This Week in Startups - Amazon's transformation, Peloton's mistakes, VC market downturn & more with Ben Gilbert | E1582

Episode Date: October 11, 2022

Acquired's Ben Gilbert fills in for Molly Wood and joins Jason to discuss Amazon's transformation (3:57), AI edge cases (22:02), Peloton's mistakes (32:05), used car prices (59:59), and the current VC market downturn. (1:09:18) (0:00) Jason tees up today's topics! (3:57) Acquired's Ben Gilbert joins Jason to break down the news! First up: Amazon sunsets its "Scout" project, and its transformation from a Day 1 to a Day 2 company (10:45) Embroker - Use code TWIST to get an extra 10% off insurance at https://Embroker.com/twist (11:53) Coco's delivery robots, history of the delivery robot space, where Coco robots can work, the maturation of smartphone components (22:02) AI edge cases: capturing the likeness of a celebrity/notable person (27:33) Microsoft for Startups Founders Hub - Apply in 5 minutes, no funding required, sign up at http://aka.ms/thisweekinstartups (29:03) Escaping the Uncanny Valley (32:05) Peloton cuts 500 more jobs; CEO's comments make employees panic (37:28) Zapier - Try for free today at https://zapier.com/TWIST (38:59) Peloton's two major corporate strategy mistakes, Apple's mass market luxury innovation (59:59) Used car prices are down significantly (1:09:18) VC market downturn coming off a record 2021; was 2021 an aberration? Check out Acquired: https://www.acquired.fm FOLLOW Ben: https://twitter.com/gilbert FOLLOW Jason: https://linktr.ee/calacanis

Hey, everybody, welcome back. It's going to be an amazing week for this week in startups. I want you to get locked in for a big week. Molly is out today. She's securing the bag. She's got a great paid speaking gig. I need to get some of those going. So I had my man, Ben Gilbert from Acquired, join the show.

We cover a ton of topics in detail. We talk about his theory that Amazon is moving from a day one company to a day two company. And we look at some of the projects that they are shutting down at Amazon. And will they ever have a third pillar? Plus, Peloton, you're not going to believe this. They're doing a fourth round of cuts. Will they be able to survive? Will they become a standalone business?

What do we think of their new downstream, downmarket strategy? We're going to go into detail there. And the use car market is showing signs of completely collapsing. What does that say for the economy? And for EVs as well, Kathy Wood from Arc chimes in on this topic. And before we forget about it, I want to tell you about our new podcast. Yes, this is the third podcast. from the creator of this week in startups and all in me.

And this new startup podcast is called Founder University. You've heard me talk about Founder University before. This is our 12-week course where we teach people to start companies. And we have a two-year course as well, a two-day course we do in person. Those courses have led us to believe that we can really help founders with a 10-minute. I kid you not, just a 10-minute episode of a tactical talk. So we're going to do one of these a week on Founder University. Every week, we're going to give you a 10-minute tactical talk.

The first one is on how to retarget your users. So probably a third of the founders who hear my voice right now are retargeting the users. But the other two thirds are not retargeting their users, and they need to watch this 10-minute video just to catch up. These are tactical tight 10-minute talks. No promotion, no marketing, no BS. Just here's how you get something done inside your company. You're going to watch, want to subscribe to this.

And then when you watch it as a founder, you're going to send it to your team members and say, are we doing this yes or no? And I'm doing this really as a service to my portfolio companies because we have to do one-on-ones with them. And we have been doing one-on-ones with them for 10 years to explain these different techniques that we find out about. Now we're going to share them with the world. These are the tools and tactics that make startups grow and succeed. All I want you to do right now is type in Founder University and find the links. Go to founder.

dot university is the domain name. But if you're just in your podcast player right now, anyway, pause the show. Search for Founder University. Subscribe to it. Uh, rate, subscribe, whatever. We're just trying to get some early signal there. It's also on YouTube, all that great stuff. Founder. Dot University. It's going to be a great show. Stick with us. This week in Startups is brought to you by, in Brokers Startup Insurance Program, helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today. atembroker.com slash twist. While you're there, get an extra 10% off using offer code twist.

The Microsoft for Startup's Founders Hub helps all founders build a better startup at a lower cost from day one. Open to anyone with an idea, you'll get up to $150,000 in Azure credits, technical advisory, access to mentors and experts, free dev tools, and so much more. There is no funding requirement and it only takes minutes to join. Sign up today at aka.m.s. Slash this week in startups. And Zapier is the easiest way to automate your work. See for yourself why teams at Airtable, Dropbox, HubSpot, Zendesk, and thousands of other companies

use Zapier every day to automate their business. Try Zapier for free today at Zapier.com slash 24. twist. All right, let's get right into the news. There's so much news going on here. You and I are obsessed with Amazon. This is like the greatest company watching it grow, watching it work in all these different arenas has been fascinating, right? It's acquired the podcast, does these long, deep dives into companies. People love, love your coverage of these deep dives. But Amazon is the one, I think, is that the company you're most obsessed with? That was definitely our big sort of like seminal episode of this season.

And I think it's the best company at innovating at large scale in human history. I'm going to agree with that. I'm going to agree with that. I'd say that in Tesla, right? If you look at like the number of products and what they're working on, people forget Tesla's like six companies in one. You'd have the AI company. They're building their own chips.

They're building a robot now. You know, the factory and of self, the batteries. It's actually like six or seven companies in one. And really, that's Amazon as well. So there's some news here. Scout was this cooler-sized, battery-powered, autonomous, R2D2-looking robot. That would theoretically zip around your prime packages and drop off a burrito or, you know, some toothpaste, whatever you needed. And it launched about three years ago, according to Bloomberg, the 400-person team that worked on Scout is going to be disbanded.

We offered other jobs with the company. The article mentioned that, quote, a skeleton crew will continue to consider the idea of an automated robot, but the current iteration isn't working. Work on the robot has already stopped. The sunseting of the project makes another sign that Amazon is starting to wind down experimental projects as it sees slowing sales growth.

Remember, back in July, Amazon reported $121.2 billion in revenue in Q2, up 7.2% year-of-year-of-year, marking the company slows growth in more than two decades. Of course, year over year, that would be during the pandemic year. So it was also down slightly from 7.3% the previous quarter. So what's your thought on this?

Is it indicative of something? Is this a healthy thing of sunseting projects that aren't working? Does this have to do with earnings? What's the... Is it just a distraction? Because this seems to be something that would be worth continuing to work on.

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

Would you just find day one for folks in the audience? This philosophy that Jeff Bezos made a core tenant of Amazon. Yes. The idea was that we should think about every single element of our business in a way that we are so early that we should make bets and make decisions with very long time horizons. And by always being in that mentality, we never become complacent. We never feel like the crusty old incumbent, and we're always able to sort of lean into all the Amazon leadership principles that sort of define the characteristics of what it is to be entrepreneurial and make sure we, it was shorthand for stay entrepreneurial. Yes. And to just look at every day is the first day of this company existing.

But what you're saying is, hey, maybe since we have distribution, that is kind of a better way to think about the world, which is how Zuck thinks about the world. right? The antithesis of day one thinking is Zuck thinking, which is what's working, what did Evan Spiegel create six months ago, that got traction, that got product market fit, let's copy it. And not only let's copy it, let's continue to copy it until we get it right, and then we plow it into the distribution channel, most famously stories will come to mind but ephemeral messaging and other products. Let's just ram and jam it and use our, and obviously now the TikTok form out of shorts, ram and jam it. Let's just put this thing people's throat until they can't not use it. Yeah, and so, I don't know, my view on Amazon now is

really like, they know what's working. They're still open to making other big bets, finding that third pillar in addition to consumer, which is the way that they've rebranded retail, that their sort of consumer division, and of course, AWS, and they're looking for that, that third pillar. But I really do think from talking to a number of people at the company, that they really know where their bread is buttered at this point, and they're going to act more like a mature company. And they're, I think, less likely than five years ago, 10 years ago, to create an AWS because they're...

AWS is so successful. Well, yeah, yeah. I mean, it's basically like, why would we focus on something else if we could add, you know, three more offerings to AWS and add two or three more things to our retail consumer product, why would you bother trying to build a third pillar? If these two pillars, it's easier to just add a feature, right? I mean, I think that's what it comes down.

Yeah. Another way to describe this is that the, especially with the changing market conditions, their hurdle rate for what they think a good rate of return is on an investment sort of goes up. And so things either need to be more likely to succeed or if you think about the other variable and expected value, the magnitude of it succeeding,

if it does, might be much higher. And so they'll lean into things that they really do think could be AWS-sized or they'll lean into things that they think have a very high degree of certainty, like features you would add to AWS or to the consumer business. But if you have something that is potentially small, like this delivery robot, incrementally improving the consumer business, and not showing signs of... success, then it doesn't meet the hurdle rate to continue to investing.

This was a key thing that Microsoft ran into as well, which was, why would we bother acquiring something? Why would we bother building a unit if it can't throw off, and Bomber was very up front about this, if we can't get to a billion dollars in revenue and whatever that is in EBITA, you know, a couple of hundred million in EBITA, why are we doing it? Why would we just focus on the two huge castles we have, thus giving a huge huge advantage to founders and startups. I'm going to quickly explain one of the crucial types of insurance. Every startup needs E and O insurance. This covers errors and omissions. That's what the E and the O stand

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That's all you need to know. In this case, you know, there's a company Coco, and I'll pull up a TikTok or two of these. These guys, gals, whoever's running this thing, seem to have figured out these robots. And I've seen other companies doing them. Look at the speed on these things. I don't know if that's sped up or not. It looks like it's sped up. But this to me seems like such a no-brainer as a big.

business. But if you're Amazon, I guess you're doing just fine with your delivery of drivers with vans. And you have so many deliveries that doing a one-off small delivery doesn't make sense. I think that's what this comes

down to is the use case of delivering boxes to people's homes is the primary Amazon use case. And that works better when you put a bunch of boxes on one delivery van. Whereas I think these robots are best served for food delivery. I think this is an Uber business.

I think this is a DoorDash business. I think this is a burrito business. They're pretty cute. And they're not in that business. Are you an investor in Coco? I'm not. I mean, this is the robotics company, I think, that has been tried like 10 times. I remember these all from the Uber days because I was maybe the third or fourth investor in Uber.

so anybody who had an idea that was adjacent to Uber would come to me and be like, hey, invest and then ask Travis to buy the company. And I looked at all these, but they didn't work five or six, seven years ago, I'll be honest. And the world wasn't ready for them because you just saw videos of them like on Market Street getting literally punted across the street or literally people would pick them up and throw them down. But I do think that with self-driving starting to become more common, people are going to understand this.

And with the stack of self-driving, computer vision, you know, real-time decision-making through machine learning and AI, understanding the world around you, these things become a no-brainer. These are a super no-brainer for Santa Monica, you know, for Brentwood, for Brooklyn. There should be a no-brainer in Brooklyn. There's also this pretty interesting trend to pay attention to, which is now that we've reached economies of scale in cell phones, it means that we've had to get unbelievably, good at some of the components at very large scale, and it drives cost down. An example of this is lithium ion, so batteries every year get whatever it is, eight or nine percent better in terms of battery density, battery life. And you compound that over the last 20 years of sort of smartphones really coming and becoming a thing that billions and billions of people have. So in addition to the

batteries, you also have image sensors. We can make really, really good cameras now for very cheap and the software stack that is sort of the industry standard now that runs on top of them, this computational photography, to then feed into these computer vision algorithms. It's writing this interesting trend of what did the smartphone make much more economically viable, much more reliable,

something that can last much longer because of the batteries. I do some space investing, and this is something we see in space all the time with the company Planet, for example, that has these really cool image sense Earth sort of sensing. There's fancy ways to describe it, but they take pictures of the Earth. They orbit the Earth and take pictures with basically a bunch of

smartphone cameras in them. Which is unbelievable. There's so many things that sort of come out of the maturation of smartphone components. And the software, this is not limited to hardware. Of course, whenever you make a billion of something a year, the price is going to go way down. The resiliency of that product, the ability for it to have a great life cycle is going to go up, right? They're just going to be grinding on a billion cameras, a billion GPS units,

a billion accelerometers a year. And that means every company, whether it's Samsung or, you know, HTC or Apple, of course, or Google are just saying, hey, make it do this, make it do this. And we can spread the cost of the next version of this across a billion. So if we spend, I don't know, a billion dollars researching accelerometers this year, it's a dollar per phone, no big deal. Yep. It's just wonderful. And then all that trickles down.

And, of course, software now, I don't know if you've been following the AI stuff, but, you know, Facebook made that tool where you can give it a sentence or a couple of words, and it makes a five-second looping video. This is, of course, after Dolly, where you give it a couple keywords, it makes a picture, which, of course, is after GPT3,

where it finishes your sentences and, you know, yada, yada. all these AI machine learning deep vertical models in particular. Yeah. It really is amazing how this is going to make something like Cocoa delivery or anything else

so, so much easier. If you, you know, really the only thing left for these is, I think, regulation. And people, you know, which cities are the most lawless and will have these things being vandalized? This is now down to vandalism.

I don't know why this doesn't exist massively. I think it's also unpopular. I've got to be honest, having invested in a couple of robotic companies like CafeX, there's a bit of anti-robot sentiment out there, which I think is being now trumped by the frustration of not being able to get a cup of coffee in under five minutes. So when consumers basically realize,

you know what, people don't want to come to work in these jobs. They had their chance. They raise the salary of these jobs. Now you can't get a job for less than 15 to 25 bucks an hour working in retail. And people still don't want to go. So I think consumers and do-goaters who are like, oh, you know, what about the people in their jobs? The robots are taking our jobs are like, well, nobody wants those jobs. So let the robots have them.

What do you think of that theory? I think that the thing that drives consumers, adopting experiences that are driven by robots is consumer experience. And because that's annoyingly tautological, businesses that decide that they want to cut costs by replacing humans with robots, that will only go well if it ends up actually being a better experience for the end user. And so, like, you walk into lots of McDonald's now and you don't stand in line to order, you hit the touchscreen.

I find that to be a much better experience than waiting in a 10-minute line. Correct. And the food comes out of the little window in the very same way that it it would have. And I actually have no idea how the food is made, but that's abstracted away for me. So I don't know if that's robots. I don't know if it's humans. I don't know if it's a hybrid. There's like a little drive-thro? No, you walk a bunch of the modern McDonald's, you walk in, there's just like big touchscreen panels. I've seen them. They're giant. They're like the size of a human. These things got to be six feet high. Most people saw one for the, or lots of people saw one for the first time when

they put a Queen Elizabeth RIP billboard. And then that thing went went viral. But like you'd walk in and Queen Elizabeth was staring at you on the McDonald's touchscreen order thing, the week of her death, it was odd. Would you like a flail fish? Yes, exactly. But I found that to me...

How would you like to supersize your rail? But that's a much better consumer experience. And so that is a place where, okay, cool, that is now tipped consumers... But tell me about the window. Well, what's the window? There's like a little window that they... Like an automat?

It's like a window inside that is between where you sort of like sit in the restaurant and the kitchen. So rather than being able to see like over all the registers where all the people normally are, since there's not registers and people, there's just like a little window where someone brings your, sets your food. There is a pickup window now apparently where you don't see into the back of a fast food restaurant. This is all funny because I don't go to fast food restaurants. I refuse.

It's not my thing, except for In and Out Burger of five guys. I do think that those two are my exceptions. Are you a fast food guy, Ben? You go to fast food more than once a month? It depends what you consider fast food. I order McDonald's like once a year, but I order like Chipotle once a week. And is fast casual, fast food? Does that count?

No, fast casual is not fast food. It's fast casual, but it's close. It's adjacent. But this, I find this fascinating. I did know that you can go to a, the, the, there's no more cashiers. That job is done. Do they even have a token cashier there just to be old school? I'm not sure.

who are scared of things. I wonder if there's a McDonald's with zero cashiers. But this all started in New York. Everybody, the fast food people, I remember this like 10 years ago, went on strike. And they were like, we want $12 an hour. We want $15 an hour, whatever it was. And they were like, okay.

And then all these startups came to me. This is like 10 years ago maybe. And they were like, oh, it's awesome. These idiotic food workers are on strike. The unions are giving them terrible advice. Now, everybody's calling us. They weren't calling us when it was, you know, $10 minimum wage.

But when it hit 12 to 15, they all called us and asked us to put in these things. I remember one startup being like, Panera bread was like enough with the cashiers complaining. We're putting it all in and we're putting managers on the floor to walk people through it. And they said after like 60 days of doing this, they didn't have to have anybody on the floor training anybody because all the regulars knew how to do it. And then the regulars would show the person next to them how to do it if they didn't know. Yeah, it was a pretty interesting phenomenon. I think this window thing, the touchscreen, I think everybody's seen this. We'll pull it up here.

But these things are huge. I just did the thing you're not supposed to do on the internet, which is perpetrate a lie. And so apparently somebody digitally created the thing with Queen Elizabeth. Oh, okay. And then it went viral. Oh, did the Nodies tell us that in the, uh, no, I was Googling. I was like trying to find this image to send it to producer Nick. Oh, I'd like to see the fake image.

That's great. This most recent link that I just sent has the two. side by side, which shows like the digital forensics where they found the original image that someone threw Queen Elizabeth on top of and were like, these look too similar. I am capturing my likeness after 1500 episodes and when I'm gone, you're going to be able to well, yeah, there's enough footage. You're just going to be able to pay $1,500 and my estate is going to interview any founder about their startup. So tell me, what is your business model? How will you scale this? What if Microsoft joins your

and if Microsoft creates that competing product and I'll just interview, you know, virtual J-Cal will just interview people till the end of time. Didn't Bruce Willis do that now that he can't... That was the rumor, yes. Unfortunately, he's got some kind of condition where he can't act anymore. And so he reportedly, he denies it. I just saw an article about this.

Oh, really? God, this is like more things that I'm like reading in my timeline. This is the world we live in. Truth is elusive. And so there was a report that this had happened. Then there's a denial of the report. and then there is a denial of the denial that there's some other thing going on.

So I think what's happening is these discussions are happening in Hollywood. And I think the discussion is, hey, we can do a deal like this now. Your estate will have like a couple of years after you die to let us know when to do it. And they're working on, you know, I'm trying to think of somebody who passed

Anthony Bourdain tragically. Like with the estate of Anthony Bourdain after he tragically committed suicide and was suffering, allow him to do this. Of course not. In 20 years, would he want them to do it for his children to have some thing and under what circumstances? So there's a lot of kind of hand-wringing as to what would be allowed here.

And they did digitally recreate in the Anthony Bourdain documentary. I don't know if you saw this. They created an AI voice of Anthony Bordane based on his speaking and they read his emails. and did it sound realistic you know what they never

the director refused to tell people which part of the documentary was him actually speaking versus which one was the digitally recreated AI of him speaking but you know

this happens in documentaries where they recreate certain sections and they don't tell you which sections are recreated or not famously the kid stays in the picture

I don't know you ever see that film about Robert Evans, the film producer. Oh my God, this is going to be a delight. Read this biography. That it gets my list. The kids stays in the picture. It's about Bob Evans.

This crazy producer who produced Rosemary's baby and love story and basically took Paramount. And they put a bunch of 30-year-olds in charge of Paramount pictures. You probably got this from, you know, the CIA, you know. Yeah, yeah. Ovid stuff, whatever. But in the 70s, there was this easy rider, you know, kind of moment in time where they're like, make films because nobody's going to see musicals on screens. Kids of the 60s were like,

I'm not going to go see the sound of music. So they create Easy Rider and Five Easy Pieces and the conversation and Godfather, Rosemary's Baby, all these crazy avant-garde taxi driver. And this is where Scorsese and all those people got their shot and then on to Spielberg. Isn't it cool that when film was becoming a medium

for the first time? All they did was just like film stage performances, and then it took them, like, a lot of time to innovate and be like, wait, we can do different things in the constraints that we have here, like cuts and like close-ups and like four-camera sets. I mean, literally, television was the three-act play from Broadway, and they just said, let's just make it into that. Here's the Anthony Bourdain voice video.

You were successful, and I am successful, and I'm wondering, are you happy? Oh, yeah, that did sound like. robot. Yeah. No. But I think in a trailer where you're not paying attention, you would just think they put an effect on it. But it did sound a little robotic.

I think you might have purposely put that robotic on because now, but that was two years ago, you could smooth that out. I just got contacted by the folks from Speechify, which is an app I use to translate text into sound and they want to do my voice. And so I'm going to do it, I think. They did Gwyneth Paltrow. They did an Obama impersonator. They call it Mr.

President. And they did like Mr. narrator, which is based on some of those great audible narrator. So I think you're going to be able to have me read you any story. It's so funny. So I need this for acquired research, because the best way for me to consume as much media as we need to to prepare for these episodes is like to not just be staring at a screen constantly. So I'll, you know, absorb as much as I can on runs and while I'm doing yard work and all this stuff. Exactly. And sometimes it's like a long Vanity Fairpiece on the CEO of some company.

And I'm like, I really wish I had some way to listen to that instead of. Natural Reader is the free version, and it's just as good as Speechify, but Speechify is like a hundred bucks a year or something. I pay for both, I think, premiums because I just want to see it happen. But what's really good about these tools is I learn best with my dyslexia when I see the word highlighted and it's being spoken. So if I really want to retain information, and I will look at my screen, watch it. it read each word and it highlights each word.

And for some reason, that just getting the visual and the auditory at the same time walks memory in for me, as does me speaking, which is why I have this chosen profession. But yeah, we went on a little bit of a detour there. But hopefully it was interesting to everybody. All right, everybody, I'm here today with Obie at Puda. He is the program manager at Microsoft for startups. Welcome to the program, Obie. I appreciate you, Jason.

Thanks for having me. Tell me a little bit about why you're choosing to give such a show. huge number of Azure credits to startups because I see a lot of them taking advantage of it now. 1,000%. Microsoft startups, we're on a mission, help all founders grow, innovate, no matter their background, progress or location. So really trying to close any type of, you know, inequality gap, any type of wealth location or access gap. We know it starts with the resources. And so that's what we're starting with, you know, a plethora of resources starting out with Azure credits. It's a very nuanced thing there. It's these kind of credits from other companies in

the industry have been limited. They're only available to people who maybe went to the most elite programs or, you know, it was kind of an insider's club. You'll give these credits to any startup anywhere that wants to change the world and build a great product, correct? 1,000%. I think the biggest thing we pride ourselves on is creating an ecosystem that doesn't require startups to be investor back or to be validated, if you will, by any third party. And we say, for all, we truly mean for all. So that's one thing we're really proud to say. All right. Thanks so much, Obi, Microsoft for Startos Founders Hub has no fundraising requirements as we discussed. It's open to anybody. And it only takes five minutes to a

apply. You can get up to six figures and benefits as we talked about. Well done, Obie. Sign up for the Microsoft for Startups Founders Hub today at AKA.m.s slash this week in startups. A.k.a.m. slash this week in startups. Obie's waiting for you. My guy's going to take care of you. I did watch, just to like close this loop on on AIification and film. I did just rewatch last night, Rogue One, because I've been really liking Android. So good. And it's like so good. It's like so damn close, so darn close with the Princess Leia. And you're like, right there in the Uncanny Valley.

Right. Like, literally, you're in the Uncanny Valley and you're about to leave and you just trip over some like digital remnants. And it's like, oh, God damn it. Yes. I was just leaving the Uncanny Valley. Sorry, we're both laughing at our own conversation. This is great radio right here.

It's a great radio, everybody. It literally like they show Princess Leia or Tarkin in. in the glass and thing. And you're like, yep, that's Tarkin. Almost. Yes. You know when it actually, I was like, for me, because it wasn't good enough for me in Rogue One,

when they had Luke Skywalker show up in Mandalorian spoiler. Oh, my God. For me, I was like, you know what? I can see why it's not working, but I want it to work. Yeah. Therefore, I'm going to squint. Yep.

I'm just going to squint. I'm going to pretend I'm watching a VHS tape. Perfect. If that was VHS quality That wasn't in 4K but was in 480P, yeah So I dropped it down to VH VHS and I'm done

Yeah, I'm like good enough The place where it seems to fall down Is when they get a close up On the face while they're talking It's always talking That first scene in Mandalorian Where it's like Luke arriving In the X wing

And then he's like a badass And like the spoiler, spoiler spoiler, spoiler It's perfect Yeah, there's no issue at all it's the close up where he starts speaking or any of them, which is what film is about. So what you need to do is basically not do a close up of them speaking. Have them speaking, you know, in a crowd or have them speaking over the shoulder. So you see the back of their head when they're speaking and keep it a little elusive, right?

And that's it. And you see their face when they're, you know, fighting a fight. By the way, but the reason I bring up the kid stays in the picture was this was the first documentary over 10 years ago. It's one of the best, 10 best documentaries of all time. One of the 10 best autobiographies of all time. You listen to this autobiography, you go see the movie. The documentary uses, I think they call it rotoscoping or something, but they would take pictures, and then they would make them three-dimensional and, like, move people around in them and

zoom in and on them, and then they did a lot of animation. So in order to tell the story, they used all these new techniques that now you see in, like, every true crime thing. And then people do reenactments. And you'd never know when it's a reenactment, or it's actually some tape that occurred. So a lot of documentaries now use these techniques, and they don't tell the audience,

and the storytellers are like, yes, it's a visual medium. We're okay with doing this, and we give some disclaimer at the end in the beginning. And if people want to think that's actual tape of, you know, something that happened 40 years ago,

that couldn't possibly be on tape, fine. All right, speaking of cutting, Peloton's cutting another 500 jobs after multiple. That was brutal. That was a hard turn. That was a transition right there. There you go. That's a hard transition. You put that hard turn there.

Man, I am rooting for Peloton, but, but it seems like this turnaround started two years too late, a year too late. They're cutting another 500 jobs. This is after multiple rounds of riffs. According to CEO, Barry McCarthy, this will mark the last of the company's restructurings. You got to remember, he took over from John Foley, the co-founder earlier this year. This is the fourth round of cuts. Peloton now has less than half the number of employees compared to. your 2021 peak.

It went from 8,000 to 3,800. Still seems like a lot. 500 jobs is 12% of the remaining workforce. And he's hoping these cuts will allow Peloton to return to growth. You know they've done a bunch of other changes. They're putting all their bikes in Hilton, Bradgett hotels. I think that's genius. It's a really great experience when you use one of these pieces of equipment when you're

on the road because you get to record all your workouts and it's really easy to do. They started selling the equipment in Dick Sporting Goods. They're selling on Amazon, all this stuff. All these sacred cows have been shot and, you know, turned into hamburger. Here's the quote. There comes a point in time when we've either been successful or we have not. After the article was published, McCraughty said he didn't mean to give the impression that the company had six months to live and send employees a memo apologizing.

Here are some quotes from the memo. There is no ticking clock on our performance. And even if there was, the business is performing well and making steady progress toward our year-end goal of break-even cash flow. We were expecting a story about redemption and the successful turnaround of Peloton, which is why we invested time on background briefing them in the state of our turnaround, yada, yada.

I was asked the question, how much time do you think you have to show success? My response was 12 months from the time I joined Peloton, knowing that we were already showing significant progress and in record time seems like a no-brainer. Most importantly, I don't want this new cycle to overshadow the difficult reality that 500 of our colleagues, blah, blah, blah,

have to go. So, I mean, basically, he feels like he got misquoted. Q4 cash, $1.2 billion. Q4 free cash flow, negative $4.11. Q4 net loss, $1.2 billion. I'm guessing that includes some stock or some writing off of inventory. And this is a fiscal year. So it's cute. The most recent quarter is, yes, yeah, because they're on a non-calendar year. Q4 inventory, 1.1 billion in inventory. That's crazy. And who knows how they're marketing that? Is that at the retail price? Is that at like some discounted price. Accounts payable, almost 800 million. Q4 revenue,

$679 million down 30% year over year and quarter, basically. Paid subscribers, still $3 million, up 27% over year. I'm one of them too, and they raised our prices down to $42 or $44.

I'm about to get on it this afternoon. So what do you think, you know, happens here? Do you think this CFO-turned CEO can get him to break even? Feels like he's pretty serious about that and then does it remain an independent company?

Chances of all, I love Barry McCarthy. Like, if anyone can do it, Barry can do it. Why? I will say, I think the story here and before we even get into this, this is a very real human story with 500 people and now 3,500

people total that have lost their jobs, which is really sad. To unpack the corporate strategy, I think the first story that I noticed in this was a corporate comms story, because the journal piece came out, and then immediately afterwards, Barry wrote that email to the employees, where you basically had a story in the public saying, there's a six-month timer on Peloton to get profitable or sell, and then him having to go, whoa, whoa, whoa, that's not what I said at all. And so it must have been absolute chaos within Peloton to have to figure out, like, what

to do with such a, um, you know, I've been in those situations before where you're, you're giving a, you're having a long conversation with a journalist. And the thing that ends up getting picked is the least, um,

or at least the, the thing. Yeah. The, the most sort of like needily thing. And then it's told with numbers in a way that makes it even hurt even more. So when he said, you know, I think we have,

I think, what did he say something about knowing more within 12 months and 20? Right. So then what they do is they flash forward six months and say six months from today. Yeah, they played some games with his statement of, like, I think we have a year to figure out a turnaround. Right. Now, that doesn't mean, if we don't figure it out,

the company shuts down. Does it mean they have no options? It's just like, he basically was honestly, I think a year is probably a good time to judge me on my turnaround, whatever. We have a year to figure it out. And they're like, Oh, clock is taking six months.

This is why podcasts are doing so well. Podcasts don't play this game. Podcasts let the person speak and let the audience judge for themselves. This is why Barry needs to come on This Week in startups, and then three months later, go on to a choir. And we'll have just a really great conversation.

Let's call. There may be two or three apps that my teams and I can't live without. One of those key apps is Zapier. It makes us happier. Why does Zapier make us happier? Well, it's a very simple way with no code to connect all the different apps you use to solve problems that you're wasting time having a human do. It basically gives you the ability to automate and write code if you're not a developer and it works with over 5,000 apps.

And you know the apps that you use all the time. You're using Google Sheets, Salesforce, Slack, Webflow, pipe drives, Shopify, Zoom, whatever it is. Here's how we use it. Anytime somebody registers for Angel University our workshop, we will also sign them up for the syndicate. which is our angel syndicate. Also, whenever somebody submits a startup for us to look at to openscouting.com, it triggers a Slack notification for my team. What does this do?

It reduces lost startups that are sitting there in the database because somebody says, I got this one. So I want you to save time. I want you to be more efficient. And I want your entire team to learn how to use Zapier. Take all 10 people, have them open a Zapier account, have them build two or three Zapier's, watch your company get, I would say, 15% more productive. I'm not kidding. basically save, I don't know, 10,000 a year per employee. And that's why 1.8 million people

and businesses use Zapier. It's the greatest. See for yourself by teams at Airtable, Dropbox, HubSpot, Zendesk, inside.com, launch, the syndicate, use Zapier every day. And try Zapier for free today at Zapier.com slash twist. That's Z-A-P-I-E-R-com slash twist. So then to analyze the two big corporate strategy observations from this, the first is the original sin of a misforecast. So when John Foley was CEO, and he's owned this mistake, they just completely lacked the

forecasting ability to know that this would slow down. They thought, as many e-commerce companies did, at the beginning of the pandemic, this is not a blip, this is a pull forward. So we think that growth will accelerate right now, but then it will go back to

the pace that we were accelerating before, but from a new higher milestone. And what ended up being true for the vast majority of e-commerce companies was not that, hey, great, we'll continue at our current growth rate or our pre-pandemic growth rate, but with higher numbers. What actually happened is we're going to have this plunge-down period where our sort of like cumulative graph over time looks like it would have without the pandemic. And so you sort of have this negative growth for a period of time, shrinkage. So it was a big misforecast, but unfortunately,

it was a big misforecast in a business that requires really expensive inventory and was sort of growing, man. Hardware is hard, man. Hardware is hard. Totally. And so they ended up with you know, a lot

of people, I mean, 8,000 people to build the products that they build and deliver the service that they do is a lot of overhead and to pile up all that inventory and to basically orient the entire company's disposition toward the good times are only going to get better

when really they were about to enter a really tough time you know it's it's just like it would have been amazing if they survived at all but Barry has come in he's made four hard decisions which you really you never want to hear the phrase fourth layoff you kind of want to get it done in one and if you're really wrong get it done in two girl he talked about this you got to do one but you know what

they did 15% cuts I think the story here I like your analysis but I think the story here is also you had a CEO who, to your point, is making these crazy projections but I also think it's a CEO who liked to spend money

and was optimistic and was not disciplined. This is a lack of discipline. That was far too many people working at a company. They didn't need to have 8,000 people. This company could have been run with two, 3,000 people, no problem. And this was a problem across

the ecosystem in Silicon Valley in the late stages of the boom. Now, it started with Google because Google had a money printing machine and they specifically pursued a strategy of take talent off the market. We want to take talent off the market so they don't build a competing project.

How many people did we know when to Google and were resting, investing, and you asked them what they're working on. They're like, yeah, they hire me because I'm smart. And they told me find a project and pitch it to my person. And yeah, we're working on a couple of ideas and we have Fridays off for 20% time.

This entitlement was all created by one company, Google. Google, because they found, it's like Norway. It's like Saudi Arabia. They found the mother load been of natural resources in the greatest advertising medium ever created. Type a word will get people to pay per click in an auction for their own name. Yep.

You type in Peloton. Peloton has to pay a $1.50 every time they click or else life fitness is going to intercept them. Not to mention, this isn't just revenue. This is like near 100% gross margin revenue to Google. Bonkers. And you know what they said? They're like, we could run this business at a 99% margin.

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

of it. We made these cuts. It was a mistake. And, you know, some people could course correct. other people Peloton was driving the car too fast into the turn and now the car is flipped four freaking times boom boom boom and now boom again this car is a wreck

it's gonna be hard to get this car back on the track yep I think Barry gets this company free cash flow positive and also within the next two years maybe less they get bought I don't think Peloton stays an independent company for the next decade

I think that is the 70% case. I think there's also the case that he makes such substantial changes that when they are cash flow positive, people say this is an undervalued stock. They work out, they have a lot of debt too and they got these inventory. This is a two-year turn. This is going to be a two, three-year turnaround like you're saying. And, you know, when you come in as a CFO like this, you're turning over rocks and you find the next worst story. This is one of the problems with being a turnaround person. these turnarounds, you know, specialty people, man, what, you start turning things over and it's like, oh, oh, we have this much debt. Oh, oh, wait, we have this settlement. Oh, we have this patent infringement. Oh, you're finding disaster after disaster. It's like buying a home and they're like, yeah, oh, by the way, the basement was flooded three times. Nobody told you. You just got like all these crazy problems. I wish them well. 70% chance, I agree. It gets sold. Do you think there's a chance, 30% chance of Marines independent or 29%? Do you think there's a chance? Do you think there's a chance?

as the equity gets wiped out? That's a good question. And here's the thing I was thinking through to prep for the show. As I went back and read the transcript from our February episode when John Foley came in, the strategy he's employing is completely different than what it was before. The strategy before was sell really expensive bikes, get only customers that are completely price and sensitive, and thus basically never churn.

I think it's, I was looking back at the, the Acquired episode. 91% of Peloton customers are still customers after a year. You look at like Netflix, that's like 50%. Yeah. So most consumer subscriptions turn half their user base every year. Peloton wasn't that. Their whole strategy was extremely high-end products for people that are completely

price insensitive. And then the new strategy with Hilton, with selling and exporting goods, with letting you rent a bike, is let's try and get, like, completely commoditize our hardware. Let's try and get it in as many homes as possible and then make money on the subscription service and try and really be a content play. Yes or no? It is a strategy that can work.

You just have to go really hard one way or the other. And they're transitioning a business from going really hard in the we make money on hardware to the really hard on the we will sell mass market. And I don't know if they will survive the complete, you know, pull the e-break, cut the wheel, spin it while you're in motion thing. This is some fast and furious maneuvering.

You have the Epic ski pass. You get a ski pass every year? Do you get a season pass? I don't. I don't. Since I tore my ACL skiing, I've lost my... Did you ever get that? The season pass or you always just paid a show?

Every time I went. Okay, so this reminds me of a bit of like the skiing strategy. Season passes used to be wildly expensive, you know, and it was for an elite group of people, yada, yada. Epic came in and said, hey, we got all these mountains we've aggregated. We're dropping this thing down to four or five hundred bucks for a local pass, five, six hundred bucks for national pass. Have that it.

We'll make money. We'll have some blockout dates. Well, you know, kind of like the Disney subscription passes. And this thing changed the entire industry, right? They just went from collecting money as they go, constantly being chasing their tails to if you want to get an epic pass, you've got to buy it in the spring. Sometime in the summer they sell out, I understand. I always have mine on auto-renew now because I don't want to deal with this.

and it really has changed the industry. The mountains are packed. They're making money on $12 pieces or whatever. So this strategy can work. But like you're saying, it is a complete mind shift from, we're dealing with millionaires or people with, you know,

home gyms and they have 800 square feet in their home for their gym, you know, their fourth bedroom in their home or their, you know, third, you know, car in their garage has been dedicated to a workout area. This is for absurd,

was for absurdly high-end people. You and I pay $42 or $44 a month now as members. They sent that email. It's a lot. You don't know. Because you're like, well, for $600 a year, I'm staying fit. This is part of my overall, whatever, a couple of thousand dollars a year. I spend on my health.

It's like an afterthought. Now, cheaper than a gym. Cheaper than a gym. Which is how I did all this math. That's how they turned the model on it. They convinced you that that's the comparable. Well, what I did was, I did, my wife and I, being members of Equinox, which we were in Santa Monica, this evil company Equinox,

the worst company on the planet, the worst human beings on the planet work of this company. It's the North Korea of fitness, as far as I'm concerned. And that's the same PE umbrella that now own SoulCycle, right? Whoever they are, they're evil. I hope this company burns because they tortured me. You know, hours of onboarding,

and then you have to change, I moved, and then they're like, you have to prove you moved. I'm just like, it's the worst customer support, the worst human beings on the planet. It's the most beautiful gym on the planet also. But, you know, 150, 175, then 200 a month. You can't get out of it.

You can never pause this thing. I hate this company. Oh, yeah, it is. They own SoulCyclox, Pure Yoga, Blink Fitness. The worst. The worst. I will tell anybody now, I mean, maybe things have changed. But it's the most anti-consumer, anti-membership company in the planet.

And how they treat their members is horrific. Just type in Equinox horror stories. And somebody can correct me if I'm wrong. But, you know, this data is when, you know, 10 years old. But I hate this company with a passion. But, you know, if you're looking for a high-end gym, you know, it's the best one. But, you know, $200 a month for a couple is $400. $400 times $1,400, so round it up to $5,000.

You have to go there. You have to park. That's a little bit of money each time. You got tip the valet, whatever. So you probably add another $1,000 into that, you know, to, you know, traveling and parking, whatever, if you go on a regular basis. You know, if you do two visits a week, you know, it's 100 visits, you know, some parking at $10 each time.

So it's called $6,000 for a couple. Now you start thinking, okay, well, Peloton for a couple is $44, and then you have a tonal, same thing, $30, $40 a month. It's a fraction of the cost. And you don't have to leave your house. I have the hydro, Peloton, treadmill, and I have the tonal, have all three. And I did the math, and I was like, this is cheaper.

This is half the price of Equinox. So I just built a home gym, and it's freaking fantastic. still a great product and service. I think they're going to make it. I think this is going to be an incredible turnaround. I'm going with the 30%. You don't think it's commoditized? I just think the thing that scares me,

and I am all in on the experience, right? I'm like very, I have instructors that I like. I'm used to the Peloton brand. I think that they do actually go above and beyond relative to other providers, but lots of people have this video streaming with instructors on an exercise bike thing now and a lot of people with cheaper bikes.

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

we're just going to buy the best. Maybe 10 years ago, you would have gone for the cheaper solution, 20 years ago, I would have gone for the cheaper solution. Right now, the cost difference between Android and iOS, we just say, screw it.

We'll spend 1,200 an iPhone instead of 800 on an Android. Eat those blue bubbles, man. Exactly. So we'll just pay it. The premium's not enough for us to care. Now, what I do think will happen is what's happened with iOS. Do you know what iOS, the iPhone percentage? Can producers, can you pull up the percentage of iOS? iPhones versus Android phones in the U.S. over time, it just hit 50% iOS. I was about to say. Now, everybody said iOS will be the niche 20, 30%. But over time, Apple figured out a way. to have an entry level product that wasn't that much more expensive than Android and slowly. Yes. They've recaptured it. So there is an art here to Peloton going downstream.

So here's the thing that Apple has done that no other company that I can think of in history has really managed to do. And it will be very interesting to see if Peloton can do it. They have created the mass market high end, like the mass market premium. And when I say that, like here's the case. the craziest thing. I have blue bubbles. My phone was $800. It's the iPhone 13-Money. The iPhone 14-Pro Max that you can buy is the most expensive one is $1,500, $1,500. And Larry Ellison has available to him the exact same phone that you and I and anyone has, that $14, $1,500 phone. We both get blue bubbles. We both get all the same apps. So they have figured out a way to serve Larry Ellison the very best

product that he can buy and have a network effect with all of us who have the ability to buy the most premium thing that we possibly can in our with our sort of like socioeconomic bracket and it turns out that like they've managed to capture both the extreme high end and create this like affordable luxury thing for 50% of the population. Amazing. What other company has done that? Man, I'm trying to think of a fashion brand that has achieved something like this, right? Or a car company.

And I think Tesla's on the verge of doing this because my wife insists that she will only get the model X. And I love the model Y. And I have conversation. What's the deal with the X that you like the air cushioning or is it like? It's going to be $150,000 for this model X that she wants all in because she wants the plage. Is it a permanent backseat? It's like what's the selling point? It's the three rows.

It's the three rows. It's the car she loves most. And I got her once seven years ago when she had the twins as like a present for the babies. I thought it was a nice thing to do when it first came out. Now it's time. I mean, the good news about these cars. Well, we're going to get into car sales in a moment. It's a good segue.

You know, these Teslas, you don't have to ever replace them. If you're replacing it's like, well, maybe I want the higher range or I want the new upgraded design. But her Model X drives as great today as it did in the beginning. My model S, even my roadster, the experience is largely the same as the first day of driving it because there's no internal combustion engine to be breaking down at increasing frequency in the second decade. I think Teslas are going to make it to their third decade and be just as good as the experience in the first decade sends the upgrade or wear and tear to the interior or whatever it is. But I think they largely say the same because you don't have that giant ice engine where anybody, when I used to have to buy used cars, you're like, oh boy, carburetor's going to go, this is going to go, that's going to go.

The only thing you have to change is really the brakes. And because of self-regeneration, the brakes don't go. So if you just take out brakes and tires and winchere wiper fluid, you're basically done. Putting that aside, the model Y to me, you're looking at a new one. I'm going to get her the new one, of course. But we're not price sensitive in that way. I wanted to have the best one that you can enjoy every day. But the model Y, to me, is a better car.

I believe it's a better car. And certainly it's a better value. Now, I don't think the folks in Tesla particularly appreciate me having this point of view. But most people would say the Model X is a better car, but I think on a dollar for dollar basis, is it worth twice as much or even more than 2X? So I told her, you know, you could get the cyber truck and the Model Y for the same price. And wait, the cyber truck's going to be 60K or 70K? Cybertruck, both of these cars will be 60K.

So I'm kind of looking at it going, wait, if you, and even if you got the both maxed out, self-driving, everything, 75K each, 150K. You could literally buy both of those for the price of the Model X. So I'm like, wait a second. I understand that's a super luxury. I understand. It has a golden doors. But do you want to even consider that as an option?

No, no, I want the Model X. I want to drive what I want to drive. Okay, that's fine. But think about that for a second. Or you could buy the Model Y, drive that every day, which is my daily driver. I love it. I'm obsessed with the Model Y. and I could buy, you know, a defender, a Range Rover defender for 80K or whatever,

or I could buy a Jeep Wrangler or a Bronco as a backup gas power car. So I think this is like a very fascinating moment in time in terms of, like you're saying, in terms of luxury, I feel like the Model Y is a luxury car. It feels luxurious to me. Well, I mean, it's... And I have that, by the way, I also have the full self-driving.

As a luxury car, but when you drive in one, it doesn't, like, it's not a let me like it's it doesn't feel capital L luxurious like it doesn't feel the same way that if you go buy a luxury car the set of things you expect to get from it it may be a smooth ride

yeah but I don't know man I just for me it's about the drive and how smooth it is and buttery and reliable and I have the full self driving beta now oh man that thing is scary good it is scary good I've only been doing it for a week and I've been like doing it like driving I've been putting it off the whole ride.

Where do you not trust it? Like, when do you grab the wheel? Well, I will say on back or country roads where it's not late, the road is not labeled properly, it does navigate it, but it does make me a little nervous that, you know,

some places I drive on the back country roads, they're not marked properly. And so it's trying to figure out a two-lane road without a line in the middle or a faded line. And then intersections, because people drive crazy. When people are driving normal, the intersection is fine.

But you get to an intersection where people are driving like they drive in California. It's trying to navigate bad behaving drivers, and I think that's going to be a super challenge. If you asked me to give a percentage, I think they're at 87% right now. The last 13% is going to be like, I think every six months they're going to get one point. So I think we're on this like three or four year journey to where they could remove the steering wheel. I don't think it's 10, but I don't think it's two or three. I think it's maybe four or five years.

I would say if I had to put the over under on, you could take the steering wheel out, five years. It's very close. But for the majority of your ride, it does work, which is scary to me. Yeah. It's kind of wild to watch it advance because they also, in the full self-driving beta,

they kind of show you what the computer is seeing. You've probably seen this. videos online where it shows you like it figuring out intersections and stuff like that. And it's like, oh, wow, it's, it knows what's going on. And this AI is going to figure out how to deal with these people who I've just, where I live in the peninsula, in the Bay Area, a stop sign is a suggestion. You know what I'm saying? It's like, you could stop. So when you come to a stop sign in California, people are like, yeah, right on red. I came to a full rolling stop. and I whipped through, I mean, people come to a full rolling stop.

That's the Bay Area of my mind or California. I don't know how it is. Seattle's the exact opposite. People are so like, oh, you want to jaywalk? Let me stop right here in the middle of the street so that you can do whatever you want. Yeah. So those are the nuances that self-driving is dealing with right now. So if you just think about that, that is something.

Also in Santa Monica that happens. Somebody walks, because I was in New Yorker, I jaywalk all the time. And when I first in Santa Monica started, just crossed. Lincoln Boulevard in the middle of the street. Man, every car, boom, they stop. I'm like, keep going. I'm walking around you. And they're like, right. No, you're walking in the middle of the street, sir. And I'm like,

yes, what's the problem here? I'm walking in the middle of the street to cross the street. Yes. And you are driving at 60 miles an hour. And I'm timing it like Frogger. And they're like, no, you can't play Frogger in Santa Monica. Apparently. Apparently. So are you going to talk about the use car market? Let's do it. All right.

Use car prices are down significantly, and people are discussing on Twitter. Sam Kores, a director of AI research at ARC, Kathy Woods firm, tweeted the following today. The interesting chart, used vehicle index is now down on a year-over-year basis. Wholesale used vehicle prices on a mixed mileage and seasonally adjusted basis decreased 3.5% in September from August. That's month over a month, obviously. The Mannheim used vehicle value index declined to 204.5, and it's now down point one from a year ago. Here's the chart featuring the Mayheim used vehicle value index. Obviously, the used vehicles went crazy when we had a supply chain problem.

They estimated that used retail sales declined 8% month over month and down 10% year over year. Compared to September 2019, sales were down 18% and a slight improvement from August, when sales were down 19% based on the same store results. Index measures, 5 million annual used vehicle transactions to indicate pricing trends in the use car market. Our founder Kathy Wood quote tweeted KORUS and said, the following. Given the accelerated consumer preference shift toward electric vehicles, use arc prices, and the residual value of all gas powered autos are likely to plummet causing serious losses in the $1 trillion auto debt market. Do you buy that?

Do you buy that? Obviously, we all know supply chain. and stimulus led people to go during COVID and want to buy a new car. So everybody wanted to buy a new car because it got some stimmy checks and the down payment was provided for them, whatever. And that was the government's intent.

They wanted to stimulate the economy. They wanted you to go buy a car. I don't know if you saw this use car prices. My used minivan, they were offering me as much as I paid for it. It was like a year or too old and they were like, we'll give you what you paid for it. And I was like, what? They're like, yeah, Honda Odyssey, not available.

Everybody wants one. There's none available. You paid 65K for this thing. We'll give you 65K. I was saying, that makes no sense. But do you buy this larger argument? Well, that was what was happening. People were paying above sticker for used scars.

So what do you think is going on here when you look at these numbers? And what do you think is Kathy's point legit or not? I think it might be a little bit of a stretch to bring the consumer preference for EVs into this. I do think it's remarkable how fast every, it seems like the last 18 months. every single car manufacturer has come out with a very viable Tesla competitor. And I actually thought it was going to take much longer. I thought Tesla was way further ahead to a lot of these areas. But we'll see unreliability, but, you know, mileage, range, all that stuff, and scale.

Yeah. Scale is the issue, yeah. But all these manufacturers are incredible at scale. I mean, like Toyota, the thing they know how to do is make cars at scale. That's the thing that Tesla for the first decade. See they can do that with batteries. That's the issue is, right? Can they do with batteries?

So I think it's a little bit cute to try and be like, but because it's a little bit sort of capitalizing on this conversation right now around electric vehicles, I suspect the two things that are playing into here the most are the end of the supply chain glut. So there's actually available inventory of new cars. And so new car prices are going down, or at least there are new cars,

available for people to buy, therefore use car prices go down. And at the same time, we're seeing a huge macroeconomic shift. We might be heading into a recession. Maybe we're already into a recession. People need jobs more than they did before. And so people are becoming much more price sensitive on all things, real estate. And so I think those two things are probably the things impacting price more. Now, you know where I stand from this on previous episodes we've done in terms of cars. my method is always buy a car very deep and it's a depreciation curve. So if Kathy's right and like all cars are about to become devalued because of some extrinsic force like people want electric vehicles, oh no, my car that I currently think of as a $50,000 car, shoot, it's going to lose half its value.

My solution to that is always go buy a $6,000 car that has lost 70% of its value. Is that your idea? So wait for the lease to come up and you buy the year four or five? 10 and I buy a Toyota or a Honda. All right. Okay, now you're just, that's just virtue signaling. You're trying to be low-key. But it's all about a 10-year-old car, your eventually driving a 20-800-Honda CRV.

My lord. And I'm looking to get a second one and I'm going to upgrade. I'm going to get like a 2012 to 14, I think. Holy cow. But then you buy into all these maintenance issues, right? Not if you're buying a Honda, man. I've had, I mean, knock on wood, but the thing, It costs me

5,500. It's probably currently valued at like 7,000 and it will drop soon to 4,000. God, you're so smart. And I have no maintenance issues with it. And here's the thing. If somebody like steals it or like breaks into it,

like I don't care. I have too many things. I like a utility. Yeah. I like your approach. Unfortunately, I don't like sitting in a car that somebody else used before me anymore.

Fair. It's fair. I like a new car, like that new car experience. And I'm the idiot. who loses $25,000 every time I do this. I guess.

That's where you like to spend, like, that's worth it. And for me, I just don't, I seem to not get the same rush. And look, like, I know it's virtual, virtue signaling. I, um, I show status in other ways, you know,

like the car is just not the way in which I show status. Podcast, podcast. Do you know, this is an SM 58. This is what Bono used in 85. Oh, wow. Fantastic. So you also do the same thing with microphones.

Well, here's the thing. I agree with you. And the thing that has hit me is I'm trying to make things last longer for two reasons. One, the environment. And two, the overhead of the unboxing overhead is a new thing for me. The amount of time it takes to swap out your phone, to swap out your car. All of that is time I want to spend with my children, my spouse, on my writing, on, you know, skiing. And so I'm like, you know what?

I don't want to upgrade my boots. I bought my Danner boots. I love my boots. These are the Danner boots. They're going to bury me in. These boots last 30 years. My Crocket, you know, I have a specific type of James Bond shoe I like to wear. They're now 10 years old.

They came out when Spector came out. No, when Skyfall came out. I have the same shoes he wore on Skyfall, Crocket and Jones. And these things are incredible. Uh, yeah. And so I now am buying pans. This is how nutty I am as a consumer. Um,

I am buying the pans knowing which ones last the longest. That's my goal. I want the pan that I don't have to replace. So I'm buying skillets or lock crusay, you know, that thing. Uh, you know, and I'm just, that's, that's what I'm focused on. That's it. That's it. Crocket and Jones.

These are the shoes I wear. Let me see my, uh, let me see of my, uh, let me see if my, uh, producers can do this. Crocating Jones, James Bond shoes. They're incredible. Jason, this must be hard for you in real life when you want to just like say words and have someone like pull something else.

You're like, oh my God, my super power doesn't work here. No, I have a producer with me at all times with a laptop. So when I'm like just out at the club or whatever, I'm like, you know, like the Crocett Jones shoes and then the producer comes up and just brings the laptop over. Look at that. Those aren't the ones, but those are another crockoning Jones shoes, but those are timeless, yes. The ones I have are the There was one of the James Bond shoes

or this is them I'll tell you there are I'm trying to have them mind read me because actually he's worn five different pairs of these So this is one pair of the Crocaddy Jones 007s But that's not the ones I have But there are other ones that are

If you scroll down you'll see He's worn 007 in the soul It does not It does not But there's a whole group of them And this is the, like, oldest shoe manufacturer, I believe, in the UK. And, man, these things, they may cost like $800, the ones I bought, were like $800, but I literally have had them for 10 years and I send them back to this company to refab them,

like once every seven years and they're perfect. And it's just, it's really just because I don't want to have to think about what are the greatest dress shoes that you can own. These trash shoes, I can wear them with jeans, Ben. I can wear them with the tucks and anything in between. And they look dynamite. That's great. Interesting.

All right, listen. I think it's enough show for today. Great. Maybe any other plugs or things that are on your mind these days that you want to share with you? I thought we were going to have to talk about the global downturn and VC funding drawing up. So I'm glad you didn't make me do the show that the depressing show. Like, we get to have the fun show here. I mean, just top level for people.

VC funding was down 50% year over year in Q3. That's not unexpected to you, is it? No, not at all. Is it healthy for the industry, or is it something to be in a panic about? You know, these things hurt. Could be a hard landing, but we needed it. I mean, the multiples people were paying, prices became completely disconnected from reality, and it trickled into everything.

And it's not a startup's thing. It's an everything in our entire economy thing. and so, you know, the market had to become a weighing machine, not a voting machine at some point to quote the late great Benjamin Graham. And hopefully it just doesn't, you know, mess up too many of our lives on the way down. I will say, to me, it always seems funny to call this VC funding. like when you had funds that were like $4 billion funds that would write $100 million checks into companies that were already doing $50 million in revenue, like that's not venture capital, let's be honest.

That would have been, you know, the IPOs in a previous era? Right, right. Like Amazon IPOed earlier than that, I think. Yes. And so to me, the thing that sort of like the balloon that got let out first was the late stage private funding, I hesitate to go to C, but it's going to get lumped in the stats. The true venture capital funding, you know, formation stage, like what we do at PSL

Ventures, that like really early napkin stage type thing or the Series A, like this, of course, is down too, but what I'm seeing day in and day out doesn't look that different than what I was seeing a year ago. Valuations are down maybe 30-ish percent. I was talking to our good friends at vouch insurance, and they track this very closely. They were saying that the formation of new companies is down, so that, you know, you can sound a little bit of an alarm on like less startups are getting started right now than they were getting started before. Good. I think it's good.

Great companies are still, you know, delivering value to customers and raising capital. You nailed it, Ben. What we're seeing here in this collapse, because this chart specifically looks like a very scary collapse. But I encourage people when you're looking at the global venture dollar volume and this chart, you know, is pretty scary. Q322, if you go back to Q321, it looks like a really severe drop.

But just go back two years to 2020. And it's a modest drop. It's off modestly from the 2020 number. 2021 was an aberration where there was so much money poured into the system that a bunch of people who typically would invest in public equities, who would invest in private equity firms that were taking over large companies,

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

you know, stable investment. Well, the investors actually do have the protections. I mean, it's preferred stock. In some cases they do, but if they're preferred and they go public. Now in the tough place because. Yeah. But no, what's going to happen is I talk to some folks. Yeah.

And when they go public, they don't have the ability to stop the public fundraise. They're not going to have the protection there. Right. And they're going to have no choice. doesn't matter if you IPO below. It's only about acquisition. Correct. So when these things do go public,

what you're going to see is these people who bought at 10 billion, company's going to go public at 4 billion. Company's going to stay at 4 billion for two years or go up to 5 or go down to 3, whatever the case may be on their fate. And those people have no choice. They've all gotten converted into common. The company went public.

And all their ratchets and stuff like that are just not going to be viable. And you know what? They're going to want them to go public because they're going to want that 40 cents or 50 cents in liquidity on the dollar. Because what's their choice? Keep the company private for another five, ten years? This is where I think some of these folks who came in,

they're going to be underwater. I don't know if you saw, did a bunch of KOTU and TPG people leave in the last week or two? Did you see those headlines? I didn't see. I saw John Curtis left Tiger Global. And I think he's starting a fundraise for his own new. He is. And Matt Mazio, who worked with Socki.

That's right. He's leaving. He's leaving Koto. So I think what's happening for those folks is, They were in these venture firms. They put it in a lot of big bets like this. Now they're looking at it saying, well, and this is super inside baseball,

but you vest when you're at a firm. They're probably looking at it saying, if I vest, these things are going to be underwater anyway, just like an employee with underwonder stock options. So if I start a new fund, I get to start, I mean, and it's not a cynical thing,

it's just a practical thing. If I start a new fund, I get to invest at the bottom of the cycle with a new set of LPs, and I get to, the entry price changes to reality and those entry prices are never going to be hit again, therefore I'm out.

Peace out. So the deck chairs are going to shuffle a bit here, but man, the thing I'm seeing, I think less startups would be very good because I don't know if you had this phenomenon, but kind of like a weak talent pool or a weak bench on some startups where they didn't have a world-class CFO

product officer, chief technology officer, whatever it is, the dispersion of talent was so great that we were taking talent and spread in the peanut butter very then.

Now you get some big chunky talented teams like it's going to be better for the startups that remain. That's what I'm excited for is the consolidation. So if you have a startup and you've got some modest traction and you got a little cash in the bank,

merge with a strong startup, bring your team over there. That's, I think, a big win. If you can get some equity and merge your startup, that's not going to get funded with a really great team. And if you have a great team, and you can do what's called the tuck-in acquisition, I know it's hard to think of in this kind of market,

man, the tuck-in acquisitions would be wonderful for everybody involved. Consolidation of talent. All right, listen, Ben, great job. You too, Jason. Thank you. Everybody, stop what you're doing right now. Go follow Gilbert.

He's not in the first name. club, but he is in the last name club, which is the second best club to be in on Twitter. G-I-L-B-E-R-T, Gilbert. He's at Gilbert. Go say hi. If you got a great company, pitch PSL, Pioneer Square Labs. This is a great, great venture fund and incubator. You're going to be incubating some more companies or you're going to be more investing in

companies. We'll spin out four or five companies this year. Love it. Let me know. Maybe I get my beak wet. Maybe I can get it out one of these. PSL companies. And importantly in the Northwest,

if you are any part of your company is in the Portland, Seattle, Vancouver region, would love to talk to you. You believe that you do better work when you can go visit and break bread with the founders, correct? Yes, but I've sharpened my pencil on this a little bit.

I believe that Seattle companies like Microsoft, Amazon, and the 200 other companies that have opened engineering offices here spin out ridiculous talent. And so I just want to fund that talent. And that talent can move, but, you know. I like it.

I like it. That's an approach. That's the thesis. I'm starting to go out there in the real world. I want to do tons of real world stuff now. I went to Stanford on Friday and was supposed to talk for 90 minutes, wound up doing three hours with these GSB students and the entrepreneurial clubs there. It took seven, eight, no, nine pitches.

And then went out for beers and pizza, really bad pizza. and cheap beer for another two hours. I spent six, no, three hours. I spent six hours, five or six hours on campus. Just hang, and, you know, of the 150 people in the audience, 100 of them came for beers and stayed till the end. And we basically closed the bar. We closed the pub on Steverdown.

I want to do more. College tour coming up. I want to meet founders. I want to get out of the house. It's good times. All right, Ben. And every, oh, by the way, since you're in your podcasting up right now, just go ahead and give a search for acquired and subscribe now.

And we'll see you all next time. Bye-bye.