How Carvana Survived a 99% Stock Collapse | Next to Lead

0:01 down 99% stock price.

0:03 The worst Company of the Year is Carvana.

0:05 It'll add a couple gray hairs.

0:07 It certainly feels dramatic as you're going through

0:09 it in late 2022 Carvana was on death watch.

0:13 Shortly after a parent on the fortune 500 the company hit a wall.

0:17 Carvana shares dropped 99% in just 16 months,

0:21 and its valuation crashed from $60 billion to 1 billion.

0:26 Analysts brace for a total financial meltdown,

0:30 predicting Carvana would run out of cash before year end.

0:34 Today, Carvana is back.

0:35 Are there some people who ate their words?

0:37 There absolutely are.

0:38 Now, let's keep going.

0:40 Shares are up 85 times its 2022, lows,

0:42 and the company is spending billions on new

0:45 acquisitions technology and augmenting the customer experience,

0:48 and yes, it's opening more of its iconic car vending machines.

0:51 So how did Carvana go from crashing to cruising?

0:54 I'm Ruth Umoh, and this is fortune next to lead.

0:57 Christina Keiser, Executive Vice President of Strategy at Carvana.

1:01 Thank you so much for joining us on fortune next to lead,

1:04 we're delighted to have you.

1:06 Thank you so much for having me.

1:08 I'm happy to be here.

1:09 I'm excited to have you, because you have had a front row seat to what is

1:13 arguably one of the more volatile business stories in corporate America.

1:17 Really unique turnaround story at Carvana not long ago,

1:20 it was the ultimate pandemic darling,

1:22 thrown at a pace that really seemed to defy gravity.

1:25 Then almost overnight, the company seemed to hit this wall.

1:29 Financial Analysts called it a near death experience.

1:32 You didn't just survive.

1:33 You actually staged one of the more aggressive pivot in retail history.

1:37 Today, you're sitting on the fortune 500 and a company reported record profits.

1:42 You're recognized as one of the fastest

1:44 growing technology in online automotive retailers.

1:46 Lots to dig into there.

1:48 Oh yeah, let's start with what exactly Carvana is in some spaces,

1:52 it's described as a tech company, is described as a retailer.

1:55 Some people discuss the financing aspect.

1:58 What is Carvana?

1:59 Carvana is all of those things.

2:01 You know, the company was really founded around a consumer experience,

2:04 and so first and foremost,

2:06 what we strive to be is a better way to buy and sell a car.

2:10 And that's can sound very high concept, but, you know,

2:12 I think what we observed basically was a very important

2:16 consumer purchase decision and experience that many of us go through.

2:20 Maybe it's the second largest purchase you'll ever make behind a home.

2:24 And yet not a lot of customer satisfaction in what

2:27 that journey feels like when you're sort of in the driver's seat.

2:30 No pun intended, of that experience.

2:32 And so Carvana aimed to change all of that by bringing you know,

2:36 sort of the trappings of modern technology into the equation.

2:39 And we are a very vertically integrated business behind the scenes, you know,

2:44 behind the website where you browse tons

2:46 of vehicles and get to see transparent pricing.

2:49 Behind all that, there's a ton of infrastructure and a ton of technology.

2:53 And so I would say we are definitely a technology company, right?

2:57 Even from day one, we were an E commerce company trying

3:00 to build something first of its kind to commercialize a different experience.

3:04 We're also a logistics company.

3:06 You can't put a car into a cardboard box and ship

3:09 it across the country through one of the many providers.

3:12 And then we're also a financing company,

3:14 because to deliver that transparent customer experience,

3:17 you need to be able to confront the fact

3:20 that most people will finance when purchasing their vehicle,

3:23 and a big part of where sort of the discomfort comes in for many

3:27 customers is the idea of information asymmetry and the lack of transparency.

3:31 And what am I going to be paying here?

3:34 Like, you know, that's the car I like.

3:36 Now, what's it going to take for me to get out the door?

3:39 And so from day one,

3:40 Carvana really invested in vertically integrating the financing portion

3:44 as well to be able to deliver the customer

3:47 the certainty that here are my exact terms

3:49 on the vehicle that I'm going to be buying,

3:51 and this is what's right for me and my family.

3:54 Many companies have tried to modernize a used car retail space.

3:58 Many of them have also flamed out.

4:00 What makes Carvana unique?

4:01 What are you doing exceptionally well?

4:03 Man, that's a really interesting question.

4:05 So I think when we first got started, what was the buzz in startups?

4:10 Was marketplaces, asset, light, capital light was the name of the game.

4:14 That was what was getting funded.

4:15 This is an era when sort of Uber was flying high, and it was, it was Wow.

4:20 Like, look at how fast these things can grow.

4:22 Carvana is not that.

4:24 As I just mentioned to you,

4:25 Carvana built a ton of operations to ultimately deliver a better

4:29 and technology to deliver a better customer experience to the customer.

4:33 And I think that came from this conviction that that is what

4:36 it would take to actually have the control over that customer experience,

4:40 and that's also what it would take to, ultimately, at scale,

4:44 be able to have differentiated cost structure and unit

4:47 economics that could let us do well by doing good.

4:50 It's interesting because we're in this age of AI,

4:53 obviously you can't have any conversation without discussing AI,

4:56 and there's this lean into discussing the human touch.

5:00 Points.

5:00 And for me as a consumer,

5:02 Carvana speaks to me because there isn't that human touch point.

5:05 I don't feel like I'm being sold

5:07 to, and I have to navigate the traditional car dealership.

5:10 How much of carvana's success, especially as you look at millennials and Gen Z,

5:14 is a fact that there's less of that human friction.

5:17 You'd go online, and you don't need to have that touch point.

5:20 It's not as critical.

5:21 I do think that's super important, but it's not right for everybody.

5:25 So our sort of ethos on this is that the customer shouldn't have to call us,

5:29 but they can if they want to, and we

5:31 should handle those calls extremely well and be

5:33 able to give them that human element if

5:35 that provides some sort of value in the transaction.

5:38 But like you, I would say I like to be sort of unbothered and be able to browse,

5:42 you know, from the comfort of home in my pajamas, right?

5:45 And and really like, get myself to a place where I'm ready to transact,

5:48 and then I'd like to be able to do that in the most efficient way possible.

5:52 And so I do think cutting out all of the inefficiencies in the transaction

5:55 and giving the customer that sense of control is a huge portion of our success.

5:59 But I'd also say a big part of it

6:01 is sort of like meeting the customer where they are,

6:03 and if what they'd like to do is talk through it, we're also there for them.

6:07 So we shared some information as of the end of the year,

6:10 where about 30% of our customers now get all the way

6:13 through the retail transaction without talking to a human until the driveway,

6:16 and that's 60% for our customers who are selling their cars to us.

6:20 So we've made a ton of progress with this sort of self service transaction.

6:23 But again, for those who want to literally or metaphorically

6:27 kick the tires or just make sure there's a warm,

6:29 friendly face, you know on the other end of the line,

6:31 we are there for them as well.

6:33 From the outside looking in, it seems as though you have

6:36 climbed up into the C suite ranks at a relatively rapid clip.

6:40 As someone who's gone through it, it might not have felt all that fast for you.

6:44 What has helped you stand out?

6:46 Oh gosh, I don't know that.

6:48 I've thought about it that way, but what I would say is,

6:50 if I were to draw a through line between my career

6:53 and sort of the opportunities that I've chosen to take,

6:56 a big part of it would be people and learning.

6:59 And not only is it a core criteria that I need to respect the people

7:02 that I work with, but I want to be able to learn a ton from them.

7:05 It's also led me to put my hand out and say,

7:07 hey, I'll grab that project at various points in my career,

7:10 where it may not have felt like a linear

7:13 step from what I was working on previously,

7:15 but that's never been that important to me.

7:17 It was more important to me to be putting

7:19 myself right in the way of learning and opportunity.

7:21 You were steeped within the communication sector.

7:24 You're advising executives and leaders on how to package

7:28 a message which is so important that storytelling.

7:31 What did that experience teach you that perhaps

7:34 leaders don't understand until they're actually under fire?

7:38 Oh, yeah.

7:38 So interesting.

7:39 So I graduated right into the financial crisis, started a job in communications,

7:45 and it became quickly crisis communications that was sort of all,

7:49 all there was at the time.

7:50 What I ended up learning was simplify down

7:53 to a concrete message that everybody can understand,

7:56 and the importance of doing that, not just externally, but also internally,

8:00 to help the workforce that you are relying on to drive toward next steps.

8:05 Strategy and communication are cousins.

8:07 They may even be twins.

8:10 Any strategy that's not communicated is more like an idea,

8:13 and it's very hard to action on and very hard to mobilize people around.

8:17 So that that really helped me

8:19 appreciate the value of really strong communication.

8:21 Let's talk about your role.

8:22 Strategy is what you're overseeing.

8:24 It's such a nebulous term.

8:25 It can mean a million different things, depending on industry or company.

8:30 What is strategy really?

8:31 What is good strategy?

8:32 How do you define that?

8:34 Oh, for sure, at Carvana, strategy is not a function.

8:37 Strategy is something that everybody does, and so my role is not to oversee

8:42 a team of strategists that makes all the decisions,

8:44 but rather, we have people who are closer

8:47 to every single problem than I could ever be,

8:49 or than our management team could ever be.

8:52 But we do need, ultimately, tools to all come together and be sharing results,

8:57 sharing priorities and marching in the same direction.

9:00 And so I think that at Carvana, the role of strategy that I play

9:04 is really more about synthesis and communication.

9:06 And, you know, target setting for the whole group and balancing

9:11 and allocating resources to the most important priorities of the company.

9:15 You brought up the really great point that, as someone

9:18 who is really pushing the strategy for it.

9:20 First of all, creating and executing on it.

9:22 You need your team members, you need your employees to feel galvanized

9:25 and understand the vision and move on that.

9:28 How do you go about doing that?

9:30 How do you lead?

9:31 I think it does come back to communication.

9:33 And at Carvana, we're a very collaborative team.

9:37 That means that the idea oftentimes comes from it can

9:40 come from it can come from anyone on the team,

9:41 and it oftentimes comes from the person closest to the problem.

9:44 We also have a pretty, I don't know,

9:46 maybe you could call it like a Socratic method,

9:48 or a collaborative method, of we stress test ideas as a group.

9:51 And a big way that we stress test ideas and formalize them

9:55 is putting them into writing an idea that can't be written down.

10:00 And really thoughtfully structured usually doesn't end up making

10:03 it and not only can it not be communicated,

10:05 but I think you learn so much in the process

10:08 of writing about sharpening it and making it right.

10:11 So we use a lot of writing to sort

10:12 of initially lay out what's the long term goal,

10:15 and then what are the many steps that it's going to take to get there.

10:18 We have a set of what we call working principles.

10:20 You know, we have company values,

10:22 but we also have these working principles that were

10:24 designed to articulate how we want to work together,

10:27 like, what does good work look like at Carvana?

10:29 And one of my favorite of those is big dreams,

10:32 small steps, and it's visualized around a trail runner.

10:35 So if you don't know where the top of the mountain is, you're going to get lost.

10:39 You're never going to find your way there,

10:41 but if you're only looking at the top of the mountain,

10:43 you're going to stumble on the rocks along the way.

10:45 And so I think we try to find this balance of picking the right goals,

10:48 really aiming and knowing where we're going,

10:50 and then getting focused on what are the iterative steps

10:53 that we'll actually take to make progress rapidly toward that goal?

10:56 What is the top of the mountain for you currently?

10:58 Oh gosh, I think that for for me as a person,

11:00 or for Carvana, I'll start with Carvana.

11:02 Carvana recently outlined a goal to sell 3 million retail units a year,

11:07 3 million cars a year in the next five to 10 years,

11:10 at a 13 and a half percent adjusted EBITDA margin.

11:12 And that's a big goal.

11:14 We choose big goals on purpose because we've observed that we're

11:18 at our best when we have sort of the pressure of a goal,

11:22 and we have to really prioritize,

11:24 and we have to really be thoughtful about each and every step that we're taking.

11:28 And it's not the end of the road for us,

11:30 but it's a good sort of midterm goal that orients

11:33 us around where we want to get from a growth perspective,

11:35 while maintaining really strong profitability, industry leading profitability,

11:38 and then at the very same time,

11:40 we're always looking to improve the customer experience,

11:43 and that's a really big part of how we continue to reach our growth goals is

11:47 by getting better and then sharing more

11:49 of the ways that we improve back with our customers.

11:51 And then for you personally, yeah, it's usually still around learning.

11:55 It is.

11:56 So I'd say I measure myself in my learning.

11:59 Oftentimes, one of my favorite parts about my career,

12:02 generally and at Carvana, is that I've never been bored.

12:06 So there are first shows, it does.

12:08 But I would say that at each phase,

12:10 I've sort of had this feeling of, I don't know

12:14 if I ever expected to be at a company this large,

12:18 with operations this big, you can, sort of like,

12:20 count all the ways that you're in rare air and wow,

12:24 let's squeeze all the learning out of that that we possibly can.

12:27 So I think I'm excited to challenge myself in new ways

12:30 that map to the ways that the company has opportunity and can grow.

12:35 So let's talk about one of the more

12:37 recent crises that Carvana navigated its way through.

12:39 Because I think that they can be hugely instructive,

12:41 especially when you once you come out on the other side,

12:45 you joined Carvana in 2016 that was about

12:47 four years after the company had been founded.

12:49 About a year before it ipoed.

12:51 The company was just seeing massive growth, massive scale in 2022 however,

12:56 there was a delta between the company's

12:59 internal optimism and the external markets, quote, unquote, death.

13:03 Watch.

13:03 You all saw aggressive growth, a major acquisition, higher interest rates,

13:07 a tougher used car market, all of those things were colliding all at once.

13:12 Walk me through that experience.

13:13 I mean, how were you feeling at the time?

13:16 What was your emotion at the time?

13:18 Carvana had been in this place where we had grown

13:20 at 100% year on year for most of our history,

13:24 in a very operationally intensive business,

13:26 that's really hard work, and it feels like a lot.

13:29 So in a lot of ways, it didn't feel that much different,

13:31 because we had always been, not in crisis mode,

13:33 but certainly in like pedal to metal.

13:35 I might describe it as almost like offsides

13:38 in 2022 we had prepared for another big growth year,

13:42 and we have to prepare in advance for that type of growth.

13:45 We have to almost choose ambition.

13:46 And then we found a very different marketplace in 22 than the one

13:50 that we planned for, and suddenly investors

13:53 change from valuing growth to valuing value,

13:57 seemingly overnight, capital markets basically closed to you,

14:00 and doors shut all at once.

14:03 So I think that it felt different because we were being questioned.

14:07 But if I'm totally honest, for most of carvana's life, we were questioned.

14:11 We had an IPO that was one of the least successful IPOs in NYSE history,

14:16 as far as I've ever researched, we were a company from Arizona that had none

14:21 of the proper accolades of a fancy venture capital investor,

14:24 or being in New York or being in San Francisco,

14:27 I think we were a bit off the map,

14:30 and that has led us to be questioned over and over again.

14:33 So 2022 almost felt like we were back in that position of being the underdog,

14:38 of being questioned, of having everyone wondering, did this idea ever work?

14:43 It's not linear.

14:44 You get celebrated that in hindsight.

14:46 However, did it feel that way in the moon

14:49 end when you're seeing these headlines saying, near death experience.

14:52 Can they survive when you're you know your employees are seeing

14:56 the stock price tank when they're

14:58 seeing the headlines eventually change, falling.

15:00 Yeah.

15:00 So how do you navigate that?

15:01 Because again, in hindsight, especially coming to the other side.

15:04 Of course, that seems like an easy statement, but in the moment,

15:07 what are you telling your employees how I'm

15:09 sure there's a movement where you're going from, okay,

15:12 this isn't great to like, are we in crisis?

15:14 Oh, for sure.

15:15 Yeah, for sure.

15:16 So it's so difficult because you have

15:18 the scoreboard of the stock price every day,

15:19 and then you also have a ton of media articles every day.

15:22 You know people day.

15:23 You know, people are going home for Christmas or Thanksgiving,

15:25 and they're definitely sitting around the table with their loved ones saying,

15:28 like, is it time to get out of there?

15:30 There was a ton of pressure coming from outside of the company.

15:33 I think one of the good things for us is that we

15:36 have the customer as sort of a ground truth as well.

15:39 So for sure, there's this referendum on your value

15:42 every single day in the stock price,

15:44 but there's also the customer in front of you saying,

15:46 I value the service that you provide to me.

15:49 And that can be really galvanizing

15:50 at a time when everything else is being questioned.

15:53 You're sort of like, does this business work?

15:55 Okay?

15:56 We need to demonstrate to our investors

15:57 that we can be profitable and then grow again.

16:00 And we created a three step plan that was, you know,

16:03 get back to positive adjusted EBITDA,

16:05 demonstrate significantly positive unit economics, and then grow again.

16:08 And we just started to chip away at that plan.

16:11 So let's say you're looking to reduce transport distances,

16:14 or something like that, and eventually that changes logistics costs,

16:18 which is going to show up in your profitability.

16:20 You can see those transport miles changing week to week.

16:22 Your investors get to see that once a quarter in an aggregated metric.

16:27 And we had so much more confidence, I think,

16:29 because we were able to see that, and we were able to see the folks

16:32 around the table get that underdog spirit

16:35 and ultimately feel not entirely uncomfortable with it,

16:38 in order to be successful as a company, even as a leader,

16:42 in some ways, you do have to be blindly optimistic to take in risk.

16:46 Now, again, looking in hindsight, did you feel that that was the case?

16:50 Did you feel that you moved a little too aggressively?

16:53 Were there any warning signs where you're like, oh, yeah,

16:56 maybe we shouldn't have been tracking for a growth period.

16:59 We should have shifted or adjusted in these specific facets?

17:01 You know, I think that's really interesting question,

17:04 and there are a lot of lessons learned,

17:06 but I would say one of the biggest lessons actually

17:09 doesn't have to do with Were we too aggressive around growth,

17:13 or anything like that.

17:14 It has to do with focus.

17:15 I think that we came to believe that we could continue to add

17:19 resources to various parts of the organization and pursue more at once.

17:23 And we had a goal of sort of parallel processing more and more and more.

17:28 And what you have to do in a moment of crisis is get focused.

17:32 And then, I think we came to believe in that almost religiously,

17:35 as the best way to work, even when you're not in a moment of crisis,

17:38 that it's often said, you know, startups die of indigestion,

17:42 not starvation, but I think big companies do the very same thing.

17:45 And maybe they don't die, but they become much less effective,

17:48 they become much less nimble, they become much more bureaucratic.

17:50 And so this afforded us an opportunity

17:53 to be really religious about what our priorities were.

17:56 Get that list tight, really make sure it was a priority list,

17:59 not just a list of all the cool things we wanted to do.

18:02 We like to say it's the error of ambitious people to want to take on more,

18:05 and it's a natural error to make.

18:07 But I think we now have this governor of, are we chasing the right things,

18:10 and are we ruthlessly prioritizing?

18:12 And the way that I like to think about it is you're doing it right.

18:15 If it doesn't feel good, it has to feel like you're giving something up to know

18:19 that you're actually setting a list of priorities and making a cut off.

18:22 What did you feel like you had to give up?

18:24 What was your trade off in terms of projects and maybe things that excited you?

18:28 There's a long list of things that we had to give up,

18:31 but many of the things were ones that didn't have a good why.

18:36 Now I described this really aggressive goal that we've put out there,

18:39 and part of why you do something like

18:41 that is that, then when the conversation about

18:43 the really neat idea that's a little far

18:46 afield of what you're working on comes up,

18:48 you can sort of say, is that going to help us get to 3 million customers?

18:51 Is that going to help us raise customer MPs?

18:53 Is that going to help us spin the flywheel of positive word of mouth?

18:57 If the answer is like, eventually, it's probably not.

19:00 Now, you said that what really helped you

19:03 move to this period of growth is becoming focused.

19:07 You mentioned focus repeatedly when I was interviewing Nike CEO Elliot Hill,

19:12 he said the same thing, we got to get focused.

19:15 Similarly when I interviewed the CEO of Airbnb, Brian Chesky,

19:18 they also, like any company, had their period of crisis.

19:20 He said it was getting back to our focus,

19:23 which is around experiences and travel.

19:25 Is that how you're describing focus for Carvana?

19:29 And if so, what do you mean by getting back to our roots?

19:31 Because also the top of the conversation,

19:33 you talk about the need to evolve in day one is not going

19:35 to look like day 100 so how do you kind of marry the two ideologies?

19:39 For sure, I do think it's similar.

19:41 I think that for us, there's sort of this customer experience North Star,

19:45 and that's backed by a business model, North Star, if you will.

19:49 So this is a little bit on the nerdier side,

19:51 but it's we're this very vertically integrated business.

19:54 We have a fundamentally different cost structure than our competitors,

19:56 and that lets us kind of capture more of the value chain by.

20:00 Doing more across the automotive transaction that lets us

20:03 deliver a better customer experience and deliver industry leading profitability.

20:06 And so that's kind of a North Star that we have.

20:09 Is we are just one and a half percent market share in an enormous market today,

20:14 most other consumer verticals,

20:16 a market leader would have a much larger market share than that.

20:20 And so I think just doing what we do better and bigger,

20:24 and letting all of the positive feedback in our model

20:27 help us continue to improve the customer experience,

20:29 which then feeds back as growth,

20:31 which lets us continue to improve the customer experience.

20:34 What's core and what reinforces that customer

20:37 experience and business model advantage loop, the true high ground is when,

20:42 by executing our model that's different and we believe better,

20:46 we can deliver a differentiated experience

20:49 that stays differentiated and continues to evolve.

20:51 That's what I would say, is like core and high priority for us,

20:55 and then the way we measure it is really always as much

20:58 as possible in quantified either unit economics or customer experience terms.

21:04 So you know, last year, we measured the value that we delivered back

21:08 to the customer in the form of delivery times that were,

21:11 on average, one day faster, and interest rates that were a point lower,

21:14 and delivery fees that were $60 less.

21:17 And those are tangible benefits we often talk in Unit economic space,

21:22 or sort of like customer economics or customer value space,

21:25 and I think that really helps us prioritize.

21:28 I want to talk about the business model,

21:30 certainly carvana's inventory, and pivot to its physical infrastructure.

21:34 Carvana sold just under 600,000 cars last year.

21:38 The more inventory you hold, obviously, the more choice you can offer customers,

21:42 but also you take more risk if used car prices fall.

21:45 So how do you kind of manage that trade off?

21:47 Well, I think one of the advantages of the model

21:50 is that we're able to expose centralized supply to national demand.

21:54 So unlike you know, the traditional retail model,

21:57 where you can buy the vehicles that are available on the lot in front of you.

22:02 You can take advantage of our inventory across

22:05 every single carbona inventory pool across the country,

22:08 and you see distance as time for the most part.

22:12 You know you can have this one today,

22:13 and you can have that one in a few days time if we ship it across the country.

22:17 So I'd say that it's less risky than it appears,

22:20 because if you look at sort of our turn times,

22:22 and the amount of inventory we hold relative

22:24 to the number of cars we sell, is very healthy.

22:26 You know, another customer benefit that we were able to achieve

22:29 in the last year was adding 20,000 units of selection.

22:32 And the single most common reason a customer doesn't buy from us,

22:36 at least that they report to us, is I couldn't find what I wanted.

22:40 So every single unit of diversity that we bring

22:43 to the platform is likely bringing a different customer to the platform.

22:46 So it's one of the core ways to kind of spin our growth flywheel,

22:50 is to continue to add inventory, and we'll do that responsibly, right?

22:54 We don't intend to do that at the expense of the health of the business.

22:58 But fortunately, these things can kind of come together.

23:01 And the more inventory we have, the more cars we sell,

23:03 the more cars we can hold, the more cars we sell.

23:06 Carvana also depends heavily on customers

23:07 being able to finance used car purchases.

23:09 If interest rates remain high, you know, they're quite high right now.

23:13 How much pressure does that put on carvana's business?

23:16 I'd say that it puts pressure on the entire marketplace,

23:19 and so we don't set benchmark interest rates.

23:23 Wouldn't that be nice?

23:24 But we don't, and we don't have any governor on inflation.

23:28 And so those move at their own pace.

23:31 If you look at the used car industry over time,

23:35 annually, it's selling 36 to 40 million cars.

23:38 There's definitely a swing there, but it's a pretty tight range.

23:41 It's a lot.

23:42 First of all, it's a very fragmented industry,

23:44 and then there are these moments of up and down, but there is robust demand.

23:48 And so I think we see sort of the market

23:52 movements as certainly very important to stay attuned to.

23:55 We're very keyed into customer affordability,

23:58 and so not being able to control benchmark interest rates, for example,

24:02 is a difficulty of that it would be nice to be able

24:05 to help our customers get into a vehicle with a lower interest rate.

24:09 Having said that, we can focus on what we can control,

24:12 which is our efficiency, and try to pass more value back to our customers.

24:15 So for example, I just shared that we passed

24:17 a point of rate back to our customers in 2025

24:20 and that was the result of our financing platform getting more

24:23 efficient and improving our credit scoring methodologies and all of that.

24:28 When we achieve a gain like that, we can either choose

24:31 to take the profit ourselves or share it back with our customers,

24:35 and it's an easy call on that front,

24:37 especially given the affordability challenges in today's market.

24:40 Simply a matter of goodwill?

24:42 Is it measurable ROI?

24:44 For sure, there's a measurable ROI, right?

24:46 You know, if affordability is one of the principal challenges,

24:50 and the whole marketplace is struggling with that same question of, how do

24:54 I help the customer in front of me afford the car that they want?

24:56 Being able to help the customer afford the car is.

25:00 Is a lever, you know as well.

25:01 Presumably they come back to you when they again need another used car.

25:04 Yeah, that's certainly the hope.

25:06 We hope that people walk away from the transaction delighted,

25:09 and we take that really seriously.

25:11 I've been meeting on my calendar every single week where we go through

25:15 our NPS reviews and we listen to we typically focus on the worst,

25:19 not the best, right?

25:20 Because that's where we can learn the most.

25:22 And we're listening to calls,

25:23 and sometimes we're cringing and saying, Gosh, we got that wrong.

25:26 How do we make sure that systematically we get that right?

25:29 In the future, Carvana acquired a US physical auction business

25:33 for $2.2 billion in 2022 the deal was a pivotal one.

25:37 It was a bit controversial at the time,

25:39 but for a digital first company buying 56

25:42 physical auction sites across the US seemed counterintuitive,

25:46 again, at the time, why was it worth the risk?

25:49 What was the thinking there?

25:50 Well, so this was really an acquisition

25:52 that was aimed at fueling our path to scale,

25:55 getting land that's zoned for automotive use,

25:58 that is adjacent to city centers that you can use to we inspect and put

26:04 work into every single vehicle that we

26:06 sell so that we can certify its condition,

26:08 and then we hold the vehicles at those very

26:10 large scale sort of industrial facilities until they're sold.

26:13 And so we need those facilities across the country.

26:16 So one of the advantages of acquiring Odessa, which, as you mentioned,

26:20 it was the second largest wholesale auction in the United States,

26:23 is that it already had this tremendous footprint of 56

26:26 sites that were the right size, the right use.

26:28 You could never have recreated their positioning in terms of the age

26:32 of the company that we bought relative to, you know, the modern era.

26:36 So it was just this very compelling way to say,

26:39 this can be our sort of launching point

26:42 footprint for the future from an infrastructure standpoint,

26:44 and we've now started to integrate Carvana reconditioning

26:47 at those wholesale sites so that we can spread,

26:51 you know, sort of inventory building across more

26:54 and more locations that has many advantages for the company,

26:57 including, you know, on the cost side, It's more efficient.

27:00 The cost to transport a vehicle inbound to one of those facilities and then

27:05 outbound to the customer is down because the miles we have to travel is down.

27:08 So that's all more efficient for the company,

27:10 and then for the customer, we're building more and more selection.

27:14 They can get vehicles faster, and the flywheel continues to spin.

27:17 So I think Odessa was a controversial acquisition,

27:20 partially because of its timing.

27:21 Ruth, we announced it before any of the big trouble happened,

27:25 and then we closed it right in the middle

27:28 of the questioning of, does this model work?

27:30 Is this a zero interest rate phenomenon, like,

27:32 does anyone want to fund this business anymore?

27:35 And so that the timing was awkward, it added debt to our balance sheet that no

27:40 one wanted to see us have at the moment, but I'd say now ex post,

27:44 it's very easy to look back and say that was so worth it.

27:48 It is our growth engine, and it's been a very successful acquisition.

27:51 I want to stick on Odessa, because Carvana prides itself as a tech disrupter.

27:56 Odessa is this legacy brick and mortar wholesale operation.

27:59 So how do you integrate this move fast tech culture with a traditional

28:04 and very labor heavy auction business without losing the strength of either?

28:09 Integrations are complicated, I would say, and in a certain way,

28:13 we were fortunate to have the world blow up

28:15 in front of us as soon as we did that acquisition,

28:19 because Odessa ran almost independently for its first couple years with Carvana,

28:24 which I think gave us a slow pace to start,

28:27 in sort of a healthy way, we got to know their business better.

28:30 Imagine being in their shoes.

28:32 You get acquired by Carvana, and immediately Carvana is persona non grata.

28:35 So that was a difficult thing for them.

28:37 I think we had to sort of earn their trust

28:39 and help evangelize what the future might look like,

28:41 and then when we did begin to integrate some of our sites,

28:44 it was really about getting everyone on board,

28:46 helping folks appreciate what the future looks like,

28:49 and also helping Odessa customers who may have

28:53 little interest in what carvana's retail intentions are.

28:57 One of the most recognizable features of Carvana is your vending machines?

29:01 Is there economics at play there, or is it all brand and spectacle?

29:06 It's both.

29:07 It's both.

29:07 This was a brilliant idea.

29:09 It predates me.

29:10 I won't take any credit, but I think our CEO,

29:13 our founding team, our brand team, had this thought of, okay,

29:16 it is very hard to build a brand in any space, but in automotive,

29:21 you'll know, if you sort of look around,

29:23 there aren't that many that aren't manufacturers, right?

29:26 If you think about the retail side,

29:28 there just aren't that many brands that have broken through at a national scale,

29:31 and it's extremely expensive.

29:32 So as a young company, how do you sort of make a splash?

29:35 Was definitely on our minds at that phase,

29:38 and this was this, you know, new fangled idea.

29:41 It was like, let's take car elevators.

29:43 They're available in Asia and in Europe.

29:46 They're used for vehicle storage all the time.

29:49 But let's wrap it in glass.

29:50 It's like a Jiffy Lube.

29:51 Is like mashed up with an Apple Store.

29:53 It's going to look really neat.

29:54 We're going to make it gimmicky.

29:55 Have a big coin that you drop in it, call it a vending machine, and.

30:00 That put us on the map, from a brand perspective, for sure.

30:02 And then we were the vending machine company for years,

30:05 every article that was written was the vending machine company,

30:08 which is, at least people were talking right.

30:11 That's, it's a huge benefit.

30:13 There was also advice that we got early on that was, you know,

30:16 a broker that we worked with, a real estate broker,

30:18 said, You know, you need a place.

30:20 And we sort of giggled at that advice.

30:22 Being an E commerce company, we were like,

30:23 that's that's sort of silly, but what he meant was ultimately so true.

30:27 How do people believe in a business that their friends

30:31 haven't transacted with yet and that they aren't totally aware of?

30:35 Part of it is just knowing, like, I can Google a place,

30:38 there's someone to go talk to and it gave a bit of credibility,

30:42 I think, as well, to have an internet business connected with a place.

30:46 Having said all of that, it is also hugely helpful from a efficiency standpoint.

30:52 So in order to fulfill each transaction,

30:55 we either drive to the customer's driveway and back, or they come to us,

30:59 and we love to for people to have the car as quickly as they

31:03 can and to be able to fulfill that demand as efficiently as they can.

31:06 So we wanted to offer a pickup option.

31:08 But if you're going to offer a pickup option,

31:10 it needs to be great, because otherwise, why wouldn't you stay at home, right?

31:13 And so we've made it sort of an event that's

31:17 fun and memorable and Instagrammable and the whole thing, right?

31:21 And then it's a permanent glowing billboard

31:22 in the sky that also put us on the map, metaphorically and literally,

31:26 in terms of, okay, that's a company I've heard of, and I

31:29 now have an emblem that I can associate with it.

31:31 Let's very quickly touch on.

31:33 Ai, sure.

31:34 I'm going to bifurcate my question first, where are you seeing?

31:38 Gen AI, genetic.

31:39 Ai, materially move the business at Carvana,

31:42 and then how do you personally use it to be more efficient in work,

31:46 in your personal life?

31:47 Oh, yeah, it's being used across the business.

31:49 I'll speak though to a couple of areas that I'm excited about within Carvana.

31:53 So one is just the customer experience.

31:55 We bought a company before covid That was building a chat bot for automotive,

31:59 and this was before LLM, so, you know,

32:01 it was a very different exercise at the time,

32:03 but we already sort of had this concept of, we own all

32:08 of the services that are necessary to give someone a very personalized,

32:12 automated experience.

32:12 We do own all of our services.

32:15 We own the finance service.

32:16 We own the logistics service that says, when's the next truck moving,

32:20 and what time could you get that vehicle?

32:22 What will your down payment be on the vehicle?

32:24 And so using AI in Customer Care has been this huge lift for us.

32:30 I'm also very excited about how we're using it in software development,

32:33 our engineering leadership is really evolving the way we come

32:37 up with ideas all the way to shipping and writing code,

32:41 and it's really changing our equation

32:43 of where the bottlenecks in the business are.

32:45 To answer your question about how I use it,

32:47 I use it all the time as a brainstorming partner.

32:49 I for sure, use it for analytics within the business,

32:53 and I find more and more that I'm also dictating to AI.

32:56 I don't know if you've found yourself doing this as well, but for me,

33:01 one of the constraints is just hands on keyboard in front of computer time.

33:05 If the bottleneck is me getting my thoughts structured and on paper,

33:10 there's no excuse for that anymore.

33:12 I can, on my drive home, dictate and then clean those thoughts up and have

33:17 them neatly organized by the end of the day, I I need to find a way to have

33:22 ai do more of the reading the moms WhatsApp groups.

33:25 So I haven't cracked that yet.

33:27 Totally honestly, Ruth, I'm still missing a lot in those chats,

33:31 but, but I think that synthesizing your thoughts has never been easier.

33:36 As a journalist, you know, the cold start problem of just like a blank

33:40 sheet of paper can be the most intimidating thing,

33:43 but these days, the first draft is easier than it ever has been,

33:48 so I really find it valuable for that.

33:50 What's the best leadership advice you've ever received?

33:54 This is more career advice, but I will share it anyway.

33:57 Someone said to me, don't spend five years getting two years of experience.

34:02 And it stuck with me ever since I thought it was just

34:06 a great way to encapsulate like you get one life to live.

34:09 You get to set the framework for what experience

34:12 you value and what learning you value, but push yourself.

34:16 Get out there.

34:17 Love that.

34:18 Yeah, I'm stealing that one.

34:19 How do you recover from a career or a business mistake?

34:23 Own it.

34:24 I think that's the simplest thing.

34:26 I find people tremendously credible,

34:28 who own their mistakes and who speak candidly.

34:31 I don't expect perfection from anyone.

34:34 I don't think people expect perfection from me, but certainly reflection,

34:39 authenticity and accountability is, I think, how you earn trust?

34:42 Well, I of course, have to ask what kind of car you drive?

34:46 Oh, right now I drive a rivian R, 1s lovely.

34:49 All right.

34:50 Well, thank you so much for coming along on this ride with me,

34:54 unintended, such a robust insight.

34:56 Thank you so much for having me such a pleasure.