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
Some of them are doing okay. A lot of them have failed, but none of them are doing really great. And just the bottom line is that it is so hard.
I actually love the comparison to Amazon. There's a video I saw once, I don't know how famous it is, but I love it, where Jeff Bezos is describing why books is the first best place for an internet business. And he talks about how the selection matters so much, and then he talks about how you can get the books and you can ship the books, and people can pay for the books.
Well, I actually think that from a consumer's perspective, used cars is just as great as books. The selection space is infinite. Selection matters an enormous amount. Also, what I described with Carvana system is a lower cost to operate system than the traditional dealership system. It's a better experience. But the thing about books is it's really easy to do.
Imagine if you had to start Amazon, but you couldn't just call up the manufacturer and get books. You had to manufacture them. And imagine if you couldn't just call FedEx and have them ship the books. You had to build basically FedEx. And imagine if you couldn't just accept MasterCard. You had to build a financing platform. And Lord knows you can't just sell the person the book.
You have to do title and registration and all that. And with books, the stakes really just aren't that high. And so people are willing to try it. And if it doesn't go so well, they're disappointed, but it's OK. A car is the second largest purchase of your life. And so you can imagine how that is also really challenging.
And so in the sort of fulfillment sense of it, I think used vehicles are probably the hardest thing to build. But the analogy to Amazon actually, I think, is apt.
If you'd asked me five years ago, I would have put myself firmly in the let's focus on the business. I don't think I bring much advantage to understanding management. It's been an exciting five years. And in that time, one of the things that's come out is the businesses where if you'd ask me, OK, if I get it, you don't care, but like rank them anyway. And I'd rank them.
the teams that I was involved with, that ranking would have perfectly predicted how things did relative to my expectations at the time. So what I learned there was two things. One, it matters. I knew it mattered. But more importantly, I think I can judge it. And so now I fall into the, obviously, I care predominantly about the business and the price. That is, in the end, the right thing.
A great team with a terrible business is going to be a slug. There's just no two ways about it. By the way, just to go back to your contained versus uncontained point, like that's another idea. It's like there are businesses where there's a new problem to solve every six to 12 months. And it throws up a never-ending series of hard problems.
You know, so you want businesses, so a contained one would be one where like once it's, set it and forget it's the wrong term, but there's like an obvious, like, would you like to sell more cars? Yes, yes, I'd like to. Okay, so now going back to management. So I don't necessarily think I'm going to ever get to a point where I'm like, this team is great.
I don't care that this is a business that will perpetually throw up hard problems. I'll buy it anyway. But I do think that I've now come to understand that I can judge it and that management matters a lot. So it gets weighted into my thinking in a way it wasn't before. For what it's worth, I'll add to you how I judge it. Meeting with a management team is great.
It turns out all the people who become CEOs figured out how to sound great. You know, I learn a little bit, but I certainly listen to them talk in public. And you can definitely pick up over time who kind of is making what seem like sound business judgments and giving good reasons for them and people who, you know, aren't.
That being said, the really good way to do it, I find, is I talk to former employees. And I'm certainly interested. I'm using that to learn about the company, learn about how it works, how do you buy things, how do you sell things, blah, blah, blah. But I'm also just assessing them. And a company which spits off
People who worked there for 10 years, left on good terms, who you're just like, I don't get it. This guy's an idiot. That says something about the caliber of people in the organization. And the human capital exhaust is kind of indicative of what's inside. And conversely, when you find yourself, go talk to 10 former employees who spent at least five years at Capital One. They'll blow your mind.
That tells you something about what's going on in Capital One. And so I find that that's really the best approach. As to Ernie, I think, you know, at the risk of inflating his ego, I think that someday people will compare Jeff Bezos to Ernie Garcia, not the other way around. He's extraordinary, right? This business is... incredibly difficult, as I've tried to emphasize so many times.
There's a reason why they've succeeded where nobody else in the world has been able to succeed. And I'll also add that I'm aware, obviously, of his dad's history with the savings and loan crisis. And This is – I think it was either a $20 or $50 fine that he paid as like a late 20-something. And this is, by the way, his dad, not him. And this is 50 years ago or 40 years ago.
It's just – it is wild to me that people then take – What his dad did. Yeah, people take that fact. They're like, therefore, this company, you know, is a fraud. And it's like, oh, my God. Like, this is the, you know, the guy was a billionaire. What was his plan? To, like, make a few billion more but send everyone he loves to prison? Like, this makes no sense to me.
If you just spend any time dealing with talking to people who've dealt with the Garcias over... the 35 years that, you know, since the, you know, guy, you know, made a mistake, which, you know, if you actually go through the details of it, it's not obvious he did anything super wrong, but like whatever, he got caught up in stuff. Everyone speaks incredibly highly of them.
They've done nothing but behave totally ethically. If you go through the experience the company had in 2022 or whatever, like there were plenty of opportunities for them to hurt us as third party shareholders. And they haven't. And, you know, so I mean, Ernie does a great job of just tuning all that nonsense out as to like what he does. Well, he's incredibly smart.
He's assembled the team around him that are incredibly smart. And he does a great job of thinking about things in a variety of perspectives that are very, you know, wise. So on the one hand, he'll analytically explain to you how, as an outside investor, you could look at CarMax and try to make a sensible guess at what Carvana sees as its price elasticity demand, which is a fairly analytical thing.
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