Would You Buy a Used Car From These Guys?

I know this sounds like it's a political post…LOL…I promise, it's not!

Rather, it’s a cautionary tale about a topic I have written a lot about over the years…Over-valued companies who make millions/billions for a small number of people, who have no real business model, and claim disruption because they are allowed to lose multi-millions/billions with zero accountability. Behind the fancy DIGIBABBLE, the only disruption that’s happening is in their personal pocketbooks.?

The latest “crisis” in quarterly reportings from companies like Disney and Netflix is going by many names—another tech bubble bursting, a market correction, and by the affected, a blip on the road to riches…In reality, I think it’s the wake-up call that slow, real growth is critical and important once again. The KPIs of future start-ups have to change: innovation for betterment, not so-called disruption; profit, not sanctioned loss; and no more labeling every retail, delivery, or entertainment business “Big Tech” to shield them from scrutiny and the need to return value like their peers. Real business models driving real business. What a refreshing idea.

I hate to pick on one company, frankly, there are so many to choose from, some that I have written about for years, like Uber and GoPuff and even Amazon…yet Carvana is a great example for all.?

Carvana. We all know the company that “disrupted” the used-car market in the US. The company made billions for its founders (one of whom had pleaded guilty to bank fraud in 1990). Those same founders control nearly 100% of the voting rights of the company and admit in their public filing that this manipulation “may result in decisions that are not in the best interests of stockholders.” WOW! As a board member of three publicly traded companies, I am speechless as to how a board allows this…and even more so, the SEC…but what do I know?

To be fair, like many similar analyst-driven super-valuations, they fared well during the pandemic. People were bored, had recovery money, and interest rates were low. The personal wealth of the founders climbed to over $20 billion as they told their shareholders, “With our progress so far this year, we believe our path to becoming the largest and most profitable retailer has never been clearer.”

One quarter of profit in their entire company history, and suddenly the forward bet was huge by the Street. Meanwhile, the founders sold billions in shares.

I will leave it to you to search (Google/Bing, you know the drill) the details and come to your own conclusions.?

I will only add that the high-profile car vending machines (pure hype), the posted complaints and client lawsuits, and the obvious lack of management skills or infrastructure might have been a hint?

As reported by Forbes, Daniel Taylor, a professor at the Wharton School was quoted as saying, “The Garcias (the founders) knew the music would eventually end.”

So, what does any of this mean?

• Enough DIGIBABBLE – there is nothing digital about this business (or others). It's about logistics…buying; selling; registering; delivering…tech is a mere enabler and worthless unless the rest works. And it doesn’t seem to.
• People are waking up to it all. While it might be cool to get a coffee delivered in 15 minutes for nothing, what’s the real cost to you, to the delivery person, or to the business that made the coffee, and who is actually benefiting?
• Start-ups, start honing in on your business model. Slow and steady might not be as sexy or get you to Unicorn Status in a year, but if you are really solving a problem, if you are really adding value, if your growth and profit ratio is sustainable, you have a better chance of weathering any storm.
• Let’s stop lionizing bullshit. There are real business heroes out there we should be emulating.

Like I said, search and read carefully. A company built on having no overhead, no real estate (what were those towers?), is now buying a company that does. Kind of like all the other retailers who swore never to have brick and mortar and now can’t open stores fast enough, despite the recession…or maybe in anticipation of the day after.?

Readers…friends…enough!!! We need to take this all back.

• Make tech the powerful tool it should be and not smoke-and-mirror hype.
• Make sustainable growth and fair profit the driver of valuations.
• Stop “disrupting” and start “solving.”

And follow the money…it doesn’t always flow to helping the consumer at all.

What’s your view?