Carvana CEO & Co-Founder, Ernest Garcia: Building a $50B Company, Losing 99% and Coming Back

1. 0:00 – 0:46

   Intro

   1. EGErnest (Ernie) Garcia0:00

      The pressure of scale pushes everyone up the pyramid. I think that if you wanna make the biggest difference, it's like, get in the game. You don't wanna be a reaction to other people's reduced view of what you are. When you're public, it's just cold. It's ruthless. It- it's, uh, it's just results. No one's ever gonna clap for you. What's more important to you, is- is it important to succeed or is it important to have the best personal life that you can have?

   2. HSHarry Stebbings0:21

      Ready to go? (instrumental music plays) (clock ticks) Ernie, I am so excited for this, dude. I am a massive fan of the Carvana business. I've known Dan for a while. Neal Mehta has sung your praises for years. So thank you so much for joining me today.

   3. EGErnest (Ernie) Garcia0:44

      Excited to be here, thanks.

2. 0:46 – 3:37

   Are all great founders just “stubborn egomaniacs”?

   1. EGErnest (Ernie) Garcia0:46

   2. HSHarry Stebbings0:46

      Now, when I was stalking the shit out of you, you once-

   3. EGErnest (Ernie) Garcia0:49

      (laughs)

   4. HSHarry Stebbings0:49

      ... said that entrepreneurs are stubborn egomaniacs (laughs) .

   5. EGErnest (Ernie) Garcia0:53

      (laughs)

   6. HSHarry Stebbings0:54

      Can I ask you-

   7. EGErnest (Ernie) Garcia0:56

      Yeah.

   8. HSHarry Stebbings0:56

      ... when you reflect on that, do you think you're a stubborn egomaniac?

   9. EGErnest (Ernie) Garcia1:00

      Can we jump to the next question, please? (laughs)

   10. HSHarry Stebbings1:03

       (laughs)

   11. EGErnest (Ernie) Garcia1:03

       Here's what I'll say. I- I think, um, truth is oftentimes, um ... Like, you- you can, you can find a positive word or a negative word to describe almost anything. And I think it comes down to, like, you know, what are you trying to get across? And I think sometimes it's more impactful to communicate with the surprising choice (laughs) of ... And so I think that there's a lot of good that comes out of being stubborn. I think there's a lot of good that comes out of self-belief, uh, which could also be, you know, restated as being an egomaniac. Um, but I do think that's what entrepreneurs are. I think it's really hard to sit in a room with a bunch of people who tell you you can't and to believe that you can if you're not stubborn and if you don't have maybe, you know, a touch too much self-belief. So I think that is, uh, that is a characteristic of entrepreneurs, in my opinion.

   12. HSHarry Stebbings1:46

       When did being stubborn in the Carvana journey help, strategically, the business in a very significant way?

   13. EGErnest (Ernie) Garcia1:55

       I think, um, many, many times. So even if I go back to, you know, six months into the business. We were out trying to raise money. Uh, you know, we went to Silicon Valley. We talked to every fund that you could possibly imagine and basically, it was just like we were capital intensive. Um, you know, we were operationally intensive. Uh, we had, like, industrial components to our business and everyone wanted us to be software and everyone would just ask the question, like, "Can't you just be a software layer on top of dealerships?" And I do think that there's a very good chance we actually would've been successful raising money had we made that, uh, that choice. But I think that we kinda believed that vertical integration was very important. Honestly, I think, every bit as much so for control over the entirety of the customer experience as for the economic benefits and strategic benefits that come from being totally stacked and having access to all the economics. But- but that was just, like, a core belief that we had. We were like, "We don't believe you can give customers the experience that we want to give them unless you do it all." And I think, you know, you face, like, a really tough choice there. You're like, okay, you have really smart people that are proven, that have backed lots of companies that have done well before, that are basically indirectly telling you they don't really think that what you're gonna do is- is gonna work. Um, and- and you can kind of bend to that and you can choose to- to kind of shift in that direction and build, like, a software layer or you can, you know, be stubborn (laughs) , um, and- and you can persist. And I think we chose the latter, and I think making that choice led to at least one extra near-death experience. Uh, but the truth is, I think- I think most companies that take a big swing generally have multiple, uh, near-death experiences. And so I think avoiding, you know, one extra one to- to kinda sacrifice the things you deeply believe is- is not worth it, so we- we went ahead and just kept doing what we

3. 3:37 – 5:49

   How Carvana Almost Died on Several Occasions

   1. EGErnest (Ernie) Garcia3:37

      were doing.

   2. HSHarry Stebbings3:37

      What's the most palpable near-death experience that you remember? And what did you learn from it?

   3. EGErnest (Ernie) Garcia3:42

      In- in 2022, our stock went down 99% and our bonds were trading at, like, 40 cents on the dollar. And I think to the world, that looked like a near-death experience. Ho- honestly, from- from my perspective, I- I didn't ever think it was that. But I think it- it very clearly looked like that and I think it was very public and I think that kind of thing is rarely public. And so I think, um, that's probably the one that would be in most people's minds. But I think i- in- in my mind, like, there were real near-death experiences, uh, early on where, you know, you're just kind of like ... You- you're struggling to get things built, you don't have the whole machine and you're struggling to get capital. And at the end of the day, like, as a company taking a big swing, you're not gonna make money for a while. And so, you know, you- you need capital. That's the lifeblood of- of- of the business and of kind of having the option to even keep building. And I think we were really struggled, uh, to- to kind of, you know, get that capital. So I think early on, we had several times where we got very, very tight on capital, um, that were ... Se- several, maybe two or three, but, um, but they were tough. And so th- those to me were like the real near-death experiences that were- that were hard to manage through. What do you learn? I think you learn like, how many stories have we all heard about, you know, somebody who had some injury where if the injury would've been one millimeter over, they would've died, right? Uh, we've all heard a hundred versions of those stories. I think that there's two things you could take away from that. One is, you know, maybe all these people are really lucky. The other thing you could take away from it is, a lot of times when we reassess things in retrospect, we think it was closer than it was. A- and I think the reason for that is because you have more moves than you think. When you find yourself with your back against the wall, you- you can find action that you might not have found otherwise. I think it makes risk a little less risky than people think because, like, when you find yourself in that spot, if you have problem solvers around, uh, you can usually do more than- than people imagine. And you know, whether that's fundraising or finding a way to make dollars go further or finding a way to be a little bit more efficient in the business, when you have to, you will. Um, to some degree at least. And I think, you know, that to me was- was like the lesson that I feel like I learned. It's like, um ... I think y- you need to take risks to do something meaningful and I think risk is less risky than most people

4. 5:49 – 11:51

   Is Carvana’s Inability to get VC Funding a Sign the VC Model is Broken?

   1. EGErnest (Ernie) Garcia5:49

      believe.

   2. HSHarry Stebbings5:49

      I do just wanna stay on the fundraising element. It would suggest a broken nature to funding and funding environments that Carvana cannot get funding in the way that you couldn't in the early days.Do you think that venture funding is broken in its mindset towards some of the businesses that we fund?

   3. EGErnest (Ernie) Garcia6:06

      You know, when you're looking at what other people are doing and you see patterns that are emerging that are successful over and over again, it takes real conviction, um, in- in some dimension to- to choose to kind of run against that. And I think at the time that we were trying to do our early fundraises, I- I think, you know, capital intensity, operational intensity were not popular. Marketplaces were very popular. That was kind of, like, the pattern people saw. Phoenix was not viewed as a market where you could build a company. And so, I think we didn't fit the patterns, and I think that we didn't have the relationships that gave investors the opportunity, I think, to have deep enough conviction in some other way that would allow them to overpower the fact that we weren't fitting those patterns. So, to me, like, you know, that- that would be my, like, PC answer today (laughs) . Um, at the time-

   4. HSHarry Stebbings6:52

      (laughs)

   5. EGErnest (Ernie) Garcia6:52

      ... wh- when you're- when you're, like, pissed off and you can't get money and you're like, "Isn't the way this is supposed to work is that, like, venture capital is supposed to be risk-takers? They're supposed to be the ones that fund risk in the economy?"

   6. HSHarry Stebbings7:04

      It's also a challenging business 'cause you have to be so mentally plastic to see the transformation margin evolution over time and buy into that. You know, what it is today in the very early days versus what it will be are two very different things. (laughs) And that you have to believe a lot is true for that margin transformation to be real. And so, you have to be j- very mentally plastic as an investor.

   7. EGErnest (Ernie) Garcia7:25

      The reality is, people taking, like, layered risk, like- like, when you have to- to solve ten problems in a row, there's just not that many people that wanna take that risk. Uh, I- I think there's people that'll take, you know, two or three risks in a row. But when you've got, like, ten in a row, it's just, it's very hard to find that match of someone who wants to take that risk. And I think, you know, given what I feel like I've seen, observed, and learned, um, throughout this journey, to me, the- the most important input to that question, to- to assess what the real risk is, is I think trying to understand the people. Because I think that people are gonna face problems and they're gonna face the strain that comes from facing those problems, and they're gonna react in some way and they're gonna try to solve them. And if you have many things in a row that have to be solved, I just think it's- it's impossible to foresee what all those things are. Um, so you have to just decide you believe in the people to ultimately solve, you know, all the problems as they come.

   8. HSHarry Stebbings8:19

      In a world of AI, many, many businesses that we thought were impenetrable are suddenly very vulnerable overnight and most defensibility is lost. Does- do assets like Carvana become more valuable because of the complex coordination logistical challenges/nightmare, respectfully, that the business-

   9. EGErnest (Ernie) Garcia8:40

      Yeah.

   10. HSHarry Stebbings8:41

       ... is, make it actually just far more valuable because there is such inherent defensibility?

   11. EGErnest (Ernie) Garcia8:45

       The simplest answer, I believe and I hope is, yes. I think it's easy to see kind of software layers, you know, being easier to- to build over time, but I think a software layer sits on top of physical processes and then fits on top of, like, business processes, and then software kind of enables that. I think that, like, as it sits today, I think you want to have m- meaningful physical processes where things are moving, and ideally different business processes where, you know, the- the dots are connected in different ways, and then the software layer, like, makes all that happen. Because if the software's easy to replicate, the next two layers are still hard. So, I think you wanna have as many layers as you can.

   12. HSHarry Stebbings9:21

       You mentioned the different layers of value there, or layers of defensibility. What layer do you not have today that you would most like to have?

   13. EGErnest (Ernie) Garcia9:29

       So, I think in, like, that highly conceptual framework, I think that we- we designed the business from scratch to basically try to deliver a customer experience that we thought was enabled by different physical infrastructure that supported a simpler, more direct customer experience where they're in complete control. And I think that that required that we build, you know, logistics and reconditioning centers and, uh, business processes where, you know, like, finance connects directly into trade-ins and all the decision-making is continuous so it all fits together, and then software layers sit on top that enable customers to interact with those choices on their own. Our entire customer experience design required all three layers. Um, so I- I think we have all three, but I also think that if you zoom into any of those layers in any part of our business, and we have many parts of our business, it's very obvious, like, any smart person sitting in a room for half an hour would come up with five things they wanna improve. And then I think what's fun about it is if you have smart people in a room that are motivated, you fix those five things. By the time you're done fixing those five things, you're gonna think of seven more things. And so, I just think that it's a continual process always, so I think there's a million things that we wish we had that we don't have. But I think, um, I think we got a lot of problem-solvers, and I- and I think we- we- we enjoy tackling those problems, and so I think we're- we're trying to make our machine better all the time.

   14. HSHarry Stebbings10:43

       If I could ask you though, impress you for one that you would most like, is there one?

   15. EGErnest (Ernie) Garcia10:48

       I would s- well, I mean, honestly, I think right now, I think, um, you know, e- even, like the start of- of this conversation, I think that it's very early in the adoption of AI broadly. And to me that is, I think, like a layer. I- I think, like, thinking about that as a layer is, like, a reasonable thing because it's- it- it can permeate, I mean, all- uh, everything that I'm able to think of right now in real time. And so, I- I think, um, I think we're very, very early. Like- like, to me, I- I think all businesses today are using AI at- at, you know, a- a small, small, small fraction of what's possible given the quality of the technology today. And I think the technology is improving so fast it's unbelievable. And so, to me, like, trying to catch up to that horizon is a battle. I mean, it's like way in front of us. Um, so I think that there's a ton to do there, uh, but I'm excited by it. But- but so to me, I think that relatively speaking, I think we're weakest there, but- because it's- it's just a new set of capabilities that we have not invested in for a long period of time. Um, so I think we got a lot of work to do.

5. 11:51 – 23:32

   Operators vs. Strategists: What Hires Can Make or Break a Company?

   1. EGErnest (Ernie) Garcia11:51

   2. HSHarry Stebbings11:51

      You've mentioned problem-solvers, you've mentioned the importance and centrality of team. When we spoke before, you said to me about operators and strategists, and I thought it was really interesting, but how do you differentiate between operators and strategists and their importance within a business?

   3. EGErnest (Ernie) Garcia12:06

      Like, one of the things that I've come to believe is that- is that pairing those two things...... it is exceptionally important. I think that if you can pick one, I think you want operators. Like, operators get things done and operators focus on the practical, and they make sure that the wheels turn and they make sure that whatever problems people are facing every single day get resolved, and I think that you, you must have that to succeed. Oftentimes, operator mentalities view, you know, more conceptual, uh, thinkers and, and kind of more strategic thinkers as sort of, you know, head-in-the-cloud idealists, and it's hard for them to s- to work well together. I think a lot of times, you know, these conceptual thinkers view operators as solving problems that are less important, right? It's not as interesting. Like, I can't sit around a campfire and talk about this for three hours and impress my friends. Um, and, and so I think a lot of times, the, the, the two, the two don't fit together as well as you would like. But I think that in reality, like, the, the more important of the two for any success, like getting from zero to one, is the operator. But then I think the, the ceiling of your possible success is a function of the conceptual thinker. And so to me, like, marrying those things together, I, I think is, is really, really important and really hard, and I think the most productive people in the world are, are kind of both. I think, um, you know, through this journey, I've been lucky enough to meet Jeff Wilke at one point and, and, you know, we went through, uh, one of our inspection centers together. And, uh, the, the number one takeaway I had from that is just, he's one of these people that is both things. Like, he's a very conceptual thinker. He's, um, he's very analytical and, and he uses frameworks to evaluate everything. But then he also, you know, wanted to tell me that he thinks that the shapes in which we're parking cars are stupid, because we're not able to move the cars around as quickly. That extreme detailed focus and, and then his storytelling of the ways that they faced those problems at Amazon and just hearing how iterative it was, uh, was just interesting because you, you very rarely talk to someone who is as fluent in frameworks and concepts and also as obsessed with details. Uh, and so I think that that's, uh, pairing those things is really important and usually they repel each other, 'cause they're not the same, they're not the same type of person. It's hard to pair those things, but if you can, I think it's very, very valuable.

   4. HSHarry Stebbings14:17

      You said about kind of strategists sitting around a campfire and discussing it for three hours. You also mentioned before about kind of living in the abstract and the potential for people to do that. How do you think about and reflect upon people living in the abstract, and whether that's good or bad and how managers should approach it?

   5. EGErnest (Ernie) Garcia14:35

      I think abstraction is very bad and I think it's the, um... Well, f- at least for a person who starts conceptual. I, I think abstraction is very bad because you have this constant desire to, to abstract. It's, it's like-

   6. HSHarry Stebbings14:47

      How do you define abstraction?

   7. EGErnest (Ernie) Garcia14:49

      The closer you get to the ground, the better you are, and I think that, like, the pressure of scale pushes everyone up the pyramid. People do really well in their career and they wanna go manage more people and they wanna have one-on-ones and they wanna influence a lot. But I think that if you wanna make the biggest difference, it's like, get in the game. Like, get, get on the ground where things are happening, sit there with the actual people that are doing work and y- your one-on-ones are great. Like, you should have real conversations with people. But if you're just there influencing what's happening right now, you're leading. Uh, like, like people are learning from that. Th- that's like the way it actually happens. And so I think fighting abstraction is, is, eh, especially for a conceptual person, is very important.

   8. HSHarry Stebbings15:28

      Strategically and specifically, what do you do to abstract yourself or to not abstract yourself, but to be as close to the iron as possible, despite the immense scale that you have today?

   9. EGErnest (Ernie) Garcia15:40

      Yeah. Uh, so I mean, first of all, I don't think I do this perfectly but I'll tell you what I try to do, and, and it's, and honestly part of it-

   10. HSHarry Stebbings15:46

       And why, it's a pod- it's a podcast, Ernie. You just say the perfect view of yourself.

   11. EGErnest (Ernie) Garcia15:48

       Yeah. Per- perfect. Good, yeah.

   12. HSHarry Stebbings15:49

       Yeah, yeah, yeah, yeah.

   13. EGErnest (Ernie) Garcia15:49

       Okay, yeah, you're right. My bad. Edit that out.

   14. HSHarry Stebbings15:51

       (laughs)

   15. EGErnest (Ernie) Garcia15:52

       Um, (laughs) what was I gonna say? I, I think, um, wh- what I generally try to do is, is I try to pick several projects. You know, you sit in a room where you're getting kind of, like, readouts on what's going on with the project and you ask questions and you figure out who's answering all the questions. And, and there tend to be a subset of people who, everyone in the room, their heads kind of turn to that person when a question comes up that isn't on the slide. And that person is the person that has developed frameworks for how it all works and is probably doing a lot of the work, and so they know all the detailed answers. Um, and, and once you find who that person is, it's like, go, go check in with that person every day. Um, and I think if you go actually sit behind that person, like, pull up behind them in a chair and you look at a screen together and you try to solve the problem. You want the flattest organization you can have, in general. Uh, eh, but you can only do so much, so you gotta limit yourself in terms of how many projects you're, you're working on.

   16. HSHarry Stebbings16:39

       You said that you should have the flattest organization. How many direct reports do you have? Are you the Jansen with 55?

   17. EGErnest (Ernie) Garcia16:46

       No. I'm not... I... No, 'cause I'm not very good at that.

   18. HSHarry Stebbings16:48

       (laughs)

   19. EGErnest (Ernie) Garcia16:48

       So I've got, um, I've got s- seven, and then, um, and then I think try to, uh, try to have all of them have as many as they can. I'm, I would not consider myself a great manager. Um, I, I, I consider myself much better at, uh, trying to solve problems and get involved than I am, I think, a, a, a natural manager.

   20. HSHarry Stebbings17:08

       The one thing I find quite hard is, especially for me, respect is earned over time. And so bluntly, I don't respect many people coming in on day one. But month one, month two, month three, it grows and grows and grows and it, it can be great. (laughs) But you have to put up with little for a while. How do you think about where your respect starts and how your relationship (laughs) with it changes with people?

   21. EGErnest (Ernie) Garcia17:32

       I would way rather take a person in any role that is respected by someone that I respect than someone who's done it before. Like, I, I don't, I, I don't... My personal view is, like, I don't care that much if you've done it before. I really don't. And I don't care that much if you did it at a company that, that everyone thinks is a great company, or if you have a degree that everyone thinks is a great degree. If you're deeply respected by someone that I deeply respect, I just think you can figure it out. And, and so for me, that's, like, way more important than anything else.

   22. HSHarry Stebbings18:00

       When you reflect on people, I... We're gonna get to what you got right. Are there any elements on what did you most get wrong and what did you learn from them?

   23. EGErnest (Ernie) Garcia18:09

       On, as it relates to people?

   24. HSHarry Stebbings18:11

       Yeah. Hiring, culture, team members.

   25. EGErnest (Ernie) Garcia18:13

       Yeah. I think...I, I think that there's, like, an archetype of, of a person that is extremely common, and I think that they're even more common in, like, Silicon Valley. Um, and I think they have good raw material, but I think that they can be very destructive. Um, and so I think that you either need to avoid them or identify them and, uh, work to, to resolve, uh, what is inside them that I think can be problematic. And I think, you know, these people are storytellers. They're people that, um, they're usually very smart, they're usually very conceptual, they're usually very good at fitting frameworks together, they're usually very articulate and persuasive. They're usually very high energy and charismatic. Um, but they, they lack the, the ability to get practical and to find out... To find the occasions where they're wrong and then to, like, own that and adjust. Um, they, they tend instead, when they find that, like, discomfort of being wrong, to shift the, the explanation or to shift to the next problem and to just, like, kinda keep bouncing to the next one. But because they're charismatic and high energy and smart, they always have people following 'em, and I think that those people, uh, uh, c- can be tough. So I think when you see those people, you've got to make sure that you address it quickly because I think that that's, that's a, I think, a very, very common archetype that leads, in my opinion, to, like, a ton of wasted effort.

   26. HSHarry Stebbings19:30

       One thing that I hate is bounces, I call it, where people jump from company to company throughout their career. And one thing that's astonishing with the Carvana exec team is bluntly the longevity of it, the stickiness of it. How have you kept such a nucleus together for such a long time when, respectfully, very, very few companies do?

   27. EGErnest (Ernie) Garcia19:53

       I think that it's a group of people that are not motivated by status as much as most are. And I think that that matters because I think that, like, um, a lot of times what creates the moments of change, like, where people bounce from company to company, I think is it's when the company faces difficulty and the people disintegrate as a result. Um, like, blame starts to show up, and it starts to feel like, "This is no longer great for my resume. This is, you know, this isn't what I signed up for. This isn't, like, the A path that I was on my whole life."

   28. HSHarry Stebbings20:24

       I, I do want to discuss resiliency of business. You said to me before about being robust to volatility versus overreacting to market conditions.

   29. EGErnest (Ernie) Garcia20:32

       There's no stories of companies that, that make it, you know, with, with no volatility. There's no stories of companies where people just cheer the whole time and it's like a standing slow clap that never ends. That's just not how it goes, right? Like, the reality is every single company has stories where they were questioned over and over again, and so you just kinda need to recognize that that's just truth. Like, that's just what it is. So if it's true, don't worry about it. You know, like, like, now, like, of course you wanna try to learn from the world around you, so you gotta listen a little bit. But my personal view is, is people listen too much, uh, to, to the world around them who's further away from the problem, um, a- and, and they should, they should listen less. Uh, they should, they should build what they believe in and they feel like they deeply know and not worry about it. And I think we try to, you know, get that going inside Carvana across all levels, and it's, it's not easy, right? You wake up and you read a new article about how you're going bankrupt and what you're, you know, working on doesn't matter and consumers don't want it, it doesn't fit the... Whatever. It, it... You're gonna go through those times, and those times are tough, but you need to just know that there's no avoiding that. And, and if you know that, then it's like, when that happens, just use it. Like, like, you know, tape that up on your locker and use it, uh, 'cause, 'cause it's energy.

   30. HSHarry Stebbings21:41

       I mean, not shying away from the directness, Ernie, y- you get a lot more criticism than a lot of CEOs, to be blunt. (laughs) You know? (laughs) I mean, I just-
6. 23:32 – 28:21

   Billionaire’s Biggest Lessons on Parenting

   1. EGErnest (Ernie) Garcia23:32

   2. HSHarry Stebbings23:32

      I'm not shying away here, but I think about-

   3. EGErnest (Ernie) Garcia23:34

      (laughs)

   4. HSHarry Stebbings23:34

      ... this a lot with great entrepreneurs, which is how, like, family money at the start and financial protection impacts, uh, upside thinking and downside protection. Given the financial protection that you had, how did that change your operating mindset, do you think?

   5. EGErnest (Ernie) Garcia23:51

      Let me start with this. I, I think any questions that you ever ask to any person about themselves are subject to the story they tell themselves, and so, uh, it's hard for anyone to even know the truth about themselves. (laughs) Like, like, you know, we're, we're complicated creatures with, with, with very high, uh, quality story-making, or storytelling capabilities that exist in our brains. So you're hearing people's stories, and so, you know, trying my best to separate from that. I mean, here's what I would say. I think, I think that I have been...... unimaginably lucky in my life in so many ways. Like, where does the willingness to take risks come from? I think one of the places, the- as a parent, I've got three kids, I- I think, like, the number one thing you have to do as a parent, in my opinion, is you have to make sure that your kids know they're unconditionally loved, no matter what happens. If they know that one thing, they always have a foundation to come back to. Like, every tough thing they go through, which they will go through tough things, they always have somewhere to go back. And when they have that and that's not going anywhere, no matter what, that they have the- the capacity to be confident, and I think that I had that growing up, so I think that that was, um, that was very lucky. I think that, you know, my dad was an entrepreneur. He went through personal bankruptcy, and he went through his own trials and tribulations, and I think that up until I was 10 or 12 years old, I don't think I even knew that was happening, w- which I give them, my- my parents a tremendous amount of credit for because I think that you shouldn't know that when you're a kid. When you're a kid you should be, you know, you should be eating dirt. It's like, you shouldn't- you shouldn't worry about, like, you know, your family's financial situation.

   6. HSHarry Stebbings25:18

      It's funny that my- my family lost all of our money when I was, like, 11 or 12, and it gave me this, like, ferociousness that I would never let us be in such a precarious position again. I- dude, I'm quite young. I look quite old. Um-

   7. EGErnest (Ernie) Garcia25:29

      (laughs)

   8. HSHarry Stebbings25:30

      ... it's 'cause I like- I will never, ever let that happen again. Ever.

   9. EGErnest (Ernie) Garcia25:34

      Yeah.

   10. HSHarry Stebbings25:34

       And that's because I saw it. I don't know if it was good for me or bad for me.

   11. EGErnest (Ernie) Garcia25:38

       Yeah. Bu- by the way, tha- that sounds like a very deep question. Um, a- and I don't- I think you'd have to-

   12. HSHarry Stebbings25:44

       That's why I'm in therapy, Ernie. (laughs)

   13. EGErnest (Ernie) Garcia25:45

       Yeah, yeah. Well, I think you'd have to define what's good and bad to even answer that. Like, uh, 'cause I think that there's probably different answers depending on different definitions of good and bad. But- but to me, like, uh, once I became aware of- of what my dad did, like, I would say the biggest benefit of that was I saw that he was successful and I saw that he was human, and I believed that if he was successful, I could be successful. And- and I think that that- that made it less scary. I think for a lot of people, like, y- they think that other people th- that are successful are made out of different stuff than they're made out of, and I think if you have an example that's very close to you in your life where you know who that person is as a person, and you see them being successful, it- it's- i- i- it gives you the belief that you can do it yourself, so I think that was tremendously helpful. The- the- the next thing that I'll say, which I think i- is my version of the motivation that you just described in yourself, which was, like, seeing difficulty, I don't know where it comes from, um, and I don't know if it's good or bad in the same way you don't know if your situation's good or bad, but I've always been a deeply competitive person. You know, I would, i- i- in high school football, like, you know, I- I would... Every time we lost, I would go sit in the back of the bus by myself, I wouldn't talk to anyone, and I would sit there and cry, like, a- you know, but- but, like, a tough cry, like a- like a cry that- that would (laughs) -

   14. HSHarry Stebbings26:56

       (laughs)

   15. EGErnest (Ernie) Garcia26:56

       ... that would make you proud. But I would s- I couldn't take it.

   16. HSHarry Stebbings26:59

       (laughs)

   17. EGErnest (Ernie) Garcia26:59

       My stomach just hurt, and I would- I would sit by myself and, like I said, I- I wouldn't talk to anyone, everyone knew to leave me alone. Um, I couldn't- I couldn't handle, like, I- th- I hated losing. Y- you would think if you hate losing so much that you would- you would just stop putting yourself in a position where that's even a possibility, but I think truly competitive people, they, like- they can't stop putting themselves in that position. They- they have to compete, and I had to compete, but I- I also just hated losing, and I think that that- that transferred a little bit into like, "Okay, like, if my dad can do it, I can do it and I can do it better." Um, and so I think from a very young age I felt like, you know, people always have these founding stories that are about their specific problem. For me, it was way more, and I- like I said, I hate to say this 'cause I don't think it's, like, a- I don't think it's a- an obviously noble thing, but it was like, "If he can do it, I can do it, and I can do it better, a- and so I'm gonna do something. I don't know what it is, but I'm gonna do something."

   18. HSHarry Stebbings27:50

       In the majority of really successful men, there is this deep-rooted desire to please/impress their father. Did you feel that?

   19. EGErnest (Ernie) Garcia27:59

       I mean, aga- the reason I'm pausing, I'm trying to decide is it please, impress, or beat? Um, and I (laughs) think-

   20. HSHarry Stebbings28:04

       (laughs)

   21. EGErnest (Ernie) Garcia28:04

       ... I'm positive that it was beat. (laughs) But I think there's no doubt that- that- that please and impress are- are in there. Um, but- but sure, I think that's- I think that's, like, it's all in there, right? Like, I think we're all humans. Like, um, it's not all conceptual. Some of it's, like, emotional and just inside, and I think that's true.

7. 28:21 – 36:22

   Is Life About Happiness or Achieving

   1. EGErnest (Ernie) Garcia28:21

   2. HSHarry Stebbings28:21

      You said something there about kind of the humanity of people and people who've achieved and kind of them being just like everyone else, and it kind of reminded me of the Steve Jobs quote, which is very famous, which is, like, "The world around you and all the amazing things is built by someone just like you." I don't really buy that, Ernie. When I meet the greatest entrepreneurs in the world, they are fucking awesome, and they are not like everyone else. That's by definition why they've built these category-defining businesses. And I almost think it's a lie to tell your random person on the street, "Oh, don't worry, you can do anything. Look at Steve Jobs." It's different. Am I overly cynical?

   3. EGErnest (Ernie) Garcia28:59

      If I got to live a thousand lifetimes, I don't think that I would be likely to- to- to be part of something as big as Carvana in very many of those lifetimes, um, because I think that there is luck in the world. Like, I just think that there is. There's prerequisite skills that a group of people has to have to have a chance at success, but I think that that- that opportunity does have to kind of meet, like, with some luck to- to- to ultimately manifest in success. And so I think what I would say is for every Steve Jobs out there, you know, that- that's out there and has done an amazing thing, there's probably 100 people of similar quality that- that haven't had anywhere near the same level of success, and so there aren't people nodding their head every time they talk because they don't have that superficial, uh, proof th- th- that what they do is exceptional. So, I do think there's a lot more exceptional people in the world that- than there are exceptional outcomes, uh, because I do think that luck plays a part in all this.

   4. HSHarry Stebbings29:57

      You mentioned the love that your parents kinda showed you and the confidence they gave you. This is totally away from all schedule, but I'm just enjoying this way too much. Uh, if that's like what you've carried with you to your children, what have you deliberately decided to do differently from the way that you were brought up with your children?

   5. EGErnest (Ernie) Garcia30:14

      Not much, honestly. I think, um, that I wanna-

   6. HSHarry Stebbings30:17

      So like mine, mine, like mine, for example, is like-

   7. EGErnest (Ernie) Garcia30:19

      Yeah.

   8. HSHarry Stebbings30:19

      ... financial shielding.... I don't think actually it was that good. Like, to know every night that you could lose your home is scary as a child. I would have a very clear Chinese wall between finances and what my children know, period.

   9. EGErnest (Ernie) Garcia30:35

      Let's side into that one for a second. Th- and that's gonna go back to what's good. My guess w- without confidence would be knowing that you could lose it all every night is not good for your happiness and for your, you know, like, like, mental daily wellbeing. It's probably very good for your ambition. It probably hardens you and creates character that, that you couldn't otherwise get. So, to me, like, is that one good or bad? I think it depends on what you're aiming for. So, that's where, to me, like, what I think I believe in deeply is basically two things. We talked about one of them. Make sure your kids know that they're unconditionally loved, and then, I think, give them a chance to go explore the world. Give them a chance to go fall down and figure things out, um, because I just think that that's how we learn as people. You can't tell people all the rules. Like, you, you just can't. Like, like, uh, people have to go learn things themselves. They have to go figure stuff out. I- and so to me, like, those are the two things that I feel strongly about in parenting. A- and then I think the rest, I feel like I don't know 'cause it's just too complicated. Um, but, but those two things I, I believe in for sure.

   10. HSHarry Stebbings31:41

       It's super, uh, interesting. Norway is the only country which encourages children to climb trees. It is also the country which has the lowest cases of depression in under 18s. (laughs)

   11. EGErnest (Ernie) Garcia31:51

       Yeah. Yeah. I- it's so gr- great example, right? Like, it's very easy to see the problem with climbing trees. It's not easy to see the 15th order impact of climbing lots of trees. So like, you know, do you want your kids to climb trees or not? I don't know. You wanna love them for sure, and, and you want them to know they're loved for sure.

   12. HSHarry Stebbings32:09

       You said like, "Is it good for you? But hey, it does give you drive and it does give you, you know, ambition." I know this is incredibly meta, but I, I actually think about it a lot. Is it actually about happiness for you or is it about achievement, success, accomplishment? How do you think about that?

   13. EGErnest (Ernie) Garcia32:30

       I think happiness is probably the unit that, that we should all be chasing, but I think that there's superficial happiness and there's deep happiness. There's cheap dopamine and there's expensive dopamine. Uh, you know, stock goes up, cheap dopamine. You know, like jump on, j- jump on Twitter, read that you're smart, you know? Uh, you know, cheap dopamine. Then there's like build something, do something, you know, overcome something difficult, uh, put yourself in a fight and lose and put yourself back in a fight and win. And I think that that drives, like, satisfaction, right, like contentment. Like, it's like a deeper happiness. And so I think maybe that's a story, but, but I think that's, that to me is the pursuit. I think it's like a beautiful thing about, you know, like our, our complex system and economy, is that it, it is, it is probably the case that to find outside success, the results of your actions have to be positive for other people so you're driving their happiness. But I think to find that outside success, you, you have to, you have to put yourself in battles and you have to seek the expensive dopamine. You have to go try to build something and find that fulfillment and satisfaction. And, and I think that that's, to me, that's like what it's about. But, but I think for different people, it's about different things.

   14. HSHarry Stebbings33:42

       I think one thing that's very challenging, respectfully, for people in your position, and I speak to, through what I do, I speak to many incredibly successful billionaires, entrepreneurs, you name it. And the unifying thing that we talk about, sometimes off-mic, sometimes on-mic, is bringing up children in an affluent environment and having that same level of ambition and hunger that they had and then infusing that in their kids. How do you think about that given, you know, the financial background that your kids are brought up in?

   15. EGErnest (Ernie) Garcia34:12

       I think it's brutally hard. I, I think, um, I, I think, you know, your palpable story is laying in bed wondering if, you know, e- ever... you're gonna lose everything. Like, humans are impacted by those moments. So, I think that when those moments aren't happening, it's gonna be a little different. As a parent, you know, I, I heard a, a quote the other day that I thought was a good one that was something like, you know, for as long as, uh, as, you know, time has been going, uh, children have not listened to their parents, but they've never failed to observe what they do. I, I think that that's pretty true. I, I think that like, uh, the actions you take every day matter. I think that your kids are watching and I think that what you value, they will value. And so I think, um, having stuff and being around stuff, um, you know, is, is one thing, but modeling for them that that's important I think is a, is a, is a much more dangerous thing, uh, th- than being around it. But, but both are probably not perfect for, for, uh, kids coming up in the world. That's hard. I think that the best answer, in my opinion, is sport. Um, not everyone loves sports, but the thing about sports is someone wins and someone loses every single time and it doesn't matter where you started, it doesn't matter, uh, you know, where you woke up this morning or where you go to bed tonight. It's like they wanna win and you wanna win and only one of you is going to. So, I think sport is one of the few places where we can go collect extremely real experiences very quickly. So I'm a huge fan of, of sport and competition for kids. I think that it's, it's very useful, uh, to help them, like, figure out how to navigate the world.

   16. HSHarry Stebbings35:43

       Do you push/encourage your children to do sports and to be actively competitive to get that same...

   17. EGErnest (Ernie) Garcia35:51

       Y- yes. I, I mean, I would say, you know, try just to not push them too hard, right? Try to model the behavior and have them want to, right? Go in the backyard and throw a football with them and, you know, let them know when they, when they drop it. (laughs) Yeah. Um, and, and then, uh, and then if, if they react to it the right way, they think that that's fun, they don't wanna drop it anymore and they wanna go out and play again more. It's like, so I think, um, I think for sure, like, I, I think sport is great and I think try to make it fun and try to make them want to do it. For people to be impacted by things in positive ways they have to want to, so I think you have to make it fun.

8. 36:22 – 42:48

   The Reality of Being a Public Company CEO

   1. EGErnest (Ernie) Garcia36:22

   2. HSHarry Stebbings36:22

      You're a public company CEO. You have so much expectation. You have so many people working for you, so many mortgages that rely on you, respectfully.... sometimes you can't always be there for your kids in the way that you'd like to be. Wh- Is there a time when that has most been prem- like, prominent to you and how did you think about and reflect on that?

   3. EGErnest (Ernie) Garcia36:43

      I think being present is the most important thing. I, I think the, um, the quality of the time, I think, is more important than the time. I, I think when you have a million things on your mind it's really easy to go lay on the couch and be deep in your head with kind of glazed over eyes. Uh, I, I think, I think with your kids it's most important that when you're there, you're there. And, and I don't think it matters if it's like, um... I, I think, like, you know, i- it can be moments that are seemingly unimportant, right? It's like picking them up from, you know, practice and driving them home or whatever it is. But I just think when you're there, it's like, you know, engage them. D- Don't, like, accept the, "How was school?" "Good." You know, "How was soccer?" "Good." "How'd you play?" "Good." And then like, kinda, "Okay, cool, I'll go into my mind and you go into yours and I'll see you later." Like, don't accept that. I think try to engage and, and I think as long as you, as long as you do that i- i- th- that's where you show that you care, right? That, that's where you show that, that, like, the love is deep and, and unconditional. Quality's more important than quantity in, in my opinion.

   4. HSHarry Stebbings37:37

      On money, I think people have a lot of, uh, misconditions, wrong thoughts around, bluntly, wealth. What do most people think about money/wealth that actually in reality is not true? I know, you're thinking, "Jesus Christ, what have my comms team done putting me in front of this deep conversation?" (laughs)

   5. EGErnest (Ernie) Garcia37:56

      (laughs) Uh, that, that was, that was my second thought. My first thought was, "What's the answer to that question?" My second thought was actually exactly that. You are who you are. Um, it, it, it's, it's hard to change who you are deeply, um, i- in, in meaningful ways, and I think it takes real effort. And I think that one of the things that's weird whenever, like, any, any outside story labels get placed on you is you see that you change in other people's eyes in a way that you haven't changed in your own. So, like, an example of that would be, you know, Carvana when it was, you know, 20 people, 50 people, 100 people, I didn't ever feel like I was the CEO. I felt like I was Ernie, right? I felt like I... It's like you walk in a room, you sit behind the person, you figure out the problem. And then all of a sudden when you're 1,000 people, 10,000 people, you kind of see the way people are looking at you and you see that you're the CEO now, right? And you're like, you've become this label. You've become this reduced concept. And it's, like, a bummer, to be totally honest, because it's, like, i- inside. You know, you're still, like, you're still that, you know, 15-year-old kid, like, looking out your eyeballs at the world that's, like, a little competitive and wants to figure things out. And you see people seeing you differently and you, you just wish that they didn't. And I think that trying to fight that as, as best you can is important, um, because I... You don't wanna be a reaction to other people's reduced view of what you are. Uh, and so I think that the reality is as, as things change, as your, as your title changes or your financial situation changes, I think that the way you feel inside changes a lot less than people think. And so... And I, and I think that that's important. I think that's probably the healthiest way to approach it.

   6. HSHarry Stebbings39:32

      You said about being a reaction to who people think you are, maybe who people want you to be. Do you like being a public company CEO and how do you reflect on what the world thinks about Ernie and what, who you actually are?

   7. EGErnest (Ernie) Garcia39:46

      The superficial answer to that is no. Um, I, I, I think it's a, I think it's a cost of, of the, the goal, basically. Um, like, you know, my, my advice to any, any person out there considering, like, going public would be, like, what's more important to you? Uh, well, first of all, it depends on who you are, 'cause some people love it. Uh, I don- I don't love it. But I think, what's more important to you is, is it important to succeed or is it, you know, important to have the best personal life that you can have? If success is the, is more important to you, um, I think you wanna be public. I, I think that the things that people say about being public are true. Like, there are bad things, right? People are short-sighted and they focus on things that don't matter that much. But on average, I think it's very, very helpful because it creates pressure that I don't think you can create otherwise. And so-

   8. HSHarry Stebbings40:36

      I mean this respectfully, Ernie.

   9. EGErnest (Ernie) Garcia40:37

      Good.

   10. HSHarry Stebbings40:37

       I've, I've, I've listened and spoken to you now for, uh, uh, y- over an hour and my takeaway is that you're incredibly disciplined, you're incredibly competitive. You don't need some analyst at a bank to tell you that you should have a margin improvement of 1%.

   11. EGErnest (Ernie) Garcia40:51

       I... So I think that's right, but I think you, um... I don't think you need that to push you in general, but I do think it helps to push you specifically. A- and, and what I mean by that is, like, earnings prep is, I think, viewed by many as, like, a waste of time, right? Like, every quarter you gotta go sit in front of, um, you know, analysts and investors, you gotta answer these questions. You have, like, a day afterwards where you talk to all your big investors for half an hour and you, you gotta answer their questions. But to me it's, it's, like, my, my natural way to approach the world. I, I like to, to go sit at, uh, you know, like I said, behind someone, understand a problem, think about, like, the fundamentals. What are the moving pieces? What are the people? What are the processes? Think about things functionally. I don't think about things from an accounting perspective. But, but then I think when you have to kind of, like, reorient your mind into that, like, accounting perspective, it, it forces this different view where a lot of times it, it, it pushes you down other, like, nooks and crannies that you might not have otherwise wondered about, you know, a- as, as quickly. And I think you kind of realize, like, "Okay, there is, like, an area. Like, we're gonna get a bunch of questions here." And the reason we're gonna get a bunch of questions from a bunch of smart people is because they're good questions. And, and so it's, like, not fun because you're like, "I wanna go attack this problem over here that I'm focused on, and now I gotta get pushed over in this direction." But I just think that, like, pressure is good. Like, like, humans all, all of us, myself very much included, we gravitate to things that we like. Um, and a lot of times productivity is found by, like, confronting the things you don't wanna confront. I do think it's helpful.

   12. HSHarry Stebbings42:21

       Playing the contrarian side, though-

   13. EGErnest (Ernie) Garcia42:23

       Yeah, please do.

   14. HSHarry Stebbings42:23

       ... there are very, very smart investors that we both know. Your Neal Matier at Greenoaks, as we said, Vince and Josh at Thrive, who would provide that similar pressure dynamic in a board environment.... more naturally in a later stage private company environment, as say they do in a Stripe of the world, without the challenges of being public.

   15. EGErnest (Ernie) Garcia42:43

       I disagree. Uh, but, but r- I respectfully disagree. Let me, let me tell you why, and I have a ton

9. 42:48 – 48:32

   Why Companies Should Go Public

   1. EGErnest (Ernie) Garcia42:48

      of respect for them. I think that when you're public, effectively there's almost zero relationship influence in the way people are reacting. Like, the stock does not care about who you are. It doesn't care about your relationships. It, it just doesn't care. The, when, when you know someone for a year or two years or five years, they do care who you are. They, they, they're, it's like, um, you could, you can evaluate someone on intentions, you can evaluate someone on their actions, or you can evaluate someone on their results. Being public, it's just results. When you have a relationship, there is some portion of the way you're evaluated that is based on intentions and actions. W- when you're public, it's just cold. It's ruthless. It, it's, uh, it's just results. It's very hard to replicate that. You know, it's like there's the heuristic, like, um, you know, eh, eh, everything, everything before the but is nonsense, right? (laughs) Um, and, and I think being public, like I said, it's, I think personally it's not perfect, but it's, um, I think the feedback that you get is cold and ruthless, and I think that's valuable.

   2. HSHarry Stebbings43:52

      Where do you feel public markets around Carvana are shortsighted, where it would be most helpful for you if they were long-sighted?

   3. EGErnest (Ernie) Garcia44:00

      I, so I think everywhere, and I think that that's, like, a useful-

   4. HSHarry Stebbings44:02

      (laughs)

   5. EGErnest (Ernie) Garcia44:02

      I think that that's a useful, um, like, thing for us to dive into, 'cause it kind of, like, contradicts my previous answer. I, I think that it's like, um, in good times, in like, uh, in 2021, what percentage of investors said that they weren't long-term focused investors? It was zero. And, and, and like, eh, or approximately zero. But, but the reason was because e- it was in their short-term interest to be a long-term investor in that moment, right? But, but then you find out who the real long-term investors are w- when it's not in your, like, short-term interest to be a long-term investor. Th- that's when you, like, know if it's real or not. I- and, and I, you know, (laughs) we, we went through a moment where I think that, you know, became exceptionally clear. And you know, god bless, people got to make their choices and it's like people, you know, change their opinion and they face their own stress, it's not on me to, like, judge the choices that were made. You see who people are and what they care about in, in moments of strain. It becomes very clear. And I think the market, in my opinion, is constantly kind of panicking about everything. Um, it's, it's constantly, like, over-evaluating all these kind of micro data points. And so y- you, you don't want to overreact to all of that. You need to have your convictions and beliefs. But it is useful to sit there and be like, "Okay, but what is the one thing we're gonna get 15 questions about?" And then, is that something where the market is just wrong and we don't care? W- which many times that, that is the case, and it's like, "Just don't worry about it, move on." But absolutely on occasion you're like, "That's not perfect. What's going on there? Like, let's dig into that." It does matter to, like, the long-term trajectory of Carvana. It does mean that this is an area where we can put more focus. And so to me, like, I, I think you have to sift through the pressure, because the pressure comes in all kinds of crazy directions.

   6. HSHarry Stebbings45:37

      You said nothing else matters but results. There's a famous saying, I can't remember who said it so I'm not gonna try, but they said that, you know, the market in the short term is a voting machine and in the long term is a weighing machine. Would you agree with that analogy?

   7. EGErnest (Ernie) Garcia45:52

      100%. And I think that's Benjamin Graham. And, and I think, uh, 100% I just think it's like, um, you know, like, like that whole analogy through that book is like Mr. Market, which is this crazy thing that you get to trade with every day, that I think that there's like a recognition that, that the sum of investors is a, is a volatile thing. And I think that when you're evaluating something that is necessarily true under high potential, I think is high volatility. Because high potential means high upside, but it also means probability of downside is, is greater than, than in many other cases. And so, uh, uh, like, y- you, if you, if you have something that is high potential, you're probably gonna have high volatility. Like, sorry, I think that's just part of what it's gonna be and you just got to deal with it. But in the long run it's, it's like it works. You know what I mean? Like, um, you know, like, like, you know, we, we went public at 15 bucks and like, you know, uh, the vast majority of the time the stock has looked pretty good compared to that. Like, if you're just connecting dots that are very far away, yes, looks pretty good. We've had moments where it didn't look great, (laughs) right? Um, which is actually hard to do from some of the places that we were, just mathematically. But we did, we found a way to do it. Uh, but I think on average it's like, you know, y- the, the market will weigh you. A- and I think it's like, build the things that you think matter, use the pressure the market provides to find the things that they may be right about that you're hiding from 'cause it's not comfortable or 'cause it's not what you're naturally good at or what you're naturally interested in, and then go, you know, go just try to do your best over and over again and, and make peace with the fact that the market's gonna move around and you can't control it.

   8. HSHarry Stebbings47:22

      You said about Mr. Market there, I, I often think about Adam Smith and the, Adam Smith's invisible hand theory and kind of markets kind of self-regulate and correct in a very natural and authentic way. Do you agree with Adam Smith's invisible hand belief? Or do you think sometimes interventions in, in many other ways are much more necessary?

   9. EGErnest (Ernie) Garcia47:42

      I, I do believe in his belief. I, I think the market, um, and, you know, capitalism and like, I don't mean to, I don't know, like fall into like the, the expected trope of all the things that I would have to believe, but, but I, I do think they're true. I, I just think that, that they're like beautiful organizing functions for people. And I think as long as you believe people are smart, um, I think markets will make all kinds of mistakes, but I think that they progress, um, on average. Like, I think on average they weigh. Um, and so I, I, yeah, I'm a huge believer in that and I, I think it's, I think it's like a, a wonderful... eh, I don't know if it's a coincidence, I would need to think through it more carefully, but I think it's a wonderful coincidence that, like, people pursuing their own goals in like a free market necessarily serve the interests of others. I think that that's, like, wonderful. (laughs) it's, it's like a beautiful truth.

10. 48:32 – 55:54

    Why You Should Price Your IPO to Perfection with No Pop

    1. HSHarry Stebbings48:32

       When you look back now, you went public I think five years into the journey? Um, and-

    2. EGErnest (Ernie) Garcia48:37

       Four, yeah.

    3. HSHarry Stebbings48:37

       ... it was 15, four, okay-

    4. EGErnest (Ernie) Garcia48:39

       Yeah.

    5. HSHarry Stebbings48:39

       ... unbelievably sharp or curt amount of time.Do you regret going public so early? Do you wish you'd gone public earlier? How do you reflect on that?

    6. EGErnest (Ernie) Garcia48:49

       I don't. Uh, but- but again, like, you know, subject to, like, you know, retrospective rationalization and- and my own storytelling, but I think it created pressure, um, and I think it made us more resilient. Like, I remember, you know, we- we went public at 15, and we came, you know, w- we were down to eight within a couple of days, and I remember walking into the office, you know, y- you go on this road show where it's like, you know, (laughs) it's like you have 45-minute meetings, you know, where you have smart people just asking you everything about the business, and then you jump in an elevator or you run downstairs, you get in a car, you drive for five, you know, you- you go to the next meeting, you're trying to find two seconds in between to- to go to the bathroom. (laughs) It's like, you have ten of them a day, and you do it for a week straight. I lost, like, 10 pounds, and so that's like the pre-IPO process, and then you go public-

    7. HSHarry Stebbings49:32

       Do- do you think- do you think they got it in that road show? Like, reflect on that.

    8. EGErnest (Ernie) Garcia49:37

       Some- some did. Some did, but- but I- I think it's, I mean, it's hard, right? We- we're an unknown entity out of- out of Phoenix, Arizona with none of the- the hallmarks of success. We don't have any of the big funds where they can go, "Yep, that's smart," and I can call this investor that I deal with 50 times and they can tell me about the company. So it's like, w- we're coming in and they're like, "Who are you? What's going on? How do I check on you? I don't have any idea." So, it- that was, like, a lot to ask of investors, and I think that's part of why we- we immediately dropped afterwards, but you go through that period, you know, you go ah, you imagine, like, ringing the bell and the stock goes up and everyone hugs and it's a party, and it's like, they can't even open the stock because it's like, it's- it's no one wants to buy it, so it's just plummeting post the IPO, which, like, the bankers are losing their minds on 'cause that's, like, not the way it's supposed to work. And then, you know, you already set up, like, four TV interviews, and yeah, I'd never done one before, and you jump in front of the camera and they're like, "Why do investors not believe in you?" And you're just like, "Come on."

    9. HSHarry Stebbings50:27

       (laughs)

    10. EGErnest (Ernie) Garcia50:27

        So (laughs) it's like a whole eight years, like I have no idea how to manage this, and then, and then you get, you know, you- you get back to the office, and I remember walking in-

    11. HSHarry Stebbings50:34

        What did, what did you say to that, like, I mean, what, I- I don't know.

    12. EGErnest (Ernie) Garcia50:37

        I don't know. I, like, I was a deer in the headlights trying to make stuff up and talk fast, like, I, uh, you know, (laughs) as- as is my, uh, my habit. So I don't know, tried to do the best you could. But- but you get back to the office where it actually matters because it's the people that are gonna build the thing for a long time, and it's the people that believe in what they were building, and it's the people who bought into that it matters, and it's the people who aren't close to investors and they think that the fact that investors are rejecting us means that we're not good, and so now they have a moment of questioning it. And- and you walk in and you feel the energy, right? You feel that the energy is like, this was supposed to be a party and it's not. And that's li- that's tough, and- and so I got a text message from someone who was like, "Hey, listen, I think we have to address this, like, we have to pull everyone in a room." And I remember I saw the text message and I was just like, (exhales) 'cause I, 'cause I knew it was right and I just, I was like, I just lost, like, 10 pounds on the road for the last week, I just, you know, had, like, the worst, (laughs) you know, like- like day ever, try- like with the socks doing the opposite thing of- of what you're hoping, and I gotta, you know, try to jump in a room and like, have energy and- and have this conversation. But- but then you jump in there and, you know, you- you do it, and it was the right thing to do, and it did, it went well, but you're building resilience. Like, personal resilience you're building, but you're also building company resilience because you- you just had a moment where everyone questioned you and you all came together and you have an honest conversation about it, and people decide whether or not they believe your answers, and then if they do, you're all now a little tighter because you just fought something together. And so to me, like, that- that- that helped to build a kind of resilience. Like, as a private company, what do you do when you go through a tough time? For, like, for the most part, what do you do? You don't talk about it because there's no, there's no forcing mechanism to make you talk about it. You just keep going. It's like, uh, and so I- I think that you- you get to avoid building resilience. So I- I think that, um, I think going through it was like, it wasn't fun, it- it was superficial, it, like, superficially, it was, it was massively dopamine-reducing. (laughs) But I think deeply, it- it allowed you to find the- the expensive dopamine of... so I- I think, I think it was better for us.

    13. HSHarry Stebbings52:39

        How do you think about IPO pricing? Do you like to price it to perfection where then you're gonna, like, drop?

    14. EGErnest (Ernie) Garcia52:44

        Yes.

    15. HSHarry Stebbings52:44

        Or do you wanna price it-

    16. EGErnest (Ernie) Garcia52:46

        Who c- yeah, I mean, uh, yeah, yes, and- and, like, you're not supposed to say that, but- but, like, it's, I don't understand why any rational person would take any other view. Like, um, if- if we all-

    17. HSHarry Stebbings52:56

        Also, you- you take the- you take the view that actually I wanna leave a little bit of room so people feel like they got a bump. It creates this synthetic excitement, and that could lead to subsequent excitement and upward mobility.

    18. EGErnest (Ernie) Garcia53:07

        Yeah, I, yeah, I don't buy into that. I- I think price it as high as you can price it. I don't think that it's very likely... I mean, l- so let's take our example. You're not supposed to say this, so like, sorry to everyone, we- you're not supposed to say this. I just don't think that the- the standard view is- is right in my opinion. But like, w- we went out at 15 bucks, we opened at 12, it's a complete disaster, we're down to eight, like, a week later. Do you remember? Do I remember? Who cares? Do our investors today care? No one cares. No one cares. But- but if we would've, you know, priced it at- at 10 or eight or whatever to try to get some magical bump, we would've gotten a lot less money and we would've been more likely to not make it across the line, and we would've, you know, taken more dilution for all of our preexisting shareholders who we also owe something to. So, uh, and then everyone's gonna forget anyway because Mr. Market's wild, right? So, like, so to me, it's like, the results are gonna matter. Get the money when you can get the money and go build the thing. That- that's- that's my take.

    19. HSHarry Stebbings53:56

        Mr. Market's wild. When you have shit, and sorry for being blunt, shit like Hindenburg-

    20. EGErnest (Ernie) Garcia54:02

        (laughs)

    21. HSHarry Stebbings54:02

        ... do you worry that Mr. Market's also irrational?

    22. EGErnest (Ernie) Garcia54:06

        I think one of the things that I have grown to believe is that the market can be more volatile than you, th- than I ever thought, and so I think you want to build in resilience in whatever ways you can. I think the most important resilience is people. It's people that have had hard days. It's ideally teams who have had hard days together and made it through, and so I think when those things happen and the market, you know, tells you that you're wrong, uh, those people have, like, reps that they can go back to th- that- that they know they've made it through before and they can probably make it through again, so I think that's important. I think resilience also ideally, especially in build phases before you are generating cash, means, like, a little bit stronger balance sheet than you think you need because, like, if- if you find yourself in a moment where...... results are a little worse than you thought and the market's a little worse than you thought, and you face another bump that you didn't foresee. L- like, that can be, that can be a problem. Um, so you wanna, like, minimize the odds of, of, like, those existential moments, uh, which I think honestly is, like, a lesson that I'll never fully internalize, and I, I think it was one that I had to learn the hard way, uh, for sure. Uh, well, it's not a natural one for me. Like, I want to take as little dilution as possible the entire time. Yeah, then those things are gonna happen. Like, n- never expect... Like I said, no one's ever gonna clap for you. Th- think about all the most amazing companies in the world today. Are people standing up clapping? Like, maybe in, in the tiny world of, of, like, investors and people that, like, study businesses, m- maybe th- there's, like, some, some applause that occurs. But for the most part, like, read the news, look at, like, public sentiment every day, it's like, no, no one ever stops and, and, and, you know, says, "Great job." It's like, you just gotta keep marching and build a thing that's valuable a- and, and, and productive and useful. I- i- if you allow yourself to need outside validation, I just think that you're, you're putting yourself

11. 55:54 – 58:04

    “What I Wish I Had Known About Debt in Building Carvana”

    1. EGErnest (Ernie) Garcia55:54

       in a weak spot.

    2. HSHarry Stebbings55:54

       You said you wanted to take as little dilution as possible. I think Bluntney, Kazoo, and Alex will very openly say that of the cancerous nature of debt and what debt did to the business. How do you reflect on relationship to debt as a business, the cancerous nature of it, maybe the benefits of it? How do you reflect on debt as an instrument?

    3. EGErnest (Ernie) Garcia56:14

       I think debt is dangerous, um, in general, and I think it's more dangerous for a company in a phase that we were in, um, where you're, you're not, like, positively cash flowing. Um, I think those things are definitely true. I also think in this case it worked out. Like, had we raised equity in the same dollars at the, at the same time that we took out debt, uh, we would have taken a lot more dilution than, let's say, that we just, like, raised equity today and paid it off just to, like, you know, allow you to do that math. W- we would have taken quite a bit more dilution had we done it the other way. So I think it, like, it worked out and then I think, um... You know, which doesn't necessarily speak to its... whether or not it's good in general. Like, you know, you observe one case of the world, but the world is complex. The other thing that I think was, like, interesting about the debt, it, it was, it was almost like being super public because it's, um, it created, like, a way bigger pressure. It, it was like, um, we were not a positive cash flowing business, and then all of a sudden the market said, "We're not giving you money." And not only did you have to get to break even, you had to get to a place where you could cover, you know, the interest. And, and that pressure, I would like to believe that we could've created it for ourselves, but I, I don't think we could've. And, and I think that, like, we're a group of people that put a tremendous amount of pressure on ourselves. I really do believe that we're relatively unique in that way. But there's no substitute for, like, huge cash flows that have to be covered and a market that's telling you you're stupid every day. That generates a type of pressure that is extremely valuable. Uh, so to me, like, that was not the plan. Right? Like, we weren't like, "Hey, let's take out this debt 'cause it's gonna create this near death experience that's gonna be great for us in the long run." Like, that wasn't our story, so, uh, we don't get to take credit for that. But I think that it, it at least ended up being that way, so I think that there was, um, there, there were positives that came from it.

12. 58:04 – 1:07:56

    Quick-Fire Round: Favourite CEO, Marriage Advice, Carvana in 10 Years

    1. HSHarry Stebbings58:04

       I've enjoyed this conversation so much. Like, the breadth is amazing. Um, I'd love to do a quick fire round now if it's okay with you.

    2. EGErnest (Ernie) Garcia58:11

       Let's, let's do it. (laughs)

    3. HSHarry Stebbings58:11

       I'm sorry, short statement. So, let's start with, what do you believe that most around you disbelieve?

    4. EGErnest (Ernie) Garcia58:17

       I believe people matter a lot. Like, like, the, the underlying capabilities of the person matters a lot more than the experience. Um, I'm not sure th- how many people around me don't believe that, but certainly a subset do. (laughs)

    5. HSHarry Stebbings58:29

       I believe that if you have kids, you are willingly accepting a tradeoff in execution professionally. Is that fair?

    6. EGErnest (Ernie) Garcia58:39

       Wow, that's a good question. Um-

    7. HSHarry Stebbings58:41

       My brothers just had a baby, and I just see the intense amount of work that it takes. I am ruthlessly selfish, Ernie. I work 16 hour days.

    8. EGErnest (Ernie) Garcia58:50

       Th- that comes across. It's very, very clear. (laughs) I'm just lying with you. Um, no. Well, by the... I think it's a good, that's a very good question. I think that there's, um... In support of that perspective, like, I've even seen, like, uh, like, papers about, like, uh, like, professors, the, the number of times that their papers are cited is, um, is I think, like, it goes down when they get married, and I think it goes down again when they have kids. Um, so I think that there's, like, data that supports that. Kids are like, um... At least an offset is they, they remind you, th- they remind you of what matters and what humans really are. It's very easy as you get older to drift into highly intellectualized views of the world. When you see your five-year-old kid explaining to you why something just happened in a way that is so obviously wrong it's unbelievable, you remember that, like, okay, this is obvious to me because I have a lot more experience and I'm a lot smarter (laughs) than my five-year-old kid right now, so I know this story is nonsense. But, like, a much higher intelligence than me would probably look at all the things that I say all the time and would view a lot of it as completely dumb as well because we are naturally storytellers. And, like, when you, when you get these, these little examples that you care so much about that are running around constantly displaying to you what the human animal is, it- it's, it's like a very helpful reminder, um, th- that I think helps you manage better. I think it helps you understand customers better. Um, so I, I think there's at least an offset there.

    9. HSHarry Stebbings1:00:27

       Where do you have little resilience where you would like to have more?

    10. EGErnest (Ernie) Garcia1:00:31

        I eat a lot of salty food at night. (laughs) I r- I don't know why that is.

    11. HSHarry Stebbings1:00:35

        (laughs)

    12. EGErnest (Ernie) Garcia1:00:35

        I'm not, I'm not a sweet guy. I- (laughs) I eat a lot of salty food at night. I, uh, I, I have some things I could bring up, like, you know, I, I think any good relationship you've got, uh, your, your recurring battles. Um, (laughs) me and my wife have our recurring battles, uh, wher- where I'm probably less resilient.

    13. HSHarry Stebbings1:00:50

        What, what's the biggest recurring...

    14. EGErnest (Ernie) Garcia1:00:51

        No. I'm gonna stay away from that one. I'm gonna stay away from that one. (laughs) That's... There's gotta be some lines. All right? Somewhere there has to be lines. So I'm gonna stay away from that one, but I think there's some areas where I'm probably less resilient than I should be there. Um-... I don't know. I- I'm not sure I answered that question very well.

    15. HSHarry Stebbings1:01:04

        I do love that dude. (laughs) It's like-

    16. EGErnest (Ernie) Garcia1:01:06

        (laughs)

    17. HSHarry Stebbings1:01:06

        ... Hindem- Hindenberg Harry will be like, "Yeah, fuck it," and then there's like, "I'm not going there." Harry's like, "I totally get it. Well played. Don't go there." (laughs)

    18. EGErnest (Ernie) Garcia1:01:12

        (laughs) Yeah, exactly.

    19. HSHarry Stebbings1:01:13

        Not worth it. That one not worth it.

    20. EGErnest (Ernie) Garcia1:01:15

        (laughs)

    21. HSHarry Stebbings1:01:15

        Ah, what is the secret though to a happy marriage in your eyes? You're a CEO of a public company that's very demanding, and you're also a happily married man. What's the secret?

    22. EGErnest (Ernie) Garcia1:01:24

        I think that comes down to people too. I th- I think, like, uh, you know, I'll try to make this quick, but my, my wife is someone who, she's probably the most present person that I know. She's probably the person who is most likely to be 100% engaged with the people around her that I have in my life at least. Um, she's, I think, she had the benefit, um, growing up of she clearly has a family that unconditionally loves her, um, and so I think she's a confident and happy person. And I think she defaults to positivity, uh, which I think, you know, different people default in different ways there. Um, and I think that that, that makes it, that makes it all, I think, pretty easy. In- in my mind, I think that, like, the, the foundations of, of people are unconditional love, um, the confidence that emerges from that, and the ability to be happy that emerges from that confidence, I think is, like, kind of the building blocks. And I think if you have that, I think you're in a good spot.

    23. HSHarry Stebbings1:02:20

        Which public company CEO do you most respect and admire, and why them?

    24. EGErnest (Ernie) Garcia1:02:24

        Exhales ] I mean, God, I, I hate to, to, to say such expected things, but I- I- I will say, like, I think we've studied Amazon, like, forever a- as just kind of, like, i- it's an incredibly analogous business to our business. There's a lot of, like, moving things, um, th- there's a lot of very similar problems th- that you face. And so I think we've always, um, you know, paid a ton of attention, uh, to that business. I think, um, you know, so- someone who I was lucky enough to meet, so I'll- I'll bring up someone that I- I met. I- I- I was lucky enough to meet Brian Niccol at- at, um, a couple times in my life. He's- he's now the CEO of Starbucks and was previously the CEO of- of Chipotle. I think that, like, to me, Chipotle is one of the most amazing operational machines I've ever seen. Like, you walk in there, and you have, you know, like ... you have an unbelievable burrito bowl in 30 seconds. And it's like, you know, i- i- there's no wasted movement in- in that entire place. It's- it's unbelievable. I think that that's, like, incredible, and I think that that's, um, you know, you try to learn from because I think it's- it's- it's, like, an area, t- that's like the practical area where I think is my relative weakness. And then I- I think, like, you know, every time you- you find, like, a clip on, you know, Twitter or whatever with, like, little nuggets of wisdom from- from Steve Jobs, I just think that, like, the depth, uh, there is- is, like, unbelievable. And- and- and it- and it stems from, like, a deeply human place, um, and I think, like, a very deeply driven place that I think is remarkable. I think Elon Musk is ... I mean, you know, people can have their views of him, and that's fine, but there's ... like, has there ever been a greater builder? Has there ever been someone who's faced more 0% likelihood of success problems in a row and- and continually succeeded? I think that that's unimaginably impressive, and I think you have to try to learn from that.

    25. HSHarry Stebbings1:04:09

        Uh, I'm actually very excited we've got Brian Niccol coming on the show.

    26. EGErnest (Ernie) Garcia1:04:12

        He's great.

    27. HSHarry Stebbings1:04:12

        Uh, yeah. I always think he's like the most underpaid CEO in the public markets. When you look at his-

    28. EGErnest (Ernie) Garcia1:04:17

        (laughs)

    29. HSHarry Stebbings1:04:17

        ... where ... when you look at his pay package -

    30. EGErnest (Ernie) Garcia1:04:19

        You should t- you should tell him that just to put him in a bad spot where he has to dance.

Episode duration: 1:10:18