NVIDIA's $500B Compute Deal, Paramount Threatens to Bounce, Record Europe Tourism | Ernie Garcia, Alex Edelson, Nico Simko, Ian McGinley, Conor Sen

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Easy to use corporate cards, bill pay, accounting, and a whole lot more all in one place. Is that the Nvidia compute deal alarm? Huge deal hit the wire yesterday, but on the COVID of the Financial Times today. Wall Street big names join NVIDIA to build $500 billion AI financing package, a landmark lending plan. Jensen really lined up the murderer's row of financiers for his new AI financing package.

Legendary setup over on CNBC, too. Legendary. Becky was one of the greatest roundtables of all time.

Yeah, incredible. Only Larry Fink was remote. They got David Solomon, CEO of Goldman Sachs, in studio. John Gray from Blackstone, Jim Seltzer from Apollo, Bruce Flatt from Brookfield. And of course, Jensen breaking it all down for everyone. I'm sure the Hollywood starlets were pounding on the glass outside looking for some new arm candy, don't you think?

100%.

100%. Because it's very rare to see that many individual allocators, capital allocators, specifically capital allocators, put it on, put it all on the line every day in the markets.

Some would call them bad boys.

Some might, some might, some have. So I'm sure they were lined up. But it's a great segment. I mean, they went for maybe 45 minutes or something. I wanted to play this one clip of them discussing just the profitability, why they see this as an investable asset. There were a couple of quotes. The interesting one from Jim Zelter, the sheer size of the infrastructure buildout is unprecedented. The president of Apollo said more than $8 trillion of capital is expected to be invested, a staggering sum. We see an enormous opportunity for private capital to finance a portion of this along with public. Public capital. So Wall Street's not taking their foot off the gas. Before we play you the clip, let me tell you about Figma. Agents, meet the canvas. Your AI agents can now create and modify your Figma files with design system context.

So very interesting. David in the X chat says time will tell if Jamie Dimon not being with them on the desk might be smart in hindsight, or if he—

it's very interesting that he was missing out. Yeah, I don't know. I mean, at the same time, it feels like there's so many different deals happening. And like, this is like this consortium. There's going to be multiple ways to participate. If this winds up being some sort of fund or vehicle, I'm sure it can be offered to his clients in some way downstream. It's more just like he wasn't in the press circuit. But I don't know. It is a really good point. He was notably absent, which was interesting. At a certain point, you get so many of the finance guys together, you start noticing who's not there. More than who is. Anyway, let's play this clip from CNBC.

More of your margin of safety of energy.

So are these concerns about whether we can meet this demand over— overdone at this point? Do you think, Jensen, that from where you see things, the demand level and how we're building up around it, that it's going to be okay, it'll all work out?

We're going to be constrained for some time and pretty much across the board, from chips to memories to packaging to systems. Photonics, connectors, another land, power, construction workers, another one, the whole thing, the entire supply chain up and down behind, behind me, upstream all the way downstream. And this is happening at a time when AI has become useful because it's starting to do productive work and it's happening all over, all over the world. And AI tokens are profitable, incredibly profitable. When you have something profitable, everybody wants to make more of it. Yeah, great demand, great profitability. The conditions are exactly right for the work that we're doing right now.

Jensen, why these companies? And did you go to any partners who said no?

No one said no. But this is the 6 premier— does that mean world's premier institutional financiers for infrastructure? This is the best of the best.

What John said, that right now you're— you'll be less likely to have public capital that comes into this because a lot of these are companies that aren't making money yet. Is he right on that or are there going to be big banks and others that kind of step?

I believe within months you're going to realize that these companies are extremely profitable. These are the fastest growing technology companies in history.

Your customers, you mean?

That's right. These are fastest growing technology companies in history and the tokens they're generating are incredibly profitable. You know, if, if the wafers that we buy from TSMC are incredibly profitable, there's incredible demand for it. I'm going to want to buy a lot more.

But who are we talking about? Your customers? Which customers will have access to these AI labs? AI labs? Yeah, that's the ones that you think are profitable. But this will—

this AI labs, AI startups, You know, as you know, this last 6 months, the world put in about $500 billion in AI startups. $500 billion, the largest month in venture capital investing period probably in recent history. And these companies need compute. And so we now have the vehicle to do so.

That's great stuff. $500 billion, huge number. But it feels a lot smaller when he lays out the actual compute compute calculation, 50 billion per gigawatt.

50 to 60.

50 to 60. So you're looking at 10 billion or 10 gigawatts of power compute, which is, you know, the labs are at like 3 combined across a few of them. And we've been on this 3x scaling. So this is really just like next year's compute basically. I think Meta individually has a 10-gigawatt plan or something like that.

So.

Yeah. Definitely.

Yeah.

And the reason he's having to talk about profitability and the profitability of incremental tokens. And I think one of the reasons that a lot of people are just very uncomfortable with this is that the two leading companies in the space are private and their various numbers leak out from time to time. But you definitely don't get a complete picture. And it's very unusual to have, you know, two the two companies that are effectively driving the private markets— yeah, sorry, the two companies driving the public markets are actually private.

Yes. Well, there is the SpaceX factor here too, which recently announced that they're going all in on NVIDIA. But again, they are turning into a Neo cloud in many ways and licensing out compute. So there's this world where you might see—

well, yeah, but I look at— but I, but I'm looking at SpaceX more on this, on the supply supply side, right? Not driving—

No, no, no, exactly. So it's like a 6-layer cake and you're seeing the finance guys there, then NVIDIA making the chips, marshaling all this capital. A lot of it's going to go to a Colossus V data center and then be rented by a lab. Like that will be one of the potential outcomes.

Yeah.

But then they're just in the supply chain because I don't think the Semi Analysis forecast was for like Groq token demand specifically. It was just overall inference and compute demand because they're capable of building data centers very quickly. Anyway, Jensen also took to X to post a long essay, 12,000 likes. He's like fully on X now. I haven't seen him—

It's almost like he was lurking, studying. You think he was lurking the whole time?

Well, I don't know if he was studying enough because people are getting mad at him about for using the, the forbidden phrase. He says NVIDIA Compute is not just a chip, it is a complete AI factory platform including accelerated computing, networking, system software, AI frameworks, and a global developer ecosystem. That doesn't sound that AI to me. I don't know, somebody will run this through Pangram and we'll get to the bottom of it. But Prakash over here—

Isn't it somewhat fair for him to just slop it up a little bit?

Yeah, there is an element where If you're a believer in AI, you sort of can use it and it's okay because that's the whole point. Like, I would expect Suno's marketing to use AI.

You wouldn't be like, oh, come on. And he's just communicating what's effectively just a—

Yeah, like you watched him on CNBC clearly not reading from a teleprompter, clearly not doing AI stuff. So if he repurposes that into a blog post for other people that want to read it in that format, and then if he— turns it into a series of tweets or anything else, like, go for it, I say. Anyway, summary here. Jensen is completing the circle, says Prakash. Bankers don't like GPUs as collateral because the depreciation is unpredictable. It's unpredictable because a new GPU can obsolete an old one. But Jensen knows his own roadmap, so he's offering depreciation insurance to the banks. The depreciation insurance up to 25% helps the banks get marginal deals over time. Speculation here from Prakash. NVIDIA will also advise the banks on reference designs for data centers that will make them fungible. So you will know this is a 1 gigawatt data center, but it's in this particular class, this particular configuration. So it's on— it's Blackwell Data Center, it's powered this way. And so if you can put it in this bucket, you can underwrite it a particular way because it's— it becomes more fungible. Having them be fungible means the debt can be repackaged into asset-backed securities, collateralized loan obligations, and collateralized debt obligations. ABS CLOs and CDOs from 2008. Haha, I'm sure there will be a lot of folks upset about all of the comparisons to the mortgage-backed security build-out in 2008. This allows tranching to get investment-grade ratings on the debt, so it can be sold and resold to pension funds and insurance firms. It also allows the banks to trade idiosyncratic project-specific credit risk for sector-wide credit risk. Credit risk. So Jensen is trying to get his customers the same cost of financing as real estate rather than venture equity. This is going to move the data center game out of the VCs and into the big leagues. And so I'm sure people will be, you know, speculating all sorts of different things on what happens next here. But let me tell you about Shopify. Shopify is the commerce platform that grows with your business and lets you sell in seconds online, in-store, on mobile, on social, on marketplaces, and now with AI agents. Um, there are some other stories. Paramount is threatening to leave California by October 1st if the state refuses to negotiate a settlement in the legal fight over its Warner Bros. Discovery merger. We've been covering the story back and forth for a while, but according to Variety, Paramount CEO David Ellison wants a quick resolution to the antitrust lawsuit brought by 12 state attorneys general seeking to block the deal. He has now told senior executives that Paramount is prepared to begin the process of moving its operations out of California if Attorney General Rob Bonta doesn't enter settlement talks. Ellison reportedly told his leadership team last week that the Paramount Skydance board has already approved the relocation plans. If negotiations with Bonta haven't begun by August 1st, the company would start preparing its exit, with Paramount's Los Angeles headquarters potentially moving out of the state as early as October. The threat dramatically raises the stakes in Paramount's fight with Bonta, who has emerged as a leading opponent of the Warner Brothers Discovery acquisition. Bonta hasn't publicly detailed what Paramount would need to offer to resolve the case, but he has said that any acceptable remedies would likely need to be structural, such as asset divestitures rather than behavioral commitments like maintaining certain levels of production. So it's not going to be enough for Ellison to say, hey, we're still going to do 12 movies a year, 24 movies a year. It needs to be something specific about the structure, like the actual structure of the company. Paramount is also racing against an expensive clock. Beginning October 1st, the company will owe Warner Bros. Discovery shareholders a $7 million— $7 million per day ticking fee until the transaction closes. The state's antitrust trial isn't scheduled to begin until May 2nd, 2027. So almost 9 months from now, meaning Paramount could rack up roughly $1.2 billion in payments by the time the case is expected to conclude. Ellison is effectively putting pressure on California from the other direction. If the state won't help find a path to closing the merger, Paramount is prepared to take— start taking jobs elsewhere.

Yeah. So, so he's, he's trying to force the issue. This gets extremely painful. For the Ellisons if this antitrust thing just drags on. You could imagine it dragging on for a couple of years. Yeah, that puts a pause on all of their integration plans. It just makes everything a lot harder. Mm-hmm. And yeah, I don't think he has this. This seems like his one option, right? It's kind of the nuclear option. It's going to piss off a lot of the industry here in LA.

It is the most symbolic move because according to Variety, the company's LA headquarters would be the first operation to leave. And Ellison already has a 5-year plan to move most studio jobs out of California. No destination has been selected, but Georgia, Texas, and Tennessee reportedly under consideration. So it's like if you're moving the LA headquarters, the iconic Paramount headquarters, Everyone's seen the water tower. That is a huge shot across the bow as opposed to something that might actually be more economically impactful, like, "We just, oh, for this production, we were gonna make it in LA, we're gonna do it in Atlanta." That might actually move more dollars around, but maintaining that headquarters is so symbolic, right? So, Ellison and much of Paramount senior leadership currently work from the historic Paramount Pictures studio lot in Hollywood, but maybe it will be moving to Georgia, Texas, or Tennessee. I wonder where they'll go.

Anyway, we'll work on getting— we're working on getting a few folks on the show.

Oh yeah.

ASAP to break down the deal.

Yeah.

Let me tell you about the New York Stock Exchange. Want to change the world? Raise capital at the New York Stock Exchange. So speaking of publicly traded companies, Elon Musk may have found a shortcut to unlocking a trillion-dollar payday. He needed a win.

You asked for it, he's delivering.

Yeah. The idea is having SpaceX buy Tesla. This has been rumored for a long time. Lots of speculation on when these two companies will merge, if they will merge. But the Wall Street Journal on the front page outlines a very odd scenario where Elon could wind up making an incremental $1 trillion. It's really complicated, and it's not as simple as just, oh, he'll just buy the companies and then he just gets another trillion dollars. It's more complicated, but there is a potential outcome, but there's some mitigating factors. But it's worth understanding the mechanics of the deal or the mechanics of potential deal as it might play out over the next few years, because this is something that couldn't happen right now, but in the future, it is possible. So the Wall Street Journal reports that there's an obscure provision in Musk's 2025 Tesla pay agreement that's already been approved by the shareholders. And it was that crazy one we talked about where it was like a million robotaxis by this time and like the Optimus needs to be shipping. And it was a lot of really bold claims. But if he hits all those and the stock goes to like $10 trillion, then he gets a huge unlock of new stock. And it was all like, okay, well, like It's a lot of money, but that's a lot of progress for this company because there's a lot of projects at Tesla that just are sort of slow and steady, not really advancing that quickly. And so he was sort of throwing down the gauntlet saying, okay, give me another couple of years and I'm going to deliver in a really big way. And if I do, I want to be compensated for that. And the shareholders approved. But the obscure provision is it— it basically there's an obscure provision in the already approved Tesla pay agreement that could eliminate half of those performance requirements attached to the stock award if Tesla is acquired. So change of control affects those, those pay packages. What are you laughing about?

Mark in the chat says, talk about Zuckerberg again. I like feisty Jordi. Feisty Jordi is based AF. Yeah, I guess I woke up on the wrong side of the bed yesterday. I had some strong opinions.

We'll see.

Somebody had to say it.

Hey, he fired back. He called out Alex Heath. He said something big is coming. He was vague posting directly to Alex Heath.

And again, I just felt like that was so memetic with all the people that are actually at the Frontier. And it's just the whole thing. I'm like, yeah, I'll believe it when I see it.

Yeah, yeah. It's kind of—

What was the actual— See, see, Mark, now you got me stuck.

Now you snapped him.

I snapped him.

Oh yeah. Let's see what Alex—

rear naked choke if you don't watch out.

Over the weekend, Zuck called me via his Meta glasses while fishing to discuss the 6,000-word pro-AI manifesto he published this morning.

Yeah.

So he's trying to balance—

I love that. That's fantastic.

Good old American fishing. American. What am I, American Mark? He told me the immediate reason he decided to publish his philosophy now is that he believes Meta is very close to having substantially stronger models.

Probably true.

He wants people to understand his values before those models arrive.

Mm-hmm.

We know your values. We know your values, which are connecting the world.

It's fine. Instagram's fine.

No, I mean, the, the, the whatever, whatever the stated values versus the, the lived values. The lived values are if there is a hot product, help small businesses grow.

What about that value?

Come on.

Uh, Instagram has birthed so many companies. We know so many people that their companies would not exist if not for Meta platforms. How about great hours of enjoyable content? Yes. Yes. Americans to watch everything. Would we be even remotely familiar with Professor Sandy and the creation of the wombo without Mark Zuckerberg?

You would have never seen that he turned it down.

You would have never seen that he turned it down.

Or the dabita.

Yeah, you wouldn't. You wouldn't have.

You would not be aware of these iconic moments.

You also wouldn't know that once you go to Ibiza, you must go back to Ibiza. And you would not know that there's a 21-year-old bodybuilder who looks like he's 35 who's on his way. See, it's enjoyable.

Admit it. I don't have a problem with Mark.

Yeah.

And I don't have a problem with Meta products. I do get enjoyment out of them.

Yeah. And the business, the apps, they're good.

I have built companies that are dependent on Meta platforms. I've invested in many companies that exist in their current form entirely because of Meta Platforms.

There you go.

But I know what Mark Zuckerberg's values are.

What are those?

Mark cares about delighting customers, profitable advertising.

These are good values.

I don't—

I wish he cared more about advertising.

That's true. Yeah.

I wish he cared more about advertising.

That would be good.

But, you know, you just look at historical behavior, it's like buy or copy or chase the hot thing.

Yeah, but that's just a game. Like, you know, you're talking about a $10 billion startup that's, you know, coming after you with some new form factor.

I don't know.

You copy it.

I think you're discounting how good MSL is. Everyone is saying that MSL is like clearly in third place, right?

That means that they're ahead of XAI.

I mean, it's crazy if they, if they, if they actually get the next version of Spark out before Gemini 4 and it's better, and then Gemini 4 launches and stays in 4th place. Like, that is a crazy, crazy reversal.

Yeah, and I just— I— they are ex— they're executing well. Yeah, coming from incredibly far behind, they are approaching the frontier. I just think that being the pick-me— if he wants to be the pick-me lab—

you don't like the comms.

I don't— yeah, I just think it's not— I just don't think it's very authentic.

Okay. I think it's the opposite. I think it is authentic. I think it is— he is thinking about this stuff. He might not be the— it is just a little bit of a tough voice because there's so much attention from the social reckoning and the social network and stuff. And then like, It's like, in terms of the overall AI industry, attaching him, it's like attaching Demis to the AI industry was definitely better for the voices of the AI industry because Demis would stay on message and just talk purely about science. He won the Nobel Prize. And so if I was like, okay, I'm dealing with an AI skeptic who is paranoid about water use and surveillance, like who can I put them in the room with? I'm like, yeah, go sit down with Demis, Sir Demis. He's going to put on a good show and like walk you through this and give you a really optimistic vision. And he's not going to have the baggage of anything else, any lawsuits or anything else, right? And so, yeah, it's a little bit of a tough go. Anyway, back to Elon Musk.

Anyways, I just think like, again—

Let's get back to less controversial tech leaders. Let's talk about Elon Musk and how he's going to make his next trillion, because this is what's in the Wall Street Journal today.

I wish— I'll just, I'll just chat, I'll just end it here.

Please.

I wish, I wish that Zuck came out with like a 5-point plan to get his own trillion-dollar pay package, which was just like sell like trillions of dollars worth of ads. And I would, I would just be praising that all day.

That would be sick.

I would be praising that all day versus being like, oh, we're doing open source and now we're not doing open source and now we're open sourcing again because I'll get some brownie points. Yeah. But also we're going to—

It doesn't feel like—

still have closed models.

Yeah.

I mean, you go to the Dario thing and it's like the guy's been hard on China. He's been anti-open source since day one. Extremely consistent. You love him, you hate him, but like there's consistency there and that is just reliable. And in many ways admirable. I understand what you're saying. Anyway, back to Elon Musk. He's been extremely consistent. He's getting that trillion dollars in Tesla one way or another.

And there are multiple ways of being a trillionaire before. Yeah, he wants to run it back.

He's got to run it up. He's got to double it. They say your first trillion is the hardest and this is how he gets his second trillion. So, so this is how he's going to do it. So in Musk's 2025 Tesla pay agreement, if he hits certain milestones, he can eliminate a lot of those performance requirements that were previously attached to a stock award if the company's acquired. And so change of control at this scale, normally you would think that's impossible. You cannot take Tesla private. He tried it. It was not— it was too big of a company. And then also, once your funding was secured, funding was secured, but But there was a trillion-dollar— once you're a trillion-dollar company, like, you can't just get acquired, except there— we're in this very unique case where SpaceX is also a trillion-dollar company. So Tesla shareholders approved the compensation plan in November, last November. Under its normal terms, Musk can earn as many as 423 million Tesla shares across 12 tranches, but each tranche requires Tesla to hit both a market cap and an operational milestone. So the goals are deliberately enormous. Tesla would eventually need to reach an $8.5 trillion market cap while accomplishing targets, including delivering 20 million vehicles. Remember, I think the number of vehicle deliveries is actually declining this year. It was a very, very bold plan. They need 10 million active FSD subscriptions. That actually seems easy. FSD is really good. They need to deliver 1 million Optimus robots. That seems crazy because Optimus is still so early as a project.

You should try to interview someone with a Tesla that doesn't get the FSD.

They turn it down.

They turn it down.

That's crazy.

And I want to understand why.

I understand it if you just bought an older Tesla, you like the ease of charging and you haven't upgraded to the newer hardware package because it's like The FSD is available on the older Hardware 3 technology, but I think it's best on the Hardware 4, which is like 2024 onward. Not everyone can upgrade. If it's a financial decision, I understand it. But the last one was they need to get 1 million robotaxis into commercial operation. That also seems pretty doable. I saw a robotaxi driving around LA recently in gold. And just from using FSD, it it seems like it's ready. Like, there's probably some legal stuff, but in general, I think they could roll out the, the robotaxis, like, very quickly. They can make a million cars pretty quickly, and they have the technology, so it's just about putting those on the road.

Yeah, I haven't spent a ton of time in Teslas, but the times recently where human drivers had to take over was getting into a driveway. Oh, effectively like private property. Yeah, which is a robotaxi. You can just pull over to the side of the street and say like, you're walking the last 100 feet, bud.

Yep, totally. And so, yeah, I mean, that one doesn't seem that difficult, although obviously it is a lot. I mean, I think that's like 100 times as many Waymos. I think there's like 10,000 Waymos out there. So it would be a big move, but over a couple years, is that possible?

Yeah, so vehicle deliveries were falling. In 2024 and 2025, but seem to be rebounding.

But they're not far off from like a million vehicles, right?

838 in each one.

838,000. Yeah. And so over a year or two, they could probably manufacture a million robotaxis. And I think the technology is pretty much there. When you actually look online and you see the reviews of people talking about Tesla Ubers, they're like, I wish there was a Tesla product or an Uber product where I could demand that if it's a Tesla, they have to stay in full self-driving mode because many Uber riders regard the full self-driving experience as smoother and less likely to cause indigestion and sickness in the backseat versus watching a, a driver who has a Tesla who isn't that experienced and doesn't understand how to use the regenerative braking properly. And so it's much more jerky when a human's driving it. Because FSD is actually superhuman relative to a newbie Uber driver with a Tesla. So I think the technology is like very, very close. They got to manufacture it, obviously legal stuff, but they'll get there. There are other milestones requiring Tesla to generate increasingly large amounts of adjusted EBITDA. They have been profitable and cash flow positive in the past. It is doable, but there's a major exception buried in the agreement. If Tesla undergoes a change of control, Essentially, if Tesla is acquired, the operational requirements disappear. You no longer have to hit a million Robotaxis or a million Optimuses to unlock those new tranches of stock for Elon. If there's a change of control, it's purely based on the market cap. And so instead, Tesla will determine how many of Musk's 12 tranches have been earned solely by looking at the company's value at the time of the transaction. So the milestones don't matter anymore, only the market cap matters. And so that could become extremely important if the widely speculated buyer turns out to be another Musk-controlled company, SpaceX. So if SpaceX comes in and gives a really high price for Tesla, Musk can unlock more of those tranches and get more equity in Tesla, which then rolls into the combined entity, of course. So under this agreement, Tesla's value in an acquisition would be calculated using whichever is higher— its market capitalization immediately before the deal or the value implied by the price being paid to Tesla shareholders. If that figure reached $8.5 trillion, all 12 tranches, tranches could qualify, putting Musk in line for the full 423 million share award without Tesla ever having to accomplish many of the pay package's operational milestones. So There's an obvious catch, which is how are you going to acquire Tesla for $8.5 trillion when, when SpaceX is not a $10 trillion company or $50 trillion company? It's a hard pitch to do a merger at that scale. But this is more of like a what might happen in a number of years.

Well, yeah.

And there's also the tradeoff between he has more ownership of SpaceX, which would mean that he would benefit from acquiring Tesla at a lower valuation. But then depending on these milestones, you know, he's— yeah, he's probably— his bankers probably have some very elaborate spreadsheets, you know, 6 different monitors.

Yeah.

Looking at all the different—

so basically there's sort of a U-shape to the incentive. If Tesla's a really low price, Elon probably benefits from acquiring it. And if Tesla's a really high price, he benefits from— he actually increases overall ownership. From buying it, but there's sort of like a messy middle where it gets a little bit rougher. So $8.5 trillion would be more than 6 times Tesla's recent market cap, and Tesla shareholders would still have to approve a SpaceX acquisition. The Journal estimates that Musk's maximum award is currently worth about $824 billion, despite the package's familiar $1 trillion label. Still, the provision creates an unusual path around some of the hardest arguments, hardest requirements in Musk's compensation package. Instead of spending the next decade hitting a dozen separate operating goals, a sufficiently expensive acquisition of Tesla could effectively declare those goals accomplished.

New bumper stick, new Tesla bumper sticker idea. I bought this to help Elon achieve his $1 trillion pay package.

Yes. Full send on the Pro Elon Tesla.

Get a lot of thumbs up, a lot of thumbs up, a lot of positive honks.

For sure, for sure. Uh, there could be another major benefit for Musk. A combination with SpaceX could increase his effective control over Tesla, something Musk has repeatedly sought while consolidating even more of his business empire under a single roof. Well, uh, it's a fascinating story, and thank you for listening to it. Let me tell you about Cisco. Critical infrastructure for the AI era unlocks seamless real-time experiences and new value with Cisco. We got to talk about the American tourist. The American tourist has become unstoppable. A supercharged U.S. economy helped transform a nation. Al Lenza's parents traveled overseas 3 times after immigrating to the U.S. in 1961. Lenza estimated he's taken 500 trips in his 50 years.

Wow.

How many times have you been overseas? Maybe 30?

Probably.

Yeah, a couple times a year for like 15 years. Yeah.

I guess 50 years, you stack them up, you start going more frequently, but that's still 10 times a year for 50 years. His home office is filled with self-printed books with recollections from each one. He's working on more. The semi-retired 70-year-old has already been to Barcelona 3 3 times in the past year. You have more time and more money, he said of his current phase of life. The clock is running out. American travel has transformed—

The clock is running out on you visiting Idaho, buddy. It's time to romanticize the states.

Yeah. I saw a funny thing about spending time in the American South and picking up a Southern— You saw that? Picking up the Southern accent and being like, Oh yeah, this summer I spent a couple weeks in Georgia. Oh, it just rubs off on you when you're there. You really have to go spend some time in the American South. It's remarkable.

Do you plan to go to all 50 states?

Ooh.

Yeah, that'd be fun. I feel like road trips, camping, those types of activities, you sort of have to lean into it. You have to be doing a lot of cannonballs, a lot of rallies. But you need excuses because I think when once you get to like 42 states, the last 8 are gonna feel like a complete slog unless you have a reason to visit each one or you're hitting a bunch of them in a quick tour. Do you count landing in an airport? No. If you don't leave the airport?

No.

You don't count that?

Why?

No, why would?

Because physically you're in the—

You have to experience the state.

You're physically in the state. Like you're legally in that state. You don't count it?

Well, I don't count it as visiting the state.

What about a layover in a country? You leave and you're out of the airport for 3 hours. Does that count? Say, "Yeah, I've been to Japan." 3 hours outside.

I actually do count that.

You do count that?

I think if you are—

What's the minimum time?

You basically leave security.

What if I leave security, take the bus on a little loop, around the parking lot, back. That counts.

Book it.

That counts.

Book it.

Okay.

Okay.

Book it.

That's the fastest way to see every state. Flight hop from airport to airport, get out, do the bus loop, come back, hop on the next plane. You could probably do all 50.

That would be a fun exercise, actually, to figure out how do you, how do you visit all 50 states in the fastest amount of time? Yeah, right.

Is it world record?

Yeah, world record.

Tyler.

I'm thinking that you need to—

No, just figure it out.

Do it. And the rule is you can't just land in the airport and step on the tarmac. You have to actually physically step outside of the airport on basically just on a regular—

Got a plan? I think you got to do like really small rural airports.

Okay.

Yeah.

Fly a small plane between airports and step outside.

Got to be a fast plane.

Oh, yeah, it does.

There's a helicopter there.

I was thinking Cessna and you fly you fly it yourself and you bounce around, that might be doable. I wonder, there's got to be some states where it's faster to drive, right? Like Rhode Island, that area, maybe faster to drive than deal with all the plane stuff.

Driving at 300 miles an hour?

I don't know.

Deal with all the plane stuff? You just land in a small airport, step out, and then get on again?

So if you're flying your own Cessna, you land, you step off the plane, does that count?

No, I'm saying you have to be outside. You have to be outside of the airport. But I think if you landed on just like some farmland, you could maybe count that. You can maybe book that.

But do you have to get out of the plane?

I do think you have to touch the ground.

Oh no, I'm going down. Mayday, mayday. I'm landing on a golf course, hopping out, hopping back in. Okay, I'm good. That's maybe the fastest way. Who knows?

Anyway.

Yeah. So actually some planes you can just land on a street or even a dirt road if it's long enough. And so that's probably actually the fastest way. Tyler, figure out some— figure out the route to hit a bunch of— to land on some farmland in every state.

And then—

OK, well anyway, back to the unstoppable American tourist. What's going on here? American travel has transformed in recent decades. A nation of 4 of former homebodies has become one of zealous and moneyed international travelers infiltrating every cobblestone corner of Europe and rapidly filling lesser-known destinations. Americans took a record 24 million trips to Europe in 2025. Portugal received nearly 5 times the number of U.S. visitors last year as it did a decade earlier. Greece took in 4 times as many. Is it getting crowded in these, in these foreign tourist destinations? I've been to Greece. I've never been to Portugal. Have you ever been to either Greece or Portugal? Tyler, Greece or Portugal?

No, I actually—

Santorini is beautiful.

It's a really— Portugal, yes. Greece, no.

Okay. Were you surfing in Portugal?

Yes. Okay.

Nazaré, 100-foot wave?

Near, nearby.

Okay. Consulting firm Tourism Economics expects American visits to Europe will have increased another 5% by the end of the year. The travel is helping boost economies even as it has angered many locals who say their cities, now relying on foreign visitors, are no longer serving them. Behind the shift is a supercharged U.S. economy that is in the course of a generation— that in the course of a generation has created a larger and wealthier class of Americans that views travel as an essential rather than a luxury. Older Americans. Let's find out what the older Americans are doing. Older Americans who are driving this new era of travel hold about $110 trillion in wealth.

Wow.

We should get these folks financing the AI buildout. They got plenty to spend.

Instead of traveling, you should just Barcelona 3 times in a year from America is just insane.

I'm sorry.

That could— that money could be sitting with John Gray at Blackstone. It could be going over to Jensen.

Could be allocating that for you.

Okay.

Could be putting it all on the line for you.

You could have your Apple Vision Pro doing Barcelona simulator.

Yeah. Yeah. Gen AI, just generate a picture of you in Barcelona. Job finished.

Generate hundreds of images potentially. Make a music video of yourself playing a song about Barcelona in Barcelona.

People will love that. People will love that. That rising wealth has coincided with dramatic changes in the travel industry itself. Foreign travel has become more accessible, and social media has made it easy to envy, emulate, and one-up friends' vacations. Apologize to Mark Zuckerberg. He is— he is— stimulating the global travel economy. We didn't even consider that. This is huge. Everyone needs to travel because of this. The whole, the whole world is growing because of Meta. You see a picture of somebody in Barcelona, you're like, I got to go for the fourth time. This is happening. This is happening. You have no defense. Defeated lion retreats. Defeated lion retreats.

It's a good point. I just, I just wish that he was twisting the knobs and to make it even more— to make it— to make Idaho and places—

oh, okay, okay. You— but yeah, this is, uh, this is, uh, this is, uh, this is putting a thumb on the scale. You don't—

you don't—

you want a thumb on the scale. You're saying his thumb's not on the scale enough. Well, interesting. Okay, okay.

Yeah, I just want to know what his values are.

Yeah, biased.

I'm on this—

biased over here. A trip to the continent is a well-worn path for U.S. elites I like calling Europe just the continent. It's a good— maybe we should try and reclaim that as part of your Make America Tourism Friendly campaign. We are the continent. The new continent.

Yeah.

It really does have to be devastating if you're in Malibu and then you find out, oh, there's New Malibu somewhere else. It's like, wait, what about me? I feel like my town's going well. And you're in York, or England, or Hampshire, or Jersey, and you're like, ah, it's probably nothing. People will get bored of New York. They'll come back to regular York. And they didn't. Anyway, by the 1950s and the 1960s, when boomers were growing up, Americans traveling abroad were in rare air. A glamorous jet set. Set who wore their best for flights on Pan Am and TWA. They were soon joined by young adventurous backpackers who filled hostels and traveled on the cheap. As the Cold War waned and airlines expanded, travel opened up further to the masses, and the European Union's free travel area made it easy to fly to the continent and hop between countries. Fascinating stat that I always come back to. People will share that photo of, oh, people in 1950 and '60, every seat on the plane looked like first class. Don't forget what they took from you. The world you remember doesn't exist. That whole thing. There are more people flying in first class today than people flew at all in the '60s.

Wow.

So like just the first. So you really need to comp the first class experience today with a lie-flat seat. They give you a glass of champagne. It's actually a pretty luxurious experience. Experience. Maybe not the best, but it's pretty good unless you're in JetBlue Mint and they won't let you pass back steak. That's brutal. But for most airlines, it's pretty good.

And we still haven't got CEO of JetBlue.

We gotta, we gotta get some answers and we gotta, we gotta push. We do, we do.

For a policy update.

We do, we do. So, uh, in 1990, fewer than 5% of Americans had a passport. Pretty crazy. Now more than 50% do, aided in part by a mandate requiring passports for travel to Canada, Mexico, and the Caribbean that took effect in 2007 and a post-pandemic travel rush. The U.S. issued a record 27 million passports in fiscal 2025. Amy Birch Buchanan— Birch Buchanan, 55— took her first flight in 1988 to visit her then-boyfriend in to England, she had a cassette tape full of Journey songs to listen to on the plane, and her parents walked her directly to the gate. The, the PJ experience, basically, back then. Onboard passengers were dressed to the nines, sipping cocktails and smoking cigarettes. What about an airline where you can't smoke cigarettes but you can smoke cigars? I think that might see some traction.

Something there.

Yeah, Spirit Airlines. Why not American Spirit? It makes so much sense. I don't know, it seems like a no-brainer. Nobody was wearing yoga pants. It was very elegant, says Buchanan, who lives in Fort Worth, Texas. She returned home a changed woman with British bands like Depeche Mode on her Walkman, new clothes, and a wanderlust that she eventually passed down to her 3 kids. Her eldest daughter Avery moved to the UK around 2 years ago and now travels across Europe. Her middle daughter went to Canada Kenya this year. They've really reached out much further as they've gone out on their own. Europe is often a gateway drug. Portugal and Greece have seen the biggest percentage increases in U.S. visitors of any country over the past decade, according to U.S. government data. The UK and Italy have seen the largest increases in the total number of tourists, getting millions of additional Americans a year arriving by air. Only 6— only 6% of U.S. travelers to Europe in 2025 said it was their first time flying abroad. Many of these tourists are visiting multiple times a year, stopping at the Eiffel Tower and the, and the Colosseum, but also taking country walks in the Cotswolds and Viking cruises on the Danube. A growing share of consumer spending is going toward foreign travel as habits change and prices rise. Open skies agreements deregulated airline competition on international routes starting in the 1990s, leading to much cheaper airfares. And more international flights from the US, said Clifford Winston, a Brookings Institution economist who studied the Pax. In 1984, a round-trip weekend fare between New York and London on Pan Am cost $669, today's equivalent of $2,150. Over the past decade, economy airfare to the region rose 56% more than inflation. The average one-way economy Plane ticket from US to Europe, not including taxes and fees, cost $588 this year, up from $533 in 2025. So even though it's getting more expensive to fly, people are still doing it more and more because of Instagram, baby. Anyway, let me tell you about Railway. Railway is the all-in-one intelligent cloud provider. Use your favorite agents to deploy web app servers, databases, and more while Railway automatically takes care of scaling, monitoring, security.

As much as I wanted you to keep reading the journal to me.

I love story time.

And our guests—

we have our next guest of the show in the studio, live in person. We have Ernie Garcia from Carvana, the founder and CEO. Welcome to the show. Thank you so much for stopping by. Please grab a seat. How you doing?

I'm great.

How you doing?

How's business?

That's good.

Very good.

Yeah.

Uh, walk me through— I mean, maybe we should start with the very beginning, but, uh, the thing that I'm most interested in is the journey throughout COVID, post-COVID, all the crazy rocky times in the market, how you got through that, where the business is today, what changed, what didn't, all of that journey.

Yeah.

And yeah, and yeah, the context here is typically our interviews are very much focused on the present, but the first time we have someone on the show, we like to give people some context.

Awesome.

Yeah, for sure. Well, let me start with this. These gongs are awesome.

Gong.

Uh, for every car sale that we had for probably the first 2 years, maybe 3 years of Carvana's history, we had a gong that was 50% that big.

Amazing.

And we'd hear—

still pretty big—

would cheer.

That's huge. That's great.

Funny to see those. So what's your guys' story with the gongs?

Uh, just to announce like fundraisings, big milestones, big numbers. Uh, I don't know how we landed on it. We just thought it was a funny prop, and, and then it just got bigger and bigger and bigger.

Surprisingly fun. And then it catches on.

Yeah, we basically maxed it out. Yeah, this was like the largest gong we could find.

You have to go like fully custom after this and it gets really crazy.

Yeah, ours was a little smaller than that one.

Yeah. What was the first car you sold?

So it would have been probably— so we launched in January 2013. I think it took us like 2 months to sell our first car.

Okay.

Um, but yeah, I mean, maybe I'll try to give like a high-level setup. I think the goal with Carvana was to try to build a different supply chain, different cost structure, vertically integrate so that customer experiences could economically be simple. I think there are many dealers out there— excuse me, I'm fighting a little cold right now. There are many dealers out there that I think, you know, do a great job with what they've got. But I think buying a car is not the most beloved customer experience in the US. And I think the reason for that is just there are so many dealers doing things the same way, the share cost structure. And I think the economic pressures mean you have to maximize the amount of revenue you get out of that back room.

Mm-hmm.

And customers don't love that experience. So the idea was, can we build a different kind of customer experience with different costs and, you know, more vertically integrated that, you know, maximize revenue is in a better way?

Yeah.

So the customer experiences can be really simple. We launched in 2013. We had to build a ton of stuff to do that. We've got a totally different supply chain. We buy cars from customers, we ship them to these large locations where we recondition them. We put $1,000 of parts and labor in every car. We have our own logistics system. We deliver. From that location to the customer's door. Our website is fully transactable. Today we have 50,000 cars, so customers can go on there, they can get financing, they get a trade-in value, they can toggle a warranty on or off, and then have the car delivered to their door. So really different experience, but it was, um, it was a lot to build because inside of that we've got a retailer, we've got a remanufacturing company, we've got a logistics company, we've got a finance company. So there was so much to build, and I think as a result of that, we had a really volatile time. So early on, you know, it took us a couple months to sell our first car. We got—

and that was like all the infrastructure was built and you were just chasing your first sale, or was more like you were kind of getting up and running on Google Ads?

Like, how did you get the first customer?

It's—

it was, it was all kinds of— yes, it was. Um, I mean, AutoTrader back then was like a big part of our advertising just because customers were already there. But yeah, I would say early on we had the experience that the customer went through felt, you know, 60% similar to today, but it was, you know, like duct tape and bubble gum in the background that was making it all happen, and it was just at a really small scale. But customers loved it once they got over the skepticism. The very first delivery, you know, I went on, and the first thing the guy did was he literally opened the hood to see if an engine was in there because he was kind of like, you know, he had gotten in arguments with his friends about whether or not the car would even actually be like the real car. So I think they loved it if they got over that fear. But then, you know, building the rest of the business at real scale and moving through all of those customer concerns.

But you got to finish the story. Was there an engine inside?

Was there?

What's that?

Was there?

There was an engine. OK, there was. The good news in this case, there was an engine. That's generally the case.

So, so the pushback in the early days. I can imagine a lot of people maybe on the investor side is like, cool idea, but you're not going to have a business selling cars at scale sight unseen. Was that some of the pushback? Because personally, growing up on the internet, and I've probably bought 5 or 6 cars over the years sight unseen where they're out of state, maybe they were on Bring a Trailer or some, I just found a spec I liked at some dealer or whatever. Facebook Marketplace. Not yet, but—

You're big on IYKYK deals, right? You get them?

No, no, no, no. But for me, when I would buy, you know, I'd buy a car, some random state, get it, it would just show up at my house. It was, you know, amazing, even if it was some third-party logistics provider or whatever. But I would have people tell me, you just bought it, like you never even saw the car. And I was like, no, dealer or whoever it was, seem legit, and it's worked out every time. But I can imagine there's maybe a generational shift of people that have just grown up super used to buying everything online, and so the idea of buying a car online is just kind of feels normal already. Yeah.

I think that was the primary business model concern and the primary unlock, because I think it's a totally reasonable question, like, will customers buy a car sight unseen? I think your experience points to many will. And, you know, there's like an interesting stat, at least as of the time we went public in 2017, 30% of customers didn't even test drive a car before buying it. So they might not have had your experience, but an experience somewhat like that. But I think that was the primary question. But if you could resolve that question and we kind of solve with a 7-day return policy, which we think is better for most customers.

Yeah.

Then you unlock a completely different supply chain because that's what enables you to no longer have to have the cars at the point of sale and distributed around the country. So you can instead replace that kind of real estate with the logistics network and you can give customers access to tens of thousands of cars and you can deliver to them less expensively.

Yeah.

So that was like the primary, I would say, business model question. And I think once we sold kind of like 100 cars and went on those deliveries and got a feel for where people were, we felt pretty confident that was going to be okay. I think another question that was asked is what about like investors? And I think at that time, that was kind of like the height of, you know, like Airbnb and Uber. And it was— everything was going to be a marketplace.

This was like the unbundling of Craigslist a little bit.

Yes, I think to a certain degree. And then I just think at that time, yeah, it was like every— everyone wanted to be the marketplace layer.

Yeah.

One wanted to just kind of connect to preexisting supply to demand and kind of be that asset-light layer. And I think we were trying to suggest that to give customers the experience that we thought was best, we were gonna need to own inventory, we're gonna have to have our own logistics network, we're gonna own real estate, we're gonna have a finance company. And that was a mess. So Silicon Valley did not love our pitch. We did not do well there.

Wow. What was the logic behind IPOing so fast? Was this as the company was growing and made more sense? Because—

We couldn't raise money. Couldn't raise money.

Yeah.

Basically, what I would say is I think, especially at the time, our business model our business model did not match what Silicon Valley was looking for.

Sure.

And there wasn't private capital at scale outside of Silicon Valley that we felt like we could get access to. Our business model, I think, given how different it is from the status quo, it surprisingly, though, like the economics and the underlying business itself are very similar to something that is highly scaled.

Yeah.

So it worked better in our pitches with more of like a New York style audience than with kind of a Bay Area style audience. And so, I think we basically were forced to go there 'cause that's where the money was.

Interesting.

Yeah.

Interesting. Yeah. What was the—?

What did the—? If I'm remembering correctly, eventually you had plenty of support on the West Coast. I'm thinking of like Neil Mehta and Green Oaks. Oh, for sure. Yeah. Was he not one of your big advocates and big believers? No, we did.

So we went public in 2017. We are a 4-year-old company. And I think as far as I'm aware, I'm not positive this is like a precisely correct stat, but I think in terms of like first day, first week, first month performance, we were like the worst IPO of 2017. We barely got out the door and we kind of bounced around for a while. I think around 2019 we started to really make progress. And then in 2020, you know, COVID was actually an incredibly scary time for us because we're a transactional business and a distributed transactional business. And so when transactions go to zero and you have this big cost structure, that's like a real problem. So it was a really scary time for 3 or 4 months. And then it turned into like all of a sudden everyone was just saying, oh, Carvana is like a COVID story because it was like we kind of answered that moment. And so I think then we were really popular for, you know, 18 months. Everyone thought we were smart. and that felt cool. But then '22 came around and I don't know if we want to hit that in like a separate segment or whatever, but everyone told us we were dumb again, very clearly in the markets. But I think, you know, overall it's been, it's been, it's been a really fun and very dynamic journey, I would say.

Yeah. Well, to talk about post-IPO, the workforce, the incentive structure, how everything changes as you take a company public that early, what does it take to keep everyone sort of rowing in the same direction?

I think it's less of a change than maybe I even would have imagined ahead of time. Like, I think it's— I think we told everyone exactly why we're going public. You know, it gave us access to capital that was hard to get otherwise. It also, because we have a finance company and we have inventory that we own, and so you finance that, it gave us better access to other capital markets. Sure. I think there's perception oftentimes, uh, that kind of like the IPO is the end, like you— that, that's like what success looks like. Um, and we were doing it so early and it so obviously wasn't the end that in a way it was kind of like helpful. But I do think there was like a little bit of an internal narrative for a second there of like, did we do it? Like, are we done? Um, but we quickly turned that around, just kind of said, now, now we're a public company, we got to be a little bit more careful about making sure we disclose information the same way to everyone. That's like the biggest change, but otherwise, here are 10 examples of companies that have multiplied by 100 after going public, and that's what we want to do, so let's just march down that path.

Yeah, being more somewhat mature, complicated on the financing side, was— were you very aggressive about hiring elite young finance talent, like poaching from Wall Street banks as opposed to Stanford siesta departments or both? Like, did the shape— did the structure of the business financially change the recruiting profile?

Yeah, I think we wanted hunger and horsepower, I would say. And I think experience is something that is necessary. Like, you know, on a scale from 0 to 10 in experience, you want like 2 or 3 so you don't make really dumb mistakes. But I think if you've got 7 or 8, you oftentimes just think things have to work the way they've always worked. And so I think a lot of the people that we brought in were, you know, somewhere between 0 and 4 or 5 of experience. I was probably more experienced than most in the finance area in particular. Our CFO, just you said Stanford CS. Yeah, he was a PhD in econometrics from Stanford. And, you know, just basically is a— he's He's someone who has absolutely incredible horsepower and throughput, uh, but understood that world pretty well. And I think a lot of times recruiting is about, do you have people— one, do you have a relatively flat organization? I think people like working in flat organizations. And then two, do you have people at the top that actually understand what the work is and how it works and how it impacts, you know, the user and the business? And if you have that, I think a lot of times the most aggressive people want to work where they have visibility all the way up to the top. And so I think in finance in particular, we were really lucky to have Mark.

What was the early expansion path like? Where did you— do you think about opening up specific markets, certain channels like you mentioned, AutoTrader? Was there like a, okay, we're doing a big like social media marketing push for the next leg up, or is it like we're taking the West Coast?

It was more like city by city. City by city. Atlanta was our first city. Okay. Um, and then we did Nashville and then we did Charlotte and it was kind of like we needed, because we were, we have like a logistics element of our business. Yeah. You needed to get enough density to make the economics work. Yep. Kind of in each, uh, you know, like part of the network. Yeah. Um, and so yeah, we went city by city and that was kind of the way we did it through probably 2020, give or take. Mm-hmm. Um, and you know, now we're nationwide and so we're kind of growing across the country in all the different places.

Yeah. And what was the strike team for expanding a new market? Are you actually setting up an office or sending out some, you know, like of your most dynamic employees to go hang out in a WeWork type of place? Like, what's the philosophy behind like the ground game?

We call the last mile logistics market ops. So we had like a market ops SWAT team. Sure. Would go out and kind of launch these markets. Yep. Now, what's nice about our system is all of the logic is deterministic. All of the merchandising and everything is happening in a kind of global way. So everything except for the car getting unloaded off the 9-car hauler at the location and then delivered to the customer, everything else is kind of already standardized. So really it was like that last leg to the customer. Yeah, that was the functional thing that was happening. And then it was just absorption of any issues that happen anywhere else in the system. Yeah. So it It was very much like dynamic, fun people that were unexpected to be delivering cars to customers that gave them an experience that was awesome. And I think that was kind of how we rolled out market by market.

Is valuation deterministic? For vehicles? Yes. Because I imagine that there's probably some mistakes where you acquire some car and you wind up being, oh, this is a rare one. It's worth more than we bought it for, or vice versa. And I'm wondering about the process of tightening your book value to the actual real-world resale value based on market fluctuations, but also just like, yeah, we didn't notice that the seats were a little more scuffed than we thought. Yeah.

So first, like a practical answer to that, which is, so we do, when we pick up a car, we'll run it through a process including an OBD2 scan scan, which kind of checks the data on the car. And in a small percentage of cases, if the variation is large versus our expectation, we will reprice the vehicle. But for the vast majority, well over 90% of customers, they're going to get exactly the value that they saw. Now, I think, like, you know, more like fundamentally, the problem there is, can you be as good at it digitally and from a distance as other people are in person? And I think that the answer to that question, I think was surprising to people. Like, that was another area that I think people thought it would be a major business model problem. But we ran a test super early on where we basically looked at a pre-run list of a bunch of cars that we're going to sell at auction. And we said, OK, like, we're going to have physical buyers go out. So buyers are what the industry calls people that go to auction and buy cars. They put hands on the car. They open it up. They turn on the AC. They check everything. They buy the car.

And these auctions you're talking about, industry-oriented auctions. So like, somebody trades in a car. to get a new car at a traditional dealership, and then the dealership doesn't want the car, so they're auctioning it off to other dealers, and so there's dealers there. Is that right?

So it's like a wholesale auction that consumers wouldn't see that dealers go to all the time. Yeah. So we had a bunch of buyers go around, and on 100 cars, they said, "Here's what I think it's gonna trade for." And then we built a model, and we said, "On those 100 cars, what do we think they're gonna trade for?" And then we calculated the absolute average error of those two processes, and the— the buyers were off on average by about $1,200, and we were off on average by $1,300 in our Gen 1 model. And so we were like, with very little data feeding it, and very little specific data about the car. So I think early on we were pretty confident that while it's hard to be exactly right, it wasn't going to be that hard to be as right as the market we were competing with was, and that's what mattered. And so it is deterministic.

We talk to a lot of founders that are, when you look at their roadmaps and what they want to do in the future, it's very like product-oriented. It's like, we have to launch this new, we have to launch this new market, or the best example of, of is like in defense tech, it's like we need to land this program of record and then we need to fulfill that. Uh, it feels like with Carvana, it's like you just need to get better every single day at buying and selling, uh, cars, and then you just need to kind of do that for forever. I, it's hard for me to see you guys like entering like the luxury, you know, super upmarket category, like being at a like Car Week, which is, but it's very easy to see just owning more and more and more of the, of the, of the, of the used market. But how do you think about that? How do, how is it different motivating a team around just getting better at what you already do every day versus like, a bunch of like net new sort of product-oriented innovation.

So, first of all, I think hopefully we succeed in both of those dimensions, but I think the observation's very right, and I think like the motivation part is also an interesting question. I think different people are different. So, in this like way of categorizing people, I would say I am more the product person. Like I'm more the person that gets really excited about what can we build what can we change, how can we make the system more efficient and better than it was yesterday. And then I think that, you know, generally what I would call operators are people that wake up in the morning and they're really excited about getting, you know, a quarter percent better every day, which will compound to massive differences. But just having that constant feedback of improvement is more what motivates them every day. Yeah. And I think that where the business is today, we're in this like interesting spot where we've built a customer experience that we're super proud out of that we think is great. The business model, you know, even at the relatively small scale compared to the market that we're at today, is producing returns that are 2 to 2.5 times kind of what is normal in the industry. But then we're only 2% market share and we find that kind of as we build more cars, we sell more cars. So I think we've made it to a spot where we don't know exactly what the total scope of the demand is, but it's more than we're able to produce cars today. And so there's a lot of value to just make sure you make the machine a little bit, you know, better and bigger every single day and spend less of your energy on all of the dramatic changes, uh, that could exist. And I think honestly, that's, that's a hard thing. I think like in a business, finding a way to focus on where you get the most leverage is really, really hard. And I think a lot of times the people that are best at inventing businesses are really bad at focusing on the things where you get the most leverage. And so I think, I think learning that lesson the hard way, which is part of what I would say happened to us in '21 heading into '22, is I think what helps us try to manage that balance. But then I also think we definitely have people inside the company that have enormous dreams and want to build big, beautiful, amazing things. And so we also have a lot of product we're really excited by. But there's no question in the position that we're in right now, like what is going to matter to our next 5 years of of economic performance is gonna be how well do we execute in making that machine a little better and a little bigger every single day over and over again.

Yeah. What does the future, you guys acquire a car, what is, you know, looking out maybe 10 years, what do you think it looks like to acquire a vehicle? How much can robotics play play in basically taking a car that was just purchased from somebody and making it ready for another person to acquire it? Yeah, because, yeah, I basically, all these OEMs are investing in robotics, then there's all these automotive shops. I'm sure you guys have your own process, but it feels like we'll get to the point where there will be something like a lights-out factory where a car goes in one side, side and it comes out the other side, you know, fully restored. I just have no idea how long that'll take.

Yeah, I think we're rooting for that to happen, um, in many ways, because I think it would make us— the thing that today constrains our scalability the most is reconditioning cars. It's putting the $1,000 parts and labor in. So I think that would be very exciting. I think the problem that OEMs face is more simply automatable than the problem that we face, because every car is getting the exact same process done to it. Yeah. Um, for us, you know, the car's coming in, you inspect it, you figure out what the car needs, and then every car is getting different processes done. So it's, it's a process that is likely to be automated more slowly, I would say, than traditional manufacturing. But we're definitely paying attention. I think there will be elements of it, like, you know, changing tires, things that are highly replicable, that probably happen faster. Uh, today, most what were filters.

Even like, it doesn't seem like that far away to having systems that could fix up little nicks on paint and things like that in an automated way, even though every car is going to have different rock chips and things like that.

Agreed. I think all that stuff, um, right now the assessment of those things is getting better all the time. I think automating the workflows for like what does the person who's doing it need to do is getting better and more automated all time. And then I think the actual physical work so far, like in auto manufacturing facilities, it's, you know, they generally have those big robots that look like an arm, you know what I mean? They're not like general purpose humanoid robots that can do anything. And I think it is, it is likely that it'll take a little bit more time for the work to be fully automated. But we are paying a ton of attention. And if that explodes at the same rate as, you know, like all of the LLMs. And who knows how quickly that can happen.

Is current AI useful in any particular area? You can imagine AI search, but also back office tooling. Like what's the shape of the impact? Where is it actually working well? Where it's like, it's a little bit earlier for that?

No, all, I mean, all over the place. I think maybe two big buckets. One is consumer facing and then one is like, what are we doing to try to move Astra as a business and everything we're trying to do from a product perspective. Yeah, but I think on the consumer-facing side, the more complicated the underlying transaction is, the more value there is to simplifying it. Okay. And so for a customer who's buying a car, they wake up in the morning and they want a car, but they have an old car's payment, they have some cash as payment, they have some finance as payment, they don't know if they want a warranty or not. There's a lot of complication in that transaction. Yeah. They, in order to get the car and get it registered, they're going to have to change over their insurance, right? They're going to have to sign contracts. They're going to have to upload documents for verifications for finance and for title registration. So the more complicated that process is and the more that our systems are designed in a way where all those processes are deterministic, so there's no human negotiating each underlying economic item, the more that you can use AI to string that together and give people really simple experiences. So I think there's a ton that we're doing already that's like really fun and interesting. And because we built it in a way where it was, it was pushed through a wire already with no kind of, you know, F&I agent sitting next to the customer. Everything we've built is like in our— it's like a service architecture. Like everything is separable and deterministic. So it lends itself very well to then you can dump that into an AI. A person can ask a natural language question and we can give a super complex and super complete answer to their questions. So I think that's fun. And then what's also fun is I think in any of these things, you know, going back to valuing cars, even what, what matters is how good of an experience can you give your customers compared to everyone else. And in the world of automotive retail, we're not competing with other players that have vertical integration, deterministic systems, or automated systems. And so the quality of answer that we can give relative to our competition is very, very high. So I think that's a really fun area for us right now. And even like the types of products you want to build, I think change when you have systems that can string together so many deterministic processes but also overlay it with discretion that you can trust. That even changes the realm of things that can be automated. So I think we're doing all kinds of fun stuff there. Internally, like every other company, we're trying to move as fast as we can, and the toolset is changing so fast. It's, it's super fun.

Are you coaching or answering stressful calls from any SaaSpocalypse victims? Because I feel like you've been on a particularly wild roller coaster ride where I've never seen a stock chart where it's so clear that the I don't want to talk too much trash about the investor community, but it was like they got it wrong. We got it wrong first. They got it wrong. It's just this gap in the chart, and you're like, OK, well, clearly there's something wrong here. But it feels like a lot of SaaS company CEOs are sort of going through that. Many of them are already out of that trough, but what advice do you have?

I think the advice is build a highly distributed business with tons of physical inventory. Is that the advice to the real world?

Real world?

Like, because you guys, you guys are in a perfect position. You guys are like a flight to safety now because it's like, hey, like, yeah, try rebuilding Carvana with AI. It's just like, it's, you know, we're, we're at least 20 years away from, you know, where do you get the demand?

It's the liquidity is what is so much of the value.

I mean, I, I think there is a lot of truth in that. I think if I were to try to give advice though, I think what I would say is it's just the themes that are popular in markets will change. Sure. And they change every couple of years and they oftentimes change dramatically. And generally the swings are more violent than they ultimately prove that they should have been. I think that's probably true in most cases. So I think that what you want to try to do, if that's true, is just set up everyone inside the company to know that's going to happen sometimes. So it doesn't feel like— I think many people inside of a company have this perception of investors that they're like all-knowing masters of the universe, and when the stock moves, it's because something deeply true and fundamental changed. When, you know, in reality, they're really smart people that have, you know, a huge set of observations they've made over time, but they live in a world of pressure with moving stock, you know, charts, and with LPs that are putting them under pressure and changing things. Yeah, someone's reading about—

there's an incentive to sell even if you still believe in the company, but I think a lot of other people are going to sell. Exactly. You get into that thing.

And then I think it's just like we've, we've made it look harder than it probably had to look. But I think most successful stories, you go through periods that are really hard. And I just think that for us internally, like the way that we went through '22 and that was a hard period is we just talked about like, okay, so this is, this is our moment where we publicly look dumb and we got to ride it out and go through the hard thing. But most companies that we really respect, if you look back in time at their stock charts, they had their moment too. And so you have to go through that at some point. Like at some point every six— or not every, but the vast majority of successful companies are going to go through a period that's really hard. And that's kind of the moment that matters. And so you got the mercenaries. Exactly. Yeah. You get people and people get fired up about that. Like, okay, cool. This is our hard moment. That's like something you can rally around. So I think, you know, every company will go through that. You just got to keep getting up, I think. Yeah.

And congratulations to the team on so many back-to-back quarters of incredible execution. Oh, thank you. It's amazing to watch. And same-day delivery now.

Yeah, exactly. Make moves. Get fast.

Another announcement. But it was fun to just get the whole story and go all over the place. We'd love to talk to you again soon. Awesome. Thank you so much.

Appreciate it. Yeah. This was great.

Thank you. Yeah. Let me tell everyone about Consul. Consul builds AI agents that automate 70% of IT, HR, and finance support. Giving employees instant resolution for access requests and password resets. And our next guest is already in the waiting room. We have Alex Edelson from Slipstream Investors. He's the founder and GP, and we'll bring him in to the TBPN UltraDome.

Alex, how you doing? Thank you guys for having me.

Sad to be here. Thanks for hopping on.

Where are you calling in from?

I am just outside of Washington, DC. Ooh, fun. Nice.

Beautiful backdrop. Well, since this is your first time on the show, we'd love for you to kick us off with an introduction on yourself and Slipstream a little bit, and then I'm sure we'll have a ton of questions to dig into. Yeah, yeah.

So a little about Slipstream first, and I'll give you my background. So Slipstream is 3 things. One, we're a venture fund of funds. We invest in pre-seed and seed funds, mostly emerging managers. Median fund size is around 30. Average fund size around 50. And most of these funds are on their first 3 vintages. They don't have to be, but that's what, that's what our typical investment profile looks like. We're on our second fund. Um, we invest in about 10 to 15 funds in every fund of ours. Mm-hmm. We also work with some of our LPs to help build out their venture portfolios. Like often when we invest, our LPs join us in these funds, invest alongside us. Yeah. And the third thing we do is we can use a portion of our capital to co-invest in our LPs, like to Co-Invest. Before this, like, irrelevant part, I was at QED. So QED is a successful fintech-focused venture firm founded by Nigel Morris, one of the two Capital One co-founders, and I joined during Fund 5. Funds 1 through 4 were small, very successful funds. And the fifth fund I started as his chief of staff. It's larger, has outside capital. I became the COO. I reluctantly became the general counsel. I was a lawyer before that. And recovering when I joined QED, trying not to be a lawyer anymore, but that didn't work. And then we raised a much larger Fund 6, and I decided to leave before Fund 7. Slipstream— I started Slipstream in '21, so we're— we just turned 5.

Congratulations. Started it during the solo GP boom. Walk us through that whole, that whole experience. Maybe. I don't know how.

Yeah. Was that like a new pitch? Because the trend pieces started. After it was already sort of happening, but it felt like sort of accidental and maybe the brand got bolted on after the fact.

Yeah, it was so interesting about that time was, well, there were two, two competing things happening. One, it was probably a good time for me to raise our fund. It was not a great time. It wasn't like a healthy time for the strategy. There's so many funds, there's so much capital coming into the ecosystem. Valuations are really high, like probably not the most disciplined investing going on during that period. We may look back on that period as not a great vintage, which I can talk about how we manage that. From a fundraising perspective, there were some positives. But yeah, when I started this, people were telling me things like, oh, this is like a 10- to 15-year-old concept. Nobody wants to do this. No one wants to pay a second layer of fees. When the market cycles through boom or hotter and colder periods. And in the hotter periods, sometimes folks think like, oh, I can do this myself. I'm seeing good stuff. It all feels up and to the right. Maybe I'll just be a direct investor. And then that doesn't maybe go as they hope. And then maybe I should invest in funds. And then that doesn't go well. It's like, maybe I should invest in a fund of funds. And there's sort of a cycle to this through market fluctuations.

I want to know about that specifically. The purpose, like what LPs are most excited about it? Is it getting toeholds in the future, great scale-up, huge venture capital firms, or is it actually like returns at the early stage that they think that they can find? Are there other pieces of like value-add and reasons to invest across a broad set of early-stage managers?

Yeah, it's such a good question. There's not one answer. And I can come back to the question about what was I seeing in emerging manager land in 2021, because there were some funny stories about people who you're just sitting there like, I don't know why this person has a fund, but here they are. And it's like a $5 million fund. But I'll come back to that. So yeah, on your question, there's not one answer, because some folks are— yeah, they're out to find firms, venture firms. We want the next Institution. We want the next Sequoia. We want to see it first. And then we'll be in a great position to deploy a lot of capital with these folks over many funds of theirs. And that— I see that. That makes sense. That's not really our strategy. But some of the funds, incidentally, will become— I mean, hopefully will become that if that's what they want. Yeah. Some of them, though, that's not the dream. And that's not the dream for the LPs. And that's not the dream for the GPs. Like, for some of them, it's just like, I want to get great returns from these funds. I believe that the best performing funds are these small funds on their first few vintages. They have very unique portfolio construction that we can talk about. Talk about that if you want. And, and there are folks who just want returns. And then like these funds, as they grow potentially towards like becoming more of like an institutional, like long-enduring platform, um, maybe outgrow those LPs. So like for me, we'll invest in some of these funds when they're small, and then it's almost like we were like releasing them into the wild. Like we can introduce them to our LPs and other LPs, but like they outgrow us. Yeah.

Oh, interesting. So you'll— so somebody will, will come to you and and it's sort of this sad moment where they're like, Alex, like, I'm ready for the half a billion dollar fund. And then you guys, you know, hug and say goodbye. Is that it? 'Cause it feels like, I mean, imagine a lot of the, I'm curious like how some of these early conversations go because I'm sure a lot of GPs will say like, yeah, I just wanna have like, you know, small funds, focus on returns. And just do a $50 million fund every couple years forever. And then given that half of our friends are GPs, it feels like every single one of those, the second they really are in a position to raise the 9-figure fund, almost all of them go for it. And it's really like a very small group of people that just stick with these smaller funds. And so, uh, how do those conversations go early? Like, are you, are you able to like pull out the honest truth with a lot of them, which is that they do want to scale up massively? Um, or does— is it, is it sometimes a bit of a surprise?

Yeah, it's, it's a great question. It's never a surprise. No, like my mission is to get a sense for where they want this to go. The answer is like that sometimes they don't know, like they're just getting started. They're on a Fund 1 or Fund 2. It's small. They want to see how the market evolves. They want to see how their sourcing evolves. Maybe they they can get there really early. They think they can get more ownership, or for one reason or another, they think they can get more ownership. They can scale up without getting adversely selected. And that even though they'll raise a larger fund in their future funds and they'll target higher ownership, that like they shouldn't— they shouldn't sort of generate worse performance than those small early funds. Like, they're— they— a lot of people just want to see how it goes. Now, certainly, like, in the back of their mind, they might have aspirations of building something large. And my hope is that, like, in the process of getting to know them, they'll be open with me and like feel like it's safe to share that with me. And, and my commitment to them is that like I need to be open with them. So like often the conversations early on, if people are thinking about, you know, a fund or two down the line raising funds that would be outside our strike zone, like it's on me to say like, hey, I'm probably not going to be with you at that point. Yeah, you also—

if they go, if they go from, you know, a $25 million, $30 million fund and then they have the opportunity to raise $200 $1 million+, it probably means that the first fund is performing, or the first 1 or 2 funds are performing quite well, which is good for you. So I think it is pretty—

Yeah, what's interesting about this is like, yeah, like it's interesting about this, like we have, I mean, there's so many ways this conversation can go, but one thing on my mind is like, yes, people typically want to get bigger, but I think their mission should be get good returns on the first few funds. If you get good returns on the first few funds, you get to be in venture for a long time. And if you don't get good returns returns on the first few funds, it'll be hard to raise future funds. The long-term greedy move, like in a long-term greedy game, is to get returns as many funds in a row as you can before you start scaling. One thing you said that came to mind there is like, I was actually worried when starting Slipstream that this could get boring. What if we do a good job, and we get into great funds? And we just start re-upping in those funds.

Oh, yeah. So great. Yeah.

There's no sourcing. This is a boring job. Yeah. Like, why am I— what am I doing? I'll never find new folks. I won't need to meet new names. I'll just like re-up in these great funds. And I guess that's good for returns. So why should I not do that? And what I'm realizing over the last 5 years is like, it was like a natural evolution to this. And like, we stick with people for 2 or 3 funds in a perfect world. And then like, they might outgrow us and we get to add new names. Like, there's always— there are always new funds for us to meet and, and for us to invest in. We're always adding new names, um, and that does keep it fun for me. So there's like almost like a natural part of what you're saying that actually creates some energy and joy for me personally, because like these people outgrow me. Like, we can help them raise hopefully more from LPs we introduce them to than they're losing from us not re-upping. Yeah. And then like we can continue to meet new managers and add folks to our portfolio.

So on your side, how do you think about timing? Like on one hand, like I feel like it's like the manager's job to make sure that they don't deploy their entire funds, let's say during 2021, like we were talking about earlier, where valuations are super high and you're paying 100x revenue. And then even if the companies do well, you don't really make money, which has happened a lot. How do you think about, deploying, like, through cycles as a fund of fund to make sure that, that your LPs do as well as possible?

Yeah, it's a great question. So there's sort of two layers to this. Like, one, there's like the GP layer. There are folks we're working with whose funds we're investing in, and we're collaborating with them as a partner. Like, hopefully we're talking all the time and we're talking about this. And, and, and then there's like the, the Slipstream fund of funds level. And that is like where it's our mission to build diversity and diversification into our portfolio construction. So we get plenty of vintage diversification and time diversification. Like in a typical fund of ours, we have 2 to 3 years of vintage diversification. We have 5 to 6 years of time diversification in terms of investments, initial investments made. And then, you know, we obviously have diversification across sectors and some across geographies. And so If we're investing in 10 to 15 funds and we're getting 400 to 600 companies in each portfolio of ours, we have a decent amount of time diversification. But it's more interesting to me— we just have that programmatically built in. And so I don't want to try to time the market from our perspective. It's hard for me to say, oh, this is a great time. You should put more into this. I don't know. I want to smooth our coverage out over a period of years in a consistent way. There is one exception to that, though, which is that when we started this, like I said, like it wasn't a very healthy time. I thought it was not a very healthy time for deploying capital through our strategy. And so I did. There was a period of time when we went 5 quarters without making an investment, and that was like pretty uncomfortable. Like I was getting calls. I got a call from one of our LPs I'll never forget, like asking, like, are you doing anything? It's like, man, I think we're doing the right thing. Like, I think this— we're all going to be really happy in a few years. But, but no, I'm not deploying a lot of capital right now. And so I have to be careful with that.

Yeah. Yeah. So that dynamic of like pressing the brakes, stepping off the gas, it happens at every layer of the stack. There are startups that recognize the end of ZIRP and they cut back, stretch to 36 months between raises. There are funds like Founders Fund, you know, Thiel is saying about how he told everyone for a year, just go to the beach because we don't want to make any investments. It's happening at the fund of funds layer. I'm sure it's happening at the LP layer. Like, how much is it most pronounced at your layer, you think? Are there any GPs who can actually raise a fund at the top and resist buying the top and then deploy at the bottom? Because that feels like the mythical best possible outcome, but it doesn't happen.

Yeah, it's so hard to do. So like, the overwhelming majority of folks don't have that level of discipline or patience. It's so hard. And especially because like, if we just step back, there's this thing that people say like in venture, and it's like, like, oh, should we play the game on the field or should we not? And like, what are our LPs paying us for? Well, they're paying us to get exposure to venture during some period of time. And like, if that period of time happens to be a hot time in the market, then I should just play the game on the field. And I guess that's my job. And I kind of resist that a bit. My feeling on this is, no, your job is to get venture-scale returns, or do your best to get venture-scale returns. And if that requires changing your strategy, or slowing down, or doing something differently in light of what's going on in the market, that, I think, is the right move. When we're 5, 10 years down the line, LPs are pushing you on like, hey, what'd you do when the market was hot? You can say, well, I just played the game on the field like everyone else. And so that's why my returns are bad, too. Or you could say, no, we were really careful. We were really patient. We set the bar very high. We tweaked our strategy. That kind of stuff really resonated when folks were reflecting on their 2021 and '22 vintages. But there were just so few GPs who were able to say that. There are a handful. I could I can't count that many of them, unfortunately, but I think the LP world was like very impressed by folks who took 2021 and 2022, who, who managed that in like a very disciplined way.

How do, how do you handle like co-invest opportunities right now specifically because everything is getting marked up? Mm-hmm. Uh, if at least it feels that way, you have the, the fifth, 5th through 10th best company in a category still getting marked up, oftentimes for good reason, just because a lot of stuff is growing in a meaningful way. But oftentimes, it's the same kind of opportunity where you— I'm sure you're getting co-invest opportunities where it seems like super talent-dense team, but you're being asked to invest at some really, really, really insane revenue multiple for a company that is a couple of years old. And I guess, like, what's the— your job is to be evaluating like managers. And so you have to put some trust in them that they're bringing a great opportunity for you. But you're also giving the opportunity to your LPs and saying like, hey, I think this is a good opportunity.

It's such a good question and really top of mind because like we get more co-investment opportunities in these hot markets. Obviously, we have a ton now. We saw a ton in 2022. And for me, the answer has like a few components. One, I have to like think pretty carefully about like, what are the GPs' blind spots and biases? Who's like bringing me these? This is one of their most promising companies, right? But like their, their view of that company is, is a bit limited. Like, once they invested in that company, they're probably not looking at all the competitors at that stage. They're not leading this next round in most cases. Sometimes we do have managers who are like preempting around, and that's unusual and cool and, and a little higher, higher conviction, I think, for them and us. But often it's like, man, the GPs know this company really well, but they also have biases and blind spots. And so that's, that's hard for me. These folks that we're investing in are also like relatively early in their investing career. Just, they just have like fewer reps. And so Yeah, I have to factor that into account when I'm making decisions about these. And then I think about my time at QED. And I thought— I'll speak for myself, not QED— I thought a lot of our LPs, they would do more co-investing than maybe they did. And realize the bar needs to be very high for a GP to show LPs a co-investment, because at the time that GP raises their next fund, The LPs are not going to know a lot about how the last fund is performing, but they might know how a co-investment is trending. And like, that's going to impact whether they kind of like trust or doubt the GP. And so like, my hope is that GPs are like, hey, I bet my— I bet my LPs' commitment to my next fund on this co-investment, that they're going to be glad they did it if I'm showing it to them. Like, that's the— that's the bar I hope people are using, or something like that. It's almost like sometimes I jokingly am like, Look, would you like fly to DC and like tell me I'm crazy if I don't make this co-investment? Like, is that the level of conviction here? Or is this like a really good company that's taking off and you want to share the opportunity with LPs and it's a good opportunity for them and it's a good opportunity for you, but maybe not that level of conviction for you? Like, I'm really trying to figure out what their level of conviction is. And the last thing I'll say is like, I need to think about like what I'm uniquely positioned to do. Like, if I'm, if I'm seeing all these co-investments, like, am I the best person to evaluate all these co-investments? And if I'm— if I think I am in a good position to evaluate a co-investment, then the question is like, well, am I going to do just one or am I going to build like a small portfolio? And if I build a small portfolio, I have to ask, like, is my small portfolio likely to outperform the next fund we might invest in? Or should I just use these slots for another fund? And so, like, in reality, the way this has worked for me is like, I haven't made any co-investments out of our funds and we're like 5 years into this and we've had some great ones. Now we bring them to our LPs and we either don't recommend them or we say basically I could see if this would be a fit for you, and I'm happy to help you run it down. But like, I want you to feel like you can get to conviction on your own with the information that I'm sharing with you. And like, I would encourage you to build a portfolio of these and not just do one. And then we put SPVs together for them. So like, I guess that's a very long way of saying like, we're pretty careful and we haven't done any out of the fund because it's hard to do this from my seat. Now, if you get it right, amazing. Like, if you're in great co-investments, that's great. And they certainly could help people fundraise. Like, in my position, in a hot market, co-investing could help me fundraise because we're likely to get some quick markups from that. I just worry that, like, yeah, yeah, maybe that isn't the right path to getting, like, long-term returns.

So that seems pretty focused. Do you think that the overall fund strategies are becoming less focused or less blurry? Is there, like, a broad trend here? Because you see venture capitalists who were known for software investing in everything from semiconductors to data center constructors to hard tech, defense tech, biotech. And then also you have blurriness on the strategy side. You're doing a billion-dollar seed round, maybe you're playing in public markets, maybe you're a hedge fund that's also doing private investments. It feels like we've been at a blurry— the blurriest it's ever been in terms of defining what a fund even is these these days. But is that what you're seeing or is there still like a healthy batch of super focused tech VC managers? It's funny, I think there's been like—

this has fluctuated over time. Like some— there have been times in the market where people are like, I don't think there's any place for a generalist fund. You'll never beat a sector-focused fund. We can only invest in sector-focused funds. If you're not a sector-focused fund, you'll lose to all the sector-focused funds, you know? And then, and then you're— it feels like we're in a period right now where it's like, no, if you have access to like the great talent the best talent at the earliest stages, you can find them like at or before inception. Like, that's a, that's a really compelling way to win in this market. And, and those are typically generalist funds. And so, like, I don't think there's one answer here. But yes, I am seeing— the longer you're in this, the longer you see people's strategies evolve from like, hey, we focus on certain sectors. Like, if we just like look at their web pages from like a couple years ago, it's like, oh, you used to be a crypto fund. And like now, You're like an AI fund. And then maybe you're becoming like a hardware fund. And I think, yes, you see a lot of that. You see— and from my position, obviously, we're all skeptical. Any investor is going to be skeptical. And my job, I think, is just to figure out who's uniquely positioned to execute on whatever strategy they have and generate significant outperformance and ideally generate top returns. And so, yes, I am seeing from a sector focus, I do see drift over time. And but it's case by case when I'm making an investment decision, like I kind of assume they are what they are today. And I like push on what they used to be and why they evolved.

And you can kind of figure out whether it's best funds, like they did evolve, they were investing in semiconductor companies and then internet technology companies. And those were related but very different structurally. So as long as you navigate the transaction, the translation, it can be good.

How much do you care about being in one of the next truly legendary funds? I'm thinking like an FF. It was FF1, right? FF2. FF2. FF2 is a 300x. Or like a lowercase. Is that something that you tell your LPs? Swinging for the fences. Not swinging. Well— Kind of. So by having— by backing the next great class of managers, you should, in theory, over the course of like 10, 20 years, you should get in one of those legendary funds.

Yeah, it's so interesting. Like, certainly doing that will help you. But the question is always like, by the time you know you were in one of those— and then let me get back to like, how important is it for me to be in one of those? Um, by the time you know you were in one of those, that was probably a long time ago, right? Like, you have some amazing funds.

That's it, dude. 20 years. So that's what I'm saying. I'm saying 20 years from now.

Yeah. Yeah. And so, like, if I— like, if we're saying that about, like, Slipstream in 20 years, oh, look at this, he was in one of the best funds of, you know, the last 20 years or something, um, isn't he so great? Like, the question will be like, well, he was great then, but like, is he still that great now? I don't know. Yeah. And so, like, that's the problem with all of venture investing. And like sometimes people talk about like, oh, emerging— investing in emerging markets is so hard because they have limited track records. It's not that much to evaluate. And I totally agree, like it's hard, but I think it's hard to evaluate in funds, like funds that have established track records too, because unless they're like the major platforms that are like pretty stable, um, there are other things changing with those, like fund size and portfolio construction. It's very hard. Like you're basing your decisions on, on returns that are like based on a different time, a different fund size, maybe a different team. Like you're always trying to figure out is this team uniquely positioned today, but like to generate great returns. But to come back off of that riff and like to get back to like the strat, to get back to like the importance of getting into one of those funds is something I think about all the time. Like especially when I was just starting out, one of the questions I would sort of pose to myself is like, does it matter to me to be in the best performing funds we meet in a given year? Or is our job to make sure that like every investment we make is a good investment? The best investments, like the 300x investments, sure, I would love to be in those. Of course, I would love to be in those. But often, those are pretty weird funds. It could be some $2 million fund that is totally not clear at the time, and it's very difficult to underwrite, and they get in a couple of good companies, and it's a ridiculous outcome. Sure, it is my job to invest in funds that have limited track records and to try to figure out who has increased odds of significantly outperforming. And so I hope that I am able to get into the best funds of the vintages when I'm investing. But the reality is, if we're investing in good funds, we can generate great returns without those. I certainly would love to be in those, though. I don't think Slipstream's success is defined by being in those. Totally. Yeah.

Yeah. It's more of a personal thing. After these 20 years, I feel like you're going to be I think there's a good shot. Oh, man. I don't know.

I don't know. We actually— yeah, we just had our first fund. We're about to have our first fund at over 20x. So, that's like a big—

There you go. There you go. We're hitting the gong for that. This was a super fun conversation. Let's make it a usual thing. Thing. It's great to get a pulse check on the market. I'm glad, I'm glad Samit connected us.

Yeah, so much fun. Oh, thank you guys.

Thanks for having me on.

I'd love to. Thanks so much. Cheers, Alex. We'll talk to you soon. Goodbye. Let me tell you about Codex. Codex is a powerful workspace for getting work done with AI agents, whether you're writing code, analyzing data, creating content, or automating business workflows. Codex helps you move projects forward from start to finish. Our next guest is already in the waiting room. We have Nico Simcoe from Klairs. Co-founder and CEO. How you doing, Nico?

Welcome to the show. Hey guys, thank you so much for having me.

Thanks so much for hopping on. Why don't you introduce yourself and the company a little bit and then give us the milestone? I want to hit the gong.

Amazing. Big day. Big day for us. Nico Simkuch here, founder and CEO of Klare. Basically, in a nutshell, what we do is we try to solve one of the biggest inefficiencies we think is in the US labor force, which is if you work today, you need to wait 2 weeks for your paycheck. And so We try to distribute that as far as we can. And today the company has crossed $100 million in— we announced $100 million in revenue run rate. Boom!

Okay, so break down a little bit more how the business works. You guys are serving 5%, I believe, of small businesses in the US. You're integrated into the payroll system. Gusto, QuickBooks, TriNet, the big guys. Yeah. And it's funny, when I— yeah, when I first started, I was surprised that this was not like a thing. Maybe it was, or just at a much smaller scale. But as soon as I understood how payroll systems worked, I was wondering like why employees didn't get access to funds, couldn't get access to them early if a payroll system like knew that they were— They already worked. Still an active employee working. Feels like pretty easy to underwrite, but it doesn't make sense for the company necessarily to be in that type of short-term lending business. But yeah, walk through maybe the history of this category, how you came upon the opportunity, and yeah, maybe even how you were kind of diligencing the opportunity early on, because I imagine it was one of those things that maybe you were like, why doesn't this exist already. Am I missing something?

You're making my life easy because basically that's very much in line of like what I think I had, but also many people that joined the company early, whether it's like employees, investors, so on and so forth. It's that it's like, look, we live in an instant world, right? You can, you can click a few buttons and get any movie you want in the world. And it's— but at the same time, if, you know, I was outside of the credit system, that's maybe a good tangent to go in. It's like I came to the the US without any credit history. My parents are not from here. I was an F1 student. I had a job at JP Morgan after college, still couldn't get a credit card. I got so many denials.

You were a student of F1, Formula One? I was an F1 visa student.

I wish I was a student in F1. But yeah, like, no, the reality is like I went through this entire journey of being outside of the credit system. 25 million people like that in the country. And then there's another I would say roughly 30-35% of the US workforce that is basically not in a prime category. And it's like, okay, if that's the case and 50% of Americans work paycheck to paycheck, why can't credit be connected to the workplace? And of course, short-term credit is one piece, but you can think about car loans, right? There's lenders that really would like to extend credit to that asset, but at the same time, it's risky. And so can they create a way to kind of connect that via the payroll system? And what it does is it decreases kind of the risk, decreases the cost to the consumers, and the entire system becomes more efficient. So honestly, I couldn't stop talking about this for many years and ended up kind of like leaving JPMorgan and starting the company.

What was the MVP like? What was the first customer? Did you go to a payroll platform and try and integrate, or did you go direct to a company and have just like a web app? Like, what do you need a bank charter for this? Money transfer licenses? Like, how does all that work to actually start this business?

Yeah, absolutely. A lot to unpack here. So I'll try to maybe take it high level and then we break it down. But the idea really, first principle, is my co-founder and I sat down and we realized like, okay, what is the perfect product? And the perfect product we thought of at the time, left our jobs then in 2019, restarting, incorporating everything in 2020, was if you could have a digital bank that connects to the workplace place, and every single time you work, um, basically your funds are available in your bank account if you need them. That would be perfect. And it's instant, it's free, it's perfect. And that's the— that's a trade-off. That product did not work. Um, and the simple reason why that product did not work is because when you're asking someone to move their entire financial life over to a new digital bank, it's a lot to ask for. It's like going on a date and asking somebody to get married on the first date. It's like, it's a lot, right? And so maybe that's where you'll end up, but like you know, don't, don't do it immediately. And, and so we kind of like— it made us a little bit more humble. And we spent a lot of time with our user base. My co-founder, like, flew down to like public schools in Georgia, met the principals around like how public school teachers don't get paid during the summer. They only get paid monthly. And it's— and then we start to realize that, you know, there's a way to do this which is embedded inside of payroll. People trust their payroll system. We all sign up for, you know, Anyways healthcare products through, through, through payroll. And payroll companies are becoming workforce super apps, right? Like, love the partners we work for because they really have this vision. They're like, one app solves a lot of things. And so we went after these providers and we're like, look, we want to, we want to foster your brand. We're not trying to send people to another app. So that's when we decided to pivot in the company in 2 years, kind of really, really accelerated when we took that strategy.

Well, congratulations. I want the opposite of this. I would love to get Tyler working for like 3 months straight before we pay him a dime. So he has to put in 90 days of hard labor until he gets a single paycheck. Sort of the opposite. Good things come to those who wait. No, it makes a ton of sense. And congratulations on the progress. Thanks so much for coming on the show.

Yeah, very, very fascinating. Thank you so much. Yeah, great to meet you, Nico.

We'll talk to you soon. Thank you for having me. Let me tell you about MongoDB. What's the only thing faster than the AI market? Your business on MongoDB. Don't just build AI. Own the data platform that powers it. Our next guest is already in the waiting room. We have Ian McGinley from Sidley Austin LLP. He's a partner there, former head of enforcement for the CFTC. How you doing, Ian? Welcome to the show. Hey, thanks for having me, guys. Thank you so much for taking the time. Great to have you. I would love for you to set the stage for us with a little bit of, of your backstory and career and what's on your mind in terms of prediction markets. We talk about prediction markets all the time. Sometimes they're really useful. There's a whole bunch of complicated issues that I'm sure you can help us unpack. But we'd love to start with, like, your background.

Yeah, yeah. And by the way, there's a lot of prediction markets on TBPn stuff, you know, including who's going to be your guests.

You know, it has happened a few times also.

It's happened. Yeah. I would say some of the— some of my least favorite moments are on the show, on the show, or when I realized that there had been a prediction market set up around things that one of our guests would say, because the people— then you would get a bunch of people in the chat that weren't here, didn't care about the content at all. They only cared about trying to manipulate us. Exactly.

Ask about Bitcoin or whatever. Normally, the chat's really helpful in actually providing really great— it just sort of ruined our chat. Anyway, that's enough. We're already starting with the gripes. But kick us off with the backstory.

Yeah. Yeah. So, so, right. I'm at a law firm called Sidley Austin right now. But before that, I was the head of enforcement at the CFTC. Yeah, that's the Commodity Futures Trading Commission. I don't think people had really heard of it until recently, you know, because it was really regulating agriculture and now it's involved in prediction markets, crypto, and some of, some of really the, the hottest topics around in finance. Yeah. And before that, I was at SDNY for a long time. Doing white-collar crime, insider trading, you know, back in the day. And so I've seen it from all sides. And now I help people try to navigate, you know, what's going on in the regulatory environment, which is active. You know, there's, there's so much going on.

How active is it? It feels like the game's over to me. I don't know. How do you feel about the prediction markets? It feels like they're here to stay, that, you know, you love them, you hate them. Sagar and Jordi, not a fan, clearly. Other people have a lot of money riding on these companies. But it feels like it's mature. It feels like it's decided. Is there— are there more points to decide at this point? Oh, definitely.

Yeah. But I mean, I think top line, they are here to stay. I mean, they've captivated the public's imagination, both retail and institutional. Right. But there are a few issues being worked out. Chief among them is sports. Yeah, right. Sports event contracts. There's, there's a lot of litigation over them. The states. Right. Which have regulated gambling, you know, for a long, for a long time are filing lawsuits. Right. They stand to lose. They stand to lose revenue. And those cases are working their way through courts. And, you know, you know, courts are reaching different decisions. We have district courts, appellate courts, and the Supreme Court. The district courts have come out both ways, some pro-prediction markets saying federal preemption applies, meaning this is the CFTC's jurisdiction and not the states. And then we've had one appellate court weigh in saying also CFTC's jurisdiction, but more courts are going to weigh in. I bet that goes to the Supreme Court. And so we'll see, you know, the future of sports contract. Meanwhile, you got the CFTC, which is regulating in the space. They put out some rules. You know, there have been issues with contracts like you mentioned, you know, mention markets and insider trading. There have been some cases. Involving, you know, people using information that they shouldn't have to go trade in prediction markets. So that's very much a focal point of the government, right?

Yeah. So, so there's a question on, on should they exist specifically for sports? There's also the, like, all the different ramifications of prediction markets being popular overall, I think, with, with the Venezuela military operation, you know, that felt like, you know, a really significant moment because you had an armed service, you know, one of our service members that had a financial incentive to put his entire crew at risk by sending a signal to the world that, hey, this operation is going to happen. Right. And that, that was just like probably one of the darkest moments that I can remember. But then there's almost infinite markets on every possible topic. So as somebody who's been working in enforcement and working on a bunch of, you know, things like insider, insider trading, which I think provides a lot of precedent for this, can this— can all these— like, we're creating a bunch of new problems where, where all these type of real-world events can be potentially influenced by individuals that have a direct financial incentive where maybe before there wasn't one at all. What's the sort of broader solution or framework that you think would be effective at maybe curtailing some of these issues?

Yeah, so you mentioned that Maduro case, right? And I think I think what gets lost in that is while the, the, the market is different, right, that conduct has always been illegal, 100% illegal. Right. It's like knowing the, the answers to the test before you take it. And that's just allegations now. So, you know, he'll have his day in court as he deserves. But I think, you know, when you think about insider trading, a lot of it boils down to common sense. Like, you can't use information that's not yours. You can't, you know, take out an event contract ahead of time when you know you're going to be the guest and there's an event contract on that. I think the challenge is that there's event contracts on everything. So, we're talking about, if you're thinking about equity markets and commodities markets, there's a very well-established playbook for how you handle that. I'm thinking like big financial institutions, they train employees, there's policies and procedures, addressing kind of everything under the sun. The prediction markets have got to catch up in terms of everyone in an industry impacted by prediction markets needs to be made aware that you can't do that because the consequences are just enormous, right? I mean, you wind up prosecuted by the DOJ, then the CFTC as well. And so there really is an education aspect of it that I think we we all need to grapple with in terms of the promises, right? I mean, you see the information and why people absolutely love it. And it's great, you know, for a news source, it's, it's great to have. I mean, look at, look at how it, how it did on elections. You know, 2024 election was a watershed moment. A lot of people think in prediction markets because the polls and the experts had it very close. Prediction markets showed that the sitting president had a pretty comfortable lead. In all the swing states. And, you know, it's an interesting question on how these prediction markets interact with normal or traditional exchanges. Right. And we've seen an integration of both because it's very helpful to have that information alongside other financial decisions you're making. Right. Like, will the Fed raise the interest rate in, in September? Right. That, that's a, that's, that's a metric that I think has a lot of implications for other instruments. And you can, you can track that. You could ask people, you could ask experts, you could talk to someone in D.C. and find out, you know, or you could go on one of the prediction markets and see what, you know, what the most likely scenario is. There's a new lawsuit.

Flight, a flight tracking platform, FlightAware, is suing Kalshi, alleging the prediction market company is using the data without permission to let users bet on flight cancellations. The when this news hit, people immediately jumped to, well, what if someone calls in a bomb threat and then the flight's delayed or canceled just because they want to win in the prediction market? But I was expecting the airlines to be pushing back on this or the FAA or the TSA or someone else that would be more directly in the affected line. It doesn't seem to affect FlightAware's business. They seem more worried about brand damage damage from having the registered trademark linked over there. But do you understand more about the different participants who are pushing back against being dragged into the prediction market world?

Well, I haven't, I haven't heard much about that lawsuit. I think it was just today that it came out. I think that one area to watch is what the CFTC does. Sure. They put out, they put out a proposed rule. Yeah. And what they're trying to prohibit is contracts that could be potentially manipulated, right? And you don't want to create any perverse incentives. And that's what the CFTC is grappling with and how to, how to separate contracts that we all are really enjoying and finding informational and economically useful to hedge in some situations. But also just make sure you're not creating a situation where someone tries to manipulate the contract for their own good. Right. We just saw a recent case involving George Santos. Different, different context. Right. Right. But, but the manipulation piece. Now, this is again, you don't— there was no admission of liability alleged. Yeah, it's alleged. But like, you know, the allegation was the contract was whether he was going to attend the State of the Union. Yeah. And he obviously knows that. And according to the allegations, went on social media and made certain statements to change the odds of the contract so that he could, that he could profit. And again, new market, but that kind of conduct has always been illegal.

What kind of lore did you pick up from CFTC history? Like when you took the job, are there like stories? I don't know what you can or can't talk about, but I imagine like some of the historical enforcement, like there has to be some like crazy, crazy stories of specifically in like agriculture going up against Big Onion.

You're talking about.

Yeah, yeah, that, that. But like, yeah, I imagine if you would, you would have had the— you probably wore a suit most days, but, but maybe if it was like, you know, 30 years prior, you would have had some jeans and a sidearm and some boots.

Sheriff, I'd have to learn some new skills. I'm a city guy. But yeah, you know, look, it's an amazing organization. It's only been around for about 74 years. Wow. Right. Yeah. So, yeah, I mean, I think, I think a great piece of trivia for the CFTC, the definition of a commodity is essentially almost everything that you have futures or derivatives on. There's two exceptions: box office movie tickets and onions. Onions. And no one knows the exact reason why they're not, but they are not regulated by the CFTC. And I don't think we could ever see an event contract on them. So, so there's that. But, you know, just in terms of prediction markets, what's really interesting is they've always— they've been around for a really long time. It's just now they really— with sports and with political contests, they've really captivated the attention of folks. And I think you're seeing a ride-along effect in terms of other contracts that are now getting, you know, really popular with the public. And so, you know, there were on a very limited basis some election contests that were experimental. But now you, now you see them everywhere. And, you know, even the 2025 mayoral race in New York, they were, they were very accurate.

So on, on sports betting, when, when we talked to Sagar and Jetty from Breaking Points, who's, who's who's very concerned about the proliferation of sports betting, having a casino in your pocket, as he puts it. His main contention is that it's the availability, it's the ease, it's the lack of the infrastructure that was formerly around sports betting. You had to tell your family that you're going to Las Vegas, walk into a casino, it's smoky, it's expensive. Put down a bet.

Did you always get that notification?

This is— there were a lot of barriers. And also you could do self-exclusion. There were gambling hotlines. There were a whole bunch of warnings about the economics of what you were participating in. The house always wins. And what I'm interested in is, does the CFTC even have the authority to layer that a similar structure of Hey, if you're going to be advertising, instead of betting on the Super Bowl, you're going to be trading the Super Bowl. You also have to have the same gambling hotline phone number because from our view, it's a similar thing. We're going to let it happen, but it needs to have the same infrastructure that it had just a few years ago. Or is this something that the CFTC doesn't even have the tools in the tool chest to make happen if they wanted to?

No, they have the tools. I mean, they've regulated these markets. Yeah, just not, you know, in these subjects. Right. So they basically— the CFTC's view and some courts have adopted this is that these are financial instruments. They're called swaps. Yep. An agreement between two parties on the occurrence of an event that has some economic financial consequences is how they view it. And so the The CFTC has authority if there's fraud, if there's manipulation. Now, I do think, and they've made some, you know, some, some talks about this, that we'll see more rules from the CFTC. It has not, you know, traditionally been involved in these spaces. And I think, like, you know, with anything with government, there is a— it takes time to catch up with industry. That's just, that's just a fact. And so I think, I think the CFTC will tackle those issues pretty soon.

Yeah, it'll be very, very interesting to follow. We'll have to have you back on when there's more news. Thank you so much for taking the time to come chat with us.

Thanks for breaking it down. Have a great rest of your day. We'll talk to you soon. Cheers.

Goodbye. Let me tell you about CrowdStrike. Your business is AI. Their business is securing it. CrowdStrike secures AI and stops breaches. Our next guest is going direct, going independent. We have Connor Sen from The Housing Frame. He is the founder of a fantastic newsletter that I just subscribed to yesterday. Connor, welcome to the show. Thank you so much for taking the time to come chat with us. How you doing? Yeah, thanks for having me. Congratulations on the launch. Um, I'd love to hear a little bit about your background, uh, your, your, the, the beats and the way you like to cover different topics, what you like digging into, and then we can go into some of your current outlook on the market, housing, all the hot topics that you're planning on covering this year and beyond.

So I'd say my professional background related to housing is twofold. One is I worked for a big hedge fund in San Francisco during the crisis. So I've been out there and got to work on credit derivatives and mortgage derivatives and all that. Yeah, all that happened. Sure. Then moved to Atlanta after the bust and just needed to start over and eventually got hooked on Twitter. Started writing for Bloomberg in 2016, did that for 10 years, wrote about the economy, housing, demographics, cities, things like that. Yeah. And just felt like the housing market to me feels like it's bottoming. And I saw the opportunity with Substack and being a chance to be the voice to come on shows like this and talk about it for the next 10, 15, 20 years. And it just felt like a great time to start doing that.

John is so happy about this because John You would, we don't have like a housing guy. Oh, that's true. And John.

Well, we got Sager and Jetty complaining about it constantly.

Well, we got Sager complaining about it, but we don't have somebody who's been like, you know, we have like, we like hanging out with Joe Wiesenthal, people like that. We have like our guy in a bunch of different categories, but we don't have like our housing guy. Ben Thompson for MagSavvage. Hopefully this is the start of many, many, many appearances.

That was part of the thinking too, because Bill McBride at Calculated Risk, the blogger that everyone knows so well, he's retiring next spring. And so I did look out 5, 10 years and thought, who are the voices for our generation who can do this? And I felt like I could be one.

So how do you think about your reporting, the shape of like, when do you want to go and talk to a bunch of sources on the ground, look at a bunch of economic data, crunch something into something more of a narrative? There's so many different outlets even when you're at Bloomberg. Opinion versus factual reporting, getting a scoop. There's so many different pieces. What, what have you explored? What have you shied away from? What have you leaned into?

I think starting out, it's probably going to be fairly similar to what I was doing at Bloomberg, probably reaching out here and there to sort of broaden my base. Yeah, but over time, I think it'll be a function of what do I think is interesting? And then who are the sources that I can talk to who are, you know, good and help me do what I do better? So I'm pretty good at data and media and all that. But yeah, I don't have a lot of friends who are real estate agents or mortgage originators or things like that.

So I'm excited about that. Yeah. Okay. So first question, you said you feel like the house— the housing market is bottoming, but like a lot of people, if you ask average Americans, that Certainly they wouldn't, they wouldn't feel that way. You say it's bottoming and yet prices still feel quite high. But, but what you're saying is maybe transaction volume has been subdued over the last couple of years due to rates and other factors. But yeah, well, break, break that down. Like talk about like the why now and then we'll get into where things are going.

I think the bottoming call is twofold. One is that the hardest-hit states over the past 2 years, places like Florida and Texas, now see inventory dropping and new orders for homebuilders are, are rising. That's kind of your classic bottoming late cycle recovery. And then San Francisco is clearly a market that, very similar to 2010, 2011, is leading the country in terms of what this expansion looks like. And I'm really excited and interested to see where that broadening out goes over the next 6 or 12 months.

How important is actual development in home building? We've talked to startups, very early stage, thinking about 3D printing or manufactured housing, and there's some technology there, but I always discount those projects as maybe that'll have an impact in 10 years, 20 years. I'm really excited and optimistic about it, but realistically, I don't think it's going to be moving home prices in the next few years. But how important is the shape and structure of the actual homebuilding market to house prices in America?

It matters a lot down here. I'm in Atlanta. It matters a lot in Texas and Florida and Arizona. Places like that historically has not mattered a lot in San Francisco. I remember talking to somebody at Bloomberg Beta about 8 or 10 years ago who said that the best way for ordinary people to bet on VC is San Francisco real estate. That's— and I think we're seeing that this year. So I'm hopeful that they can build more homes out there. But it's been a long, tough slog. I mean, I left in part because of housing and here we are 16 years later.

What about government regulation? Obviously, it feels like the story of housing in America is very much the mortgage interest tax deductions, all the incentives to get the American dream is directly tied to homeownership. And so the government has done a lot for that. But then there's also permitting reform, the abundance Democrats, the abundance wing are pushing for more building. And I'm just wondering if you think that there's anything that could happen on the policy side that would actually move house prices in the, in the short, medium or long term.

So I did speak with a policy expert on housing about— I said, what are your thoughts on road to housing and what matters for this? And there are some short-term things like manufactured housing should get easier to build. But he said the really important thing is we've identified a bipartisan coalition that will vote for housing bills. So this was our first crack at the apple, and— but we now know where the votes are. So going forward, we can take another crack at it in 2 years and just keep chipping away, try to try stuff, see what moves the needle, and just hope that slowly but surely over time we can build more housing.

Do you have any idea of like what the shape of that legislation might actually look like? Because it's just saying, like, we need to build more, a lot of— you'll get a lot of thumbs up. But what are we actually changing? Are we making the time to permitting more? Are we hiring more people to review permits? Are we changing the requirements for fireproofing or something? Like, it's very— it gets nitty-gritty really fast.

So one thing that might be— that resonate with your audience is that right now the financing piece is really hard. And what happened was similar to VC and private equity. A lot of people invested money in 2021, 2022. Interest rates were low in real estate. We'd say cap rates were lower, valuations were high. Sure. And they got blown out pretty bad over the next few years and the equity got wiped out. Maybe people are still sitting on loans. So as we see the apartment market, apartment market starting to turn, time to build apartments again, there's no equity to go around and you can't get a deal done unless there are equity investors ready to go because they all got wiped out last time. They're gun-shy. And then nowadays, maybe you'd rather fund a data center than an apartment building. Yeah. So I think finding ways to finance new developments and maybe the public sector can have some role here, whether it's subsidizing or tax incentives, things like that. That's something that we should look into. Interesting. Interesting.

What role do you think other buyers in the market that aren't specifically someone going to either buy a house that they'll live in or buy maybe an apartment building to rent out are having an effect on the housing market overall? You hear a lot of hand-wringing around private equity buying a bunch of homes. Is that actually distorting the market? I was running the numbers, and it felt like a couple percentage points of homes are owned by private equity. Seem like it was the biggest factor, but how have you grappled with that story?

It was really a much bigger story 15 years ago, and certainly here in Atlanta, the private equity investors bought up a lot of distressed homes. And I know that looking back, it doesn't look so good, but at the time, that was when there really weren't a lot of qualified buyers. People had bad credit scores, unemployment was really high, banks were failing, and so investors came in and stabilized the market. And I know it's not popular now, but at the time it made sense. Yeah. And so I would say today it's that we have a really K-shaped housing market where if you have a lot of stock wealth, it doesn't really matter where mortgage rates are, you can still buy a home. And in fact, I was looking at data in Nashville year to date. Home sales in Nashville for homes over $2 million are up 32%. For homes under $500,000, basically flat. So the corner of you need a mortgage, you have just a job, that market's still pretty stagnant, but the high end is really booming.

And so are the— is the bottom of that K switching into renting? In that case, they are.

And renting is still basically a better deal in most places. But I do think an issue is that in the apartment market, we're starting to see vacancy rates come down. And typically when vacancies come down, rents go up next. And so you might be in a situation where, yes, it's cheaper to rent than buy. But if you think that your rent's now going to go up a lot over the next 2 or 3 years, you might factor that in and say, I'm willing to overpay for a house because my rent's going to go up 20% in 2 years. So I think that's more of a 2020, 2027 story. But that's something I'm thinking about for next year.

How much are you going to be tracking demographic, like basically demographic trends and how that impacts housing? The boomers have a lot of— quite a lot of homes and they'll be turning them over. Eventually. But yeah, that story is definitely a— is that like a 2030s story?

I think so. For me right now, the demographic story is that we see both in New York and San Francisco that rents are really high, but rents have come down a lot in the states that built over the past few years. So as the San Francisco-Austin gap gets really wide, maybe an Anthropic employee won't move to Austin, but maybe somebody who, you know, couldn't buy the house they wanted to buy because they got outbid by an AI person, maybe they start to look to leave. And so maybe then you can get the migration flywheel cranking again in the South. Interesting.

How big of a deal are foreign buyers in the American housing market? There's a lot of— again, you see these pieces similar to the private equity buying houses of, oh, there's someone that made a ton of money internationally and they just want a safe place to park their capital. And so why not buy an empty luxury apartment in Los Angeles or Miami or New York. Is that, is that just a, just a small fraction of what's going on in the real estate market, or is it actually enough to move the overall picture?

That was actually a sneaky source of weakness in the North Dallas suburbs last year because H-1B visas were apparently a fairly meaningful part of the sort of ex-urban Dallas new home market. And then financing got— I don't know the details of that very well, but just with the policy changes with the administration, And so that seems to kind of come in waves where you get these moments where China's buying up a lot of housing and then they go away for a while and then they come back. I don't think it's a big factor right now, but it's certainly something to watch going forward.

Yeah. Last question for me. I'm interested in how you're thinking about your audience for the housing frame. Is, is the— do you think that there's a goal to reach hedge funds and traders who will be reading your analysis and actually building an investment thesis on top of it? Or like, what— where is that? And then does that lead into like a consulting business? I'm just sort of interested in where the— where the overall company goes as you expand.

Yeah, it's interesting because coming from Bloomberg, we didn't get a lot of demographics or data about our audience and our writing. And so I think to start, it's just going to be looking at the Substack metrics and seeing who's coming in, what's getting their interest. Kind of thinking about that, reaching out to people one-on-one, because especially early on I can do that. Cool. And then it's sort of— again, these are not one-to-one comps, but I look at what Bill McBride built with Calculated Risk over 20 years and thinking I could try to have some of that audience over time or try to earn their trust. And then this is like, you know, pie in the sky, but what Dylan Patel did with, uh, Summy Analysis, and he was just a guy who got started and then his sector got hot. And so I do think housing eventually will get hot again. And hopefully I can be a place that people come to when that happens.

Yeah, yeah, I can totally see the semi-analysis type tokenomics model, understanding how data centers are building out. I haven't seen that data contextualized for the housing market, and I can imagine so many consumers and obviously business people being fascinated by it. Jordi, anything else?

Not for now, but congratulations on the launch. Subscribe.

Where can we sign up? News. Give us the What's the URL so everyone can go?

It's connorsen.substack.com or just The Housing Frame. I'm sure you can find it. So thanks a lot, guys.

Thank you so much. Great to meet you, Connor.

We'll talk to you soon. Thanks for coming on. Have a good one. Goodbye. Let me tell you about Public.com. Investing for those who take it seriously. We got stocks, options, bonds, crypto, treasuries, and more with great customer service. Um, any other, uh, stories you want to cover? Bending Spoons? Apparently on a tear, 265x price-to-earnings ratio, buying old boring SaaS with slow growth. People are excited about that, I guess. Bending Spoons added $11 billion in market cap after announcing the Airtable acquisition. Can't make it up. Is that true? Bending Spoons? Bending Spoons market cap? Market cap. Wow, $33, $34 billion. $1.1 billion company. Way up since IPO. Wow. Really, really, really impressive. Up 50% since they IPO'd. They're on a tear. Who will be the next Ben Spoon? That is the question everyone's asking. Do not get—

Don't get your spoon bent. Don't get your spoon bent.

Do we need to—

Unless that's the best possible outcome. Yeah, maybe. We'll leave this show with a post from June Chu, who was the COO at Zillow until very recently. He posted on LinkedIn, I have stepped down from my role as COO of Zillow. That's all I have to say about that.

Mic drop moment. There we go.

And yeah, I'm curious. I'm sure we'll find out in due time what he really wants to say about that.

It feels like teeing up a tell-all.

Uh, feels like he maybe can't say anything. For sure.

Um, anyway, there's a bunch of other good stories.

Last but not least, Leonardo DiCaprio, uh, urged Chilean authorities to protect a critically endangered frog from a proposed power transmission project. This feels like something that's solvable. Like, I think that I think we can protect the frogs and do the power transmission project. Yeah. Do you agree, John? I know nothing about the situation, but I have, I have a little faith.

Spiny chest frog. There's 1,000 of them that remain in the wild.

I think, I think Leo should let them move in.

Ooh, bring them to America, put them in a zoo or something. I think they want to live there. I think I think you got to do a lot of work. I don't know, maybe beam the power somehow, do something else. Yeah, interesting. It's got to be rough being in the Chilean government and just being like, "Who's Leo? Just comes over the top." He sent 60 million Instagram followers our way and they're here.

Sí, hermanos. It's got to be brutal.

Well, good luck. Hopefully the frog can be protected while the power transmission project goes on. Frogs on hamster wheels powering, generating power. Maybe that's the future. Who knows? Well, thank you so much for tuning into TVPN. Leave us 5 stars on Apple Podcasts and Spotify. Sign up for our newsletter at tvpn.com.

It's August 11th. It's August 11th. It's summer. Yeah, it's summer. Go touch some grass for us. Have a good one.

Have a good day, and we'll see you tomorrow at 9 AM Pacific. Goodbye.