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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Appearances
When you own a stock that's down 30%, you know, okay, here's what's wrong, here's what we're going to fix it, blah, blah, blah. When it's down 99%, like, so, you know, someone meets you and says, like, what's up with Carvana? And you're like, well, I'm aware that last year I thought they were going to sell 800,000 cars, and they're on track to sell 300.
And I'm also aware that last year I thought they'd make positive EBITDA this year, and they're on track to lose $2 billion. And I'm also aware that the stock is down 99%. But what I'm about to say is I think things are going to be okay. And you can see how that makes you seem like you've lost the plot. And there isn't a good way to say that that doesn't make you seem totally nuts.
Because basically, you say all that and they're like, oh, you denial bull market baby. And so that was another real tricky thing. There was no good way to... And there was, at some level, deep uncertainty because things had gotten bad enough where I couldn't be like, look, I'm 100. I couldn't be like, yes, yes, we're fine. I was like, look, things are way off course, right?
And for reasons I never would have predicted. And so how do you have that meeting, right? And then how do you have the 30th version of that meeting, right? Because you do these over and over, right? And then, of course, you leave that meeting and you've sort of done it. And then you drive and the stock's down another 8%. And you're going to the gym and you're like, particularly, whatever.
You sort of try to manage yourself and then you can't sleep. It was really hard. I'd rather not go through it again.
One thing I mentioned earlier was the importance of management teams. Like if I rank things instead of how they ultimately turned out over the full span, the management teams were wildly predictive of outcomes versus my expectations. So that's like a practical learning.
Another is that in general, I have a new and deeper appreciation for how much harder it is in reality to go from unprofitable to profitable.
than it is on paper and like i that you know i everyone like i feel like that's kind of trite but like this the thing is you do this analysis you're like okay this is you know the margins and blah blah blah and like it all makes sense but like now i've seen this like play out like up close over and it's hard like it's so hard it's so much harder than it looks and so i think my it's not that i won't invest in loss making companies but like my
willingness to underwrite to that is just adjusted. There's like a base rate adjustment that's more salient for me than it was before. I have less of an interest, I should say, in investing in businesses that have narrower Because like life will throw massive curveballs at you.
And like, you know, there's sort of an interesting point, which is like if you'd asked me why I owned so much Carvana back when it traded for like 300 back in 2021, I would have said this is an incredibly stout business. People do not appreciate how stout this business is. And in retrospect, I was right.
The world threw three once-in-a-generation curveballs at these guys at the same time while they were having all kinds of internal problems that don't happen that often. And they added debt and whatever at the same time. And they did it. They got through it. So it turns out it really was that stout. But had it not been that stout, had these sort of advantages been –
If this business all grown up and super great was a 5% margin business and not like a 13 or 14% margin business, I'm not sure they'd have had the wherewithal to make it. So I have a greater, like my sort of just my reaction to companies where, yeah, like it works, but there's just consumer surplus isn't that much and the advantage isn't that big, but like pencils, it's just kind of like move on.
Yeah.
It's made me re-question that. Well, I think on the one hand, you know, one of the things that I have said to people who've asked me about this is sort of like the lessons from this period are... important, but it's a teaspoon of medicine, not the whole bottle. So on the margin, I'm less interested in loss-making companies, but I'm not excluding them.
On the margin, I think there's probably room to be a little more diversified. But, you know, like we've had a lot of success over the whole history of the fund up to through and including, you know, this period, that success was because of how we did things. And if I were to
have thrown out the concentration over the whole life, I think we come out in a worse place, albeit maybe with less volatility. And so the lesson is, yeah, on the margin, there's room to be more diversified probably, especially if you factor in the idea that you might have some companies that are less stout. But a teaspoon of medicine, not the whole bottle.
Yeah, you should ask someone really smart about that. And here we are. I'll tell you a few thoughts on artificial intelligence that are super narrow because, you know, some world is big and complicated. And, you know, I think maybe one of the lessons of 2022 is that you don't know a lot. I find this super helpful. I use various AIs every day.
You know, in particular for businesses where there's a lot of information on the Internet. Right. So if you're studying Medicare Advantage or Medicaid managed care companies, you know, let's take Medicaid managed care. There's think tanks and government reports and RFPs. And you could fill a room with the materials that are on the internet and you can't possibly read all of it.
And most of it's kind of boring anyway. But these things can. And so then you can ask it questions like, okay, who won... you know, the RFPs, did the incumbent win or did the entrant win for Medicaid RFPs in the last 50 RFPs by state? And like, what were the major qualitative factors identified in the, you know, decision that like drove each one, make me a table, right?
And that's a ton of work and, you know, it takes two seconds with an AI. So I think that in the playing field of life, it advantages someone like me who works, you you know, fairly independently. I don't have like a giant team in investing. Um, you know, as to whether these, like right now, an enormous amount of information is not in the internet, right?
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