YouSaid · the spoken record

Cliff Sosin

lines on the record: 140
first: 2025-04-29
most recent: 2025-04-29
sittings or episodes: 1
sources: podcast

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“You got a management team, things are not going well. What are you going to do? On the one hand, you have an obligation to understand, so you have to ask questions. But on the other hand, they're trying, right? Even if they're idiots, they're trying, right? And so it's important to sort of remember how I felt then and how I was treated by different people and like how I want to treat people. And so maybe a better person. It's great.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I had the two that I mentioned earlier. One was the guy who, you know, right when I was starting my fund, invested in it. And I didn't quite appreciate at the moment just how rare that was, but it turned out to be a major kind of event that played a big role in me ultimately having some success. And then the other one was in 2022, that partner who went out of his way to just come and basically buck me up over lunch. Didn't have to do it. What a kind thing to do. I mean, and you think about how, I mean, I'd lost the guy to fortune, right? At least on paper, right? And not only did it make me feel better at the time, but I think it's made me a better person because I can reflect on that now and try to make sure that, you know.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's frustrating. And there have been times, I remember, back in 2010, like Google, my friend of mine put it really well, there's Google sitting there looking all cheap, right? And, you know, he was right. But thank goodness they didn't buy it because I think the things I owned did better. But not all of them. So, you know, I wish I could have picked the worst thing I had. But that's not how life works. These are great businesses if I ever retire. I imagine I'll stop thinking about stocks and diversify and I'd own them. And if I had someone who wasn't, you know, if my mother wasn't invested in my fund, I'd tell her to buy that. But there's a lot of businesses I don't own. The key isn't to understand everything or to pick the very best ones. The key is to pick a bunch of things, a handful of things that you know well and are going to do well and watch them closely and don't worry too much about all the other stuff.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“I have a fairly boring view like everyone else. I think for the average investor, you know, in SP 500, ETF is a great way to go. Maybe an all-market ETF or whatever. But I've certainly looked at all these big companies. They are great for a reason. You know, I've certainly thought at times that they represented good to even superior returns. It's just never, they've never kind of, I mean, one of the hardest parts about my job is like I sit around and I study all these things. I find plenty of things where, you know, I said a joke in the $100 billion portfolio, there's definitely room for that, but we don't, you know, we're not managing $100 billion. And as it is, the opportunity cost of selling A to buy B doesn't work. So the hardest part about this, one of the harder parts about my business, about my day-to-day is like spending a lot of time on something, getting to know it really well, concluding that it's a great investment, but just not quite as great as the other thing.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I always use the following example talk to some investor and they're telling you about their British restaurant investment or something. You say, that's so cool. Sounds like you really know England really well. Why don't you tell me three places you could buy a power drill in the UK? And they sort of like realize that they don't know, right? And there's just an enormous amount that you learn about a place by being there. And so it's not that I could never invest outside the US. It's just that I'm keenly aware that overcoming a certain degree of naivete is very, very hard, even for some places seemingly close as the UK. And so I just think that the US is an enormous market. There's lots of interesting things to do. And, you know, someone will pitch me some like, you know, Chinese stock and I say, that's fascinating. I'm sure it's going to be great. I'm going to put it on the bottom of my list right after all the American stocks. That served me well. I'm sure I miss all kinds of stuff, but we got to pick our lanes.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“The US is an amazing system Think there's a lot of reasons for that. I mean, I tend to think about the idea that there was meaningful selection effects in the people who chose to migrate to the US versus the people who chose to stay behind. And that probably”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, it might be hard to do well after all this happens if I reflect on the future sort of big picture. I mean, people used to ask me what my macro opinion was, and they always meant like interest rates and GDP growth. And I always give them some version of something like, look, I'm fully confident that my great-grandchildren will marvel at my poverty. And unless they're all dead. But hopefully they won't be. I think these tools make it all the more clear how we're going to get there. especially if quantum computing happens, right? Because the ability to create synthetic data with real-world simulations using quantum simulators and then to train the AIs on that seems like a wildly interesting tool.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“That being said, you know, over time, maybe they have agents that are able to gather information, put it into the internet, maybe the internet, this corpus information on the internet gets bigger because more stuff is put in there in other ways. And of course, these tools are only going to get better. When AIs get to the point where they can make investing decisions, there's probably not a lot that's pretty far down the spectrum, I think, of things that they would require doing. It's kind of like asking about singularity. It's like, ah, you know, sometimes I'm grateful that I've had a chance to sort of do well before all this happened because...”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“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 Fairly independently. I don't have a giant team in investing as to whether these, like right now an enormous amount of information is not in the internet, right? So if I were to grill an AI about all things like Medicare managed care, he knows a lot. If I grill it about Carvana, we pretty quickly run out of stuff. Like this interview will get in there. most of what I know about Carvana, I've learned from a lot of thinking, a lot of talking to people who used to work there, a lot of data scraping and other things that just aren't in the internet yet. And so the tools, you know, these, like if you spent a bunch of time trying to learn about Carvana from an AI, I don't think you'd get very far.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Some world is big and complicated, and I think maybe one of the lessons of 2022 is that you don't know a lot. I find this world to be super helpful. I use various AIs every day. 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, let's take Medicaid Managed Care. 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 you know the these things can and so then you can ask it questions like okay like who won you know the rfps uh did the incumbent win or did 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 making a table right and that's”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“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.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“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 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, like 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 like stout. But a teaspoon of medicine, not the whole bottle.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's made me request that, well, I think on the one hand, 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.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“People do not appreciate how stout this business is. And in retrospect, I was right, right? Like the world through 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. Like 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 You know, if this business all grown up in super great was a 5% margin business and not like a 13 or 14% margin.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Than it is on paper. And like, you know, everyone, I feel like that's kind of trite. But the thing is, you do this analysis. You're like, okay, this is the incremental margins and the blah, blah, blah. And it all makes sense. But now I've seen this play out up close over. And it's hard. It's so hard. It's so much harder than it looks. And so I think 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 I'm that's more salient for me than it was before. I have like less of an interest, I should say, in investing in businesses that have narrower advantages. Because like life will throw massive curveballs at you. And like, you know, there is sort of an interesting point, which is, if you'd ask 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.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“One thing I mentioned earlier was the importance of management teams. Like if I rank things and sort 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 to In reality to go from profitable to profitable?”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“You're like going to the gym, and you're like, you know, particularly, you know, whatever. You said to try to manage yourself, and then you can't sleep. It's really, it was really hard. I'd rather not go through it again.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“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 was like there was no good way and there was at some level deep uncertainty because things had gotten bad enough where I couldn't be like, look, I'm 100. Like this is like I couldn't be like, yes, yes, we're fine. I was like, well, you know, look, things are way off course, right? And for reasons I never would have predicted. And so how, you know, 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%, right? And, you know.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of other things I'm grateful for that would be another one. But you've let people down and you internalize that. And there's also this weird thing that happens where like When you own a stock that sounds 30%, you know, okay, here's what's wrong, here's a villa, we're gonna fix it, blah, blah, blah. When it's down 99%, so someone meets you and says, what's up with Carvana? 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 made 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.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm just here to express my and everyone I work with view that you're awesome. And you're going through a lot and we're just, I'm just here to say you're great. We support you. Let us know if we can be helpful. But we're Team Cliff. And I didn't cry, but I was like, wow. What a thing. And he's like, yeah, look, we're here for lunch. I drove here just to meet with you. We can talk about investing. Yeah, we can talk about other things. I don't really care. But like, this is what we're, and I was just like, it was like, wow. And so that would be the other thing. To that day, and I think it makes me a better person because I remember how that affected me like the other day there's a CEO and a company I'm involved in and he's wrongly getting a lot of crap from really dumb investors. So I wrote him like I sent him like a hug. Like I sent him like a nice email I think as nice as I could write it. But I think it makes me a better person to be on that side and to hear it and remember.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, your view of the world is that maybe you haven't let them down. It's just like, this is just a very big wave. But then your partners would, you know, like you've got different responses, you know, some smaller partners who are no longer partners who were mean. But like I had other, you know, partners who would very sensibly and totally appropriately want to grill me about it. But that grilling didn't wasn't mean. It was totally reasonable, but like it didn't come from a place of confidence, right? You know, we'll eventually get to people I'm grateful for, but there was one partner who drove a long distance to have lunch with me. And turns out that was the only reason they drove this long distance. And we got to lunch. This is not going to go great. These meetings haven't been going my way recently. And we sit down and he goes, Cliff.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And there was the me who was laying awake at night at 1 a.m. who was just kind of like, you know, my inner voice was not being kind to me. And I've always thought of myself as a person. I think I am sort of naturally one of these people who has pretty good control over his inner monologue. And it was the first and only time in my life where I lost control of my inner monologue. would lay awake at night. I'd never lose sleep over things. I sleep. And I would lay awake at night and I would, you know, fret and berate myself. And it's super hard to live like that. But again, I didn't have terminal cancer. I wasn't fighting the Japanese in the Pacific. Like it was, you know, within the Roman experience. But like, it was super difficult. And you've partners that you've let down, right? And I mean, I say you've let them down as though you've let them down. Like, have you let them down?”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Talk about how it was super miserable, and it's pretty easy to imagine how it was super miserable, but it is worth just making a point. We were not fighting the Japanese in the Pacific. It sucked. You know, but In the realm of human experience, I've lived a blessed life. I would say one way to think about it is There were two versions of me. There was the me who you spoke to, who I think would sort of cogently say, well, there's this weird thing going on with rates, and it can't last forever. And when it gets better, I think this will get better.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“But to be honest, my initial reaction was like, well, that's annoying, but I wasn't planning to buy any right now anyway. But then, as fate would have it, six weeks, eight weeks later, I'm looking at all of my data, and like it's all green shoots. And I'm like, darn. That wasn't what I said. It was different work. And so I tried to reach out to see if they could make an exception, but of course, you know, they can't, all that stuff. So we ended up not being able to buy anymore. Now, I should say when I made the decision to buy half now and half later. I promised myself that I wouldn't beat myself up. So I said, listen, Cliff, you will be a happy, successful person if you're right about this, whether you buy this other half or not. So it's all good. And so I'm still telling myself that.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“But at this point, we had things pretty well instrumented, and we had all this rate data, which I hadn't had in the beginning of this process. We had just a lot, like a lot of ways to capture how cars move villages. There's just a lot. So then, you know, the year ends. They put out this poison pill. And the poison pill basically said that anyone who owns over 5%, which was like me and like two other people, can't buy more stock. And they had very good reason to do this. The reason is they had big NOLs. And there's IRS rules having to do with turnover. And if they're too much turnover amongst the 5% holders, then they would have destroyed the value of those NOLs because the way they repriced it, if a certain amount of turnover happens, they repriced the NOLs based on your market cap. So the market cap was super low and the NOLs could turn over and there'd been a bunch of turnover. So there was a risk they were going across some threshold. And so they put this poison pill in, which made all the sense in the world for them, but it was not particularly helpful for me.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And like, you know, you're living this in real time, right? You're just like, what the heck? And so I was really glad I hadn't bought the second half.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“The heck out of this in a way. Like, we already were instrumenting it somewhat, but we're really going to turn our attention to focusing on instrumenting this, and we're going to focus on the things we think we're going to see first when we see the turn. And when we see the turn, you know, we're going to know and maybe we'll pay a little more, but we're going to get, that's when we buy the second half of the stock. And that was May. So I bought the first half. And I think in sort of the mid-20s was where I ended up getting kind of most of it. So I bought some at 80, some in the mid-20s. And some major like 180 in the mid-20s. And then we started instrumenting and we started waiting. And like things just get worse and worse and worse. And it's like every marginal data point was worse. I remember I, you know, thanks the week after Thanksgiving. Sales always fall off in Thanksgiving and then they always come back the week after. It's always a little lower because of seasonality. And it was like Sales fall off during Thanksgiving and then they just didn't. It was just like, what the heck?”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And I convinced myself that this would work. No, Clifford, you weren't a moron. Yes, the stock was down 95%. But this was okay, and they'll be fine. And it's just, you know, they'll be, they're going to sort it out. And so, but I realized that that point that there were more kind of deep operational fixes in the business than I'd realized. And so my thinking at the time was like they should be fine. I'll buy half now and I'll buy half when I can see it turn. And in order to see it turn, what I'm going to do is we work with a third party consulting firm that basically does analytics web scraping and database, you know, go get credit card data and match it and blah, blah, blah. And so we were like, okay, we're going to just go instrument.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“I didn't actually buy any the whole way down to there. And the reason was just big position, and I generally don't buy more of things that are over a certain amount of the fund. And I was sort of waiting, you know, like was kind of like, well, if it gets below that, I'll buy more. If it doesn't, it's fine. And then I bought a bit more after that. But by then something was off, so I kind of didn't buy a lot. And then they came out with this operational plan and issuance at 80. And I thought, okay, like this is, they'll fix it. So I bought a bunch more. And then the stock went all the way down to the 20. And in that intervening period, I'd gone out to visit them again and I'd gone through the whole operational plan with them and tried to basically do a blank sheet of paper underwriting.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it went down the first sort of most of that thirding was because things were really bad during Omicron. But until you realized that there was a deep demand problem, that seemed like the sort of thing that happens in markets when you have a short-term operational hiccup. And it was only once demand didn't kind of recover that you're like, uh-oh, something's wrong. But by then, prices go down so much, you're kind of like, well.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“I knew the issues they were having logistically in Q1. I could see it. And when I say I could see it, we look at a lot of data on the website. So I knew that Omicron was an issue. And so the disappointing surprise was that as Omicron kind of cleared up, it was like I was waiting for some units to come out of the system. I was like, why are they not selling any units? It was kind of clear there was a problem. But then the stock had thirded.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Stupid question. I'd have sold all there are stupid questions. I would have sold all of it at the peak and bought all of it back. Very good.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Into new debt, which is safer, more higher priority at a discount, and that whole exchange happened in the summer of 2030. And a lot of sort of the retelling of the story is, and by virtue of that exchange, they saved the business. By that point, the data I was looking at said that everything. You know, the cherry on top because that saved them a ton of money in terms of interest expense and debt. But it was not by any stretch the thing that turned the business.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, and then rates fix themselves and the industry seen, you know, as car prices, manufacturing improved, car prices ground lower, and over time, you know, unit volumes have improved industry quite a bit, although it's still pretty low. And they succeeded in cutting a lot of costs and got to the place they are today, which is that everything worked. Oh, I forgot to mention, because everyone thinks the whole story is they got this deal with Apollo. Yeah, so basically, along the way, one of the levers they had to pull was putting their lenders into prisoners' dilemma. So you have bondholders and you basically say, look, we might not be able to pay any of you. But the first person who accepts less gets paid first. And if your documents are written, you can do that the right way. Written, you can do the right way. You can do that. And they were. And so they ended up negotiating this new secured loan structure and people converted their”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And then what happened was they got much faster cutting costs. The banking system kind of discovered that interest rates had gone up and that really helped. And sometime instead of January, February of 23, instead of chasing demand, it looked like they were restraining it. And you can sort of see that because if you think about delivery lead times on the website as like a line, you can sort of see how long the line is to get a car. And you could see that the units were steady, but the lines were longer, if that makes any sense.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I don't think so. I don't think so. I think they're going to fix it. I think the Union Economics work. By the way, this crazy thing with the credit markets is going to end at some point. And I'm sure Navy Federal isn't going to give away free money forever. But then you'd say, yeah, but of course I never thought Navy Federal would be giving away free money for like, you know, nine months. Like I thought it was going to be like a few weeks, right? Before they noticed that interest rates had changed. I never thought it taking this long, you know, that they'd have so much trouble chasing demand this far down. And so at that point, that was when it was the most challenging part of the investment because at that point, like you did have to put on the table. Like Ernie would say, like, we're cutting costs and we're burning cash. And as our costs go down, like eventually we'll be profitable. But as to the pace of that versus the cash burn, like reasonable people could disagree as to whether like we'll get there in time, which is like, you know, super reassuring.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. By far, it's my biggest position. And, you know, didn't help that nothing else I seem to be doing well at the time either, you know, by the time you get to the fall of 22, demand just keeps going away. And they hadn't by that point caught up on costs to like fix it so everyone at this point, not everyone, but there was a narrative out there that look, the problem is it doesn't work. The problem is they're trying to get the profitability, but there isn't. They can't do it. If they keep cutting costs, they can't. They said, okay, in May, they did this operational plan. Okay, so I'm going to re-underwrite everything. And I think they can do this. This makes sense to me. And they have a lot of liquidity to make this work. Fast forward six months, they've burned a lot of liquidity. They're way behind, right? And now at that point, you're like, well, if next year looks like this year, we're going to run out of money kind of in 13, 14 months. You'd ask, well, is that going to happen? You'd say, well.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“When you cut that a lot because of all this stuff, that all runs against you. So you slash advertising, you slash inventory, and then external demand gets even worse, and you've reduced things that drive down demand further, and they were chasing a ball down a hill all year long. Ernie told you the story on your podcast about kind of how they got better organizationally at being at focusing on efficiency and how they kind of learned their way into it. And, you know, look, the reality is, is like the sort of 10,000 foot telling of the story was they were okay at getting more efficient between March and November of 2022, and they got really amazing at it after November of 2022. Took them six months to figure it out. That's fine. So I lived for their six months. It felt like a very long time”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“You do what Carvana has to do, right? Which is you start cutting. And this is a bit, one of the things that's glorious about this business is that as it gets bigger, it gets better. And size B gets size. It's just a virtuous cycle. But here's the thing.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And you just bought this big asset with a bunch of debt. And it turns out that you're learning that like a bunch of your processes. Like, eventually, I always sort of thought that Carbano would have bumps in the road operationally. But it turns out they're all now. And that none of that was totally obvious in the time. There were like bits and pieces. You're kind of learning as you go. The rate stuff was pretty clear. The market stuff was pretty clear. The stuff I described, you know, like, but all this data comes at a lag. Like, there's just a bunch of like, it was all in a cloud of uncertainty. And then...”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“So turns out from Carvana's perspective, although none of us sort of realized at the time this isn't great. So I think that was a third contributor that was unique to Carvana. So you have these three, you've got the overall market is down more than the Great Recession. You've got the tightest auto credit spreads ever, and you can't match, and you have this unique thing where you kind of all of your sort of bleeding edge customers bought last year.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“That you roll forward a year, and all these people are in the exact opposite position. They've just had the opposite of a windfall, whatever you call that, sort of unexpected loss. Yes. And the year before, they all just bought a car”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Back in 21, let's say that you were the sort of person who had a Robin Hood account, and you might have speculated in some spacs and some cryptocurrencies. You might have had a windfall. And you might have thought, you know, look, this isn't like billions of dollars. This is thousands of dollars, tens of thousands of dollars maybe. You might have thought that given your windfall, you were going to go buy a car. And you might have thought to yourself since you're the sort of person who owns spacs and cryptocurrencies and shops online. Obviously the place you were going to buy a car was Carvana. Now you may or may not have actually bought that car at Carvana because Carvana was sold out and they might not have got what you wanted. You might have gone somewhere else. But here's the deal. You pulled your demand forward. So from Carvana's perspective, even if this is like Carvana in 2021 had like 1% share. So even at this 0.3% of the market, this does not have to be a lot of the market for Carvana to feel this enormous demand pool, which they definitely saw. And it also means...”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“So we added to the survey something to the effect of, you know, like, did you get a recommendation from a friend or family member how important was it? And we found that 70% of people said that it was either somewhat or very important in their choice to buy from Carvana, therefore only a third of people were buying from Carvana without the recommendation of a friend or family member. And once I saw that, that got me thinking, I wonder what's going on with this third of people who are buying without the recommendation. So that convinced me there's virality, right? But what's going on with these people who are buying without the recommendation of a friendly family member? And my theory was, well, they're early adopters. So we survey people who bought from Carvana. We ask them questions like, do you have a Robinhood account? Have you ever owned like Bitcoin?”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“People who bought from Carvan asked if they recommended it to people. I think it's something like four, they would recommend it to four people on average, which is an enormous number. Yeah. And so that's where I'd left it. But as in the sort of wreckage of trying to figure all this stuff out, I started thinking harder about this. And it occurred to me that I'd never done two things which seem obvious in retrospect. One is I'd never ask people how important this word of mouth was to their decision to buy from Carvana.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because they probably have, I don't know, Kinney else has my head with 100%, something like that. And so, you know, the first thing you might do is throw out, okay, well, there are some cars they have there in California, there's shipping fees, there's delays. Let's only look at cars that are nearby. And so you cut that inventory down. And then you might say, well, let's throw out people who haven't heard of Carvana. Turns out they have like 80% awareness, but we'll throw out some people. Okay, let's reduce. Half of people say they don't want to buy a car online right now, although the number is gradually falling. But let's throw out that half. You're still left with a number that's way higher than where they are. So where are the sales? And also weird is, okay, you go into a market, you have all these huge inventory, this great product. Why does it take all, you know, why does, why do sales kind of ramp like this as opposed to just like step function? What is delaying people adopting this? I didn't have a great answer for that for a long time, but I kind of thought it was word of mouth. I was kind of like, you know, I think it just takes time word of mouth. And my evidence for that was that if you surveyed.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“So Carvana's dealing with both of those things. The other thing which I think is more subtle, but I also think is true, has to do with early adopters. And to explain this, I need to go back and explain a little about how Carvana grows. And this is one of these, this is the part that I was least aware of at the time, but I've done more work on and I've come to understand a lot better. Carvana, you know, if you think about a market like Connecticut, Carvana has, I don't know exactly how big Connecticut's total used vehicle inventory is, but let's say that Carvana has something like three quarters of all the inventory, including Carvana's inventory in the state of Connecticut, just to make up a number. One might ask why we don't have like three-quarters of the sales.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. This is definitely not in the textbook. So the problem, so Carmax, they just ate it. They just originated at low spreads. And then the next year, and even to somewhat, it's getting better now. But if you look at their financials, you can see they paid for it a year or two later, but they ate it at the time. They sacrificed a bit of the future for the present. Carvana was not in that position, right? The company needed the money. So Carvana had to price to reality. That meant the Carvan was in the market with loans that were like meaningfully more expensive than competitors, which did not help. And to just put this in context, capital one also priced to reality because they're smart. They saw their auto originations fall 5050%.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“For a whole bunch of really good reasons. And the underlying auto collateral was the most kind of overpriced it would ever be. So auto loans should have been really expensive on a spread basis, but instead they were at their all-time tights. And the reason was that there was just all these dumb competitors. And then you'd call these, you know, we did research into what was going on and be like, well, our asset liability management committee meets like once a quarter. And then we try not to raise rates more than like 25 bips at a time. And you just, and then it takes us 60 days to implement the rate changes because our systems, blah, blah, blah. And you're just like, but guys, like, what is...”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source
“And I remember there was a long period of time where Navy Federal was offering car loans at a discount to the Treasury of the comparable duration. This is a big problem for us. This is funny, except for the fact that we have to compete with this every day industry-wide auto loan spreads by late 22 were at the lowest levels in the whole time series I have going back to before the crisis, before the financial crisis in 2008, and it was a wild time for that to be the case because every other consumer credit spread was wide. Right.”
2025-04-29 · Invest Like the Best · Cliff Sosin - Investing in Carvana - [Invest Like the Best, EP.421] · IDENTIFIED FROM THE TRANSCRIPT · source