without Mark Zuckerberg?

• 18:50Jordi Hays?

  You would have never seen that he turned it down.

• 18:52John Coogan?

  You, you would have never seen that he turned it down.

• 18:54Jordi Hays?

  Or the David.

• 18:56John Coogan?

  Yeah, you wouldn't, you wouldn't have, you would not be aware of that.

• 18:59Jordi Hays?

  All these iconic moments.

• 19:00John Coogan?

  You also wouldn't know that once you go to Ibiza, you must go back to Ibiza. And you would not know that there's a 21-year-old bodybuilder who looks like he's 35, who's on his way.

• 19:14John Coogan?

  See, it's enjoyable. Admit it.

• 19:16Jordi Hays?

  I, I don't have a problem. I don't have a problem with Mark.

• 19:22John Coogan?

  Yeah.

• 19:23Jordi Hays?

  And I don't have a problem with meta products. I do get enjoyment out of them. I

• 19:28John Coogan?

  In the business, the I have, they're good.

• 19:30Jordi Hays?

  Companies that are dependent on meta platforms. Uh, I've invested in many companies that, that exist in their current form entirely because of meta platforms.

• 19:40John Coogan?

  There you go.

• 19:40Jordi Hays?

  But I, I know what Mark's values are.

• 19:43John Coogan?

  What are those?

• 19:45Jordi Hays?

  Mark cares about.

• 19:47John Coogan?

  Delighting customers. Profitable advertising. These are good values.

• 19:54Jordi Hays?

  I don't, I wish he cared more about advertising.

• 19:56John Coogan?

  That's true. Yeah.

• 19:57Jordi Hays?

  I wish he cared more about advertising.

• 19:59John Coogan?

  That would be good.

• 19:59Jordi Hays?

  But, but you know, you just look at the historical behavior. It's like buy or copy or chase the hot thing.

• 20:07John Coogan?

  Yeah, but that's just, that's just a game. Like, you know, you're talking about a $10 billion startup that's, you know, coming after you with some new form factor. I don't know. You copy it.

• 20:17Speaker 04

  I, I think you're discounting how good MSL is. Everyone is saying that MSL is like clearly in third place, right? That means that they're ahead of XAI and DeepMind.

• 20:25John Coogan?

  It's crazy. If they, if they, if they actually get the next version of Spark out before Gemini four and it's better, and then Gemini four launches and stays in fourth place, like that is a crazy, crazy reversal.

• 20:38Jordi Hays?

  Yeah. And I just,

• 20:40Jordi Hays?

  I, they're, they're executing well.

• 20:43John Coogan?

  Yeah.

• 20:43Jordi Hays?

  Coming from incredibly far behind. They are approaching the frontier. I just think that being the pick me, if he wants to be the pick me lab leader.

• 20:55John Coogan?

  You don't like the comms.

• 20:57Jordi Hays?

  I don't. Yeah. I just think it's, I think it's not, uh, I just don't think it's very authentic.

• 21:04John Coogan?

  Okay. I, I, I think it's the opposite. I think, I, I think it is authentic. I think it is, he, he is thinking about this stuff. Um, he might not be the, it, it is, it is just a little bit of a tough voice because there's so much attention from the social reckoning and the social network and stuff. And then like, it, it's like, uh, in, in terms of the overall AI industry, uh, attaching him, it's like, uh, attaching Demis to the AI industry was definitely better for the voices of the AI industry. Cause Demis would stay on message and just talk purely about, uh, science. He won the Nobel prize.

• 21:42John Coogan?

  And so if, if I was like, okay, I'm, I'm dealing with an AI skeptic who is paranoid about water use and surveillance. Like who can I put them in the room with? I'm like, yeah, go sit down with Demis, Sir Demis. He's going to put on a good show and like, and like walk you through this and give you a really optimistic, optimistic vision. And he's not going to have the baggage of anything else, any lawsuits or anything else. Right? Uh, and so, yeah, it, it, it's a little bit of a, it's a little bit of a tough, tough go. Anyway.

• 22:11Jordi Hays?

  Anyways, I just, I just think like, again.

• 22:14John Coogan?

  Let's get back to less controversial tack leaders. Let's talk about Elon Musk and how he's going to make his next trillion. Cause this is what's in the Wall Street Journal today.

• 22:23Jordi Hays?

  I wish, I'll, I'll just, I'll just, I'll just end it here. I wish, I wish that Zuck came out with like a five point plan to get his own trillion dollar pay packet, which was just like, sell like trillions of dollars worth of ads. And I would, I would just be praising that all day.

• 22:43John Coogan?

  That would be sick.

• 22:44Jordi Hays?

  I would be praising that all day versus being like, oh, we're doing open source and now we're not doing open source. And now we're open, uh, we're open sourcing again because I'll, I'll get some brownie points. Uh, but also we're gonna,

• 22:57John Coogan?

  It doesn't feel like,

• 22:58Jordi Hays?

  Still have closed models.

• 22:59John Coogan?

  Yeah. I mean, you go to the Daria thing and it's like, the guy's been hard on China. He's been anti-open source since day one.

• 23:04Jordi Hays?

  Extremely consistent.

• 23:05John Coogan?

  Extremely consistent. You love him, you hate him, but like there's consistency there and that is, uh, just reliable. And, and in many ways admirable. I, I understand what you're saying. Anyway. Back to Elon Musk. He's been extremely consistent. He's getting that trillion dollars from Tesla one way or another. And there are multiple ways.

• 23:22Jordi Hays?

  Being a trillionaire before. He wants to run it back.

• 23:25John Coogan?

  He's got to run it up. He's got to double it. They say your first trillion is the hardest and this is how he gets his second trillion. So, uh, so this is how he's going to do it. So in Musk's 2025 Tesla pay agreement, uh, if he hit certain milestones, he can eliminate a lot of those performance, uh, performance requirements that were previously attached to his stock award, uh, if the company's acquired. And so change of control at this scale, normally you would think that's impossible. You cannot take Tesla private. He tried and it was not, it was too big of a company. And then also, once you're,

• 24:01Jordi Hays?

  Funding was secured.

• 24:02John Coogan?

  Funding was secured, but, uh, but there was a trillion dollar, once you're a trillion dollar company, like you can't just get acquired. Except there, we're in this very unique case where SpaceX is also a trillion dollar company. So, Tesla shareholders approved the compensation plan in November, last November. Uh, under its normal terms, Musk can earn as many as 423 million Tesla shares across 12 tranches. But each tranche requires Tesla to hit both a market cap and an operational milestone. So the goals are deliberately enormous. Uh, Tesla would eventually need to reach an 8.5 trillion dollar market cap while accomplishing targets, including delivering 20 million vehicles. Remember, I think the number of vehicle deliveries is actually like declining this year.

• 24:47John Coogan?

  Uh, it was a very, very bold plan. They need 10 million active FSD subscriptions. That actually seems easy. FSD is really good. Uh, they need to deliver 1 million Optimus robots. That seems crazy because Optimus is still so early as a project.

• 25:01Jordi Hays?

  We should try to interview someone with a Tesla that, that doesn't get the FSD.

• 25:06John Coogan?

  Turn it down?

• 25:07Jordi Hays?

  They turn it down.

• 25:08John Coogan?

  That's crazy.

• 25:09Jordi Hays?

  And I want to understand why.

• 25:11John Coogan?

  I understand it if you just bought an older, older Tesla. You like the ease of charging and you haven't upgraded to the newer hardware package. Uh, because it's, it, it like, like the, the FSD is available on the older hardware three, uh, technology. But, uh, I think it's best on the hardware four, which is like 2024 onward. Not everyone can upgrade. If it's a financial decision, I understand it. Um, but the last one was, uh, they need to get a million robo taxis into commercial operation. That also seems pretty doable. I saw a robo taxi driving around LA recently in gold. And, uh, like just from using FSD, it seems like it's ready. Like there's probably some legal stuff, but, uh, in general, I think they could roll out the, the robo taxis like very quickly.

• 25:55John Coogan?

  They can make a million cars pretty quickly and they have the technology. So it's just about putting those on the,

• 25:59Jordi Hays?

  Yeah. I haven't spent a ton of time in Teslas, but the times recently where human drivers had to take over was getting into a driveway, into effectively like private property.

• 26:11John Coogan?

  Yeah.

• 26:11Jordi Hays?

  It's a robo taxi. You can just pull over the side of the street and say like, you're walking the last hundred feet by.

• 26:16John Coogan?

  Yep. Totally. Um, and so, yeah, I mean, I mean, that, that one doesn't seem that, that difficult. Uh, although obviously it is a lot. I mean, I think that's like a hundred times as many Waymos. I think there's like 10,000 Waymos out there. So, uh, it would be, it would be a big, a big move, but over a couple of years, is that possible?

• 26:34Jordi Hays?

  Yeah. So vehicle deliveries, uh, were falling in 2024 and 2025, but seemed to be rebounding.

• 26:42John Coogan?

  But they're not, they're not far off from like a million vehicles, right?

• 26:46Jordi Hays?

  Uh, 838 in each one.

• 26:48John Coogan?

  838,000. Yeah. And so, and so over a year or two, they could probably manufacture a million robo taxis. And I think the technology is pretty much there. When, when you actually, uh, look online and you see the reviews of people talking about Tesla Ubers, they're like, I wish there was a Tesla product or an Uber product where I could demand that if it's a Tesla, they have to stay in full self-driving mode because many Uber riders regard the full self-driving experience as smoother and less likely to cause indigestion and sickness in the backseat versus watching a, a driver who has a Tesla who isn't that experienced and doesn't understand how to use the regenerative braking properly.

• 27:31John Coogan?

  And so it's much more jerky when a human's driving it because FSD is actually superhuman relative to a newbie Uber driver with a Tesla. So, uh, I think the technology is like very, very close. They got to manufacture it, obviously legal stuff, but they'll get there.

• 27:46John Coogan?

  There are other milestones, uh, requiring Tesla to generate increasingly large amounts of adjusted EBITDA. Uh, they have been profitable and cash flow positive in the past. It is doable. Um, but there's a major exception buried in the agreement. If Tesla undergoes a change of control, essentially if Tesla is acquired, the operational requirements disappear. You no longer have to hit a million robo taxis or a million Optimuses, uh, to unlock those new tranches of stock for Elon.

• 28:15John Coogan?

  If there's a chain of control, it's purely based on the market cap. And so instead Tesla will determine how many of Musk's 12 tranches have been earned solely by looking at the company's value at the time of the transaction. So the milestones don't matter anymore. Only the market cap matters. And so that could become extremely important if the widely speculated buyer turns out to be another Musk controlled company SpaceX. So if SpaceX comes in and gives a really high price for Tesla, Musk can unlock more of those tranches and get more equity in Tesla, which then rolls into the combined entity, of course. So under this agreement, Tesla's value in an acquisition would be calculated using whichever is higher, its market capitalization immediately before the deal, or the value implied by the

• 29:00John Coogan?

  price being paid to Tesla shareholders. If that figure reached 8.5 trillion, all 12 tranches, tranches could qualify, putting Musk in line for the full 423 million share award without Tesla ever having to accomplish many of the pay packages operational milestones. So there's an obvious catch, which is how are you going to acquire Tesla for 8.5 trillion? When, when SpaceX is not a $10 trillion company or $50 trillion company? It's a hard pitch to do a merger at that scale. But this is more of like a what might happen in a number of years.

• 29:38Jordi Hays?

  Well, yeah, and there's also the trade off between he has more ownership of SpaceX, which would mean that he would benefit from acquiring Tesla at a lower valuation. But then depending on these milestones, you know, he's, he's probably, his bankers probably have some very elaborate spreadsheets, you know, six different monitors, looking at all the different.

• 30:01John Coogan?

  So basically there's sort of a U shape to the incentive. If Tesla's a really low price, Elon probably benefits from acquiring it. And if Tesla's a really high price, he benefits from, he actually increases overall ownership from buying it. But there's sort of like a messy middle where it gets a little bit rougher. So 8.5 trillion would be more than six times Tesla's recent market cap and Tesla shareholders would still have to approve a SpaceX acquisition. The Journal estimates that Musk's maximum award is currently worth about 824 billion, despite the package's familiar $1 trillion label. Still, the provision creates an unusual path around some of the hardest arguments, hardest requirements in Musk's compensation package.

• 30:44John Coogan?

  Instead of spending the next decade hitting a dozen separate operating goals, a sufficiently expensive acquisition of Tesla could effectively declare those goals accomplished.

• 30:54Jordi Hays?

  New bumper stick, new Tesla bumper sticker idea. I bought this to help Elon achieve his $1 trillion pay package.

• 31:02John Coogan?

  Yes. Full send on the pro Elon Tesla. Get a lot of thumbs up.

• 31:08Jordi Hays?

  A lot of thumbs up, a lot of positive honks.

• 31:10John Coogan?

  For sure, for sure. There could be another major benefit for Musk. A combination with SpaceX could increase his effective control over Tesla, something Musk has repeatedly sought while consolidating even more of his business empire under a single roof. Well, it's a fascinating story and thank you for listening to it. Let me tell you about Cisco, critical infrastructure for the AI era. Unlock seamless, real time experiences and new value with Cisco. We got to talk about the American tourist. The American tourist has become unstoppable. A supercharged US economy helped transform a nation. Al Lanza's parents traveled overseas three times after immigrating to the US in 1961.

• 31:52John Coogan?

  Lanza estimated he's taken 500 trips in his 50 years. Wow. How many times have you been overseas?

• 32:02Jordi Hays?

  Probably.

• 32:03John Coogan?

  30?

• 32:04Jordi Hays?

  Yeah, a couple of times a year for like 15 years.

• 32:07John Coogan?

  Yeah, I guess 50 years you stack them up, you start going more frequently, but that's still 10 times a year for 50 years. His home office is filled with self printed books with recollections from each one. He's working on more. The semi retired 70 year old has already been to Barcelona three times in the past year. You have more time and more money, he said of his current phase of life. The clock is running out. American travel has transformed.

• 32:33Jordi Hays?

  The clock is running out on you visiting Idaho, buddy. It's time to romanticize the states.

• 32:41John Coogan?

  Yeah. I saw a funny thing about the, the spending time in the American South and, and picking up a southern, you saw that? Picking up the southern accent and being like, oh yeah, I, you know, this summer I spent a couple of weeks in Georgia. Oh, and it just rubs off on you when you're there. You really have to go spend some time in the American South. It's remarkable.

• 33:02Jordi Hays?

  Do you plan to go to all 50 states?

• 33:04John Coogan?

  Oh, yeah, that'd be fun. I feel like road trips, camping, those types of activities, you sort of have to like lean into it. You have to be doing a lot of cannonballs, a lot of rallies. But you, you need excuses because I, I think once you get to like 42 states, the last eight are going to feel like a complete slog unless you have a reason to visit each one or you're hitting a bunch of them in a, in a quick tour. Do you count landing in an airport? If you don't leave the airport?

• 33:35Jordi Hays?

  No.

• 33:35John Coogan?

  You don't count that?

• 33:36Jordi Hays?

  Why? No, why would?

• 33:37John Coogan?

  Because physically you're in.

• 33:39Jordi Hays?

  You have to experience the state.

• 33:40John Coogan?

  You're physically in the state, like you're legally in that state. You're, you don't count it.

• 33:46Jordi Hays?

  Well, I don't count it as visiting the state.

• 33:49John Coogan?

  What about, what about a layover in a country? You leave and you're out of the airport for three hours. Does that count? Say, yeah, I've been to Japan, three hours outside.

• 34:01Jordi Hays?

  I actually do count that.

• 34:02John Coogan?

  You do count that.

• 34:03Jordi Hays?

  I think if you are, if you basically leave security.

• 34:06John Coogan?

  What if I leave security, take the bus on a little loop around the parking lot? Back? That counts.

• 34:12Jordi Hays?

  Book it.

• 34:13John Coogan?

  That counts.

• 34:14Jordi Hays?

  Book it.

• 34:14John Coogan?

  Okay, okay.

• 34:15Jordi Hays?

  Book it.

• 34:16John Coogan?

  That's the fastest way to see every state. Flight hop from airport to airport, get out, do the bus loop, come back, hop on the next plane. You could probably do all 50.

• 34:26Jordi Hays?

  That would be a fun exercise, actually, to figure out how do you, how do you visit all 50 states in the fastest amount of time?

• 34:33John Coogan?

  Yeah.

• 34:33Jordi Hays?

  Right? Is it?

• 34:34John Coogan?

  World record.

• 34:35Jordi Hays?

  Prop, yeah, world record. Uh, I, I'm thinking that you need a.

• 34:38John Coogan?

  Don't just figure it out.

• 34:39Jordi Hays?

  And, and the, and the rule is, the rule is you can't just land in the airport and step on the tarmac. You have to actually physically step outside of the airport on, basically on a, on a regular.

• 34:52John Coogan?

  You got a plan?

• 34:52Jordi Hays?

  I think you got to do like really small rural airports.

• 34:55John Coogan?

  Okay.

• 34:56Jordi Hays?

  Yeah. Fly a small plane. Rural airports in a charter. It's got to be a fast plane.

• 35:00John Coogan?

  Oh yeah, it does.

• 35:01Jordi Hays?

  As a helicopter.

• 35:02John Coogan?

  I was thinking, I was thinking Cessna and you fly it yourself and you bounce around. That might be doable. I wonder, there's got to be some states where it's faster to drive, right? Like Rhode Island, that area, maybe faster to drive than deal with all the plane stuff?

• 35:18Jordi Hays?

  Driving at 300 miles an hour?

• 35:20John Coogan?

  I don't know.

• 35:21Jordi Hays?

  Deal with all the plane stuff?

• 35:23John Coogan?

  I don't know.

• 35:23Jordi Hays?

  Land in a small airport, step out and then get on again.

• 35:26John Coogan?

  Wait, so, so, so if you're in a, if you're flying your own Cessna, you land, you step off the plane, does that count?

• 35:34Jordi Hays?

  No, I'm saying you have to be outside, you have to be outside of the airport. But I think if you landed on just like a, some farmland, you could maybe count that. You could maybe book that.

• 35:42John Coogan?

  But do you have to get out of the plane?

• 35:44Jordi Hays?

  I do think you have to touch the ground.

• 35:45John Coogan?

  Oh no, I'm going down Mayday, Mayday, I'm landing on a golf course, hopping out, hopping back in. Okay, I'm good. That's maybe the fastest way. Who knows? Anyway.

• 35:54Jordi Hays?

  Yeah. So, so actually some, some, some planes you can just land on, you know, a street or even a dirt, a dirt road if it's long enough. And so that's probably actually the fastest way. Tyler, figure out some, some, figure out the route to hit a bunch, to land on, uh, some farmland in every state. And then, and then.

• 36:16John Coogan?

  Okay. Well, anyway, back to the unstoppable American tourist. What's going on here? American travel has transformed in recent decades. A nation of former homebodies has become one of zealous and moneyed international travelers infiltrating every cobblestone corner of Europe and rapidly filling lesser known destinations. Americans took a record 24 million trips to Europe in 2025. Portugal received nearly five times the number of US visitors last year as it did a decade earlier. Greece took in four times as many. Is it getting crowded in these, uh, in these foreign tourist destinations? I've been to Greece, I've never been to Portugal. Have you ever been to either? Greece or Portugal?

• 37:01John Coogan?

  Tyler, Greece or Portugal? No?

• 37:03Jordi Hays?

  I actually.

• 37:04John Coogan?

  Santorini's beautiful.

• 37:06Jordi Hays?

  Uh, Portugal, yes, Greece, no.

• 37:08John Coogan?

  Okay. Were you surfing in Portugal?

• 37:10Jordi Hays?

  Uh, yes.

• 37:11John Coogan?

  Oh, okay. Nazaré, 100 foot wave?

• 37:14Jordi Hays?

  Near, nearby.

• 37:15John Coogan?

  Okay. Consulting firm Tourism Economics expects American visits to Europe will have increased another 5% by the end of the year. The travel is helping boost economies even as it has angered many locals who say their cities now reliant on foreign visitors are no longer serving them. Behind the shift is a supercharged US economy that is in the course of a generation, that in the course of a generation has created a larger and wealthier class of Americans that views travel as an essential rather than a luxury. Older Americans, let's find out what the older Americans are doing. Older Americans.

• 37:54John Coogan?

  Who are driving this new era of travel hold about 110 trillion in wealth. Wow, we should get these folks financing the AI build out. They got plenty to spend instead of traveling. You should just.

• 38:08Jordi Hays?

  Barcelona, three times in a year from America is just insane. I'm sorry.

• 38:13John Coogan?

  That money could be sitting with John Gray at Blackstone. It could be going over to Jensen.

• 38:17Jordi Hays?

  Could be allocating that for you.

• 38:20John Coogan?

  Could be putting it all on the line for you.

• 38:21Jordi Hays?

  You could have your Apple Vision Pro doing Barcelona simulator.

• 38:25John Coogan?

  Yeah, yeah. Gen AI, just generate a picture of you in Barcelona. Job finished.

• 38:31Jordi Hays?

  Generate hundreds of images.

• 38:33John Coogan?

  Potentially.

• 38:34Jordi Hays?

  Make a music video of yourself. Playing a song about Barcelona in Barcelona.

• 38:39John Coogan?

  People will love that. People will love that. That rising wealth has coincided with dramatic changes in the travel industry itself. Foreign travel has become more accessible and social media has made it easy to envy, emulate and one up friends, vacations. Apologize to Mark Zuckerberg. He is, he is stimulating the global travel economy. We didn't even consider that. This is huge. Everyone is traveling because of this. The whole, the whole world is growing because of meta. You see a picture of somebody in Barcelona, you're like, I gotta go for the fourth time. This is happening. This is happening. You have no defense. Defeated lion retreats.

• 39:20Jordi Hays?

  Good point.

• 39:20John Coogan?

  Defeated lion retreats.

• 39:22Jordi Hays?

  It's a good point. I just, I just wish that he was twisting the knobs and.

• 39:26John Coogan?

  To make it even more.

• 39:27Jordi Hays?

  To make it, to make Idaho and places like that more appealing.

• 39:30John Coogan?

  Okay, you, but yeah, this is, uh, this is, uh, this is, this is putting a thumb on the scale. You don't, you don't, you, you want a thumb on the scale. You're saying his thumb's not on the scale enough.

• 39:39Jordi Hays?

  Well.

• 39:40John Coogan?

  Interesting. Okay.

• 39:41Jordi Hays?

  Yeah, I just want to know what his values are.

• 39:43John Coogan?

  Yeah, bias.

• 39:44Jordi Hays?

  Thumb on the.

• 39:44John Coogan?

  Bias. A trip to the continent is a well-worn path for US elites. I like calling Europe just the continent. It's a good, it's a, maybe we should try and reclaim that as part of your Make America Tourism Friendly Campaign. We are the continent.

• 40:02Jordi Hays?

  The new continent.

• 40:03John Coogan?

  Yeah, it's, it's got, it really does have to be devastating. If, if you're in Malibu and then you, you find out, oh, there's new Malibu somewhere else. It's like, wait, what about me? I feel like my town's going well. And you're in York or England or Hampshire or Jersey. And you're like, ah, it's probably nothing. People will get bored of New York. They'll come back to regular York and they didn't. Anyway, by the 1950s and the 1960s, when boomers were growing up, travel, Americans traveling abroad were in rare air, a glamorous jet set who wore their best for flights on Pan Am and TWA.

• 40:48John Coogan?

  They were soon joined by young adventurous backpackers who filled hostels and traveled on the cheap. As the Cold War waned and airlines expanded, travel opened up further to the masses. And the European Union's free travel area made it easy to fly to the continent and hop between countries. Fascinating stat that I always come back to. People will share that photo of, oh, people in 1950 and 60, every seat on the plane looked like first class. Don't forget what they took from you. The world you remember doesn't exist, that whole thing. There are more people flying in first class today than people flew at all in the 60s.

• 41:28John Coogan?

  So like just the first, so you really need to comp the first class experience today with a lie flat seat. They give you a glass of champagne. It's actually a pretty luxurious experience. Maybe not the best, but it's pretty good unless you're in JetBlue Mint and they won't let you pass back steak. That's brutal, but for most airlines, it's pretty good. And.

• 41:47Jordi Hays?

  We still haven't got CEO of JetBlue.

• 41:50John Coogan?

  We gotta, we gotta get some answers.

• 41:52Jordi Hays?

  And we gotta, we gotta push.

• 41:54John Coogan?

  We do, we do.

• 41:54Jordi Hays?

  For our policy update.

• 41:56John Coogan?

  We do, we do. So in 1990, fewer than 5% of Americans had a passport. Pretty crazy. Now more than 50% do. Aided in part by a mandate requiring passports for travel to Canada, Mexico and the Caribbean that took effect in 2007 and a post pandemic travel rush. The US issued a record 27 million passports in fiscal 2025. Amy Burch Buchanan, Burch Buchanan, 55, took her first flight in 1988 to visit her then boyfriend in England. She had a cassette tape full of Journey songs to listen to on the plane. And her parents walked her directly to the gate. The, the PJ experience basically back then.

• 42:39John Coogan?

  Onboard passengers were dressed to the nines, sipping cocktails and smoking cigarettes. What about an airline where can't smoke cigarettes, but you can smoke cigars? I think that might see some traction.

• 42:50Jordi Hays?

  Something there.

• 42:51John Coogan?

  Yeah, Spirit Airlines. Why not American Spirit? It makes so much sense. I don't know. It seems like a no brainer. Nobody was wearing yoga pants. It was very elegant, says Buchanan, who lives in Fort Worth, Texas. She returned home a changed woman with British bands like Depeche Mode on her Walkman. New clothes and a wanderlust that she eventually passed down to her three kids. Her eldest daughter, Avery, moved to the UK around two years ago and now travels across Europe. Her middle daughter went to Kenya this year. They've really reached out much further as they've gone out on their own. Europe is often a gateway drug. Portugal and Greece have seen the biggest percentage increases in US visitors of any country over the past decade, according to US government data.

• 43:34John Coogan?

  The UK and Italy have seen the largest increases in the total number of tourists, getting millions of additional Americans a year arriving by air. Only six, only 6% of US travelers to Europe in 2025 said it was their first time flying abroad. Many of these tourists are visiting multiple times a year, stopping at the Eiffel Tower and the, and the Colosseum, but also taking country walks in the Cotswolds and Viking cruises on the Danube. A growing share of consumer spending is going toward foreign travel as habits change and prices rise. Open skies agreements to deregulated airline competition on international routes. Starting in the 1990s, leading to much cheaper airfares and more international flights from the US,

• 44:15John Coogan?

  said Clifford Winston, a Brookings Institution economist who studied the PAX. In 1984, a round trip weekend fare between New York and London on Pan Am costs $669. Today's equivalent of $2,150. Over the past decade, economy airfare to the region rose 56% more than inflation. The average one-way economy plane ticket from US to Europe, not including taxes and fees, cost $588 this year, up from 533 in 2025. So even though it's getting more expensive to fly, people are still doing it more and more because of Instagram, baby. Anyway, let me tell you about Railway.

• 44:57Jordi Hays?

  As much.

• 44:58John Coogan?

  Railway is the all-in-one intelligent cloud provider. Use your favorite agents, deploy web, app, service, databases and more, while Railway automatically takes care of scaling, monitoring.

• 45:05Jordi Hays?

  As much as I wanted you to keep, uh, reading the journal to me.

• 45:09John Coogan?

  Love story time.

• 45:10Jordi Hays?

  And our guests.

• 45:11John Coogan?

  We have our next guest here.

• 45:12Jordi Hays?

  Our first guest of the show.

• 45:13John Coogan?

  In the studio, live in person. We have Ernie Garcia from Carvana, the founder and CEO. Welcome to the show. Thank you so much for stopping by. Please grab a seat. How you doing?

• 45:25Speaker 05

  Going great.

• 45:26John Coogan?

  How you doing? How's business?

• 45:27Speaker 05

  It's good. It's very good. Yeah.

• 45:29John Coogan?

  Uh, walk me through, I mean, maybe we should start with the very beginning, but, uh, the thing that I'm most interested in is the, the, the journey throughout COVID, post-COVID, all the crazy rocky times in the market. How you got through that? Where the business is today? What changed? What didn't? All of that journey.

• 45:46Jordi Hays?

  Yeah, and, and, uh, yeah, the context here is typically our interviews are very much focused on the present. But the first time we have someone on the show, we like to give people some context.

• 45:57Speaker 05

  Awesome. Yeah, for sure. Well, let me start with this. These gongs are awesome. For every car sale that we had for probably the first two years, maybe three years of Carvana's history, we had a gong that was like 50% that big.

• 46:08John Coogan?

  Amazing.

• 46:08Jordi Hays?

  So pretty big.

• 46:09Speaker 05

  And we'd cheer.

• 46:09John Coogan?

  That's huge.

• 46:10Speaker 05

  Yeah, it was a huge gong. It's funny to see those. So what's your guys' story with the gongs?

• 46:14John Coogan?

  Just to announce like fundraisings, big milestones, big numbers. I don't know how we landed on it. We just thought it was a funny prop and, and then it just got bigger and bigger and bigger.

• 46:23Speaker 05

  It's surprisingly fun and then it catches on.

• 46:25Jordi Hays?

  Yeah, we basically maxed it out.

• 46:27John Coogan?

  Yeah.

• 46:27Jordi Hays?

  This was like the, the largest gong we could find.

• 46:30John Coogan?

  You have to go like fully custom after this and it gets really crazy.

• 46:34Speaker 05

  Yeah, ours was a little smaller than that one.

• 46:36John Coogan?

  Yeah. What was the first car you sold?

• 46:39Speaker 05

  So it would have been probably, so we launched in January 2013. I think it took us like two months to sell our first car.

• 46:44John Coogan?

  Okay.

• 46:45Speaker 05

  But yeah, I mean, maybe I'll try to give like a high level setup. I think the goal with Carvana was to try to build a different supply chain, different cost structure, vertically integrate so that customer experiences could economically be simple. I think, uh, there are many dealers out there. Excuse me, by the way, I'm fighting a little cold right now. There are many dealers out there that I think, um, you do a great job with what they've got, but I think buying a car is not the most beloved customer experience in the US. And I think the reason for that is just there are so many dealers doing things the same way, the share of cost structure. And I think the economic pressures mean you have to maximize the amount of revenue you get out of that back room. And customers don't love that experience. So the idea was can we build a different kind of customer experience with different costs and, you know, more vertically integrated that, you know, maximize revenue is in a better way.

• 47:30Speaker 05

  So the customer experiences can be really simple. We launched 2013. We had to build a ton of stuff to do that. We've got a totally different supply chain. We buy cars from customers. We ship them to these large locations where we recondition them. We put a thousand dollars of parts and labor in every car. We have our own logistics system. We deliver from that location to the customer's door. Our website is fully transactable. Today we have 50,000 cars, um, so customers can go on there. They can get financing, they get a trade-in value, they can toggle a warranty on or off, um, and then have the car delivered to their door. So really different experience, but it was, um, it was a lot to build because inside of that, we've got a retailer. We've got a remanufacturing company. We've got a logistics company. We've got a finance company.

• 48:13Speaker 05

  So there was so much to build and I think as a result of that, we had a really volatile time. So early on, you know, it took us a couple of months to sell our first car. And that was like all the infrastructure was built and you were just chasing your first sale or was more like you were kind of getting off the ground?

• 48:28John Coogan?

  Running Google Ads? Like, how did you get the first customer?

• 48:31Speaker 05

  It was all kinds. Yes, it was, I mean, AutoTrader back then was like a big part of our advertising just because customers were already there. But yeah, I would say early on, we had the experience that the customer went through felt, you know, 60% similar to today, but it was, you know, like duct tape and bubble gum in the background that was making it all happen and it was just at a really small scale. But customers loved it. Once they got over the skepticism, the very first delivery, you know, I went on and the first thing the guy did was he literally opened the hood to see if an engine was in there. Because he was kind of like, he had gotten in arguments with his friends about whether or not, you know, the car would even actually be like the real car. So I think they loved it if they got over that fear, but then, you know,

• 49:14Speaker 05

  building the rest of the business at real scale and moving through all of those customer concerns.

• 49:19John Coogan?

  But you got to finish the story. Was there an engine inside?

• 49:21Speaker 05

  Was there? What's that? There was an engine. The good news, in this case, there was an engine. That's generally the case.

• 49:26Jordi Hays?

  So the pushback in the early days, I can imagine a lot of people, maybe on the investor's side, is like, cool idea, but you're not going to have a business selling cars at scale sight unseen. Like, was that some of the pushback? Because like personally, growing up on the internet, and I've probably bought five or six cars over the years sight unseen where they're out of state, maybe they were on Bring a Trailer or some, I just found a spec I liked at some dealer or whatever.

• 49:56John Coogan?

  Facebook.

• 49:56Jordi Hays?

  And I've always, not yet, but not opposed.

• 49:59John Coogan?

  You're big on IYKYK deals, right?

• 50:01Jordi Hays?

  No, no, no. But for me, when I would buy, you know, I'd buy a car, some random state, get it, it would just show up at my house. It was, you know, amazing, even if it was some third-party logistics provider or whatever. But I would have people tell me, you just bought it, like, you never even saw the car. And I was like, no, dealer or whoever it was seemed legit. And it's worked out every time. But I can imagine there's maybe a generational shift of like, people that have just grown up super used to buying everything online. And so the idea of buying a car online is just kind of feels normal already.

• 50:36Speaker 05

  Yeah. I think that was the primary business model concern and the primary unlock. Because I think, it's a totally reasonable question, like, will customers buy a car sight unseen? I think your experience points to many will. And, you know, there's like an interesting stat, at least as of the time we went public in 2017, 30% of customers didn't even test drive a car before buying it. So they might not have had your experience, but an experience somewhat like that. But I think that was the primary question. But if you could resolve that question, and we kind of solved with a seven-day return policy, which we think is better for most customers,

• 51:08Jordi Hays?

  Yeah.

• 51:09Speaker 05

  then you unlock a completely different supply chain, because that's what enables you to no longer have to have the cars at the point of sale and distribute it around the country. So you can instead replace that kind of real estate with a logistics network, and you can give customers access to tens of thousands of cars, and you can deliver to them less expensively.

• 51:25Jordi Hays?

  Yeah.

• 51:25Speaker 05

  So that was like the primary, I would say, business model question. And I think once we sold kind of like 100 cars and went on those deliveries and got a feel for where people were, we felt pretty confident that was going to be okay. I think another question that was asked is what about like investors? And I think at that time, that was kind of like the height of, you know, like Airbnb and Uber, and it was, everything was going to be a marketplace.

• 51:47John Coogan?

  This was like the unbundling of Craigslist a little bit?

• 51:50Speaker 05

  Yes, I think to a certain degree. And then I just think at that time, yeah, it was like, everyone wanted to be the marketplace layer.

• 51:58John Coogan?

  Yeah.

• 51:58Speaker 05

  Everyone wanted to just kind of connect to pre-existing supply, to demand, and kind of be that asset-light layer.

• 52:04John Coogan?

  Yeah.

• 52:04Speaker 05

  And I think we were trying to suggest that to give customers the experience that we thought was best.

• 52:08John Coogan?

  Yeah.

• 52:09Speaker 05

  We were in need to own inventory, we're going to have to have our own logistics network, we're going to own real estate, we're going to have a finance company.

• 52:14John Coogan?

  Sure.

• 52:14Speaker 05

  And that was a mess. So Silicon Valley did not love our pitch. We did not do well there.

• 52:19John Coogan?

  Wow. What was the logic behind IPO-ing so fast? Was this, the company was growing and made more sense?

• 52:25Speaker 05

  We couldn't raise money.

• 52:26John Coogan?

  Couldn't raise money.

• 52:27Speaker 05

  Yeah. Basically, what I would say is, I think, especially at the time, our business model did not match what Silicon Valley was looking for.

• 52:35John Coogan?

  Sure.

• 52:36Speaker 05

  And there wasn't private capital at scale outside of Silicon Valley that we felt like we could get access to. Our business model, I think, given how different it is from the status quo, surprisingly though, like, the economics and the underlying business itself are very similar to something that is highly scaled.

• 52:54John Coogan?

  Yeah.

• 52:54Speaker 05

  So it worked better in our pitches with more of like a New York-style audience than with kind of a, you know, Bay Area-style audience.

• 53:02John Coogan?

  Southern-style.

• 53:02Speaker 05

  And so I think we basically were forced to go there because that's where the money was.

• 53:06John Coogan?

  Interesting.

• 53:07Speaker 05

  Yeah.

• 53:07John Coogan?

  Interesting. Yeah, what was the?

• 53:10Jordi Hays?

  But if I'm remembering correctly, eventually you had plenty of support on the West Coast. I'm thinking of like Neil Meda and Greeno. Was he not one of your big advocates and big believers?

• 53:24Speaker 05

  No, we didn't. So, we went public in 2017. We were a four-year-old company. And I think, as far as I'm aware, I'm not positive this is like a precisely correct stat, but I think in terms of like first day, first week, first month performance, we were like the worst IPO of 2017. We barely got out the door. And we kind of bounced around for a while. I think around 2019, we started to really make progress. And then in 2020, you know, COVID was actually an incredibly scary time for, because we're a transactional business, and a distributed transactional business. And so when transactions go to zero, and you have this big cost structure, that's like a real problem. So it was a really scary time for three or four months. And then it turned into, like, all of a sudden, everyone was just saying, oh, Carvana is like a COVID story. Because it was like, we

• 54:08Speaker 05

  kind of answered that moment. And so I think then we were really popular for, you know, 18 months. Everyone thought we were smart. And that felt cool. But then '22 came around, and I don't know if we want to hit that in like a separate segment or whatever, but everyone told us we were dumb again, very clearly through the markets. But I think, you know, overall, it's been, it's been, it's been a really fun and very dynamic journey, I would say.

• 54:29John Coogan?

  Yeah. Well, to talk about post-IPO, the workforce, the incentive structure, how everything changes as you take a company public that early, what does it take to keep everyone sort of rowing in the same direction?

• 54:43Speaker 05

  I think it's less of a change than, than maybe I even would have imagined ahead of time. Like, I think it's, I think, we told everyone exactly why we were going public. You know, it gave us access to capital that was hard to get otherwise. And also, because we have a finance company and we have inventory that we own, and so you finance that, it gave us better access to other capital markets.

• 55:05John Coogan?

  Sure.

• 55:06Speaker 05

  I think there's a perception oftentimes that kind of like the IPO is the end. Like, that's like what success looks like. And we were doing it so early, and it so obviously wasn't the end, that in a way, it was kind of like helpful. But I do think there was like a little bit of an internal narrative for a second there of like, did we do it? Like, are we done? But we quickly turned that around, just kind of said, now, now we're a public company, we got to be a little bit more careful about making sure we disclose information the same way to everyone. That's like the biggest change. But otherwise, you know, here are 10 examples of companies that have multiplied by 100 after going public, and that's what we want to do. So, you know, let's just march down that path.

• 55:41John Coogan?

  Yeah. Being more somewhat mature or complicated on the financing side, was, were you very aggressive about hiring, like, a young finance talent, like poaching from Wall Street banks as opposed to like Stanford CS departments or both? Like, did the shape, did the, did the structure of the business financially change the recruiting profile?

• 56:06Speaker 05

  Yeah. I think we, we wanted hunger and horsepower, I would say. And I think, I think experience is something that is necessary, like, you know, on a scale from 0 to 10 in experience, you want like two or three, so you don't make really dumb mistakes. But I think if you've got seven or eight, you oftentimes just think things have to work the way they've always worked. And so I think a lot of the people that we brought in were, you know, somewhere between zero and four or five of experience. I was probably more experienced than most in the finance area in particular. Our CFO, just you said, Stanford CS, he was a PhD in econometrics from Stanford. And, you know, just basically, he's someone

• 56:49Speaker 05

  who has absolutely incredible horsepower and throughput,

• 56:54John Coogan?

  Sure.

• 56:55Speaker 05

  but understood that world pretty well. And I think a lot of times recruiting is about, do you have people, one, do you have a relatively flat organization? Because I think people like working in flat organizations. And then, two, do you have people at the top that actually understand what the work is and how it works and how it impacts, you know, the user and the business?

• 57:13John Coogan?

  Yeah.

• 57:14Speaker 05

  And if you have that, I think a lot of times, the most aggressive people want to work where they have visibility all the way up to the top. And so I think in finance in particular, we were really lucky to have Mark.

• 57:23John Coogan?

  What was the early expansion path? Like, did you think about opening up specific markets, certain channels? Like, you mentioned AutoTrader. Was there like a, okay, we're doing a big, like, social media marketing push for the next leg up? Or is it like, we're taking the West Coast?

• 57:40Speaker 05

  It was more like city by city.

• 57:41John Coogan?

  City by city.

• 57:42Speaker 05

  So Atlanta was our first city.

• 57:43John Coogan?

  Okay.

• 57:43Speaker 05

  And then we did Nashville, and then we did Charlotte. And it was kind of like, we needed, because we were, we have like a logistics element of our business,

• 57:50John Coogan?

  Yeah.

• 57:51Speaker 05

  you needed to get enough density to make the economics work,

• 57:53John Coogan?

  Yeah.

• 57:53Speaker 05

  kind of in each, you know, like, part of the network.

• 57:56John Coogan?

  Yeah.

• 57:56Speaker 05

  And so, yeah, we went city by city, and that was kind of the way we did it through probably 2020, give or take. And, you know, now we're nationwide, and so we're kind of growing across the country in all the different places.

• 58:07John Coogan?

  Yeah. And what was the strike team for expanding a new market? Are you actually sending them an office or sending out some, you know, like, of your most dynamic employees to go hang out in a WeWork type of place? Like, what's the, what's the philosophy behind, like, the ground game?

• 58:22Speaker 05

  So, we call the last mile logistics Market Ops. And so we had like a Market Ops SWAT team,

• 58:27John Coogan?

  Sure.

• 58:28Speaker 05

  would go out and kind of launch these markets.

• 58:29John Coogan?

  Yep.

• 58:29Speaker 05

  Now, what's nice about our system is all of the logic is deterministic. All of the merchandising and everything is happening in a kind of global way. So, everything except for the car getting, you know, unloaded off the nine-car hauler at the location and then delivered to the customer, everything else is kind of already standardized. So really, it was like that last leg to the customer.

• 58:52John Coogan?

  Yeah.

• 58:52Speaker 05

  That was the functional thing that was happening. And then it was just absorption of any issues that happened anywhere else in the system.

• 58:57John Coogan?

  Yeah.

• 58:58Speaker 05

  So it was very much like dynamic, fun people that were unexpected to be delivering cars to customers, that gave them an experience that was awesome. And I think that was, that was kind of how we rolled out market by market.

• 59:09John Coogan?

  Is valuation deterministic?

• 59:12Speaker 05

  For

• 59:12John Coogan?

  For vehicles.

• 59:13Speaker 05

  Yes.

• 59:13John Coogan?

  Because I imagine that there's probably some mistakes where you get, you acquire some car and you wind up being, oh, this is a rare one. It's worth more than we bought it for, or vice versa. And I'm wondering about the, like, the process of tightening the, your book value to the actual real world resale value based on market fluctuations, but also just like, yeah, we didn't notice that the seats were a little more scuffed than we thought.

• 59:39Speaker 05

  Yeah. So first, like, a, like, practical answer to that, which is, so we do, when we pick up a car, we'll run it through a process, including an OBD2 scan, which kind of checks the date on the car. And in a small percentage of cases, if the variation is large versus our expectation, we will reprice the vehicle. But for the vast majority, well over 90% of customers, they're going to get exactly the value that they saw. Now, I think like, you know, more like fundamentally, the, the problem there is, can you be as good at it digitally and from a distance as other people are in person? And I think that, that the answer to that question, I think, was surprising to people. Like, that was another area that I think people thought it would be a major business model problem. But we ran a test super early on,

• 1:00:24Speaker 05

  where we basically looked at a pre-run list of a bunch of cars that we're going to sell at auction.

• 1:00:27John Coogan?

  Yeah.

• 1:00:28Speaker 05

  And we said, okay, like, we're going to have physical buyers go out. So buyers are what the industry calls, people that go to auction and buy cars. They put hands on the car, they open it up, they turn on the AC, they check everything, and they buy the car.

• 1:00:38Jordi Hays?

  And, and these auctions, you're talking about industry-oriented auctions. So like, somebody trades in a car to get a new car at a traditional dealership, and then the dealership doesn't want the car, so they're auctioning it off to other dealers. And so there's dealers there. Is that right?

• 1:00:51Speaker 05

  Correct. So it's like a wholesale auction that consumers wouldn't see that dealers go to all the time.

• 1:00:54Jordi Hays?

  Yeah.

• 1:00:55Speaker 05

  So we had a bunch of buyers go around, and on 100 cars, they said, here's what I think it's going to trade for. And then we built a model, and we said on those 100 cars, what do we think they're going to trade for? And then we calculated the absolute average error of those two processes. And the, the buyers were off on average by about 1,200 bucks, and we were off on average by 1,300 bucks in our Gen 1 model. And so we were like, with, with very little data feeding it, and, and very little specific data about the car. So I think early on, we were pretty confident that while it's hard to be exactly right, it wasn't going to be that hard to be as right as the market we were competing with was, and that's what mattered. And so it is deterministic.

• 1:01:30Jordi Hays?

  Yep.

• 1:01:35Jordi Hays?

  We talked to a lot of founders that are, when you look at their roadmaps and what they want to do in the future, it's very like product-oriented. It's like, we have to launch this new, we have to launch this new market. Or the best example of, of, is like in defense tech, it's like, we need to land this program of record, and then we need to fulfill that. It feels like with Carvana, it's like, you just need to get better every single day at buying and selling cars, and then you just need to kind of do that forever. I, it's hard for me to see you guys like entering like the luxury, you know, super upmarket category, like being at a, like Car Week, which is, but it's very easy to see just owning more and more and more

• 1:02:17Jordi Hays?

  of the, of the, of the, of the used market. But how do you think about that? How, how is it different motivating a team around just getting better at what you already do every day versus like, a bunch of like net new sort of product-oriented innovation?

• 1:02:30Speaker 05

  So first of all, I think, I think hopefully we succeed in both of those dimensions, but I think the observation's very right. And I think like, the motivation part is also an interesting question. I think different people are different. So in, in this, like, way of categorizing people, I would say I am more the product person. Like, I'm more the person that gets really excited about what can we build? What can we change? How can we make the system more efficient and better than it was yesterday? And then I think that, you know, generally what I would call operators are people that wake up in the morning and they're really excited about getting, you know, a quarter percent better every day, which will compound to massive differences. But just having that constant feedback of improvement is more what motivates them every day.

• 1:03:11Jordi Hays?

  Yeah.

• 1:03:11Speaker 05

  And I think that where the business is today, we're in this like interesting spot where we've built a customer experience that we're super proud of, that we think is great. The business model, you know, even at the relatively small scale compared to the market that we're at today, is producing, you know, returns that are two to two and a half times kind of what is normal in the industry. But then we're only 2% market share. And we find that kind of as we build more cars, we sell more cars. So I think we've made it to a spot where we don't know exactly what the total scope of the demand is, but it's more than we're able to produce cars today. And so there's a lot of value to just make sure you make the machine a little bit, you know, better and bigger every single day, and spend less of your energy on all of the dramatic changes that could exist.

• 1:03:54Speaker 05

  And I think honestly, that's, that's a hard thing. I think like, in a business, finding a way to focus on where you get the most leverage is really, really hard. And I think a lot of times, the people that are best at inventing businesses are really bad at focusing on the things where you get the most leverage. And so I think, I think learning that lesson the hard way, which is part of, you know, what I would say happened to us in 21, heading into 22, is I think what helps us try to manage that balance. But then I also think we definitely have people inside the company that have enormous dreams and want to build big, beautiful, amazing things. And so we also have a lot of product we're really excited by. But there's no question in the position that we're in right now, like, what is going to matter to our next five years of economic performance is going to be how well do we execute in making that machine

• 1:04:39Speaker 05

  a little better and a little bigger every single day, over and over again.

• 1:04:41Jordi Hays?

  Yeah. What does the future, you guys buy, acquire a car?

• 1:04:48Jordi Hays?

  What is, you know, looking out maybe 10 years, what do you think it looks like to acquire a vehicle? How much, how much can robotics play in basically taking a car that was just purchased from somebody and making it ready for another person to acquire it?

• 1:05:07Speaker 05

  Yeah.

• 1:05:08Jordi Hays?

  Because Yeah, I basically, all these OEMs are investing in robotics, then there's all these automotive shops. I'm sure you guys have your own process, but it, it feels like, it feels like we'll get to the point where there will be something like a lights-out factory where a car goes in one side and it comes out the other side, you know, fully restored. I just have no idea how long that'll take.

• 1:05:30Speaker 05

  Yeah. I think we're rooting for that to happen in many ways, because I think it would make us, the, the thing that today constrains our scalability the most is reconditioning cars. It's putting the $1,000 parts and labor in. So I think that would be very exciting. I think the problem that OEMs face is more simply automatable than the problem that we face, because every car is getting the exact same processes done to it.

• 1:05:53Jordi Hays?

  Yeah.

• 1:05:54Speaker 05

  For us, you know, the car's coming in, you inspect it, you figure out what the car needs, and then every car is getting different processes done. So it's, it's a process that is likely to be automated more slowly, I would say, than traditional manufacturing. But we're definitely paying attention. And I think there will be elements of it, like, you know, changing tires, things that are highly replicable, that probably happen faster. Today, most of what we're focused on

• 1:06:18Jordi Hays?

  Even like, it doesn't seem like that far away to having systems that could fix up little nicks on paint and things like that in an automated way, even though every car is going to have different rock chips and things like that.

• 1:06:30Speaker 05

  Agreed. I, I think all that stuff, right now, the assessment of those things is getting better all the time. I think automating the workflows for like, what does the person who's doing it need to do is getting better and more automated all the time. And then I think the actual physical work so far, like, in auto manufacturing facilities, it's, you know, they generally have those big robots that look like an arm. You know what I mean? They're not like, general-purpose humanoid robots that can do like anything. And I think it is, it is likely it'll take a little bit more time for the work to be fully automated, but we are paying a ton of attention. And if that explodes at the same rate as, you know, like all of the LLMs, then who knows how quickly that can happen.

• 1:07:12John Coogan?

  Is current AI useful in any particular area you can imagine? AI search, but also back office tooling? Like, what's the shape of the impact? Where is it actually working well? Where it's like, eh, it's a little bit earlier for that?

• 1:07:25Speaker 05

  No, all, I mean, all over the place. I think maybe two big buckets. One is consumer-facing, and then one is like, what are we, what are we doing to try to move faster as a business and everything we're trying to do from a product perspective?

• 1:07:36John Coogan?

  Yeah.

• 1:07:37Speaker 05

  But I think on the consumer-facing side, the more complicated the underlying transaction is, the more value there is to simplifying it.

• 1:07:45John Coogan?

  Okay.

• 1:07:45Speaker 05

  And so for a customer who's buying a car, they wake up in the morning and they want a car, but they have an old car's payment, they have some cash's payment, they have some finance's payment, they don't know if they want a warranty or not. There's a lot of complication in that transaction.

• 1:07:57John Coogan?

  Yeah.

• 1:07:57Speaker 05

  They, in order to get the car and get it registered, they're going to have to change over their insurance, right? They're going to have to sign contracts, they're going to have to upload documents for verifications for finance and for title and registration.

• 1:08:07John Coogan?

  Yeah.

• 1:08:07Speaker 05

  So the more complicated that process is, and the more that our systems are designed in a way where all those processes are deterministic, so there's no human negotiating each underlying economic item, the more that you can use AI to string that together and give people really simple experiences. So I, I think there's a ton that we're doing already that's like really fun and interesting. And because we built it in a way where it was, it was pushed through a wire already, with no kind of, you know, F and I agent sitting next to the customer, everything we've built is like in our, it's like a service architecture. Like, everything is separable and deterministic. So it lends itself very well to, then you can dump that into an AI.

• 1:08:48Speaker 05

  A person can ask a natural language question, and we can give a super complex and super complete answer to their questions. So I think that's fun. And then what's also fun is, I think, in any of these things, you know, going back to value in cars even, what, what matters is how good of an experience can you give your customers compared to everyone else? And in the world of automotive retail, we're not competing with other players that have vertical integration deterministic systems or automated systems. And so the quality of answer that we can give relative to our competition is very, very high. So I think that's a really fun area for us right now. And even like the types of products you want to build, I think change when you have systems that can string together so many deterministic processes,

• 1:09:33Speaker 05

  but also overlay it with discretion that you can trust. That even changes the, the realm of things that can be automated. So I think we're doing all kinds of fun stuff there. And then internally, like every other company, we're trying to move as fast as we can. And the toolset is changing so fast. It's, it's super fun.

• 1:09:50John Coogan?

  Are you coaching or answering stressful calls from any SaaS apocalypse victims?

• 1:09:59John Coogan?

  Because I feel like you've been on a particularly wild roller coaster ride where I've never seen a stock chart where it's so clear that the, I don't want to talk too much trash about the investor community, but it was like they got it wrong.

• 1:10:13Speaker 05

  We got it wrong first.

• 1:10:14John Coogan?

  They got it wrong. It's just this, this gap in the, in the chart and you're like, okay, well, clearly there's something wrong here. Uh, but it feels like a lot of, a lot of SaaS company CEOs are sort of going through that. Many of them are already out of that trough, but what advice do

• 1:10:28Jordi Hays?

  you have? I think the advice is like, build a highly distributed business with tons of physical inventory.

• 1:10:36John Coogan?

  Is that the advice? Is that for the real world?

• 1:10:38Jordi Hays?

  Real world. Like, cause you guys, you guys are in a perfect position. You guys are like a, a flight to safety now. Cause it's like, hey, like, yeah, try rebuilding Carvana with AI. It's just like, it's, you know, we're, we're at least 20 years away from, you know.

• 1:10:51John Coogan?

  Where do you get the demand? It's a, the liquidity is what is so much of the value.

• 1:10:55Speaker 05

  I mean, I, I, I think there is a lot of truth in that. I think if I were to try to give advice though, I think what I would say is it's just, the themes that are popular in markets will change.

• 1:11:05John Coogan?

  Sure.

• 1:11:06Speaker 05

  And they change every couple of years and they oftentimes change dramatically. And generally the swings are more violent than they ultimately prove that they should have been. I think that's probably true in most cases. So I think that what you want to try to do, if that's true, is just set up everyone inside the company to know that's going to happen sometimes. So it doesn't feel like, I think many people inside of a company have this perception of investors that they're like all knowing masters of the universe. And when the stock moves, it's because something deeply true and fundamental changed. When, you know, in reality, they're really smart people that have, you know, a huge set of observations they've made over time, but they live in a world of pressure with moving stock, you know, charts and with LPs that are putting them under pressure and changing themes that one's reading about.

• 1:11:51Jordi Hays?

  There's an incentive to sell, even if you still believe in the company, but you think a lot of other people are going to sell too.

• 1:11:56Speaker 05

  Exactly. You get, you get into that thing. And then I think it's just like, we've, we've made it look harder than it probably had to look, but I think most successful stories, you go through periods that are really hard. And I just think that for us internally, like the way that we went through 22 and that was a hard period is we just talked about like, okay, so this is, this is our moment where we publicly look dumb and we got to ride it out and go through the hard thing. But most companies that we really respect, if you look back in time at their stock chart.

• 1:12:24John Coogan?

  That's true.

• 1:12:24Speaker 05

  They had their moment too. And so you have to go through that at some point. Like at some point, every six, or not every, but the vast majority of successful companies are going to go through a period that's really hard.

• 1:12:33John Coogan?

  Yeah.

• 1:12:34Speaker 05

  And that's kind of the moment that matters.

• 1:12:35John Coogan?

  Washes out the mercenaries.

• 1:12:36Speaker 05

  Exactly. And yeah, you get people, and people get fired up about that. Like, okay, cool. This is our hard moment. That's like something you can rally around. So I think, you know, every company will go through that and you just got to keep getting up, I think.

• 1:12:47Jordi Hays?

  Yeah. And congratulations to the team on so many back-to-back quarters of incredible execution.

• 1:12:53Speaker 05

  Oh, thank you.

• 1:12:54Jordi Hays?

  It's amazing to watch.

• 1:12:55John Coogan?

  And same day in delivery now.

• 1:12:56Speaker 05

  Yeah, exactly. Make the move. Get it fast.

• 1:12:58John Coogan?

  Another announcement. But it was fun to just get the whole story and, and go all over the place. Would love to talk to you again soon.

• 1:13:04Speaker 05

  Awesome. Thank you so much. Appreciate it. Yeah.

• 1:13:05John Coogan?

  This was great. Let me tell everyone about Consol. Consol builds AI agents that automate 70% of IT, HR and finance support, giving employees instant resolutions for access requests and password resets. And our next guest is already in the waiting room. We have Alex Edelson from Slipstream Investors. He's the founder in GP and we'll bring him in to the TDP and Ultra Dome.

• 1:13:30Jordi Hays?

  What's going on?

• 1:13:32Speaker 06

  Thank you guys for having me. Glad to be here.

• 1:13:33John Coogan?

  For hopping on.

• 1:13:35Jordi Hays?

  Where are you calling in from?

• 1:13:37Speaker 06

  I am just outside of Washington DC.

• 1:13:39John Coogan?

  Ooh, fun.

• 1:13:39Jordi Hays?

  Nice.

• 1:13:40John Coogan?

  Beautiful backdrop. Uh, well, since it's your first time on the show, uh, would love for you to kick us off with an introduction on yourself and Slipstream a little bit. And then I'm sure we'll have a ton of questions to dig into.

• 1:13:51Speaker 06

  Yeah. Yeah. So, um, a little about Slipstream first and I'll give you my background. So, um, Slipstream is three things. One, we're venture fund of funds. We invest in pre-seed and seed funds, uh, mostly emerging managers. Uh, median fund size is around 30, average fund size around 50. And most of these funds are on their first three vintages. They don't have to be, but that's what, that's what our typical investment profile looks like. We're on our second fund. Uh, we invested in about 10 to 15 funds in every fund of ours. We also work with some of our LPs to help build out their venture portfolios. Like often when we invest, our LPs join us in these funds, invest alongside us.

• 1:14:28John Coogan?

  Yeah.

• 1:14:28Speaker 06

  And the third thing we do is we can use a portion of our capital to co-invest and our LPs like to co-invest. Before this, like in relevant part, I was at QED. So, um, QED is a successful fintech focused venture firm founded by Nigel Morris, one of the two Capital One co-founders. And I joined, uh, during fund five, funds one through four were small, very successful funds. And the fifth fund, I started as chief of staff. It's larger, has outside capital. I became the COO. I reluctantly became the general counsel. I was a lawyer before that and recovering when I joined QED, trying not to be a lawyer anymore, but that didn't work. Um, and then we raised a much larger fund six and I decided to leave before fund seven.

• 1:15:11Speaker 06

  Slipstream, uh, I started Slipstream in 21, so we're, uh, we just turned five.

• 1:15:16John Coogan?

  Congratulations.

• 1:15:17Jordi Hays?

  Started it during the solo GP boom. Walk us through that whole, that whole experience. Maybe, I don't know how much of it was at a part of.

• 1:15:29John Coogan?

  Because the trend pieces started after it was already sort of happening, but it felt like sort of accidental and maybe the brand got bolted on after the fact.

• 1:15:37Speaker 06

  Yeah. What's so interesting about that time was, um, well, there were two, two competing things happening. One, it was probably a good time for me to raise our fund. It was not a great time. It wasn't like a healthy time for the strategy. There's so many funds, there's so much capital coming into the ecosystem. Valuations are really high, like probably not the most disciplined investing going on during that period. And so like, we may look back on that period as like not a great vintage.

• 1:16:01John Coogan?

  Yeah.

• 1:16:02Speaker 06

  Um, which I can talk about like kind of how we managed that, but like from a, from a fundraising perspective, there were some positives. But like, yeah, when I started this, people were telling me things like, oh, you know, this is sort of like a 10 to 15 year old concept. Nobody wants to do this. No one wants to pay a second layer of fees. Um, and when the market sort of, you know, the market cycles through like boom or like hotter and, and colder periods. And, and in the hotter periods, sometimes folks think like, oh, I can do this myself. Like, let me, I'm seeing good stuff. It all feels up and to the right. You know, maybe I'll just be a direct investor and then, then that doesn't maybe go as they hope. And then maybe I should invest in funds and then like that doesn't go well. It's like, maybe I should invest in a fund of funds. And there's sort of a cycle to this through, through, um,

• 1:16:44John Coogan?

  Yeah.

• 1:16:45Speaker 06

  market fluctuations.

• 1:16:46John Coogan?

  I, I want to know about that specifically, like the, the, the, the, the purpose, uh, like, like the, the, uh, like what LPs are most excited about it? Is it, is it getting toeholds in the future? Great scale up, huge venture capital firms? Or is it actually like returns at the early stage that they think that they can find? Are there other pieces of like value add and, and reasons to invest, uh, across a broad set of early stage managers?

• 1:17:13Speaker 06

  Yeah. It's such a good question. So there's not one answer. And I can come back to the question about like, kind of what was I seeing in terms of, in like emerging manager land in 2021? Cause they're like, there were some funny stories about people. You're just sitting there kind of like, I don't know why this person has a fund, but like here they are. And it's like a $5 million fund, but, but I'll come back to it. So yeah, like on your question, like there's not one answer because some folks are, yeah, they're out to like find firms, like venture firms. We want the next institution. We want the next equator. We want to see it first. And, and then we'll be in a great position to deploy a lot of capital with these folks over many funds of theirs. And that, I see that, that makes sense. That's not really our strategy, but some of the funds, incidentally will become, I mean, hopefully will become that if that's what they want.

• 1:17:55John Coogan?

  Yeah.

• 1:17:56Speaker 06

  Some of them though, that's not the dream. And that's not the dream for the LPs and that's not the dream for the GPs. Like for some of them, it's just like, I want to get great returns from these funds. I believe that the best performing funds are these small funds on their first few vintages. They have very unique portfolio construction. Like we can talk about, talk about that if you want. And, and there are folks who just want returns. And then like these funds, as they grow potentially towards like becoming more of like an institutional, like long enduring platform, um, maybe outgrow those LPs. So like for me, we'll invest in some of these funds when they're small. And then it's almost like we were like releasing them into the wild. Like we can introduce them to our P, our, our LPs and other LPs, but like they outgrow us.

• 1:18:35John Coogan?

  Yeah.

• 1:18:36Jordi Hays?

  Oh, interesting. So you'll, so somebody will, will come to you and, and it's sort of this sad moment where they're like, Alex, like I'm ready for the half a billion dollar fund. And then you guys, you know, hug and say goodbye. Is that, is that it? Cause it feels like, I mean, I mean, I mean, imagine a lot of the. I'm curious like how some of these early conversations go because I'm sure a lot of GPs will say like, yeah, I just want to have like, you know, small funds, focus on returns. And just do, you know, a $50 million fund every, every couple of years forever. And then, given that, you know, half of our friends are, are, you know, GPs.

• 1:19:18Jordi Hays?

  It feels like every single one of those, the second they really are in a position to raise the like, the, the, the nine-figure fund, almost all of them go for it. And it's really like a very small group of people that just stick with these smaller funds. And so, uh, how do those conversations go early? Like, are you, are you able to like pull out the honest truth with a lot of them, which is that they do want to scale up massively? Or is it, is it, is it sometimes a bit of a surprise?

• 1:19:48Speaker 06

  Yeah, it's, it's a great question. It's never a surprise, no. Like, my mission is to get a sense for where they want this to go. The answer is like, that sometimes they don't know. Like, they're just getting started. They're on a fund one or a fund two. It's small. They want to see how the market evolves. They want to see how their sourcing evolves. Maybe they, they can get there really early. They think they can get more ownership, or for one reason or another, they think they can get more ownership. They can scale up without getting adversely selected and that even though they'll raise a larger fund in their future funds and they'll target higher ownership, that like they shouldn't, they shouldn't sort of generate worse performance than those small early funds. Like, they're, they, a lot of people just want to see how it goes. Now, certainly like in the back of their mind, they might have aspirations of building something large. And my hope is that like in the process of getting to know them, they'll be open with

• 1:20:31Speaker 06

  me and like feel like it's safe to share that with me. And, and my commitment to them is that like I need to be open with them. So like often the conversations early on, if people are thinking about, you know, a fund or two down the line, raising funds that would be outside our strike zone, like it's on me to say like, hey, I'm probably not going to be with you at that point. Like, that's probably going to be outside our strike zone.

• 1:20:50Jordi Hays?

  If they go, if they go from, you know, a $25 million, $30 million fund, and then they have the opportunity to raise 200 plus, it probably means that the first fund is performing, or the first one or two funds are performing quite well, which is good for you. So I think it is pretty aligned.

• 1:21:05Speaker 06

  Yeah, well, what's interesting about this is like, yeah, like it's interesting about this, like, we have, I mean, there's so many ways this conversation can go, but one thing on my mind is like, yes, people typically want to get bigger, but I think their mission should be get good returns on the first few funds. If you get good returns on the first few funds, you get to be in venture for a long time. And if you don't get good returns, um, on the first few funds, like you, it'll be hard to raise future funds. And so, like, the long-term greedy move, like in a long-term greedy game, is to get returns, as many funds in a row as you can, before you start scaling. And so, um, yeah, but like, one thing you said that, that came to mind there is like, I was actually worried when starting Slipstream, that like, this could get boring.

• 1:21:48Speaker 06

  Like, what if we do a good job and we get into great funds and we just start re-upping in those funds because they're so great?

• 1:21:54John Coogan?

  Yeah, there's no sourcing.

• 1:21:55Speaker 06

  Like, is this a boring job? Like, why am I, what am I doing? I'll never find new folks. I won't need to meet new names. I'll just like re-up in these great funds and I guess that's good for returns, so why should I not do that? And what I'm realizing over the last five years is like, no, there's like a natural evolution to this and like, we stick with people for two or three funds in a perfect world. And then like they might outgrow us and we get to add new names. Like, there's always, there are always new funds for us to meet and, and for us to invest in. We're always adding new names. Um, and that does keep it fun for me. So there's like almost, like a natural part of what you're saying that actually creates some energy and joy for me personally. Because like, if these people outgrow me, like, we can help them raise hopefully more from LPs we introduced them to than they're losing from us not re-upping.

• 1:22:38Speaker 06

  And then like, we can continue to meet new managers and add folks to our portfolio.

• 1:22:44Jordi Hays?

  So, on your side, how, how do you think about, how do you think about timing? Like, on one hand, like, I feel like it's like the manager's job to make sure that they don't, you know, deploy their entire funds, let's say during a 2021, like we were talking about earlier, where, uh, valuations are super high, you're paying 100x revenue, and then even if the companies do well, you don't really make money, which has happened a lot. How do, how do you think about, um, deploying like through cycles as a fund of fund to make sure that, that your LPs do as well as possible?

• 1:23:18Speaker 06

  Yeah, it's a great question. So, there's sort of two layers to this. Like, one, there's like the GP layer, there are folks we're working with whose funds we're investing in, and we're collaborating with them as a partner. Like, hopefully, we're talking all the time and we're talking about this. And, and then there's like the, the Slipstream Fund of Funds level. And that is like where it's our mission to build diversity and like diversification into our portfolio construction. So we get plenty of vintage diversification and time diversification. Like, in a typical fund of ours, we have two to three years of vintage diversification. We have five to six years of time diversification in terms of investments, initial investments made. Um, and then, you know, we obviously have diversification across sectors and some across geographies.

• 1:24:03Speaker 06

  And so, if we're investing in 10 to 15 funds and we're getting, you know, 400 to 600 companies in each portfolio of ours, like, we have a decent amount of time diversification, but it's more interesting to me, like, like, we kind of just have that programmatically built in. And so, I don't want, I don't want to try to time the market from, like, our perspective. It's hard for me to say like, oh, this is a great time, you should put more into this vintage. I don't know. I want to smooth our coverage out over a period of years in a consistent way. There is one exception to that, though, which is that when we started this, like I said, like, it wasn't a very healthy time, I, I thought it was not a very healthy time for deploying capital, uh, through our strategy.

• 1:24:44Speaker 06

  And so, I did, there was a period of time when I, we went five quarters without making an investment. And that was like pretty uncomfortable. Like, I was getting calls, I had a call from one of our LPs, I'll never forget, like, asking like, are you doing anything? It's like, man, I think we're doing the right thing. Like, I think this, we're all going to be really happy in a few years, but, but no, I'm not deploying a lot of capital right now. And, um, so I had to be careful with that. Oh, yeah, go ahead.

• 1:25:09John Coogan?

  So that dynamic of like, uh, pressing the brakes, stepping off the gas, it happens at every layer of the stack. There are startups that recognize the end of ZERP and they cut back, stretch to 36 months between raises. There are funds, like Founder's Fund, with, you know, Teal has this saying about how he told everyone for a year, just go to the beach because we don't want to make any investments. It's happening at the Fund of Funds layer. I'm sure it's happening at the LP layer. Like, how much is, i- i- is it most pronounced at your layer, you think, Jake? Are there any GPs who can actually raise a fund at the top and resist buying the top and then deploy at the bottom? Because that feels like the mythical best possible outcome, but it doesn't happen often.

• 1:25:53Speaker 06

  Yeah. It's so hard to do. So like, the overwhelming majority of folks don't have that level of discipline or patience. It's so hard. And especially because, like, if we just step back, there's this saying that people say, like in venture, and it's like, like, oh, should we play the game on the field? Or should we not? And like, what are our LPs paying us for? Well, they're paying us to get exposure to venture during some period of time. And like, if that period of time happens to be a hot time in the market, then I should just like play the game on the field and I guess like that's my job. And I kind of resist that a bit. Like, my feeling on this is like, no, your job is to get like venture scale returns, or do your best to get venture scale returns. And if that requires like, all, like changing your strategy, or slowing down, or doing

• 1:26:38Speaker 06

  something differently in light of what's going on in the market, like, that I think is the right move. Like, when we're five, 10 years down the line and LPs are pushing you on like, hey, what'd you do when the market was hot? You can say, well, oh, I just played the game on the field like everyone else, and it's like, that's why my returns are bad too. Or you could say like, no, like, we were really careful, we were really patient, we set the bar very high, we tweaked our strategy, we, like, that kind of stuff really resonated when folks were reflecting on their 2021 and 22 vintages. But there were just so few GPs who were able to say that. There are a handful, I could, I can't count that many of them, unfortunately. But I think the LP world was like very impressed by folks who took 2021 and 2022, who, who managed

• 1:27:23Speaker 06

  that in like a very disciplined way.

• 1:27:25Jordi Hays?

  How do, how do you handle like co-invest opportunities right now? Specifically because everything is getting marked up. Uh, if, at least it feels that way. You have the, the fifth, five through 10th best company in a category still getting marked up. Oftentimes for good reason, just because a lot of stuff is, is growing in a meaningful way. Uh, but, but oftentimes, like, it, it's the same kind of opportunity where you, I'm sure you're getting co-invest opportunities where, uh, it seems like, you know, super talent dense team, but you're being asked to invest at, you know, some really, really, really insane revenue multiple for a company that is, you know, a couple of years old.

• 1:28:07Jordi Hays?

  Uh, and I guess like what's the, uh, your job is to be evaluating like managers, and so you have to put some trust in them, that they're, that they're bringing a great opportunity for you. But you're also giving the opportunity to your LPs and saying like, hey, I think this is a good opportunity.

• 1:28:25Speaker 06

  It's such a good question and really top of mind because like we get more co-investment opportunities in these hot markets, obviously. We have a ton now. We saw a ton in 2022. And for me, the answer has like a few components. One, I have to like think pretty carefully about like, what are the GPs blind spots and biases? Who's like bringing me these? This is one of their most promising companies, right? But like their, their view of that company is, is a bit limited. Like, once they invested in that company, they're probably not looking at all the competitors at that stage. They're not leaving this next round in most cases. Sometimes we do have managers who are like preempting around and that's unusual and cool and, and a little higher, higher conviction, I think for them and us.

• 1:29:10Speaker 06

  But often it's like, man, the GPs know this company really well, but they also have biases and blind spots. And so that's, that's hard for me. These folks that we're investing in are also like relatively early in their investing career. They just have like fewer reps. And so, yeah, I have to factor that into like, into account when I'm making decisions about these. And then like, I think about my time at Q E D. And like, I thought, I'll speak for myself, like not Q E D. I thought like a lot of our LPs would, they would do more co-investing than maybe they did. And, and realize like the bar needs to be very high for a GP to show LPs a co-investment. Because at the time that GP raises their next

• 1:29:51Speaker 06

  fund, the LPs are not going to know a lot about how the last fund is performing. But they might know how a co-investment is trending. And like, that's going to impact whether they kind of like trust or doubt the GP. And so, like, my hope is that GPs are like, hey, I bet my, I bet my LP's commitment to my next fund on this co-investment, that they're going to be glad they did it if I'm showing to them. Like, that's the, that's the bar I hope people are using, or something like that. It's almost like, sometimes I joke to them, like, look, would you like fly to DC and like tell me I'm crazy if I don't make this co-investment? Like, is that the level of conviction here? Or is this like a really good company that's taking off and you want to share the opportunity with LPs? And it's a good opportunity for them? And it's a good opportunity for you? But maybe

• 1:30:33Speaker 06

  not that level of conviction for you? Like, I'm really trying to figure out what their level of conviction is. And the last thing I'll say is like, I need to think about like what I'm uniquely positioned to do. Like, if I'm, if I'm seeing all these co-investments, like, am I the best person to evaluate all these co-investments? And if I'm, if I think I am in a good position to evaluate a co-investment, then the question is like, well, am I going to do just one? Or am I going to build like a small portfolio? And then if I build a small portfolio, I have to ask like, is my small portfolio likely to like outperform the next fund we might invest in? Or should I just use these slots for another fund? And so like, in reality, how, the way this has worked for me is like, I haven't made any co-investments out of our funds. And we're like five years into this. And we've had some great ones. Now, we bring them to our LPs, and we either don't recommend them,

• 1:31:17Speaker 06

  or we say, basically, I could see if this would be a fit for you, and I'm happy to help you run it down. But like, I want you to feel like you can get to conviction on your own with the information that I'm sharing with you. And like, I would encourage you to build a portfolio of these, and not just do one. And then we put SVBs together for them. So like, I guess that's a very long way of saying like, we're pretty careful, and we haven't done any out of the fund. Because it's hard to do this from my seat. Now, if you get it right, amazing. Like, if you're in great co-investments, that's great. And they certainly could help people fundraise. Like, in my position, in a hot market, co-investing could help me fundraise because we're likely to get some quick markups from that. I just worry that like, yeah, maybe that isn't the right path to getting like, long-term returns.

• 1:32:02John Coogan?

  So that seems pretty focused. Do you think that the overall fund strategies are becoming less focused or less blurry? Is there like a broad trend here? Because you see venture capitalists who are known for software, investing in everything from semiconductors to data center constructors to hard tech, defense tech, biotech. And then also you have blurriness on the strategy side. You're doing a billion dollar seed round. Maybe you're playing in public markets. Maybe you're a hedge fund that's also doing private investments. It feels like we've been at a blurry, the blurriest it's ever been in terms of defining what a fund even is these days. But is that what you're seeing? Or is there still like a healthy batch of super focused tech VC managers?

• 1:32:44Speaker 06

  It's funny. I think there's been like, this has fluctuated over time. Like, some, there, there have been times in the market where people are like, I don't think there's any place for a generalist fund. You'll never be the sector-focused fund. We can only invest in sector-focused funds. If you're not a sector-focused fund, you'll lose all, all the sector-focused funds. You know, and then, and then you're, it feels like we're in a period right now where it's like, no, if you have access to like the great talent, the best talent at the earliest stages, you can find them like at or before inception. Like, that's a, that's a really compelling way to win in this market. And, and those are typically generalist funds. And so, like, I don't think there's one answer here. But yes, I am seeing, oh, the longer you're in this, the longer you see people's strategies evolve from like, hey, we focus on certain sectors. Like, if we just like look at their

• 1:33:26Speaker 06

  webpages from like a couple of years ago, it's like, oh, you used to be a crypto fund. And like, now, you're like an AI fund. And, and then like, maybe you're becoming like a hardware fund. And I think like, yes, you see a lot of that. You see, and, and for my position, like, obviously, like, we're all skeptical. Any investor's going to be skeptical. And, and, and my job, I think, is just to like figure out who's uniquely positioned to like execute on whatever strategy they have and like generate significant outperformance. And like ideally, like be generated top decile returns. And so, yes, I am seeing from a sector focus, I do see drift over time. And, but it, but it's case by case when I'm making an investment decision. Like, I kind of assume they are what they

• 1:34:10Speaker 06

  are today. And I like push on what they used to be and why they evolved. And, and you can kind of figure out.

• 1:34:16John Coogan?

  I mean, some of the best funds, like, they, they did evolve. They were investing in semiconductor companies, and then internet technology companies. And those were related, but very different structurally. So, as long as you navigate the transaction, the translation, it can be good.

• 1:34:28Jordi Hays?

  How much do you care about being in one of the next, like truly legendary funds? I'm thinking like an FF, you know, was, it was FF1, right?

• 1:34:38John Coogan?

  FF2.

• 1:34:39Jordi Hays?

  FF2. FF2 is a 300X. But, or like a lowercase. Like, is that something that you tell your LPs? Like,

• 1:34:47John Coogan?

  I'm swinging for the fences.

• 1:34:49Jordi Hays?

  Not swinging. Well,

• 1:34:51John Coogan?

  Kind of, I mean,

• 1:34:52Jordi Hays?

  But I, but I think by having, by backing the next great class of managers, you are, you're, you should, in theory, over the course of like, 10, 20 years, you should get in one of those, you should get in one of those legendary funds.

• 1:35:08Speaker 06

  Yeah, it's so interesting. Like, certainly, doing that will help you. But the question is always like, by the time you know you were in one of those, and then let me get back to like, how important is it for you to be in one of those? By the time you know you were in one of those, that was probably a long time ago, right?

• 1:35:24Jordi Hays?

  FF2, it's like, yeah, it's 20 years. So that's what I'm saying. I'm saying 20 years from now.

• 1:35:29Speaker 06

  Yeah. And so like, if I, like, if we're saying that about like Slipstream in 20 years, oh, look at this, he was in one of the best funds of the, you know, the last 20 years or something. Isn't he so great? Like, the question will be like, well, he was great then, but like, is he still that great now? I don't know. And so, like, that's the problem with all of venture investing. And like, sometimes people talk about like, oh, emerging man, investing in emerging managers is so hard. They have limited track records. There's not that much to evaluate. And I totally agree. Like, it's hard. But I think it's hard to evaluate in funds, like funds that have established track records too. Unless they're like the major platforms that are like pretty stable. There are other things changing at those, like fund size and portfolio construction. It's very hard. Like, you're basing your decisions on, on returns that are like, based on a different time, a different

• 1:36:14Speaker 06

  fund size, maybe a different team. Like, you're always trying to figure out, is this team uniquely positioned today? But, like, to generate great returns. But to come back off of that riff and like to, to get back to like the strat, to, to get back to like the importance of getting into one of those funds, is something I think about all the time. Like, especially when I was just starting out, one of the questions I always sort of posed to myself is like, does it matter to me to be in the best performing funds we meet in a given year? Or is our job to make sure that like every investment we make is a good investment? Like, the best investments, like, the 300X investments, like, sure, I would love to be in those. Of course, I would love to be in those. But like, often those are like pretty weird funds. Like, it could be some like $2 million fund that you like,

• 1:36:59Speaker 06

  is totally not clear at the time. And it's very difficult to underwrite. And they get in a couple of good, good companies. And like, it's a ridiculous outcome. Like, sure, it is my job to invest in funds that have limited track records and to try to figure out who has increased odds of like significantly outperforming. And so I hope that I am able to get into the best funds of the vintages when I'm investing. But the reality is like, if we're investing in good funds, like, we can generate great returns without those, I certainly would love to be in those, though. I don't think like Slipstream's success is defined by being in those.

• 1:37:30Jordi Hays?

  Totally, totally. Yeah, it's more of like a personal thing. Like, you know, after these 20 years, I feel like you're going to be, I think, I think there's a good, I think there's a good shot. This is a

• 1:37:43Speaker 06

  Oh, man, I don't know. I don't know. We actually, yeah, we just had our, our first fund, will that, will be, we're about to have our first fund at over 20X. So that's like a big

• 1:37:55Jordi Hays?

  There you go. There you go. We're hitting the gong for that.

• 1:37:58Speaker 06

  Hey.

• 1:37:59Jordi Hays?

  This was a super fun conversation. Let's, let's make it a usual thing. It's a great to get a pulse check on the market. I'm glad, I'm glad to meet, connected us.

• 1:38:10John Coogan?

  Yeah, so much.

• 1:38:11Speaker 06

  Oh, thank you, guys. Thanks for having me on. I'd love to.

• 1:38:13John Coogan?

  Thanks so much.

• 1:38:14Jordi Hays?

  Cheers, Alex.

• 1:38:15John Coogan?

  We'll talk to you soon. Goodbye. Let me tell you about Codex. Codex is a powerful workspace for getting work done with AI agents. Whether you're writing code, analyzing data, creating content, or automating business workflows, Codex helps you move projects forward from start to finish. Our next guest is already in the waiting room. We have Nico Simko from Claire. He's the co-founder and CEO. How you doing, Nico? Welcome to the show.

• 1:38:37Speaker 07

  Hey, guys. Thank you so much for having me.

• 1:38:40John Coogan?

  Thanks so much for having me on. Why don't you introduce yourself and the company a little bit and then give us the milestone? I want to hit the gong.

• 1:38:46Speaker 07

  Amazing. Big day, big day for us. Nico Simko here, founder and CEO of Claire. Basically, in a nutshell, what we do is we try to solve one of the biggest inefficiencies we think is in the US labor force, which is if you work today, you need to wait two weeks for your paycheck. And so, we try to distribute that as far as we can. And today, the company has crossed $100 million in, we announced $100 million in revenue run rate.

• 1:39:14Jordi Hays?

  Okay, so uh break down a little bit more how the business works. You guys are serving 5% I believe of small businesses in the US. You're integrated into the payroll system.

• 1:39:29John Coogan?

  Gusto, QuickBooks, Trinet, the big guys.

• 1:39:32Jordi Hays?

  Yeah, and it's funny when I uh yeah, when I first started, I was surprised that this was not like a thing. Maybe it was, or just at a much smaller scale. But as soon as I understood how payroll systems worked, I was wondering like why employees didn't get access to funds, couldn't get access to them early if a payroll system like knew that they were

• 1:39:54John Coogan?

  They already worked.

• 1:39:54Jordi Hays?

  Still an active employee, working. Feels like pretty easy to underwrite, but it doesn't make sense for the company necessarily to be in that type of, you know, short-term lending business. But yeah, walk through maybe like the history of this category, how you came upon the opportunity, and yeah, maybe even how you how you were kind of diligencing the opportunity early on. Because I imagine it was one of those things that maybe you're like, why doesn't this exist already? Am I missing something?

• 1:40:26Speaker 07

  You're making my life easy because basically that's very much in line of like what I think I had, but also many people that joined the company early, whether it's like employees, investors, and so on and so forth. It's that. It's like, look, we live in an instant world, right? You can you can click a few buttons and get any movie you want in the world. And it's but at the same time, if you know, I was outside of the credit system, that's maybe a good tangent to go in. It's like I came to the US without any credit history. My parents were not from here. I was an F1 student. I had a job at JP Morgan after college. Still couldn't get a credit card. I got so many denials.

• 1:40:59Jordi Hays?

  You were a student of F1, of Formula One?

• 1:41:02Speaker 07

  I was an F1 visa student. I wish I was a student in F1.

• 1:41:08Speaker 07

  But but yeah, like, no, the the reality is like I I went through this entire journey of of being outside of the credits of 25 million people like that in the country. And then there's another, I would say roughly 30, 35% of the US workforce that is basically not in a prime category. And it's like, okay, if that's the case, and 50% of Americans work paycheck to paycheck, why can't credit be connected to the workplace? And of course, short-term credit is one piece, but can think about car loans, right? There's lenders that are really would like to extend credit to to to that asset. But at the same time, it's it's it's it's risky. And so can they can they create a way to kind of connect that via the payroll system? And and what it does, it decreases kind of the risk, decreases the cost to the consumers, and the entire system becomes more efficient. So honestly,

• 1:41:52Speaker 07

  I couldn't stop talking about this for many years and ended up kind of like leaving JP Morgan and and starting the company.

• 1:41:58John Coogan?

  What was the MVP? Like, what was the first customer? Did you go to a payroll platform and try and integrate? Or did you go direct to a company and have just a like a web app? Like, what? Do you need a bank charter for this? Like, money transfer licenses? Like, how does all that work to actually start this business?

• 1:42:15Speaker 07

  Yeah, absolutely. A lot to unpack here. So I'll try to maybe take it high level, and then we we break it down. But the idea, really, first principle is, my co-founder and I sat down and we realized like, okay, what is what is the, you know, the perfect product? And the perfect product, we thought of at the time, left our jobs in 2019, restarted incorporating everything in 2020, was if you could have a digital bank that connects to the workplace, and every single time you work, basically, your funds are available in your bank account if you need them, that would be perfect. And it's instant, it's free, it's perfect. And that's the that's the trade-off. That product did not work. And the simple reason why that product did not work is because when you're asking someone to move their entire financial life over to a new digital bank, it's a lot to ask for. It's like going

• 1:42:58Speaker 07

  on a date and asking somebody to get married on the first day. It's like, it's a lot, right? And so maybe that's where you'll end up. But like, you know, don't don't do it immediately. And and so we kind of like, it made us a little bit more humble. And we spent a lot of time with our user base. My co-founder like flew down to like, public schools in in Georgia, met the principals around like how public school teachers don't get paid during the summer, they only get paid monthly. And it's and then we start to realize that, you know, there's a way to do this, which is embedded inside of payroll. People trust their payroll system. We all sign up for, you know, anyways, healthcare products through through payroll. And payroll companies are becoming workforce super apps, right? Like, love the partners we work for because they really have this vision. They're like, one app involves a lot of things. And and so we went after these providers. And we're like, look, we want to, we want to foster your brand. We're not trying to send people to

• 1:43:40Speaker 07

  another app. So that's why we decided to pivot in the company in two years, kind of really, really accelerated when we took that strategy.

• 1:43:47John Coogan?

  Well, congratulations. I want the opposite of this. I would love to get Tyler working for like, three months straight before we pay him a dime. So he has to put in 90 days of hard labor until he gets a single paycheck, sort of the opposite.

• 1:44:01Jordi Hays?

  The grindset?

• 1:44:03John Coogan?

  Yeah, good things come to those who wait. No, it makes a ton of sense. And congratulations on the progress. Thanks so much for coming on the show.

• 1:44:09Jordi Hays?

  Yeah, very, very fascinating.

• 1:44:10Speaker 07

  Thank you so much.

• 1:44:11Jordi Hays?

  Yeah, great to meet you, Nico.

• 1:44:12John Coogan?

  We'll talk to you soon.

• 1:44:13Speaker 07

  Thank you for having me.

• 1:44:14John Coogan?

  Let me tell you about MongoDB. What's the only thing faster than the AI market? Your business on MongoDB. Don't just build AI, own the data platform that powers it. Our next guest is already in the waiting room. We have Ian McGinley from Sidley Austin LLP. He's a partner there, former head of enforcement for the CFTC. How you doing, Ian? Loving the show.

• 1:44:37Speaker 08

  Thanks for having me, guys.

• 1:44:38John Coogan?

  Thank you so much for taking the time.

• 1:44:40Speaker 08

  Great to have you.

• 1:44:40John Coogan?

  I would love for you to set the stage for us with a little bit of of your backstory and career, and what's on your mind in terms of prediction markets. We talk about prediction markets all the time. Sometimes they're really useful. There's a whole bunch of complicated issues that I'm sure you can help us unpack. But we'd love to start with like your background.

• 1:44:58Speaker 08

  Yeah, yeah. And by the way, there's a lot of prediction markets on TBPN stuff, you know, including who's going to be your guest, you know?

• 1:45:05John Coogan?

  That has happened a few times. Also, it's happened.

• 1:45:08Jordi Hays?

  Yeah, I would say some of the some of my least favorite moments are on the show on the show, or when I realized that there had been a prediction market set up around things that one of our guests would say, because the people, then you would get a bunch of people in the chat that weren't here, didn't care about the content at all. They only cared about trying to manipulate us.

• 1:45:27John Coogan?

  Exactly. Ask about Bitcoin or whatever. Normally, the chat's really helpful and actually providing really great. It just sort of like ruined our chat. Anyway, we're already starting with the gripes, but kick us off with the backstory.

• 1:45:37Speaker 08

  Yeah, yeah. So so right, I'm at a law firm called Sidley Austin right now. But before that, I was the head of enforcement at the CFTC. That's the Commodity Futures Trading Commission. I don't think people had really heard of it until recently, you know, because it was really regulating agriculture. And now it's involved in prediction markets, crypto, and some of some of really the hottest topics around in finance. And before that, I was at SDNY for a long time, doing white collar crime insider trading, you know, back in the day. And so I've seen it from all sides. And now I help people try to navigate, you know, what's going on in the regulatory environment, which is active. You know, there's there's so much going on.

• 1:46:17John Coogan?

  How active is it? It feels like the game's over to me. I don't know. How do you feel about the prediction markets? It feels like they're here to stay, that, you know, you love them, you hate them, Sagar and Jetty, not a fan, clearly. Other people have a lot of money riding on these companies. But it feels like it's mature. It feels like it's decided. Is are there more points to decide at this point?

• 1:46:37Speaker 08

  Oh, definitely. Yeah. But I mean, I think top line, they are here to stay. I mean, they've captivated the public's imagination, both retail and institutional, right? But there are a few issues being worked out. Chief among them is sports, right? Sports event contracts, there's there's a lot of litigation over them. The states, right, which have regulated gambling, you know, for a long for a long time, are filing lawsuits, right? They stand to lose. They stand to lose revenue. And those cases are working their way through courts. And you know how, you know, courts are reaching different decisions. We have district courts, appellate courts, and the Supreme Court. The district courts have have come out both ways. Some pro prediction markets, saying federal preemption applies, meaning

• 1:47:20Speaker 08

  this is the CFTC's jurisdiction and not the states. And then we've had one appellate court weigh in, saying also CFTC's jurisdiction. But more courts are going to weigh in. I bet that goes to the Supreme Court. And so we'll see, you know, the future of sports contract. Meanwhile, you got the CFTC, which is regulating in the space. They put out some rules. You know, there have been issues with contracts. Like, you you mentioned, you know, mention markets and insider trading. There've been some cases involving, you know, people using information that they shouldn't have to go trade in prediction markets. So that's very much a focal point of government, right?

• 1:47:57Jordi Hays?

  Yeah. So so there's a question on on should they exist specifically for sports? There's also the, like, all the different ramifications of prediction markets being popular overall. I think with with the Venezuela military operation, you know, that felt like, you know, a really significant moment, because you had a armed, you know, one of our our service members that had a financial incentive to put his entire crew at risk by sending a signal to the world that, hey, this operation is going to happen, right? And that that was

• 1:48:39Jordi Hays?

  just like, probably one of the darkest moments that I can remember. But then there's almost infinite markets on every possible topic. So as somebody who's been working in enforcement and working on a bunch of, you know, things like insider insider trading, which I think provides a lot of precedent for this, can this can all these like, we're creating a bunch of new problems where where all these type of real world events can be potentially influenced by individuals that have a direct financial incentive where where maybe before there wasn't one at all. What's the what's the sort of broader solution or framework

• 1:49:23Jordi Hays?

  that you think would would be effective at maybe curtailing some of these issues?

• 1:49:31Speaker 08

  Yeah, so you mentioned that Maduro case, right? And I think what gets lost in that is while the market is different, right? That conduct has always been illegal, 100% illegal, right? It's like knowing the answers to the test before you take it. And that's just allegations now, so you know, he'll have his day in court as he deserves. But I think, you know, when you think about insider trading, a lot of it boils down to common sense, like you can't use information that's not yours. You can't, you know, take out an event contract ahead of time when you know you're going to be the guest and there's an event contract on that, right? I think the challenge is that there's event contracts on everything, right? So we're talking about, you know, if you're thinking about equity markets and commodities

• 1:50:15Speaker 08

  markets, there's a very well-established playbook for how you handle that, right? I'm thinking like, you know, big financial institutions, they train employees, there's policies and procedures, you know, addressing kind of everything under the sun. The prediction markets have got to catch up in terms of everyone in an industry impacted by prediction markets needs to be made aware that you can't do that because the consequences are just enormous, right? I mean, you wind up prosecuted by the DOJ, then the CFTC as well. And so there really is an education aspect of it that I think we all need to grapple with. In terms of the promises, right, I mean, you see the information and why people absolutely

• 1:50:59Speaker 08

  love it and it's great, you know, for a news source. It's great to have. I mean, look at how it did on elections, you know, 2024 election was a watershed moment. A lot of people think in prediction markets because the polls and the experts had it very close, prediction markets showed that the sitting president had a pretty comfortable lead in all the swing states. And, you know, it's an interesting question on how these prediction markets interact with normal or traditional exchanges, right? And we've seen an integration of both because it's very helpful to have that information alongside other financial decisions you're making, right? Like, will the Fed raise the interest rate in September, right?

• 1:51:41Speaker 08

  That's a metric that I think has a lot of implications for other instruments. And you can track that, you could ask people, you could ask experts, you could talk to someone in DC and find out, you know, or you could go on one of the prediction markets and see what, you know, what the most likely scenario is.

• 1:51:57John Coogan?

  There's a new lawsuit, flight tracking platform, FlightAware is suing Kalshi alleging the prediction market companies using the data without permission to let users bet on flight cancellations. The, when this news hit, people immediately jumped to, well, what if someone calls in a bomb threat and then the flight's delayed or canceled just because they want to win on the prediction market? But I was expecting the airlines to be pushing back on this, or the FAA, or the TSA, or someone else that would be more directly in the affected line. It doesn't seem to affect FlightAware's business. They seem more worried about brand damage from having the registered trademark linked over there.

• 1:52:38John Coogan?

  But do you understand more about the different participants who are pushing back against being dragged into the prediction market world?

• 1:52:48Speaker 08

  Well, I haven't heard much about that lawsuit. I think it was just today that it came out. I think that one area to watch is what the CFTC does. They put out, they put out a proposed rule and what they're trying to prohibit is contracts that could be potentially manipulated, right? And you don't want to create any perverse incentives. And that's what the CFTC is grappling with and how to separate contracts that we all are really enjoying and finding informational and economically useful to hedge in some situations. But also just make sure you're not creating a situation where someone tries to manipulate the contract for their own good, right?

• 1:53:30Speaker 08

  We just saw a recent case involving George Santos, different context, right? But the manipulation piece, now this is, again, you don't, there was no admission of liability.

• 1:53:42John Coogan?

  It's all alleged.

• 1:53:43Speaker 08

  Yeah, it's alleged, but like, you know, the allegation was, the contract was whether he was going to attend the State of the Union. And he obviously knows that and according to the allegations, you know, went on social media and made certain statements to change the odds of the contract so that he could profit. And again, new market, but that kind of conduct has always been illegal.

• 1:54:07Jordi Hays?

  What kind of lore did you pick up from CFTC history? Like when you took the job or like stories, I don't know what you can or can't talk about, but I imagine like some of the historical enforcement, like there has to be some like crazy, crazy stories of specifically in like agriculture.

• 1:54:31John Coogan?

  Going up against Big Onion, you're talking about?

• 1:54:33Jordi Hays?

  Yeah, yeah, that, but like, yeah, I imagine if you had had the, you probably wore a suit most days, but maybe if it was like, you know, 30 years prior, you would have had some jeans and a sidearm and some boots.

• 1:54:49Speaker 08

  I'd have to learn some new skills on the city guy. But yeah, you know, look, it's an amazing organization, it's only been around for about

• 1:54:58Jordi Hays?

  74?

• 1:55:00Speaker 08

  Yeah, so, yeah. I mean, I think a great piece of trivia for the CFTC, the definition of a commodity is essentially almost everything that you have a futures or derivatives on. There's two exceptions, box office movie tickets and onions. And no one knows the exact reason why they're not, but they are not regulated by the CFTC. And I don't think we could ever see an event contract on them. So there's that. But, you know, just on, in terms of prediction markets, what's really interesting is they've always, they've been around for a really long time. It's just now they really, with sports and with political contests, they've really captivated the attention of folks. And I think you're seeing a ride along effect in terms of other contracts that are now

• 1:55:45Speaker 08

  getting, you know, really popular with the public. And so, you know, there were on a very limited basis, some election contests that were experimental, but now you see them everywhere. And, you know, even the 2025 mayoral race in New York, they were very accurate.

• 1:56:02John Coogan?

  So on sports betting, when we talked to Sagar and Jetty from Breaking Points, who's very concerned about the proliferation of sports betting, having a casino in your pocket, as he puts it, his main contention is that it's the availability, it's the ease, it's the lack of the infrastructure that is, that was formerly around sports betting. You had to tell your family that you're going to Las Vegas, walk into a casino, it's smoky, it's expensive, put down a bed.

• 1:56:33Speaker 08

  Did you always give that notification?

• 1:56:36John Coogan?

  This is, there were a lot of barriers and also you could do self-exclusion, there were gambling hotlines, there were a whole bunch of warnings about the economics of what you were participating in, the house always wins. And what I'm interested in is, does the CFTC even have the authority to layer that a similar structure of, hey, if you're going to be advertising, instead of betting on the Super Bowl, you're going to be trading the Super Bowl, you also have to have the same gambling hotline phone number because from our view, it's a similar thing. We're going to let it happen, but it needs to have the same infrastructure that it had just a few years ago.

• 1:57:17John Coogan?

  Or is this something that the CFTC doesn't even have the tools in the tool chest to make happen if they wanted to?

• 1:57:27Speaker 08

  No, they have the tools. I mean, they've regulated these markets, just not, you know, in these subjects, right? So they, basically the CFTC's view, and some courts have adopted this, is that these are financial instruments, they're called swaps. An agreement between two parties on the occurrence of an event that has some economic financial consequences is how they view it. And so the CFTC has authority if there's fraud, if there's manipulation. Now, I do think, and they've made some, you know, some talks about this, that we'll see more rules from the CFTC. It has not, you know, traditionally been involved in these spaces. And I think like, you know, with anything with government, there is, it takes time to catch up with industry.

• 1:58:12Speaker 08

  That's just, that's just a fact. And so I think the CFTC will tackle those issues pretty soon.

• 1:58:17John Coogan?

  Yeah, it'll be very, very interesting to follow. We'll have to have you back on when there's more news. Thank you so much for taking the time to come chat with us.

• 1:58:24Jordi Hays?

  Yeah, thanks for breaking it down.

• 1:58:24John Coogan?

  Have a great rest of your day. We'll talk to you soon.

• 1:58:26Jordi Hays?

  Cheers.

• 1:58:27John Coogan?

  Goodbye. Let me tell you about CrowdStrike. Your business is AI, their business is securing it. CrowdStrike secures AI and stops breaches. Our next guest is going direct, going independent. We have Conor Sen from The Housing Frame. He is the founder of a fantastic new substack that I just subscribed to yesterday. Conor, welcome to the show. Thank you so much for taking the time to come chat with us. How you doing?

• 1:58:52Speaker 09

  Yeah, thanks for having me.

• 1:58:54John Coogan?

  Congratulations on the launch. I'd love to hear a little bit about your background, your, the beats and the way you like to cover different topics, what you like digging into, and then we can go into some of your current outlook on the market, housing, all the hot topics that you're planning on covering this year and beyond.

• 1:59:16Speaker 09

  So I'd say my professional background related to housing is twofold. One is I worked for a big hedge fund in San Francisco during the crisis. So I've been out there and got to work on credit derivatives and mortgage derivatives and all that. Saw all that happen.

• 1:59:29John Coogan?

  Sure.

• 1:59:29Speaker 09

  Then moved to Atlanta after the bust and just needed to start over. And eventually got hooked on Twitter, started writing for Bloomberg in 2016. Did that for 10 years, wrote about the economy, housing, demographics, cities, things like that.

• 1:59:40John Coogan?

  Yeah.

• 1:59:41Speaker 09

  And just felt like the housing market to me feels like it's bottoming. And I saw the opportunity with Substack and being a chance to be the voice, to come on shows like this and talk about it for the next 10, 15, 20 years. And it just felt like a great time to start doing that.

• 1:59:56Jordi Hays?

  John is so happy about this because John, you're, you would, you would, we, we, we don't have like a, a housing guy.

• 2:00:05John Coogan?

  Oh, that's true.

• 2:00:05Jordi Hays?

  And John, John.

• 2:00:06John Coogan?

  Well, we got Sager and Jenny complaining about it constantly.

• 2:00:09Jordi Hays?

  We got Sager complaining about it. But, but we don't have, we don't have somebody who's been like, you know, we have like, we like hanging out with Joe Weisenthal.

• 2:00:16John Coogan?

  Yeah.

• 2:00:17Jordi Hays?

  People like that. We have like our guy in a bunch of different categories, but we don't have like our housing guy.

• 2:00:21John Coogan?

  Ben Thompson for Mag7.

• 2:00:22Jordi Hays?

  Hopefully this is, hopefully this is the start of, of many, uh, many, many appearances.

• 2:00:27Speaker 09

  And that was part of the thinking too, because Bill McBride at Calculated Risks, the blogger that everyone knows so well, he's retiring next spring. And so I did look out five, 10 years and thought, who are the voices for our generation who can do this? And I felt like I could be one.

• 2:00:39John Coogan?

  So how do you think about your, your, your, your reporting, the shape of like, when do you want to go and talk to a bunch of sources on the ground? Look at a bunch of economic data, crunch something into something more of a narrative. There's so many different, uh, outlets, even when you're at Bloomberg, uh, opinion versus factual reporting, getting a scoop. There's so many different pieces. What, uh, what, what have you explored? What have you shied away from? What have you leaned into?

• 2:01:06Speaker 09

  I think starting out, it's probably going to be fairly similar to what I was doing at Bloomberg, probably reaching out here and there to sort of broaden my base.

• 2:01:12John Coogan?

  Yeah.

• 2:01:13Speaker 09

  But over time, I think it'll be a function of what do I think's interesting?

• 2:01:16John Coogan?

  Yeah.

• 2:01:16Speaker 09

  And then who are the sources that I can talk to who are, you know, good and help me do what I do better. So I'm pretty good at data and media and all that. But yeah, I don't have a lot of friends who are real estate agents or mortgage originators or things like that. So I'm, I'm excited about that.

• 2:01:30John Coogan?

  Yeah.

• 2:01:30Jordi Hays?

  Okay. So first question, you said you feel like the house, uh, the housing market is bottoming. But like a lot of people, if you ask average Americans, that certainly they, they wouldn't, they wouldn't feel that way.

• 2:01:44John Coogan?

  You say it's bottoming and yet how is this where it's?

• 2:01:46Jordi Hays?

  Prices still feel quite high, but, but what you're saying is maybe transaction volume has been subdued over the last couple of years due to, to rates and, and other factors. But yeah, we'll break, break that down, like talk about like the, the why now and, and then we'll get into where things are going.

• 2:02:05Speaker 09

  I, I think the bottoming call is twofold. One is that the hardest hit states over the past few years, places like Florida and Texas now see inventory dropping and new orders for home builders are, are rising. That's kind of your classic bottoming late cycle recovery. And then San Francisco is clearly a market that very similar to 2010, 2011 is leading the country in terms of what this expansion looks like. And I'm really excited and interested to see where that broadening out goes over the next six or 12 months.

• 2:02:34John Coogan?

  How important is, uh, actual development in home building? Uh, we've talked to startups, very early stage thinking about 3D printing or manufactured housing. And there's some technology there, but I always discount those projects as maybe that'll have an impact in 10 years, 20 years. Uh, I'm really excited and optimistic about it, but realistically, I don't think it's going to be moving home prices in the next few years. But how important is the shape and structure of the actual home building market to house prices in America?

• 2:03:07Speaker 09

  It matters a lot down here. I'm in Atlanta. It matters a lot in Texas and Florida and Arizona, places like that. Historically has not mattered a lot in San Francisco. I remember talking to somebody at Bloomberg Beta about eight or 10 years ago, who said that the best way for ordinary people to bet on VC is San Francisco real estate. And I think we're seeing that this year. So I'm, I'm hopeful that they can build more homes out there, but it's been a, a long, tough slog. I mean, I, I left in part because of housing and here we are 16 years later.

• 2:03:34John Coogan?

  What about government regulation? Obviously it feels like the story of housing in America is very much, uh, the mortgage interest tax deductions, uh, all the incentives to get, uh, the American dream is directly tied to homeownership. And so the government has done a lot for that. But then there's also permitting reform, the abundance Democrats, the abundance wing are pushing for more building. And I'm just wondering if you think that there's anything that could happen on the policy side that would actually move house prices in the, uh, in the short, medium or long term?

• 2:04:09Speaker 09

  So I did speak with a, a policy expert on housing about, I said, what are, what are your thoughts on road to housing and what matters for this? And there are some short-term things like manufactured housing should get easier to build. But he said, the really important thing is we've identified a bipartisan coalition that will vote for housing bills. So this was our first crack at the apple and, but we now know where the votes are. So going forward, we can take another crack at it in two years and just keep chipping away. Try, try stuff, see what moves the needle and just hope that slowly but surely over time, we can build more housing.

• 2:04:39John Coogan?

  Do you have any idea of like what the shape of that legislation might actually look like? Because it's just saying like, we need to build more, a lot of, you'll get a lot of thumbs up, but what are we actually changing? Are we, are we making the time to permitting more? Are we hiring more people to review permits? Are we changing the requirements for fireproofing or something like, it, it's very, it, it gets nitty gritty really fast.

• 2:05:06Speaker 09

  So one thing that might be, that resonated with your audience is that right now the financing piece is really hard. And what happened was similar to VC and private equity, a lot of people invested money in 2021, 2022. Interest rates were low and in real estate, we'd say cap rates were low or valuations were high.

• 2:05:22John Coogan?

  Sure.

• 2:05:22Speaker 09

  And they got blown out pretty bad over the next few years. And the equity got wiped out. Maybe people are still sitting on loans. So as we see the apartment margins, apartment market starting to turn, time to build apartments again, there's no equity to go around. And you can't get a deal done unless there are equity investors ready to go. Because they all got wiped out last time. They're gun shy. And then nowadays, maybe you'd rather fund a data center than an apartment building. So I think finding ways to finance new developments and maybe the public sector can have some role here. Whether it's subsidizing or tax incentives, things like that, that's something that we should look into.

• 2:05:56John Coogan?

  Interesting, interesting. What role do you think other buyers in the market that aren't specifically someone going to either buy a house that they'll live in? Or, um, or buy maybe an apartment building to rent out or having on the, uh, or having an effect on the housing market overall? You hear a lot of, uh, uh, sort of hand wringing around like private equity, buying a bunch of homes. Is that actually distorting the market? I was running the numbers and it felt like a couple percentage points of homes are owned by private equity. It didn't seem like it was the biggest factor, but how have you grappled with that story?

• 2:06:34Speaker 09

  It was really a much bigger story 15 years ago. And certainly here in Atlanta, the private equity investors bought up a lot of distressed homes. And I know that looking back, it doesn't look so good, but at the time that was when there really weren't a lot of qualified buyers. People had bad credit scores. Unemployment was really high. Banks were failing. And so investors came in and stabilized the market. And I know it's not popular now, but at the time it made sense.

• 2:06:57John Coogan?

  Yeah.

• 2:06:58Speaker 09

  And, and so I would say today it's that we have a really K-shaped housing market where if you have a lot of stock wealth, it doesn't really matter where mortgage rates are, you can still buy a home. And in fact, I was looking at data in Nashville, year to date, home sales in Nashville for homes over $2 million are up 32%. For homes under a half million dollars, basically flat. So the corner of you need a mortgage, you have just a job, that market's still pretty stagnant, but the high end is really booming.

• 2:07:24John Coogan?

  And so are the, is the bottom of that K switching into renting in that case?

• 2:07:31Speaker 09

  They are, and renting is still basically a better deal in most places. But I do think an issue is that in the apartment market, we're starting to see vacancy rates come down. And typically when vacancies come down, rents go up next.

• 2:07:43John Coogan?

  Yeah.

• 2:07:43Speaker 09

  And so you might be in a situation where yes, it's cheaper to rent than buy. But if you think that your rent's now going to go up a lot over the next two or three years, you might factor that in and say, I'm willing to overpay for a house because my rent's going to go up 20% in two years. So I think that's more of a 2020, 20, 2027 story, but that's something I'm thinking about for next year.

• 2:08:01Jordi Hays?

  How much are you going to be tracking, uh, demographic, uh, like basically demographic trends and how that impacts housing? The boomers have a lot of, quite a lot of homes and they'll be turning them over eventually. But, uh, is that a story for like, is that like a 2030s story?

• 2:08:24Speaker 09

  I think so. For, for me right now, the demographic story is that we see both in New York and San Francisco that rents are really high. But rents have come down a lot in those states that built over the past few years. So as the, the San Francisco Austin gap gets really wide, maybe an anthropic employee won't move to Austin. But maybe somebody who, you know, couldn't buy the house they wanted to buy because they got outbid by an AI person. Maybe they start to look to leave. And so maybe then you can get the migration flywheel cranking again in the South.

• 2:08:50John Coogan?

  Interesting. How big of a deal are foreign buyers in the American housing market? There's a lot of, uh, again, you see these pieces that's similar to the private equity buying houses of, uh, oh, there's someone that made a ton of money internationally and they just want a safe place to park their capital. And so why not buy an empty luxury apartment in Los Angeles or Miami or New York? Is that, is that just a, just a small fraction of what's going on in the real estate market? Or is it actually enough to move the overall picture?

• 2:09:22Speaker 09

  That was actually a sneaky source of weakness in the North Dallas suburbs last year because H1B visas were apparently a fairly meaningful part of the, the sort of exurban Dallas new home market. And then financing got, I don't know the details of that very well, but just with the policy changes with the administration. And so that seems to kind of come in waves where you get these moments where China's buying up a lot of housing. And then they go away for a while and then they come back. I don't think it's a big factor right now, but it's certainly something to watch going forward.

• 2:09:50John Coogan?

  Yeah. Um, last question for me, I'm, I'm interested in, um, how you're thinking about your audience for the housing frame. Is, is the, do, do you think that there's a goal to, uh, reach hedge funds and traders who will be, uh, reading your analysis and actually building an investment thesis on top of it? Or, or like what, where is the, and then does that lead into like a consulting business? I'm just sort of interested in where the, where the overall, uh, company goes as you expand.

• 2:10:19Speaker 09

  Yeah, it's interesting because coming from Bloomberg, we didn't get a lot of demographics or data about our audience and our writing. And so I think to start, just going to be looking at the Substack metrics and seeing who's coming in, what's getting their interest, kind of thinking about that, reaching out to people one-on-one, because especially early on, I can do that. And then it's sort of, again, these are not one-to-one comps, but I look at what Bill McBride built with calculated risk over 20 years and thinking, I could try to have some of that audience over time or try to earn their trust. And then this is like, you know, pie in the sky, but what Dylan Patel did with semi-analysis, and he was just a guy who got started, and then his sector got hot. And so I do think housing eventually will get hot again. And hopefully, I can be a place that people come to when that happens.

• 2:11:02John Coogan?

  Yeah, yeah, I can totally see the semi-analysis type, tokenomics model, understanding how data centers are building out. I haven't seen that data contextualized for the housing market, and I can imagine so many consumers and obviously, business people being fascinated by it. Jordy, anything else?

• 2:11:23Jordi Hays?

  Not for now, but

• 2:11:24John Coogan?

  Congratulations on the launch. Subscribe. Where can you sign up?

• 2:11:27Jordi Hays?

  Yeah, there's news.

• 2:11:28John Coogan?

  Give us the URL, so everyone can go subscribe.

• 2:11:29Speaker 09

  It's connersend.substack.com, or just the housing frame. I'm sure you can find it. So thanks a lot, guys.

• 2:11:35John Coogan?

  Thank you so much for having me on the show. We'll talk to you soon.

• 2:11:37Jordi Hays?

  Thanks for coming on. Congrats.

• 2:11:38John Coogan?

  Have a good one. Goodbye. Let me tell you about public.com. Investing for those who take it seriously. They've got stocks, options, bonds, crypto, treasuries, and more with great customer service. Any other stories you want to cover? Bending Spoons, apparently on a tear, 265x price-to-earnings ratio, buying old boring SaaS with slow growth. People are excited about that, I guess. Bending Spoons added $11 billion in market cap after announcing the Airtable acquisition. Can't make it up. Is that true? Bending Spoons? Bending Spoons market cap? Market cap? Wow, $33, $34 billion company, way up since IPO.

• 2:12:22John Coogan?

  Wow, really, really, really impressive. Up 50% since they IPOed. They're on a tear. Who will be the next Ben Spoon? That is the question everyone's asking. Do not get

• 2:12:34Jordi Hays?

  Don't get your spoon bent.

• 2:12:35John Coogan?

  Don't get your spoon bent. Do we need to

• 2:12:37Jordi Hays?

  Unless that's the best possible outcome.

• 2:12:38John Coogan?

  Yeah, maybe.

• 2:12:40Jordi Hays?

  We'll leave this show with a post from June Chu, who was the COO at Zillow until very recently. He posted on LinkedIn, "I have stepped down from my role as COO of Zillow. That's all I have to say about that."

• 2:12:58John Coogan?

  Mic drop moment. There we go.

• 2:13:00Jordi Hays?

  And yeah, I'm curious. I'm sure we'll find out in due time, what he really wants to say about that.

• 2:13:09John Coogan?

  Yeah, it feels like teeing up a tell-all.

• 2:13:11Jordi Hays?

  Feels like he maybe can't say anything.

• 2:13:15John Coogan?

  For sure, for sure. Anyway, there's a bunch of other good stories.

• 2:13:20Jordi Hays?

  Last, but not least, Leonardo DiCaprio urged Chilean authorities to protect critically endangered frog from a proposed power transmission project. This feels like something that's solvable. Like, I think that, I think we can protect the frogs and do the power transmission project.

• 2:13:41John Coogan?

  Yeah.

• 2:13:42Jordi Hays?

  Do you agree, John? I know nothing about this situation, but I have, I have a little faith.

• 2:13:48John Coogan?

  Spiny-chest frog. There's a thousand of them that remain in the wild.

• 2:13:52Jordi Hays?

  I think, I think Leo should let them move in.

• 2:13:57John Coogan?

  Ooh, bring them to America, put them in a zoo or something. I think they want to live there. I think, I think you gotta do a lot of work. I don't know, maybe beam the power somehow, do something else. Yeah, interesting. It's gotta be rough being the, being the, in the Chilean government and just being like, who's taking shots at us?

• 2:14:17Jordi Hays?

  Leo just comes over the top.

• 2:14:18John Coogan?

  60, he sent 60 million Instagram followers our way, and they're

• 2:14:23Jordi Hays?

  Sickness on us?

• 2:14:25John Coogan?

  It's gotta be brutal. Well, good luck. Hopefully, the frog can be protected while the power transmission project goes on. Frogs on hamster wheels powering, generating power. Maybe that's the future, who knows. Well, thank you so much for tuning into TVPN. Leave us five stars on Apple Podcasts and Spotify. Sign up for our newsletter.

• 2:14:46Jordi Hays?

  It's August 11.

• 2:14:47John Coogan?

  It's August 11. It's summer. Yeah, it's summer.

• 2:14:50Jordi Hays?

  Go touch some grass for us.

• 2:14:52John Coogan?

  Have a good day, and we'll see you tomorrow, weathering the Pacific. Goodbye.

• 2:14:58Jordi Hays?

  Love you.