Cliff Sosin
speaker
323 appearances
1 recordings
1 series
first heard Apr 2025
last heard Apr 2025
Cliff Sosin’s voice in public audio — every appearance, attributed to the second.
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things and you know if someone's done it well and sort of smart they can kind of figure it out and they can do a pretty decent job um but as you scale you're putting people into roles who you know may not be as good at this and um in 2021 in retrospect for the first time the business kind of in part because of covid in part because of the growth the businesses kind of reach outstripped its grasp from a process maturity perspective now in 2022 there's a software system
And the software system tells you, this is how many people you need at these times of the day. And this is where you're going to put the cars. And here's your protocols. You're going to have a starter, like a jumper. You're going to keep it here. And this is how you do this. And it turns out that this set of protocols
locally and globally optimizes better than even the best people, but also makes sure that everybody, so it takes the best people, makes them better, and then takes everyone else and makes them almost as good as the best, right? That software had never been written, right? Because this was just not a function that someone had ever bought.
Because think about how hard, that's in and of itself what I just described is a fairly meaningful like project, right? Before 2018, before 2019, I should say, the company bought almost all of its cars at auction. So the flow of cars was auction to IRC to customers. Starting in 2019, the company began buying cars in the public. And this has been a wildly successful thing.
They make a lot more money doing this. But it turns out that when you do that, you create the potential that if you buy more cars than your... If you have a node in your system, an IRC, it's possible, unless you've thought about this, for cars to accumulate at a node. You can be buying more cars than are leaving that system, or more cars can be transiting in than are leaving.
And if you have finite amounts of parking, this can create congestion, right? And what had happened, what interestingly what happened for the first time in 2021 or so was the buying cars process became really successful. And they were buying more cars. For the first time they were buying.
And so now suddenly they had this shift in the logistics system, sort of reduce the, flip the direction of net flow. This is fine. You just need to build a bunch of things to change it. But like this is an example of the sort of thing that was happening all at the same time. A lot of this was covered up in 21 because they were hiring to beat the band.
And so when you have excess staffing, it kind of covers up a lot of blemishes. As you get into the end of 21, the first indication that something was wrong was, you know, slightly weak November. And then Omicron happened. Their whole system became a disaster. And the reason is that if you think about cars like a series of events that have to happen one after the other.
if let's say you have a truck and the truck goes out 250 miles, switches with the driver and comes back. Well, if that driver calls in sick, like how does that truck route continue? Okay, so now you have nine cars that just got stranded somewhere, right? How do you get those cars moving again? And now this happens all the time, but like if this happens a lot,
you overwhelm your ability to clear these things. And now you have cars piling up in basically giant traffic jams throughout their whole system. And then your delivery times that you're promising on your website have to get way extended because you just can't. So your sales come way down.
Which, if you haven't had a system before where you could accidentally buy more cars than you're selling because that's never come up, Now suddenly you have a problem where like you're buying cars, they're accumulating the system, you know, and you don't have your flows to your logistic system haven't been optimized for this. So the cars are piling up everywhere. You're sort of shuttling cars.
This is what the system looked like in January of 2022. It was total wreck. And they were trying to fix it. And, you know, it took them a few months to do it, like three, six months or whatever to fix this. But the important fact is that it obscured demand, which was falling off a cliff. Underlying demand was falling off a cliff.
And it meant that they were still behaving in February like demand was as it had been in September, even though by that point, in retrospect, demand had materially declined. Yeah. they bought Odessa using tech. Odessa was, just describe what Odessa was. Sure. So Odessa is a traditional auction business.
So I think a large lot, people bring car dealerships, fleets, they bring cars, and they hold in-person auctions. You drive them down a lane, people bid. The in-person auction business will have a long tail to it, but it's eventually a decaying business over time.
But what they got with Odessa is 54, I believe, very large, centrally located properties on which they can build IRCs and store facilities. One of the challenges in their business had been that it turns out they worked out that it is better for them to have large IRCs located relatively close to the customer, because fast delivery speeds are good. Access to labor pools is good.
And those are more important than the benefits of being far away. But it turns out that getting 200 acres zoned for auto industrial within 10 miles of downtown Boston is difficult, to say the least. It turns out this is the sort of property that Odessa had. And so they basically bought it for the commercial real estate.
It came with the auction business, which has a lot of benefits to them as well. And makes all the sense in the world. In retrospect, it's been a huge home run. But they bought it with all that. They bought it in February of 22 after, if you read the proxy or whatever, they've been talking for years. It just happened the timing was bad.
So what happens is you get to March and they sort of realize that they have a demand problem. And I haven't really addressed what was going on that caused the demand problem. So there were, as far as I, my best understanding is there were three things. Although at the time I pretty much only sort of knew about two of them.
And it's worth pointing out that all of these things, they kind of got worse and worse and worse and worse and worse over time. So you thought you'd identified it. And then like six months later, it was like worse. So the first, there were chip shortages. during 2020 and 21, which caused manufacturing shortages and caused used car prices to rise.
You think about the used car business as facilitating people swapping cars. But what happens oftentimes when people are swapping cars is they're upgrading. And so if prices are higher, the cost of upgrading is greater. And that tends to reduce people's propensity to swap cars. As a consequence of that, the used car industry, which is typically about 40 to 42 million cars a year,
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