YouSaid · the spoken record

Ram Parameswaran

lines on the record: 74
first: 2021-01-05
most recent: 2021-01-05
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Started with Nashville first, and their entire point was let's go to Nashville and let's sell the first hundred cars and then 200 cars, then 500 cars, and let's acquire customers on the back of radio commercial because people spend time in cars on the other radio. It's a pretty simple way of thinking. But then their entire point was the playbook was extremely local. So you start with one city and go up the penetration curve and get to one percentage point of all the cars sold in that market. I go to market was phenomenal because once people were hooked onto the product and they tried the product and bought the car in 10 minutes, the car car got delivered to you with a seven day return policy within 48 hours. Very recently, I sold my car on Carvana and this is what happened. I sold a car. I got four quotes. I got four from Carvana and three competitors. One competitor gave me a price $1,000 more than Carvana. So I went down the process of selling.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“The fulfillment center's checks and talk to salespeople and a lot of scuttlebutt work to get conviction on an idea. But the point I wanted to make with the Carvana experience was it took 10 minutes to buy a car and I've never seen 10 minutes to buy anything, especially for a $25,000 transaction. The beauty is how they executed against every single market. The other thing I haven't talked about internet businesses is, and one thing I insist every single company going public does is please show us your cohorts. cohort analysis the one superpower that you shouldn't make investors guess on because you want to be able to drive layer by layer buildup on a three to five year basis what carvana go to market unlike room for example is they took a city and they said we're going to have a playbook driven by radio advertising who would have thought radio advertising would be a suitable go-to market for an internet business but it worked really well i think”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“They had a company called DriveTime that was a part of a historical part of their business. It gave them some capability to acquire cars at scale. Then what they did is they ended up building refurbishment centers, centralized refurbishment centers, which reminds me of Amazon Fulfillment Centers. By doing that, they got real scale economics because a portion of every Carmax location is spent on refurbishing cars. Now, what have you centralized it? They've got some real scale economics there. But the real genius, I think, is on the front end for what they did. So if you've used a Carvana, so I bought four used cars on Carvana. And frankly, it's a delightful experience. It's delightful because you can actually pick the car, buy the car and gamify the process and get financing all in 10 minutes or less. I've never seen a smoother transaction process of buying a car. And part of what we do is whenever we own a stock, we actually go through the product experience quite a bit and then we also go and do.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because it is not a scalable business model, most dealers either end up franchising across multiple locations, but then they have the cost of their people. The business model works without upselling you on warranties and guarantees and other sales tactics that do not make it a happy experience. And I'm pretty sure dealers work at sub 5% operating profit margins. By no definition is that a good business model to start with. The innovation in the mid-1990s out of Circuit City was PuncarMax. Let's build a superstore for used cars. Carmax is a wonderful company, by the way. It's a wonderful company because they were able to integrate, I think, 1.6% of the overall market share, 600,000 sales, car sales, I think, a couple of years ago. It took them, gosh, 30 years to do it. 30 years to get a sell 600,000 cars. What is the problem in CarMax? Three parts to the car selling business. You're going to acquire cars. You're going to refurbish cars. You're going to sell cars. It's very simple. If you think about what are”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's take the case of Carbana. It's a super interesting company. Carvana sells you cars online. The used car dealership model is a terrible business model for the dealer. And it's one of the worst experiences for a consumer.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“As their next driver of growth. Now, Facebook obviously taps out after a while, which is why we saw all these DTC businesses get to $10, $20 million of volume, and then it became unaffordable to scale on Facebook. But Facebook has the biggest reach and the most targeting variables out there. So it is an absolute beast for growing your business. But then I look for very interesting other channels. Like if you take DoorDash, for example, I find it very impressive that they use Square Cash app as a way to grow their business. Companies that constantly find the next interesting hack to grow that business also tells me that there's some internet scale potential in that business. So you have the growth mentality, the virality of consumer adoption, and then”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“That reduces friction. I love companies. In fact, the only thing we look for primarily from a product perspective, does it reduce friction to achieve human needs? The number one you have is are people pulling the product off the shelf? Number two is, does it reduce friction? Then number three, of course, is, listen, are there smart marketing channels? And once you find that product market fit, are there smart marketing channels you can use in order to scale your business? And is the team being very smart about using this channel? So obviously many years ago, people used to have entire businesses built on Google SEM and SEO. Classic examples, booking.com. They were selling hotels online, but they built the best SEO engine in the world. Nobody could beat them at that stuff. In fact, the heart of that business is the SEO SEM engine. It just so happens they sell hotels, but I bet if you put that on selling cars or selling food, they do a bang up job anyway. Then everyone pivoted to using Facebook.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“And businesses. I think there's an old saying that distribution trumps product innovation all day long. For me, it's about I look for companies where they reduce the friction for whatever the business or the consumer wants to achieve. Let's take the case of Tweleo as a company. I love Tweelio as a business. It's a software company, but any API model, what does it do? It allows developers to expand the total amount of things they can do and makes their life easier. When you reduce friction for developers or reduce friction for SMBs by allowing them to put up a website in three clicks like Shopify, when you have TikTok, which allows a creator to create a professional video within 15 minutes, all you have Instagram that allows everyone to look and feel like a professional photographer, that reduces friction. When you can click, like yesterday, I just got this mic you asked me to buy for this podcast on Instagram via Best Buy. One click, pay $10 as a tip for convenience to bring a mic and a webcam to me.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Difficult for me to comment on non internet businesses because it's just not part of my circle of competence. So let me talk about how I think about internet scale. So, first of all, from a qualitative perspective, I tend to love companies that have a product that is not sold, that is pulled off the shelf. And this is applicable to software companies, payments companies, and internet companies. If you have a product that's pulled off the shelf by your consumers, where there is a bit of a viral loop, whether it's customer love, you start seeing the beginnings of internet-like behavior. What does that really mean? It means that you don't have to put a bunch of marketing into growing your business, which also means that most of the efforts in the company, especially in the early stages, happen from a product-driven perspective. Product driven customer obsessed firms generally tend to have the initial potential of becoming internet-scale business. So let's start there. Number two, I want to see companies that reduce friction for consumers.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Rather invest in the picks and shovels and the distribution layer. I am a bigger fan of owning Instacart stock than owning Walmart stock or Target stock. If you ignore the retailers for a second, I have an even bigger affinity for brands. We as a firm started doing work on Nike and Lululemon because I think brands that have this pole position and customer love historically highly distributed but also earned very high margins because Nike earns high margins so does Lulu for the quality of product. Well now if they transition to an e-commerce business they expand the TAM for themselves, they reduce their store footprint which gets them more efficient and they create more software in their ecosystem which increases their margins. For me if you look at existing companies transitioning onto the new world I have a preference for the infrastructure providers such as a DoorDash such as an Instacart such as a RAPI in Latin America within the retailers and brands I have a preference for brands and again”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Finally, after 20 years again, we're seeing old school companies finally figure out the e-commerce model, for example. E-commerce is one of the oldest parts of the internet. You had travel and then e-commerce. And you would argue travel's a part of e-commerce. But if you look at 20 years, there was a time, I still remember, where Target used Amazon to run their website. We've been doing a lot of soul searching on companies like, hey, what are omnichannel businesses going to do in the future? And now with a number of tools available, you finally enable both SMBs as well as large corporations kind of evolve themselves into internet forward businesses. Within that, companies that we don't like are companies who are just not willing to evolve and are willing to die. You can broadly divide this group into brands and retailers. If you look at the retailers, obviously Costco, obviously Walmart, and obviously Target, obviously William Sonoma, four big companies come to my mind. That said, even with these companies,”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Frugality and growth mentality almost go hand in hand for me in many of the cases I've seen. You try to not spend too much and try to get the most oomph of what little resources you have. So the growth mentality is so important. And then finally, you come to the team. And again, I want to only work with people who are honest, high integrity, and who we can basically sleep well at night knowing that they will take care of our capital. I spent a lot of time testing out, doing back channel references on the CEO, CFO, just the quality of people they hire. I just want to make sure that, listen, we are hopefully going to be on the journey for 10 years with you. And for me, integrity and trust is probably the most important thing. What's the frameworks are used for almost everything in the earlier stages, especially in the private markets? The same thing is true for the public markets as well. We generally try to find similar principles and similar philosophies. So now the question was about what are companies making the change?”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Company we own, yes, they burnt a lot of money for a long time, but as long as they were making money on a street level, you knew that this model is translatable to the entire country. So that brings me to the second point. So the first point is unity economics. We tend to focus on unity economics and break it down 10 ways to Sunday, biography, bi-demographic, bi-subscription model, etc. And we absolutely want to see real free cash flow on a per unit basis in almost every scenario. That's number one. Because once you find that, then you come to the second point, which is the growth mentality. We as a firm do not invest in companies growing 20% for a long time. We want to see you expanding and capturing asset market share as possible because even in an oligopoly or a duopoly to the larger company goes a majority of the operating profit dollars in that particular”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Just infinite potential in almost every single vertical ahead of us. So let's talk about new companies. Generally speaking, we don't invest early on in the life cycle of companies, especially in internet, because I find people who invest, they are, it's almost like black magic. I just couldn't do it. I look for companies that have created real tangible business models. And for me, the one thing that I look at is the unity economics of the business model. In the internet, there's been so much noise and confusion over the last few years that all these companies burn so much money and burning all these VC capital. And God, there's no business we built here. And this will all come to an end one day. I cannot disagree more with that view because anybody who's investing in a company, obviously there are some lazy theses out there, but the reality is that the only thing we focus on is, is the company able to make money on a per unit basis, whether it's a unit or whether it's a hyper-local area. You look at DoorDash overall.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I have a bit of a bias, and my bias is towards working with newer, younger companies that are on the side of disruption versus companies that can reinvent themselves. So that's a bias embedded in my assumption. So let's start with that first. So the beauty about creative disruption in tech is anybody who started something and built something better be very, very paranoid because if somebody right behind them going to disrupt them. That's number one. So I'd say that our general framing to think about almost any company starts with team. So there's usually an old framework we use. Team TAM growth intensity or growth culture and unity economics. So those are the four things that I think are whether you invest in payments or software or internet, it's the same thing in my framework. The one variable that I have dropped completely is the TAM equation because I've historically gotten TAM completely wrong. I've always underestimated TAM. And if you believe what I said we think is going to happen on the internet, then it is.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Me so excited. We always want to find the next new thing. I think the next new thing is staring us in the face right now.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“companies it's probably 13 to 14 trillion dollars a market cap embedded today in 2020 but in 2040 just on the basis of two pieces advertising products and e-commerce which is calculated 45 plus 10 to 15 to 60 trillion dollars just this piece alone is a 6x from here now what about payments what about content what about gaming what about all the pieces of software you can very conservatively say there's a hundred trillion dollar plus opportunity still ahead of us and just this morning a friend of mine put this piece together on what changes in 2021 and my answer was nothing we have more e-commerce penetration more on-demand penetration and then more importantly because now we have all these wonderful tools like podcasts and twitter i'm fully convinced that the entirety of human creativity is now available and up for grabs that's what gets”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Typically, asymptotes to 1% of total global GDP. So, what's the global GDP right now? 85 trillion. It doubles in 20 years, 3% KGA. You have 170 trillion in GDP. And assuming a 1% penetration, that's 1.6 trillion dollars or so of just ad revenue. 25% net income margins takes you to the $500 billion range in net income. What is the value of $500 billion? 10 trillion, 12 trillion. I'm just not sure. So you can see how just on the basis of advertising, which I think is conservative if you assume a one percent asymptote of GDP, and just in the basis of product and services, you end up with 50, 60 trillion dollars of equity value today. So today we covered around 45 stocks in the firm and I did this piece of analysis before we caught up. We calculated around 10, we cover $10 trillion worth market cap. And assuming we missed a bunch.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Trillion of net income only on products and services around the world, assuming a 30% penetration. By our estimates in 2019, that number was 30 to 50 billion. So let's think about that. The next 20 years, you have a 5% KGA on overall growth, which is to be expected. You have a penetration curve going up. And then you see the explosion of earnings going from 50 billion to 1.5 trillion. So at 30x over the next 20 years alone, just on e-commerce and just on services. That's number one. What would you price this at? What would 1.5 trillion dollars of net income be valued at in 40 years? I don't know what rates are going to be at, but let's assume it's 20 to 30 times earnings. You have 40 to 50 trillion dollars of equity value yet to be created from now just on products and services alone. Then you can take advertising.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's talk about these species holistically. Let's say take a couple of very small pieces out of this. So let's talk about the front end and let's talk about marketplaces and e-commerce companies. In 2019, globally, we spent around $60 trillion on products and services as a civilization. Now, even if you assume, gosh, three to four percent K go over the next 20 years by 2040, this is going to be closer to 120, 125 trillion in volume totally spent by the world. And if you take any definition of, for example, some online penetration occurs, a 30 to 35 percent across products and services, you end up with 40 to 45 trillion dollars conducted via the internet only in e-commerce and some services. What is the net income margin of these products and services? Let's assume products are five to six percent and services end up being two to three percent. Well, if you take 4% on 45 trillion of volume, you end up with 1.5 trillion.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“20 or 30 years we go up that escrow from a 10 penetration rate to 50 60 70 in the course of time so let's quantify this even further so now let's talk about 2019 as a base and let's talk about how i think about the internet so fundamentally the internet has two pieces to it you've got the front end and what's the front end the front end is marketplaces e-commerce companies on-demand businesses and advertising and content solutions that's the front end the apps that we use every day behind this sits two pieces the first piece being payments that really kind of lubricates the entire economy going forward and then what i call certain parts of software not all software”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“It was probably the most elegant way I have heard this describe in a long time. So we took over the last few months a chance to kind of quantify that. If you think about it, the total earnings today of internet companies as a percentage of total earnings globally is between 5 and 7 percent. This net income of internet companies divided by total earnings globally. And that's number one. Number two is by any measure, the volume that is sent through the internet is still in the mid single digits right now. And number three is if you look at the market capitalization of internet companies as a percentage of total global market cap, it's around 10%. So almost by any definition, we're so dependent on the internet right now. And yet even today, less than 10% by almost any mesh up is still conducted via the internet. But when you put together the explosion of people capability, explosion of tools and connectivity together, you have to believe or we definitely believe that over the next”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“Number one. Number two is you've now got cloud infrastructure and tools that drive cloud infrastructure that allow every single piece of global GDP to become a part of the mobile internet. That's the second piece. And now with COVID, which is this unfortunate situation we live in right now, COVID's basically allowed people and talent to be globally discoverable and globally utilized. So when you pit infrastructure tools and people together, now we can see how, gosh, where are the beginning of that S curve and potentially a Cambrian explosion of companies that convert every single piece of consumer internet and every single piece of the business internet onto the overall flow of the internet? Let's quantify that for a little bit. I think a few months ago you had John Collison on your podcast and he said something wonderful which has struck me since then. He said Stripe's job is to increase the GDP of the”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source
“You for having me on the podcast. So, when I think about the internet, I think about what is the sum totality of human knowledge, human creativity, and human capability. It's very difficult to put a number on it, but here are a few attempts at doing it. If you think about the global GDP of 85 trillion plus, I just think there's just so much opportunity still left for the internet penetrating that entire global GDP. So the internet's, what, 30 years old, it's a utility for all of us. And it took us years to get here. But after 30 years in 2020, I think we're at that beginning of that SCOV. And it's happened now because of a few things that have happened over the last 20 or 30 years. Number one, we have ubiquitous, high-speed connectivity on mobile devices and future mobile devices. Now, that's been a process that worked, and I was a part of it for years. And now it's real. If we cannot stream a high 4K video on your mobile phone, you're going to be really annoyed right now. But this wasn't the case even 15 years ago.”
2021-01-05 · Invest Like the Best · Ram Parameswaran - Internet Scale Businesses – [Invest Like the Best, EP.207] · IDENTIFIED FROM THE TRANSCRIPT · source