SPEAKER_00: Hey everybody, welcome back. It's going to be an amazing week for this week in startups. I want you to get locked in for a big week. Molly is out today. She's securing the bag. She's got a great paid speaking gig. I need to get some of those going. So I had my man, Ben Gilbert from acquired join the show. We cover a ton of topics in detail. We talk about his theory that Amazon is moving from a day one company to a day two company. And we look at some of the projects and that they are shutting down at Amazon. And will they ever have a third pillar? Plus Peloton, you're not going to believe this. They're doing a fourth round of cuts. Will they be able to survive? Will they become a standalone business? What do we think of their new downstream down market strategy? We're going to go into detail there. And the used car market is showing signs of completely collapsing. What does that say for the economy and for EVs as well? Cathie Wood from Ark chimes in on this topic. And before we forget about it, I want to tell you about our new podcast.

SPEAKER_01: Yes, this is the third podcast from the creator of this week in startups and all in me. And this new startup podcast is called Founder University. You've heard me talk about Founder University before.

SPEAKER_03: This is our 12 week course where we teach people to start companies. And we have a two year course as well. A two day course we do in person.

SPEAKER_01: Those courses have led us to believe that we can really help founders with a 10 minute. I kid you not, just a 10 minute episode of a tactical talk. So we're going to do one of these a week on Founder University. Every week, we're going to give you a 10 minute tactical talk. The first one is on how to retarget your users. So probably a third of the founders who are hearing my voice right now are retargeting the users. But the other two thirds are not retargeting their users. And they need to watch this 10 minute video just to catch up. These are tactical tight, 10 minute talks, no promotion, no marketing, no BS. Just here's how you get something done inside your company. You're going to watch want to subscribe to this. And then when you watch it as a founder, you're going to send it to your team members and say, are we doing this? Yes or no. And I'm doing this really as a service to my portfolio companies because we have to do one on ones with them. And we have been doing one on ones with them for 10 years to explain these different techniques that we find out about. Now we're going to share them with the world. These are the tools and tactics that make startups grow and succeed. All I want you to do right now is type in Founder University and find the links.

SPEAKER_03: Go to founder.university is the domain name. But if you're just in your podcast player right now, anyway, pause the show, search for Founder University, subscribe to it, rate, subscribe, whatever. We're just trying to get some early signal there. It's also on YouTube, all that great stuff. Founder.University.

David Friedberg: It's going to be a great show. Stick with us.

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SPEAKER_11: All right, let's get right into the news. There's so much news going on here. You and I are obsessed with Amazon. This is like the greatest company watching it grow, watching it work in all these different arenas has been fascinating, right? It's acquired the podcast does these long deep dives into companies and people love, love your coverage of these deep dives. But Amazon is the one I think, is that the company you're most obsessed with?

SPEAKER_13: That was definitely our big sort of like seminal episode of this season. Um, and I think it's the best company at innovating at large scale in human history.

SPEAKER_11: I'm going to agree with that. I'm going to agree with that. I'd say that and Tesla, right? If you look at like the number of products and what they're working on, people forget Tesla's like six companies in one. You have the AI company, they're building their own chips. They're building a robot now, you know, the factory in and of itself, the batteries, like it's actually like six or seven companies in one. And really, that's Amazon as well. So there's some news here, Scout was this cooler sized battery powered autonomous r2d2 looking robot that would theoretically zip around your prime packages and drop off a burrito or, you know, some toothpaste, whatever, whatever you needed.

SPEAKER_20: Um, and it launched about three years ago, according to Bloomberg, the 400 person team that worked on Scout is going to be disbanded and we offered other jobs within the company.

SPEAKER_11: The article mentioned that quote, a skeleton crew will continue to consider the idea of an automated robot. But the current iteration isn't working.

SPEAKER_25: Work on the robot has already stopped. The sun setting of the project makes another sign that Amazon is starting to wind down experimental projects as it sees slowing sales growth.

SPEAKER_11: Remember back in July, Amazon reported 121.2 billion in revenue in Q2 up 7.2% year over year, marking the company's slowest growth in more than two decades. Of course, year over year, that would be during the pandemic year. So, uh, it was also down slightly from 7.3% the previous quarter. Uh, so what, what's your thought on this? Is it indicative of something? Is this a healthy thing of sun setting projects that aren't working? Does this have to do with earnings? What's the, is it just a distraction? Because this seems to be something that would be worth continuing to work on.

SPEAKER_29: I believe in these robots for some reason.

SPEAKER_13: I think if this were five, six years ago, Amazon totally would just keep working on this, even if it wasn't working, if it looked like a 10 or 15 year bet. Um, but I think we're in a different Amazon now. I think, uh, I'm sure many people at the company would disagree with me, but I think of Amazon, not as a day one company, the way Jeff always talked about it, uh, but as a day two company now. And I don't think that's a bad thing. I think day two is the time where they really lean into their scale and, um, especially for shareholders start realizing some profits.

SPEAKER_36: And so that would you just find day one for folks in the audience, this philosophy that, uh, Jeff Bezos, uh, you know, made a core tenant of Amazon.

SPEAKER_13: Yes. The idea was that we should think about every single element of our business in a way that we are so early that we should make bets and make decisions with very long time horizons. And by always being in that mentality, we never become complacent. We never feel like the crusty old incumbent. And we're always able to sort of lean into all the Amazon leadership principles that sort of define the characteristics of what it is to be entrepreneurial and make sure we, it's, it was shorthand for stay entrepreneurial.

SPEAKER_03: Yes.

SPEAKER_41: And to just look at every day is the first day of this company existing, but what you're saying is, Hey, maybe since we have distribution, that is kind of a better way to think about the world, which is how Zuck thinks about the world, right? The, the antithesis of day one thinking is Zuck thinking, which is what's working. What did Evan Spiegel create six months ago that got traction that got product market fit? Let's copy it. And not only let's copy it, let's continue to copy it until we get it right. And then we plow it into the distribution channel. Most famously stories will come to mind, but ephemeral messaging and other products. Let's just ram and jam it and use our, and obviously now the tick tock format of shorts, ram and jam it.

SPEAKER_03: Let's just put this thing down people's throat until they can't not use it.

SPEAKER_13: Yeah. And so I don't know my view on Amazon now is, is really like they know what's working. They're still open to making other big bets, finding that third pillar in addition to consumer, which is their, the way that they've rebranded retail, uh, that, that they're sort of consumer division. And of course, AWS, and they're looking for that, that third pillar. But I really do think from talking to a number of people at the company that they really know where their bread is buttered at this point, and they're going to act more like a mature company. And they're, I think less likely than five years ago, 10 years ago to create an AWS because they're, uh, um, AWS is so successful.

SPEAKER_41: Well, I mean, yeah, yeah, I mean, it's basically like, why would we focus on something else if we could add, you know, three more offerings to AWS and add two or three more things to our retail consumer product?

SPEAKER_11: Why would you bother trying to build a third pillar if these two pillars, it's easier to just add a feature, right? I mean, I think that's what it comes down to.

SPEAKER_13: Yeah, another way to describe this is that the, uh, especially with the changing market conditions, their hurdle rate for what they think a good rate of return is on an investment sort of goes up. And so things either need to be more likely to succeed, or, uh, if you think about the other variable and expected value, the magnitude of it succeeding, if it does might be much higher. And so they'll lean into things that they really do think could be AWS sized, or they'll lean into things that they think have a very high degree of certainty, like features you would add to AWS or to the consumer business. Um, but if you have something that is potentially small, like this delivery robot, incrementally, uh, uh, improving the consumer business and not showing signs of success, then it doesn't meet the hurdle rate to continue to investing.

SPEAKER_03: This was a key thing that Microsoft ran into as well, which was, why would we bother acquiring something? Why would we bother building a unit if it can't throw off, you know, and bomber was very upfront about this.

SPEAKER_11: If we can't get to revenue, a billion dollars in revenue, and whatever that is in EBITDA, you know, you know, a couple of hundred million in EBITDA, why are we doing it? Why wouldn't we just focus on the two huge castles we have, thus giving a huge advantage to founders and startups?

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SPEAKER_11: In this case, um, you know, there's a company, Coco, and I'll pull up a TikTok or two of these, these guys, gals, whoever's running this thing seem to have figured out these robots. And I've seen other companies doing them.

SPEAKER_41: Look, look at the speed on these things. I don't know if that's sped up or not. It looks like it's sped up, but this to me seems like such a no brainer as a business. But if you're Amazon, I guess you're doing just fine with your, uh, delivery of drivers with vans and you have so many deliveries that doing a one-off small delivery doesn't make sense. I think that's what this comes down to is the use case of delivering boxes to people's homes is the primary Amazon use case. And that works better when you put a bunch of boxes on one delivery, then, whereas I think these robots are best served for food delivery.

SPEAKER_01: I think this is an Uber business, I think this is a DoorDash business, I think this is a burrito business.

SPEAKER_35: They're pretty cute and they're not in that business. Are you an investor in Coco?

SPEAKER_11: I'm not. I mean, I, this is the robotics company. I think that has been tried like 10 times.

SPEAKER_03: I remember these all from the Uber days because I was maybe the third or fourth investor in Uber.

SPEAKER_20: So anybody who had an idea that was adjacent to Uber would come to me and be like, Hey, invest. And then, you know, ask Travis to buy the company.

SPEAKER_11: And I looked at all these, but they, they didn't work five or six, seven years ago. I'll be honest. Uh, and the world wasn't ready for them because you just saw videos of them like on Market Street, getting literally punted across the street or literally people would pick them up and throw them down. Um, but I do think that with self-driving starting to become more common, people are going to understand this. And with the stack of self-driving, uh, computer vision, you know, real-time decision-making through machine learning and AI, uh, understanding the world around you, these things become a no-brainer.

SPEAKER_77: Um, these are a super no-brainer for Santa Monica, you know, for Brentwood, for Brooklyn. Right. These should be a no-brainer in Brooklyn.

SPEAKER_33: There's also this pretty interesting trend to pay attention to, which is now that we've reached economies of scale in cell phones,

SPEAKER_13: it means that we've had to get unbelievably good at some of the components at very large scale, and it drives costs down. An example of this is lithium-ion, so batteries every year get whatever it is, eight or nine percent better in terms of battery density, battery life. And you compound that over the last 20 years of sort of smartphones really coming and, and, and becoming a thing that billions and billions of people have. So in addition to the batteries, you also have image sensors. We can make really, really good cameras now with, uh, for very cheap and the software stack that is sort of, uh, the, the industry standard now that runs on top of them, this computational photography to then feed into these computer vision algorithms. It's, it's riding this interesting trend of what did the smartphone make much more economically viable, much more reliable, um, something that can last much longer because of the batteries. This is, I do some space investing, and this is something we see in space all the time with, like, uh, the, the company Planet, for example, that has these really cool, um, image sense, uh, uh, Earth sort of sensing. There's fancy ways to describe it, but they take pictures of the Earth. They, they, they orbit the Earth and take pictures with basically a bunch of smartphone cameras in them, which is unbelievable.

SPEAKER_40: Yeah, it's, it's the, the, there's so many things that sort of come out of the maturation of smartphone components.

SPEAKER_41: Just, and, and the software, this is not limited to hardware, but when, of course, whenever you make a billion of something a year, the price is going to go way down. The, uh, resiliency of that product, the ability for it to have a great life cycle is going to go up, right? They're just going to be grinding on a billion cameras, a billion GPS units, a billion accelerometers, a year. Yeah. And that means every company, whether it's Samsung or, you know, HTC or Apple, of course, or Google are just saying, hey, make it do this, make it do this. And we can spread the cost of the next version of this across a billion. So if we spend, I don't know, a billion dollars researching accelerometers this year, it's a dollar per phone, no big deal. Yep. It's just wonderful.

SPEAKER_11: And then all that trickles down. And, uh, of course, software now, I don't know if you've been following the AI stuff, but, you know, Facebook made that, uh, tool where you can give it a sentence or a couple of words and it makes a five second looping video. This is, of course, after Dolly, where you give it a couple of keywords, it makes a picture, which of course is after GPT three, where it finishes your sentences. And, you know, yada, yada, all these AI machine learning, deep verticals in particular, yeah, uh, it, it really is amazing how this is gonna make something like cocoa delivery or anything else so, so much easier if you, you know, I mean, really the only thing left for these is I think regulation and people, you know, which cities are the most lawless and we'll have these things being vandalized.

SPEAKER_00: This is now down to vandal, vandalism, this, I don't know why this doesn't exist massively, I think it's also unpopular, I gotta be honest, having invested in a couple of robotic companies like cafe X, there's a bit of, um, uh, anti robot sentiment out there, um, yeah, which I think is being now trumped by the frustration of not being able to get a cup of coffee in under five minutes.

SPEAKER_41: So when consumers basically realize, you know what, people don't want to come to work in these jobs, they had their chance, they raised the salary of these jobs.

SPEAKER_79: Now you can't get a job for less than 15 to 25 bucks an hour working in retail and people still don't want to go. So I think consumers and, you know, do gooders who are like, oh, you know, what about the people in their jobs? The robots are taking our jobs are like, well, nobody wants those jobs. So let the robots have, what do you think of that theory?

SPEAKER_13: I, I think that the thing that drives consumers adopting experiences that are driven by robots is consumer experience. And because that's annoyingly tautological businesses that decide that they want to cut costs by replacing humans with robots, that will only go well if it ends up actually being a better experience for the end user. And so like you walk into lots of McDonald's now and you don't stand in line to order. You hit the touch screen. I find that to be a much better experience than waiting in a 10 minute line. Um, and the food comes out of the little window in the very same way that it would have. And I actually have no idea how the food is made, but that's abstracted away from me. So I don't know if that's robots. I don't know. What do you mean it comes out of a window? There's like a little drive though. No, you want a bunch of the modern McDonald's you walk in. There's just like big touch screen panels. I've seen them.

SPEAKER_00: They're giant. They're like the size of a human. These things gotta be six feet high.

SPEAKER_13: Most people saw one for the, or lots of people saw one for the first time when they put a Queen Elizabeth RIP billboard. And then that thing went, went viral. But like you'd walk in and Queen Elizabeth was staring at you on the McDonald's touch screen order thing. The, the week of her death was odd.

SPEAKER_82: Would you like a flail fish? Yes, exactly.

SPEAKER_13: But I found that to be-

SPEAKER_104: How would you like to supersize your royale? But that's a much better consumer experience. And so that is the, a place where, okay, cool.

SPEAKER_34: That is now tipped consumers. But tell me about the window. Well, what's the window?

SPEAKER_108: There's like a little window that they, because- Like an automat?

SPEAKER_13: It's like the window inside that is between where you sort of like sit in the restaurant and the kitchen. So rather than being able to see like over all the registers where all the people normally are, since there's not registers in people, there's just like a little window where someone brings your, sets your food.

SPEAKER_11: There is a pickup window now apparently where you don't see into the back of a fast food restaurant. This is all funny because I don't go to fast food restaurants. I refuse. It's not my thing except for In-N-Out burger or Five Guys. I do think that those two are my exceptions. Are you, you're a fast food guy, Ben? You, you go to fast food more than once a month?

SPEAKER_13: It depends what you consider fast food. I order a McDonald's like once a year, but I order like Chipotle once a week. And is fast casual fast food? Does that count?

SPEAKER_11: No, fast casual is not fast. It's fast casual, but it's close. It's adjacent. But this, I find this fascinating. I did know that you can go to a, the, the, the, the, the, the, there's no more cashiers. That job is done. Do they even have a token cashier there just to be old school? I'm not sure. People who are scared of, of things. I wonder if there's a McDonald's with zero cashiers, but this all started in New York. Everybody, the fast food people, I remember this like 10 years ago, went on strike. And they were like, we want $12 an hour. We want $15 an hour, whatever it was. And they're like, okay. And then all these startups came to me. This is like 10 years ago, maybe. And they were like, oh, it's awesome. These, these idiotic food workers are on strike. The unions are giving them terrible advice. Now everybody's calling us. They weren't calling us when it was, you know, 10 buck minimum wage. But when it hit 12 to 15, they all called us and asked us to put in these things. And I remember one startup being like Panera bread was like enough with the cashiers complaining.

SPEAKER_00: We're putting it all in and we're putting managers on the floor to walk people through it.

SPEAKER_11: And they said, after like 60 days of doing this, they didn't have to have anybody on the floor training anybody. Cause all the regulars knew how to do it. And then the regulars would show the person next to them how to do it. If they didn't. Wow. Yeah, it was a pretty interesting phenomenon, but that I think this window thing, the touch screen. I think everybody's seen this. We'll pull it up here, but these things are huge.

SPEAKER_13: I just did the thing you're not supposed to do on the internet, which is perpetrate a lie. And so apparently somebody digitally created the thing with Queen Elizabeth. Oh, okay. And then it went viral. Oh, did the notice tell us that in the?

SPEAKER_115: No, I was Googling.

SPEAKER_13: Actually, I was like trying to find this image to send it to producer Nick and. Oh, I'd like to see the fake image. That's great. This most recent, uh, link that I just sent has the two side by side, which shows like the digital forensics where they found the original image that someone threw Queen Elizabeth on top of. And we're like, these look too similar.

SPEAKER_20: Uh, I am, uh, capturing my, uh, likeness after 1500 episodes. And when I'm gone, you're going to be able to. Well, yeah, there's enough footage.

SPEAKER_121: You're just going to be able to pay $1,500 and my estate is going to interview any founder about their startup.

SPEAKER_11: So tell me, what is your business model? How will you scale this?

SPEAKER_00: What if Microsoft joins your?

Chamath Palihapitiya: What if Microsoft creates a competing product? Well, I'll just interview, you know, virtual J cow. We'll just interview people. Till the end of time with the startups. Didn't Bruce Willis do that?

SPEAKER_104: Now that he can't. That was the rumor. Yes.

SPEAKER_13: Unfortunately, he's got a, some kind of condition where he can't act anymore.

SPEAKER_34: And so he reportedly, he denies it. I, I just saw an article about this. Oh, really?

SPEAKER_127: God, this is like more things that I'm like reading in my timeline. No, this is the world we live in. Truth is elusive.

SPEAKER_41: And so there was a report that this had happened. Then there's a denial of the report. And then there's a denial of the not denial that there's some other thing going on. So I think what's happening is these discussions are happening in Hollywood. And I think the discussion is, hey, we can do a deal like this. Now your estate will have like a couple of years after you die to let us know when to do it. And they're working on, you know, I'm trying to think of somebody who passed Anthony Bourdain tragically. Like with the estate of Anthony Bourdain after he tragically committed suicide and was suffering, allow him to do this. Of course not. In 20 years, would he want them to do it for his children to have some thing and under what circumstances?

SPEAKER_79: So there's a lot of kind of hand wringing as to what would be allowed here.

SPEAKER_41: Um, and they did digitally recreate in the Anthony Bourdain documentary. I don't know if you saw this, they created an AI voice of Anthony Bourdain based on his speaking and they read his emails.

SPEAKER_00: Whoa. And did it sound controversial?

SPEAKER_11: You know what? They never, the director refused, refused to tell people which part of the documentary was him actually speaking versus which one was the digitally recreated AI of him speaking. Um, but you know, you know, this happens in documentaries where they recreate certain sections and they don't tell you which sections are recreated or not. Um, famously, uh, the kid stays in the picture. Uh, I don't know how you ever see that film about Robert Evans, the film producer. Oh my God. This is gonna be a delight. Read this biography. I think it's my list. The kid stays in the picture. It's about Bob Evans. The, this crazy producer who produced Rosemary's baby and love story and basically took paramount and they put a bunch of 30 year olds in charge of paramount pictures. You probably got this from, uh, you know, the, the CAA, uh, you know. Yeah.

SPEAKER_79: Of it stuff, whatever, but in the seventies, they, there was this easy rider, um, you know, kind of moment in time where they're like, make films because nobody's going to see, um, musicals on screens. Like kids of the sixties were like, I'm not going to go see the sound of music. So they create easy rider and five easy pieces. And, you know, the conversation and Godfather, Rosemary's baby, all these crazy, uh, you know, avant-garde taxi driver. And this is where Scorsese, you know, and all those people got their shot. And then onto Spielberg.

SPEAKER_13: Isn't it cool that when film was becoming a medium for the first time, all they did was just like film stage performances. And then they, it took them like a lot of time to innovate and be like, wait, we can do different things. And the constraints that we have here, like cuts and like closeups and like four camera sets.

SPEAKER_11: I mean, they literally television was the three act play from Broadway. And they just said, let's just make it into that.

SPEAKER_66: Here's the Anthony Bourdain voice video.

SPEAKER_140: You were successful and I'm successful.

SPEAKER_141: And I'm wondering, are you happy? Are you happy?

SPEAKER_143: Oh yeah. That did sound like a robot. Yeah. No, but I think in a trailer where you're not paying attention, you would just think they put an effect on it, but it did sound a little robotic.

SPEAKER_11: I think you might've purposely put that robotic on cause now, but that was two years ago. You could smooth that out.

SPEAKER_79: I just got contacted, um, by the, uh, folks from speechify, which is an app I use, um, to translate text into. Oh, and they want to do my voice. And so I'm going to do it.

SPEAKER_11: I think they did Gwyneth Paltrow. They did an Obama impersonator. They call him Mr.

SPEAKER_41: President and they did like Mr. Narrator, which is based on like some of those great audible narrator. So I think you're going to be able to have me read you any story.

SPEAKER_34: It's so funny.

SPEAKER_13: I, so I need this for acquired research because the, the best way for me to consume as much media as we need to, to prepare for these episodes is like to not just be staring at a screen constantly. So I'll, you know, absorb as much as I can on runs and while I'm doing yard work and all this stuff. Exactly. And sometimes it's like a long vanity fair piece on the CEO of some company. And I'm like, I really wish I had some way to listen to that instead of.

SPEAKER_03: Natural reader is the free version and it's just as good as speechify, but speechify is like a hundred bucks a year or something. I pay for both. I think, uh, premiums, cause I just want to see it happen.

SPEAKER_00: But what's really good about these tools is I learn best with my dyslexia. When I see the word highlighted and it's being spoken.

SPEAKER_20: So if I really want to retain information and I will look at my screen, watch it, read each word and it highlights each word.

SPEAKER_11: And for some reason that just getting the visual and the auditory at the same time locks memory.

SPEAKER_79: And for me, as does me speaking, which is why I have this chosen profession. Uh, but yeah, we went on a little bit of a detour there.

SPEAKER_77: Uh, but hopefully it was interesting to everybody.

SPEAKER_03: All right, everybody. I'm here today with Obi Akpuda. He is the program manager at Microsoft for startups. Welcome to the program. Obi.

SPEAKER_152: I appreciate you, Jason. Thanks for having me.

SPEAKER_03: Tell me a little bit about why you're choosing to give such a huge number of Azure credits to startups. Cause I see a lot of them taking advantage of it now.

SPEAKER_153: Yeah. 1000% Microsoft startups. We're on a mission to help all founders grow, innovate, no matter their background, progress or location. So really trying to close any type of, you know, inequality gap, any type of wealth location or access gap. We know it starts with the resources. And so that's what we're starting with. You know, a plethora of resources, starting out with Azure credits.

SPEAKER_122: It's a very nuanced thing there.

SPEAKER_00: It's these kinds of credits from other companies in the industry have been limited. They're only available to people who maybe went to the most elite programs or, you know, it was a kind of an insider's club.

SPEAKER_54: You'll give these credits to any startup anywhere that wants to change the world and build a great product.

SPEAKER_153: Correct? 1000%. I think the biggest thing we pride ourselves on is creating an ecosystem that doesn't require startups to be invested back or to be validated, if you will, by any third party. When we say for all we truly mean for all. So that's one thing we're really proud to say. All right.

SPEAKER_83: Thanks so much, Obi. Microsoft for startups founders hub has no fundraising requirements. As we discussed, it's open to anybody. And it only takes five minutes to apply. You can get up to six figures in benefits as we talked about. Well done, Obi. Sign up for the Microsoft for startups founders hub today at aka.ms slash this week in startups, aka.ms slash this week in startups. Obi's waiting for you.

SPEAKER_13: Take care of you. Ciao. I did watch just to like close this loop on, on AI-ification in film. I did just rewatch last night, uh, Rogue One because I've been really liking Andor. So good. And, uh.

SPEAKER_82: So good. It's like so damn close. So darn close with the, uh, Darkin and Princess Leia. Yes.

SPEAKER_161: And you're like right there in the uncanny valley.

SPEAKER_41: Right. Like literally you're in the uncanny valley and you're about to leave and you just trip over some like digital remnants. It's like, ah, God damn it. Yes. Yes. I was just leaving the uncanny valley. Sorry.

Chamath Palihapitiya: We're both laughing at our own conversation.

SPEAKER_164: This is great radio right here.

Chamath Palihapitiya: It's a great radio everybody.

SPEAKER_20: It literally like they show princess Leia or Tarkin in the glass and then you're like, yep, that's Tarkin. Um, almost. Yes. Uh, you know, when it actually, I was like, for me, cause it wasn't good enough for me in Rogue One. When they had, um, Luke Skywalker show up in a Mandalorian spoiler. Oh my God.

SPEAKER_165: For me, I was like, you know what? I can see why it's not working, but I want it to work.

SPEAKER_00: Yeah. Therefore I'm gonna squint. Yeah. I'm just gonna squint. I'm gonna pretend I'm watching a VHS tape. Perfect. It would, if that was VHS quality.

SPEAKER_13: That wasn't in 4k, but was in, you know, 480p. Yeah.

SPEAKER_169: So I dropped it down to VH, VHS and I'm done. Yeah. I'm like, good enough.

SPEAKER_13: I will say the, the, the place where it seems to fall down is when they get a closeup on the face while they're talking. Yes.

SPEAKER_171: It's always talking. Yes.

SPEAKER_13: That first scene in, uh, Mandalorian where it's like Luke arriving in the X-Wing and then he's like a badass. Perfect. Spoiler, spoiler, spoiler. It's, it's perfect. Yeah.

SPEAKER_34: There's no, no issue at all.

SPEAKER_00: It's the closeup where he starts speaking or any of them, which is what film is about. So what you need to do is basically not do a closeup of them speaking, have them speaking, you know, in a crowd or have them speaking over the shoulder.

SPEAKER_11: So you see the back of their head when they're speaking and keep it a little elusive. Right. And you see their face when they're, you know, fighting a fight, uh, by the way.

SPEAKER_03: But the reason I bring up the kid stays in the picture was this was the first documentary over 10 years ago. It's one of the best 10 best documentaries of all time. One of the 10 best autobiographies of all time. You, you listen to this autobiography. You, you go see the movie.

SPEAKER_11: Uh, the documentary uses, um, I think they call it rotoscoping or something, but they would take pictures and then they would make them three dimensional and like move people around in them and zoom in and on them. And then they did a lot of animation. So in order to tell the story, they used all these new techniques that now you see in like every true crime thing.

SPEAKER_03: And then people do reenactments.

SPEAKER_41: Um, and you'd never know when it's a reenactment or it's actually some tape that occurred. So a lot of documentaries now use these techniques, um, and they don't tell the audience and the storytellers are like, yes, it's a visual medium. We're okay with doing this.

SPEAKER_79: And, you know, we give some disclaimer at the end in the beginning. Um, and if people want to think that's actual tape of, you know, something that happened 40 years ago that couldn't possibly be on tape.

SPEAKER_77: Fine. Uh, all right. Speaking of cutting, uh, Peloton is cutting another 500 jobs after multiple. That was brutal. That was a hard transition right there. There you go. That's a hard transition. Hard turn there.

SPEAKER_03: Um, man, I am rooting for Peloton, but, but it seems like this turnaround started two years too late, a year too late.

SPEAKER_20: They're cutting another 500 jobs. This is after multiple rounds of riffs. According to CEO Barry McCarthy, this will mark the last of the company's restructurings. And you gotta remember, he took over from John Foley, the co-founder earlier this year. This is the fourth round of cuts. Peloton now has less than half the number of employees compared to 2021 peak. It went from 8,000 to 3,800. Still seems like a lot. 500 jobs is 12% of the remaining workforce. And he's hoping these cuts will allow Peloton to return to growth. You know, they've done a bunch of other changes. They're putting all their bikes and Hilton branched hotels. I think that's genius.

SPEAKER_77: Um, it's a really great experience when you use one of these pieces of equipment, uh, when you're on the road, because you get to record all your, uh, workouts and it's really easy to do.

SPEAKER_79: Um, they started selling the equipment and Dick's sporting goods. Uh, they're selling on Amazon, all this stuff. All these sacred cows have been shot and, you know, turned into hamburger. Um, here's the quote.

SPEAKER_03: There comes a point in time when we've either been successful or we have not. Uh, after the article was published, McCarthy said he didn't mean to give the impression that the company had six months to live and send employees a memo apologizing.

SPEAKER_20: Here are some quotes from the memo. There is no ticking clock on our performance. And even if there was the business is performing well and making steady progress toward our year end goal of breakeven cashflow. We were expecting a story about redemption and the successful turnaround of Peloton, which is why we invested time on background briefing them in the state of our turnaround. Yada, yada. I was asked the question, how much time do you think you have to show success? My response was 12 months from the time I joined Peloton knowing that we were already showing significant progress and in record time seems like a no brainer. Most importantly, I don't want this new cycle to overshadow the difficult reality that 500 of our colleagues, blah, blah, blah, have to go. So, I mean, basically he feels like he got misquoted. Q4 cash 1.2 billion. Q4 free cashflow negative 411.

SPEAKER_77: Q4 net loss 1.2 billion. I'm guessing that includes some stock or some writing. And this is a fiscal year.

SPEAKER_13: So it's cute. The, the, the most recent quarter is yes. Yeah.

SPEAKER_77: Um, cause they, they're on a non calendar year. Q4 inventory 1.1 billion in inventory. That's crazy. And who knows how they're marketing that?

SPEAKER_79: Is that at the retail price? Is that at like some discounted price? Counts payable, almost 800 million.

SPEAKER_77: Q4 revenue, 679 million down 30% year over year and quarter.

SPEAKER_186: Basically, um, paid subscribers, still 3 million up 27%. I'm one of them over year. I'm one of them too. And they raised our prices down to 42 or 44.

SPEAKER_188: I'm, I'm about to get on it this afternoon. Um, so what do you think, you know, happens here?

SPEAKER_03: Do you think this CFO turned CEO can get him to break even?

SPEAKER_177: Feels like he's pretty serious about that. And then does it remain an independent company? Chances.

SPEAKER_13: First of all, I love Barry McCarthy. Like, uh, if anyone can do it, Barry can do it. Why? Uh, I will say, I think the story here, and before we even get into this, um, this is a very real human story with 500 people and now 3,500 people total that have lost their jobs, which is really sad. Um, to unpack the corporate strategy, I think the, the first story that I noticed in this was a corporate comms story because the, the journal piece came out. And then immediately afterwards, Barry wrote that email to the employees where you basically had a story in the public saying there's a six month timer on Peloton to get profitable or sell. And then him having to go, whoa, whoa, whoa, whoa. That's not what I said at all. Yeah. And so it must've been absolute chaos within Peloton to have to figure out like what to do with such a, um, you know, I've been in those situations before where you're, you're giving a, you're having a long conversation. You're having a long conversation with a journalist and the thing that ends up getting picked is the least, um, or at least the, the thing is fair. Yeah. The, the, the most sort of like neatly thing. And then it's told with numbers in a way that makes it even hurt even more. So when he said, you know, I think we have, uh, I think, well, what did he say? Something about knowing more within 12 months. We have a year to describe it. Right.

SPEAKER_199: So then what they do is they flash forward six months and say six months from today.

SPEAKER_41: Yeah. They played some games with his statement of like, I think we have a year to figure out a turnaround. Right. Now that doesn't mean if we don't figure it out, the company shuts down. Doesn't mean they have no options.

SPEAKER_03: It's just like, he basically was honestly, I think a year is a probably a good time to judge me on my turnaround. Whatever. We have a year to figure it out. Um, and they're like, Oh, clock is taking six months. This is why podcasts are doing so well. Podcasts. Don't play this game. Podcasts. Let the person speak and let the audience judge for themselves. This is why Barry needs to come on this week in startups.

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SPEAKER_13: So then to analyze the two big corporate strategy observations from this, the first is the original sin of a misforecast. So when John Foley was CEO and he's owned this mistake, they just completely lacked the forecasting ability to know that this would slow down. They thought, as many e-commerce companies did at the beginning of the pandemic, this is not a blip. This is a pull forward. So we think that growth will accelerate right now, but then it will go back to the pace that we were accelerating before, but from a new higher milestone. And what ended up being true for the vast majority of e-commerce companies was not that, hey, great. We'll continue at our current growth rate or our pre pandemic growth rate, but with higher numbers. What actually happened is we're going to have this plunge down period where our sort of like cumulative graph over time looks like it would have without the pandemic. And so you sort of have this negative growth for a period of time shrinkage. Yes. So it was a big misforecast, but unfortunately it was a big misforecast in a business that requires really expensive inventory and was sort of growing. Hardware's hard, man. Hardware is hard. Totally. And so they ended up with, you know, a lot of people, I mean, 8,000 people to build the products that they build and deliver the service that they do. Is a lot of overhead and to pile up all that inventory and to basically orient the entire company's disposition toward the good times are only going to get better when really they were about to enter a really tough time. You know, it's, it's, it's just like, it would have been amazing if they survived at all, but Barry has come in. He's made four hard decisions, which you really, you never want to hear the phrase fourth layoff. You kind of want to get it done in one. And if you're really wrong, get it done in two.

SPEAKER_00: Bill Gurley talked about this. Yeah. You got to do one, but you know what? They did 15% cuts. They, I think the story here, I like your analysis. And I think the story here is also you had a CEO who to your point is making these crazy projections, but I also think it's a CEO who liked to spend money and was optimistic and was not disciplined.

SPEAKER_41: This is a lack of discipline that was far too many people working at a company. They didn't need to have 8,000 people.

SPEAKER_01: This company could have been run with two, 3,000 people. No problem.

SPEAKER_00: And this was a problem across the ecosystem in Silicon Valley in the late stages of the boom.

SPEAKER_41: Now it started with Google because Google had a money printing machine and they specifically pursued a strategy of take talent off the market. We want to take talent off the market so they don't build a competing project. How many people did we know when to Google and we're resting investing and you would ask them what they're working on. They're like, yeah, they hire me because I'm smart. And they told me find a project and pitch it to my, you know, person. And yeah, we're working on a couple of ideas and we have Fridays off for 20% time. This entitlement was all created by one company, Google.

SPEAKER_01: Google, because they found it's like Norway. It's like Saudi Arabia. They found the mother load, Ben. Yep.

SPEAKER_41: Of natural resources in the greatest advertising medium ever created. Type a word will get people to pay per click in an auction for their own name. Yep. To type in Peloton. Peloton has to pay a dollar 50 every time they click or else like fitness is going to intercept them. What a giant. Not to mention, this isn't just revenue.

SPEAKER_82: This is like near 100% gross margin revenue to Google.

SPEAKER_00: Bonkers. And you know what they said? They're like, we could run this business at a 99% margin. But why don't we just hire every smart person? And we'll make a whatever 80% margin and not have to deal with the fact that somebody could create a competitor because every smart person will come work here. We'll just we'll just give that money as a blocker strategy. That blocker strategy is the original sin of Silicon Valley that everybody copied and has now led to chaos. And Toby was on. I don't know if you heard the Toby episode from Shopify, but he was like, listen, I hired too many people. I was two years ahead. I take ownership of it.

SPEAKER_11: I made these cuts. It was a mistake. And you know, some people could course correct other people.

SPEAKER_00: Peloton was driving the car too fast into the turn. And now the car is flipped for frickin times. Boom, boom, boom.

SPEAKER_41: And now boom again. This car is a wreck. It's gonna be hard to get this car back on the track. Yep.

SPEAKER_13: I think Barry gets this company free cashflow positive and also within the next two years, maybe less. They get bought. I don't think Peloton stays an independent company for the next decade.

SPEAKER_03: I think that is the 70% case.

SPEAKER_41: I think there's also the case that he makes such substantial changes that when they are cashflow positive, people say this is an undervalued stock. They work out, they have a lot of debt too. And they got these, you know, inventory. This is a two year chart. It's gonna be a two, three year turnaround. Like you're saying. And you know, when you come in as a CFO like this, you're turning over rocks and you find the next worst story. This is one of the problems with being a turnaround person. These turnarounds, you know, specialty people, man, what you start turning things over. It's like, oh, oh, we have this much debt. Oh, oh, wait, we have this settlement. Oh, we have this patent infringement. Oh, it's just you're finding disaster after disaster. Like buying a home. And they're like, yeah. Oh, by the way, the basement was flooded three times. Nobody told you.

SPEAKER_79: You just got like all these crazy problems. Uh, I wish him. Well, 70% chance. I agree. It gets sold. Do you think there's a chance? 30% chance of Marines independent or 29%.

SPEAKER_215: Do you think there's a chance the equity gets wiped out? I think that's a good question.

SPEAKER_13: And here's the thing I was thinking through to prep for the show as I went back and read the transcript from our February episode when, uh, when John Foley came in. Uh, the, the strategy he's employing is completely different than what it was before. The strategy before was sell really expensive bikes, get only customers that are completely price insensitive and thus basically never churn. I think it's, I was looking back at the acquired episode, 91% of Peloton customers are still customers after a year. You look at like Netflix. That's like 50%. Yeah. So most consumer subscriptions turn half their user base every year. Peloton wasn't that their whole strategy was extremely high end products for people that are completely price insensitive. And then the new strategy with Hilton, with selling and exporting goods, with letting you rent a bike is let's try and get like completely commoditize our hardware. Let's try and get it in as many homes as possible and then make money on the subscription service and try and really. Is this a good strategy? Yes or no.

SPEAKER_33: It is a strategy that can work. You just have to go really hard one way or the other.

SPEAKER_13: And they're transitioning a business from going really hard in the, we make money on hardware to the really hard on the, we will sell mass market. And I don't know if they will survive the complete, you know, pull the e-brake, cut the wheel, spin it while you're in motion thing.

SPEAKER_03: This is some fast and furious maneuvering. Yes.

SPEAKER_215: You have, uh, the Epic ski pass. You get a, you get a ski pass every year. Do you get a season pass? I don't, I don't. Okay.

SPEAKER_104: Uh, since I tore my ACL skiing, I've lost my. Did you ever get that?

SPEAKER_228: Uh, season pass. Uh, season pass. No.

SPEAKER_227: Every time I went.

SPEAKER_228: Okay. So this reminds me of a bit of like the skiing strategy. Yeah.

SPEAKER_01: Season passes used to be wildly expensive, you know, and it was for an elite group of people, but yada yada. Epic came in and said, Hey, we got all these mountains.

SPEAKER_41: We've aggregated. We're dropping this thing down to four or 500 bucks for a local pass, five, 600 bucks for national pass.

SPEAKER_03: Have at it. We'll make money. We'll have some block out dates. Well, you know, like kind of like the Disney subscription passes.

SPEAKER_00: But this thing changed the entire industry, right? They just went from collecting money as they go, constantly being chasing their tails to if you want to get an epic pass, you got to buy it in the spring.

SPEAKER_03: Sometime in the summer they sell out. I understand. I always have mine on auto renew now because I don't want to deal with this. And it really has changed the industry. The mountains are packed.

SPEAKER_00: They're making money on $12 pieces, whatever. So this strategy can work. But like you're saying, it is a complete mind shift from we're dealing with millionaires or people with, you know, home gyms and they have 800 square feet in their home for their gym. You know, their extra, their fourth bedroom in their home or their, you know, third, you know, car in their garage has been dedicated to a workout area. Yeah. This is for absurd was for absurdly high end people. You and I pay 42 or $44 a month now as members.

SPEAKER_79: I don't know. They sent that email.

SPEAKER_41: It's a lot. You don't know because you're like, well, for 600 bucks a year, I'm staying fit. This is part of my overall, whatever, a couple of thousand dollars a year I spend on my health. It's like an afterthought.

SPEAKER_168: Now, cheaper than a gym, cheaper than a gym, which is how I did all this math. That's how they turn the, the, the model and they, they, they convince you that that's the comparable.

SPEAKER_41: Well, what I did was I did my wife and I being members of Equinox, which we were in Santa Monica, this evil company Equinox, the worst company on the planet, the worst human beings on the planet work at this company.

SPEAKER_79: It's the North Korea fitness. As far as I'm concerned.

SPEAKER_33: It's because the same PE umbrella that now in soul cycle, right?

SPEAKER_35: Whoever they are, they're evil. Uh, I hope this company burns because they tortured me, you know, hours of onboarding.

SPEAKER_188: And then you have to change. I moved.

SPEAKER_41: And then like, they're like, you have to prove you moved. I'm just like, it's the worst customer support, the worst human beings on the planet. It's the most beautiful gym on the planet also, but you know, 150, 175, then 200 a month. You can't get out of it. You can never pause this thing. I hate this company. Oh yeah, it is.

SPEAKER_13: They own, uh, SoulCycle Equinox, Pure Yoga, Blink Fitness. The worst. They own a bunch of these.

SPEAKER_41: The worst. I, I will tell anybody now. I mean, maybe things have changed, but it's the most anti-consumer, anti-membership company on the planet. Um, and how they treat their members is horrific.

SPEAKER_79: Just type in Equinox horror stories and, and somebody can correct me if I'm wrong, but you know, this data is when, you know, 10 years old, but I hate this company with a passion.

SPEAKER_03: But, you know, if you're looking for a high-end gym, you know, it's the best one.

SPEAKER_54: But, you know, 200 bucks a month for a couple is 400.

SPEAKER_03: 400 times 12 is 4800.

SPEAKER_231: So rounded up to 5,000.

SPEAKER_03: Uh, you have to go there. You have to park. That's a little bit of money. Each time you got tipped the valet, whatever. So you probably add another thousand dollars into that, you know, to, you know, traveling and parking, whatever. If you go on a regular basis, you know, if you do two visits a week, you know, it's a hundred visits, you know, some parking at 10 bucks each time.

SPEAKER_177: So it's called $6,000 for a couple.

SPEAKER_79: Now you start thinking, okay, well, Peloton for a couple is $44. And then you have a tonal, same thing, 30, 40 bucks a month.

SPEAKER_31: It's a fraction of the cost.

SPEAKER_79: And you don't have to leave your house.

SPEAKER_31: I have the Hydro, Peloton, treadmill, and I have the tonal. I have all three. And I did the math and I was like, this is cheaper. This is half the price of Equinox. So I just built a home gym and it's fricking fantastic.

SPEAKER_29: Still a great product and service. Um, I think they're going to make it. I think this is going to be an incredible turnaround. I'm going with the 30%. You don't think it's commoditized?

SPEAKER_192: I just think the thing that scares me, like, and I am all in on the experience, right?

SPEAKER_13: I'm like very, I have instructors that I like, I'm used to the Peloton brand. I think that they do actually go above and beyond relative to other providers. But like lots of people have this video streaming with instructors on an exercise bike thing now. And a lot of people with cheaper bikes. And it's the Android.

SPEAKER_41: It's Android versus iOS. I think this is the iOS version and that many people, the high end will always just buy the best. You and I are at the point in our lives.

SPEAKER_177: We're just going to buy the best. Maybe 10 years ago, you would have gone for the cheaper solution. 20 years ago, I would have gone for the cheaper solution.

SPEAKER_03: Right now, the, the cost difference between Android and iOS. We just say, screw it. We'll spend 1200 on iPhone instead of 800 on Android. Those blue bubbles, man.

SPEAKER_79: Exactly. So we'll, we'll just pay it. The premium's not enough for us to care. Now, what I do think will happen is what's happened with iOS.

SPEAKER_41: Do you know in iOS, the iPhone, uh, percentage producers, can you pull up the percentage of iOS? iPhones versus Android phones in the U S over time. It just hit 50% iOS. I was about to say. Now, everybody said iOS will be the niche 20, 30%. But over time, Apple figured out a way to have an entry level product that wasn't that much more expensive than Android and slowly. Yes. They've recaptured it. So there is an art here to Peloton going downstream.

SPEAKER_13: So here's the thing that Apple has done that no other company that I can think of in history has really managed to do. And it will be very interesting to see if Peloton can do it. They have created the mass market high end, like the, the mass market premium. And when I say that, like the, here's the craziest thing. I have blue bubbles. My phone was $800. It's the iPhone 13 mini. Yeah. The iPhone 14 pro max that you can buy is the most expensive one is $1,400, $1,500. And Larry Ellison has available to him the exact same phone that you and I and anyone has that $1,400, $1,500 phone. We both get blue bubbles. We both get all the same apps. Absolutely. They have figured out a way to serve Larry Ellison, the very best product that he can buy and have a network effect with all of us. Yes. Who have the ability to buy. Brilliant. The most premium thing that we possibly can in our, with our sort of like a socioeconomic bracket. And it turns out that like they've managed to capture both the extreme high end and create this like affordable luxury thing for 50% of the population.

SPEAKER_183: Amazing. What other company has done that man?

SPEAKER_20: I'm trying to think of a, of a fashion brand that has achieved something like this, right?

SPEAKER_03: You, or a car company. And I think Tesla's on the, on the verge of doing this because my wife insists that she will only get the model.

SPEAKER_20: X. And I love the model. Y.

SPEAKER_85: And I conversation with the X that you like, you like the air.

SPEAKER_25: It's gonna be $150,000 for this model X that she wants all in because she wants the.

SPEAKER_34: Permanent back seats. Like what's the selling point?

SPEAKER_03: It's the three rows. It's the three rows. It's the, it's the car she loves most.

SPEAKER_79: And I got her one seven years ago when she had the twins as like a present for the babies. I thought it was a nice thing to do when it first came out. Now it's time.

SPEAKER_03: I mean, the good news about these cars, well, and we're gonna get into car sales in a moment. It's a good segue. You know, these Teslas, you don't have to ever replace them.

SPEAKER_00: If you're replacing, it's like, well, maybe I want the higher range or I want the new upgraded design.

SPEAKER_41: But her model X drives as great today as it did in the beginning. My model S even my roadster. The experience is largely the same as the first day of driving it because there's no internal combustion engine to be breaking down at increasing frequency in the second decade.

SPEAKER_01: I think Tesla's are going to make it to their third decade and be just as good as the experience. The first decade sends the upgrade or wear and tear to the interior, whatever it is.

SPEAKER_79: But I think they largely say the same because you don't have that giant ice engine where anybody when I used to have to buy used cars. Yeah, you're like, oh boy, carburetor is going to go. This is going to go. That's going to go. The only thing you have to change is really the brakes. And because of self regeneration, the brakes don't go. So if you just take out brakes and tires and winter wiper fluid, you're basically done putting that aside. The model Y to me, you're looking at anyone.

SPEAKER_41: I'm going to get her the new one, of course, but we're not price sensitive in that way.

SPEAKER_01: I wanted to have the best one that you can enjoy every day. But the model Y to me is a better car. I believe it's a better car and certainly it's a better value.

SPEAKER_79: Now, I don't think the folks in Tesla particularly appreciate me having this point of view, but most people would say the model X is a better car. But I think on a dollar for dollar basis, is it worth twice as much or even more than 2x?

SPEAKER_228: So I told her, you know, you could get the Cybertruck and the model Y for the same price.

SPEAKER_168: And wait, the Cybertruck is going to be 60k or 70k Cybertruck of both of these cars will be 60k.

SPEAKER_41: So I'm kind of looking at it going, wait, if you and even if you got them both maxed out self-driving and everything, 75k each, 150k. You could literally buy both of those for the price of the model X. So I'm like, wait a second. I understand that's a super luxury.

SPEAKER_20: I understand it has the golden doors. But do you want to even consider that as an option? No, no, I want the model X. I want, you know, what I want to drive what I want to drive. Okay, that's fine. But think about that for a second. Or you could buy the model Y drive that every day, which is my daily driver. I love it. I'm obsessed with the model Y. And I could buy, you know, a land, a defender, a Range Rover Defender for 80k or whatever, or I could buy a Jeep Wrangler or a Bronco as a backup guest power car. So I think this is like a very fascinating moment in time in terms of like you're saying in terms of luxury. I feel like the model Y is a luxury car.

SPEAKER_203: It feels luxurious to me. Well, I mean, it's.

SPEAKER_296: And I have, by the way, I also have the full self-driving.

SPEAKER_13: Driving as a luxury car, but when you drive in one, it doesn't like, it's not a, let me like it's, it doesn't feel capital L luxurious. Like it doesn't feel the same way that if you go buy a luxury car, the set of things you expect to get from it. It may be a smooth. You mean the leather?

SPEAKER_41: Yeah. Yeah. But I don't know, man. I just, for me, it's about the drive and how smooth it is and buttery and reliable. And I have the full self-driving beta now.

SPEAKER_302: Oh man, that thing is scary. Good. It is scary. Good. I've only been doing it for a week.

SPEAKER_183: And I've been like doing it, like driving. I've been putting it off the whole ride. Where do you trust it? Where do you not trust it? Like, when do you grab the wheel?

SPEAKER_41: Well, I will say on back or country roads where it's not late.

SPEAKER_00: The road is not labeled pro properly. It does navigate it, but it does make me a little nervous that, you know, some places I drive on the back country roads. They're not marked properly.

SPEAKER_03: Yeah. And so it's trying to figure out a two lane road without a line in the middle or a faded line. And then intersections, because people drive crazy, when people are driving normal, the intersection is fine. But you get to an intersection where people are driving like they drive in California. It's trying to navigate bad behaving drivers. And I think that's going to be a super challenge. I would, if you ask me to give a percentage, I think they're at 87% right now.

SPEAKER_79: The last 13% is going to be like, I think every six months, they're going to get one point. So I think we're on this like three or four year journey to where they can remove the steering wheel. I don't think it's 10, but I don't think it's two or three. I think it's maybe four or five year five.

SPEAKER_03: I would say if I had to put the over under on, you could take the steering wheel out five years.

SPEAKER_79: Um, it's very close, but you know, for the majority of your ride, it does work, which is scary to me.

SPEAKER_311: Uh, yeah.

SPEAKER_79: It's kind of wild to watch it advance because they also in the full self-driving beta, they kind of show you the, what the computer is seeing. You've probably seen these videos online where it shows you like it figuring out intersections and stuff like that. And it's like, Ooh, wow. It's it knows what's going on. And this AI is going to figure out how to deal with these people who I've just, where I live in the peninsula, in the Bay Area, a stop sign is a suggestion.

SPEAKER_41: You know what I'm saying? It's like, you could stop. Stop.

SPEAKER_01: So when you come to a stop sign in California, people are like, yeah, right on red. I came to a full rolling stop. And I whipped through, I mean, people come to a full rolling stop. That's the Bay Area of my mind or California.

SPEAKER_13: I don't know how it is. It's funny. Seattle is the exact opposite. People are so like, oh, you want to jaywalk. Let me stop right here in the middle of the street so that you can do whatever you want. Yeah.

SPEAKER_41: So that's, those are the nuances that self-driving is dealing with right now. So if you just think about that, that is something also in Santa Monica that happens. Somebody walks because I was a New Yorker. I jaywalk all the time. And when I first in Santa Monica started just crossing Lincoln Boulevard in the middle of the street, man, every car. Boom, they stop. I'm like, keep going. I'm walking around you. And they're like, right? No, you're walking in the middle of the street, sir. And I'm like, yes. What's the problem here? I'm walking in the middle of the street to cross the street. Yes. And you are driving at 60 miles an hour and I'm timing it like Frogger. And they're like, no, you can't play Frogger in. Santa Monica.

SPEAKER_320: Apparently. Apparently.

SPEAKER_322: Are you going to talk about the used car market? Let's do it. All right.

SPEAKER_177: Used car prices are down significantly and people are discussing on Twitter.

SPEAKER_03: Uh, Sam chorus, a director of AI research at arc. Kathy Woods firm tweeted the following today. An interesting chart used vehicle index is now down on a year over year basis.

SPEAKER_25: Wholesale used vehicle prices. On a mixed mileage and seasonally adjusted basis decrease 3.% in September from August. That's month over month. Obviously. Uh, the Mannheim used vehicle value index declined to 204.5 and it's now down 0.1 from a year ago. Here's the chart featuring the Mayheim used vehicle value index. Obviously these vehicles went crazy when we had a supply chain problem. They estimated that used retail sales declined 8% month over month and down 10% year over year. Compared to September, 2019 sales were down 18%. A slight improvement from August when sales were down 19% based on the same store results. Index measures 5 million annual used vehicle transactions to indicate pricing trends. In the used car market, our founder, Kathy would quote tweeted chorus and said the following.

SPEAKER_03: Given the accelerated consumer preference shift toward electric vehicles. Use our prices and the residual value of all gas powered autos are likely to plummet. Causing serious losses in the $1 trillion auto debt market. Do you buy that? Do you buy that? Obviously we all know supply chain and. Stimulus led people to go during COVID and want to buy a new car. So everybody wanted to buy a new car because it got some stimmy checks and the down payment.

SPEAKER_11: Was, you know, provided for them, whatever. And that was the government's intent. They wanted to stimulate the economy. They wanted you to go buy a car.

SPEAKER_41: I don't know if you saw this used car prices. Some of my used minivan. They were offering me as much as I paid for it.

SPEAKER_11: It was a year or two old and they were like, we'll give you what you paid for it. And I was like, what? They're like, yeah, Honda Odyssey not available. Everybody wants one. There's not available. You paid 65 K for this thing. We'll give you 65 K. I was like, that makes no sense. But do you buy this? Cause they can sell it for 80. Well, that was what was happening. People were paying above sticker for used cars. So what do you think is going on here when you look at these numbers? And what do you think Cathy's is Cathy's point legit or not?

SPEAKER_13: I think it might be a little bit of a stretch to bring the consumer preference for EVs into this. I do think it's remarkable how fast every it seems like the last 18 months, every single car manufacturer has come out with a very viable Tesla competitor. And I actually thought it was going to take much longer. I thought Tesla was like way further ahead to a lot of these areas. But, um, and we'll, we'll see on reliability, but you know, um, mileage range, all that stuff and scale. Yeah. Scale is the issue. Yeah. But all these manufacturers are incredible at scale. I mean, like Toyota for the thing they know how to do is make cars at scale. That's the thing that Tesla for the first.

SPEAKER_337: See if they can do that with batteries. That's the, the issue is right.

SPEAKER_13: Can they do with batteries? So, so I think it's a little bit, um, cute to try and be like, but because like, it's a little bit sort of capitalizing. On this, this conversation right now around electric vehicles, I suspect the two things that are playing into the, into here the most are, um, the end of the supply chain glut. So there's actually available inventory of new cars. Yeah. And so new car prices, uh, are going down, or at least there are, um, new cars available for people to buy, therefore used car prices go down. And at the same time, we're seeing a huge macroeconomic shift. We might be heading into a recession. Maybe we're already into a recession. People need jobs more than they did before. And so, uh, people are becoming much more price sensitive on all things, real estate. And so I think those two things are probably the things impacting price more. Now, you, you know, where I stand from this on previous episodes we've done in terms of cars. I, my method is always buy a car very deep and it's a depreciation curve. So if Cathy's right and like all cars are about to become devalued because of, um, some extrinsic force, like people want electric vehicles. Oh no, my car that I currently think of as a $50,000 car, shoot, it's going to lose half its value. My solution to that is always go buy a $6,000 car, uh, that has lost 70% of its value. Well, what do you do? Will you buy in year four? Is that your idea?

SPEAKER_34: So wait for the lease to come up and you buy the year four or five? I buy in year 10 and I buy a Toyota or a Honda. All right. Okay.

SPEAKER_341: Now you're just, that's just virtue signaling.

SPEAKER_34: You're trying to be low key.

SPEAKER_342: My Lord. Your virtue.

SPEAKER_85: And I'm looking to get a second one and I'm going to upgrade. I'm going to get like a 2012 to 14, I think.

SPEAKER_34: Holy cow. And you, but then you buy into all of these maintenance issues, right? Not if you're buying a Honda, man.

SPEAKER_13: I've had, I mean, knock on wood, but the thing, it costs me 5,500. It's probably currently valued at like 7,000 and it will drop soon to 4,000. You're so smart. And I have no maintenance issues with it. And here's the thing. If somebody like steals it or like breaks into it, like, I just don't care. You don't care. I have too many things for you about. You look at it as like a utility. Yeah.

SPEAKER_231: I like it.

SPEAKER_03: I like your approach. Unfortunately, I don't like sitting in a car that somebody else used before me anymore. Fair. It's fair. I, I like a new car, like that new car experience. And I'm the idiot who loses $25,000 every time I do this. I guess.

SPEAKER_85: You know what? That, that, that's where you like to spend, like that's, that's worth it.

SPEAKER_13: Yeah. And, and for me, I just don't, I seem to not get the same rush. And, and look, like I know it's virtual virtue signaling. I, um, uh, I show status in other ways, you know, like the car is just not the way in which I show status.

SPEAKER_353: Podcast, podcast.

SPEAKER_13: Do you know this is an SM 58. This is what Bono used in 85. Oh, wow. Fantastic. Same thing with microphones.

SPEAKER_03: Well, here's the thing. I, uh, I agree with you. And I, the, the thing that has hit me is I'm trying to make things last longer for two reasons.

SPEAKER_01: One, the environment and two, the overhead of the unboxing overhead is a new thing for me. Uh, the amount of time it takes to swap out your phone, to swap out your car. All of that is time. I want to spend with my children, my spouse on my writing on, you know, skiing. And so I'm like, you know what? I don't want to upgrade my boots. I bought my Daner boots. I love my boots. These are the Daner boots. They're going to bury me in these boots last 30 years. My, my Crockett, you know, my, my, I have a special, specific type of James Bond shoe. I like to wear. They're now 10 years old. They came out with Spectre came out. Uh, no, when, um, Skyfall came out, I have the same shoes he wore at Skyfall. Crockett and, uh, Jones, and these things are incredible. Uh, yeah. And so I now I'm buying pants. That's how nutty I am as a consumer.

SPEAKER_00: Um, I am buying the pants knowing which one. Last the longest. That's my goal.

SPEAKER_11: I want the pan that I don't have to replace. I'm buying skillets or lock who say, you know, that thing. Uh, you know, and I'm just, that's, that's what I'm focused on.

SPEAKER_360: That's it.

SPEAKER_204: That's it. Crockett and Jones. These are the shoes I wear. Let me see my, my, uh, let me see if my producers can do this. Crockett and Jones. James Bond shoes. Uh, they're incredible. Jason, this must be hard for you in real life.

SPEAKER_13: When you, when you wanna just like, um, say words and have, have someone like pull something else. You're like, oh my God, my, my super power doesn't work here.

SPEAKER_07: No, I have a producer with me at all times with a laptop. So when I'm like, just out at the club or whatever, I'm like, you know, like the Crockett and Jones shoes.

SPEAKER_03: And then the producer comes up and just brings the laptop over. Those aren't the ones, but those are another Crockett and Jones shoes. But those are timeless. Yes. Um, the ones I have are the, uh, those are one of the James Bond shoes. James Bond shoes or no, no, no, I'll tell you there are, I'm trying to have them mind read me because actually he's worn five different pairs of these. Ah, so this is one pair of the Crockett and Jones 007s.

SPEAKER_79: Uh, but that's not the ones I have. Uh, but there are other ones that are, if you, if you scroll down, you'll see.

SPEAKER_01: Does yours say 007 in the sole? Does not, it does not. But, um, the, there, there's a whole group of them.

SPEAKER_03: This is the like oldest shoe manufacturer, I believe, um, in the UK. And man, these things, they may cost like 800 bucks. The ones I bought, uh, were like 800 bucks, but I literally have had them for 10 years. And I send them, I send them back to this company to refab them like once every seven years. And they're perfect.

SPEAKER_54: And it's just, it's really just because I don't want to have to think about what are the greatest dress shoes that you can own.

SPEAKER_00: These dress shoes, I can wear them with jeans, Ben. I can wear them with the tux and anything in between. And they look dynamite. That's great. Uh, interesting.

SPEAKER_79: All right.

SPEAKER_00: Listen, I think it's, I think it's enough show for today. Uh, maybe any other plugs or things that are on your mind these days that you want to share with the audience?

SPEAKER_13: Well, I thought we were going to have to talk about the, the global downturn and VC funding drawing up. So I'm glad you didn't make me do the show that the depressing show, like we get to have the fun show here.

SPEAKER_183: I mean, just top level for people.

SPEAKER_79: VC funding was down 50% year over year in Q3.

SPEAKER_215: That's not unexpected to you, is it? No, not at all. Is it healthy for the industry or is it something to be in a panic about?

SPEAKER_13: Uh, you know, these things hurt, could be a hard landing, but we needed it. I mean, the, the, the, the multiples people were, were paying, uh, prices became completely disconnected from reality and it trickled into everything. And it's not a startups thing. It's an everything in our entire economy thing. And so. Correct. You know, the market had to become a, uh, a weighing machine, not a voting machine at some point to quote the late, great Benjamin Graham. And, uh, hopefully it just doesn't, um, you know, mess up too many of our lives on the way down. I will say, uh, to me, it always seems funny to call this VC funding. Like when you had funds that were like $4 billion funds that would write $100 million checks into companies that were already doing 50 million in revenue. Like that's not venture capital. Let's be honest. That would have been, you know, the IPOs in a previous era. Right.

SPEAKER_376: Right.

SPEAKER_13: Like Amazon IPO earlier than that, I think. Yes. And so. To me, the thing that sort of like the, the balloon that got let out first was the late stage private funding. I hesitate to call VC, but it's going to get lumped into the stats. The true, like venture capital funding, you know, formation stage, like what we do at PSL Ventures that like really early napkin stage type thing or the series day, like this of course is down too, but what I'm seeing day in and day out doesn't look that different than what I was seeing a year ago. Correct. Valuations are down maybe 30 ish percent. Uh, I was talking to our good friends at, at vouch insurance and they, they track this very closely. Uh, they were saying that the formation of new companies is down. So the, you know, you can sound a little bit of an alarm on like less startups are getting started right now than they were getting started before. Um, I think it's good. Great companies are still, you know, delivering value to customers and raising capital. You nailed it, Ben.

SPEAKER_20: What we're seeing here in this collapse, because this chart specifically looks like a very scary collapse.

SPEAKER_177: But I encourage people when you're looking at the global venture dollar volume in this chart, you know, is pretty scary.

SPEAKER_20: Q3 22, if you go back to Q3 21, it looks, you know, like a, like a, a really severe drop, but just go back two years to 2020.

SPEAKER_01: And it's a modest drop. It's off modestly from the 2020 number. 2021 was an aberration where there was so much money poured into the system that a bunch of people who typically would invest.

SPEAKER_03: In public equities who would invest in private equity firms that were taking over large companies decided, Hey, what Ben and I do.

SPEAKER_01: He does it at Pioneer Square Labs. I do it at launch in the syndicate. What we do is easy and it's high alpha. Therefore, let's just take this X number of our fund billions of dollars, tens of billions of dollars. And let's just wash it down there because you can't lose in venture. And what they're going to realize is you can lose these folks who came in and put these last rounds in. They don't have the protections that we have or the multiples that we've already hit that make us a profitable fund or a good, you know, stable investment. Well, the investors actually do have the protections.

SPEAKER_18: I mean, it's preferred stock. Preferred stock. In some cases they do, but if they're preferred and they go public. And so the companies are now in the tough place because.

SPEAKER_228: Yeah. But no, what's going to happen is I talked to some folks. Yeah.

SPEAKER_212: And when they go public, they don't have the ability to stop the public fundraise. They, they're not going to have the protection there. Right. And they're going to have no choice.

SPEAKER_13: Preferred stock doesn't, doesn't matter if you IPO below. It's only about acquisition.

SPEAKER_34: Correct.

SPEAKER_00: So when these things do go public, what you're going to see is these people who bought at 10 billion. Companies going to go public at 4 billion.

SPEAKER_177: Companies going to stay at 4 billion for two years or go up to five or go down to three, whatever the case may be on their fate. And those people have no choice.

SPEAKER_03: They've all gotten converted into common. The company went public and all their ratchets and stuff like that are just not going to be viable. And you know what? They're going to want them to go public because they're going to want that 40 cents or 50 cents in liquidity on the dollar. Right. Because what's their choice? Keep the company private for another five, 10 years. The, this is where I think some of these folks who came in, they're going to be underwater. I don't know if you saw, did a bunch of KOTU and TPG people leave in the last week or two? Did you see those headlines? I didn't see.

SPEAKER_13: I saw, uh, John Curtius left tiger global. Yeah. I think he's starting a fundraise for his own new. He is.

SPEAKER_25: And, and Matt Masio, uh, who worked with soccer. That's right. He left KOTU. He's leaving.

SPEAKER_03: He's leaving KOTU. So I think what's happening for those folks is they were in these venture firms. They put in a lot of big bets like this. Now they're looking at it saying, well, and this is, this is super inside baseball, but you vest when you're at a firm. They're probably looking at it and saying, if I vest, these things are going to be underwater anyway, just like an employee with underwater stock options. So if I start a new fund, I get to start. I mean, and it's not a cynical thing. It's just a practical thing.

SPEAKER_41: If I start a new fund, I get to invest at the bottom of the cycle with a new set of LPs and I get to the, the entry price changes to reality. And those entry prices are never going to be hit again.

SPEAKER_79: Therefore I'm out piece out. So the deck chairs are going to shuffle a bit here, but man, I think I'm seeing, I think less startups would be.

SPEAKER_03: Hmm. Very good.

SPEAKER_79: Because I don't know if you had this phenomenon, but kind of like a weak talent pool or a weak bench on some startups where they didn't have a world-class CFO product officer, chief technology officer, whatever it is. Because the dispersion of, uh, talent was so great that we were taking talent and spread it in the peanut butter very then. Now you can get some big, chunky talented teams. Like it's going to be better for the startups that remain. Yeah. That's what I'm excited for is the consolidation.

SPEAKER_01: So if you have a startup and you've got some modest traction, uh, and you have a little cash in the bank, merge with a strong startup, bring your team over there. That's, I think a big win. If you can get some equity and merge your startup, that's not going to get funded with a really great team.

SPEAKER_79: And if you have a great team and you can do what's called the tuck in acquisition, I know it's hard to think of in this kind of market, man, the tuck in acquisitions, it would be wonderful for everybody involved. Consolidation of talent. All right.

SPEAKER_03: Listen, Ben, great job. Great job. You too, Jason. Thank you.

SPEAKER_00: Everybody stop what you're doing right now. Hey, go follow Gilbert. He's not in the first name club, but he is in the last name club, which is the second best club to be in on Twitter. G I L B E R T Gilbert. He's at Gilbert. Go say hi. If you've got a great company, pitch PSL, Pioneer Square Labs.

SPEAKER_87: This is a great, great venture fund and incubator. You're going to be incubating some more companies or are you doing more investing in companies?

SPEAKER_215: We'll, we'll spin out four or five companies this year. Hmm. Love it. Let me know. Maybe I get my beak wet.

SPEAKER_399: Maybe I can get PSL companies. All right.

SPEAKER_13: And importantly in the Northwest, if you are, if you're, if you are any part of your company is in the Portland, Seattle, Vancouver region, would love to talk to you.

SPEAKER_203: You believe that you can do better work when you can go visit and break bread with the founders.

SPEAKER_231: Correct?

SPEAKER_13: Yes. But I've sharpened my pencil on this a little bit. Okay. I believe that Seattle companies like Microsoft, Amazon, and the 200 other companies that have opened engineering offices here spin out ridiculous talent. And so I just want to fund that talent. Love it. And that talent can move, but you know.

SPEAKER_180: I like it. I like it.

SPEAKER_405: That's an approach.

SPEAKER_180: That's the thesis. I like to go out there in the real world. I want to do tons of real world stuff. Now.

SPEAKER_79: I went to Stanford on Friday and was supposed to talk for 90 minutes wound up doing three hours with these GSB students and the entrepreneurial clubs there took seven, eight, no, nine pitches, and then went out for beers and pizza. Really bad pizza and cheap beer for another two hours. I spent six. No, three hours. I spent six hours, six, five or six hours on campus. Just hang. And you know, of the 150 people in the audience, a hundred of them came for beers and stayed to the end. And we basically closed the bar. We closed the pub on Stanford. I want to do more college tour coming up. I want to meet founders. I want to get out of the house. It's good times. All right, Ben. And every, oh, and by the way, since you're in your podcasting app right now, just go and give a search for acquired and subscribe now. And we'll see you all next time.

SPEAKER_409: Bye bye.