Doug Demuro on Analyzing the Car Industry, Creator-Led Businesses, and Porsche Episode Follow Up

Ben: Doug DeMuro, it's great to see your face.

Doug: It is nice to be here. Thank you for having me.

Ben: Here, virtually this time instead of in-person in your garage.

Doug: Indeed.

David: Instead of us literally taking over your garage and house. Thank you so much.

Doug: But it wasn't that fun.

David: It was.

Ben: It was awesome. It was a year highlight for me. (a) It's fun to travel. (b) It's fun to do episodes in person with people. And (c) it was very fun to bring you into the fold, for you to get to see all the weird, idiosyncratic stuff that goes into Acquired, and for us to get to learn a little bit from you on how that is very different than how you have built your business.

Doug: I agree. It was just as interesting for me for a lot of the same reasons. You guys are so much more legit in terms of production quality and thinking through that sort of thing. I'm like, let's just wing it. Come on.

Ben: Which may or may not matter. You have built this incredible empire doing your strategy, and we have built our business doing our strategy. I think that's part of what we're going to talk about today.

Listeners, we wanted to do this immediately following the Porsche episode. But after a seven-hour day and sitting in a pretty hot garage with a lot of particulates in the air from all these Amazon moving blankets that we had just unpacked, we were like, let's get out of here. We can do this another time.

David: I will say, the kindest thing that Doug did for us among the many kind things you have done for us is you offered to keep the 100-plus pounds of moving blankets.

Doug: Let me tell you, Cars & Bids, we got an office. We're creating our own studio for me to film in the office. It's like a garage, and we need the blankets. My production people in the end were thrilled. I'm going to send you guys a photo of 300 blankets sitting on the floor of the office.

David: We were terrified, honestly. When we were emailing beforehand, we're like, we don't want to disrupt your house. We'll break everything down. We'll get it all out. We're like, how are we going to dispose of several hundred pounds of moving blankets in San Diego?

Ben: For listeners who didn't see our tweet about this, the setup that we did in Doug's garage, fortunately, yours had a reasonably low ceiling, but that's about the only gift that the space gave us in terms of acoustics. Garages are notoriously the absolute worst place that you could record audio, but it is a historic place. It's the place where you do all of this stuff on your channel, and it's the place where your Carrera GT is. So of course, we wanted to do it. Our solution was hanging moving blankets and coating the floor and moving blankets.

Doug: Which worked. It was a process.

Ben: Totally. It was a process. Doug, today, I wanted to dive into a bunch of stuff that are fun Acquired-like topics to talk about with you but just didn't fit into the Porsche narrative, including your business, including now that we've had some time since doing that episode for both of us to reflect on what we've seen in our analytics and our anecdotal feedback of changing our format to include a third person, an expert, and frankly, just a bunch of car industry stuff that I wanted to ask you about. The car industry over the last few years has gone through one of the most unique periods in history.

Doug: Totally.

Ben: Maybe let's start with Porsche episode follow up stuff. Listeners, we put that one on YouTube. We put lots of things on YouTube. Sometimes when we have guests, we'll put the full video up. Sometimes when we don't have guests, we'll put just the audio up and the logo of the episode, because it's a lot of work to create a video that hides all the seams well, because we don't shoot B roll that matches the exact audio that's in our audio episodes and are edited to that caliber, blah-blah-blah. But they never get more than 5000 or 10,000 views.

David: We are primarily an audio format.

Ben: Right, that's not what we do. We put up this episode with Doug, and it's gotten 400,000 views and is adding another 6000 a day, which in big YouTuber land doesn't sound like much. But for us, it's multiple orders of magnitude over anything else we've ever done on the platform.

David: Ben has this amazing shirt that he creates of the amalgamated analytics for all of our episodes. It's a time series graph, and you see the dots over time. It always goes up exponentially, which is super cool. The Porsche episode just breaks the graph. The scale doesn't accommodate it because of this. It's never happened before.

Doug: There's obviously a lot of potential reasons for it. Me is potentially one of them, but adding a third person is an interesting component.

Ben: Sure, but adding the third person being Doug is the driving factor.

Doug: For YouTube especially.

Ben: It has to be. You didn't put it on your channel. Do you have any thoughts on why that happened?

Doug: Unfortunately, some of my haters, for lack of a better term, have found that using my name has an effect on driving traffic, algorithm traffic, search traffic. There was a long time where I didn't do much. I didn't do a lot of interviews. I was just busy. I was so busy shooting my own stuff that I just didn't do a lot. The rare interviews that I would do would really blow up. I think that still carries through.

I've got a huge channel, and people are interested in, what's this guy really like? What's this guy really doing? I think any chance they have to see a little bit more, it seems like it pushes it out. That's what I've noticed. I say my haters, because sometimes people who have negative Doug things will be like, Doug DeMuro is wrong about this. That will drive traffic for them because my name has some search impact.

Ben: Fascinating. It's interesting that it's literally the name, because my best hypothesis was, you did share a tweet that linked to the video on our channel. My thought was, oh, because you sent a bunch of people to this video, YouTube learned that people who like Doug DeMuro's channel also watched this video, so it started surfacing it to people who are watching your channel. But the mere string of character is Doug DeMuro, the idea that your haters put that in their video titles, and that gets them views, is actually a completely different thing.

Doug: Yeah, it's an interesting thing, but I think that is what happened. I tweeted it, and I shared it on Facebook. I have a pretty large, organic Facebook following. Those two things probably helped, maybe drove a little bit more traffic than usual. Then YouTube was like, okay, why is it getting more traffic?

The name is in it. Their algorithm is probably sophisticated enough to understand, this isn't just dump content of some dude hating on Doug. This is actually good, thorough content, and that's a big driver for YouTube too. They push it out even more from there.

I think each of those things probably built on each other, and there you go. You guys had your first foray into a large scale YouTube. You must have gotten a lot of comments and crazy people.

David: Oh boy, yeah. I don't even know what to say on this. Podcast world is so different. This doesn't happen. There's no algorithm in the podcast world.

Ben: No episode is ever twice as big as your next best episode.

Doug: Right, sure.

David: It never happens. This is our first experience in eight years of something that just became an outlier.

Ben: Which actually really is annoying to me, because we had this very beautiful exponential graph that just doubled year over year, and there's no outlier. There's a little variance here and there, but you never have to explain away like, this number is really high for that reason. We won't hit that again for years. No, we don't even want to hit that again because our goal isn't going viral on YouTube. No, it's not the right one. I almost want to adjust our graph and be like, this is the Doug adjusted…

Doug: I agree.

David: This is the Barry Bonds of...

Doug: When I was obsessed with my YouTube Analytics for years and years, and there would be certain days where I did an integration, and I got paid way more than that one day, the graph spikes. There was some way I could remove it from the graph, because the beauty of the consistency of the graph is so important.

David: There's so much good stuff to talk about here. You mentioned getting paid. We have monetization turned off for our YouTube channel for us, because it's not our primary business model.

Ben: Or even a YouTube partner.

David: Yeah, we have no relationship with them. For you, especially in those days, and for most YouTubers, literally, views equals money like one to one, because we don't have the incentive in podcast land. Listens don't equate to money directly. When that would happen for you back in the day when you were first starting out, did you ever have a life-changing, at the time, amount of money in a single day?

Doug: The thing that was huge, I really started the channel in earnest in 2016. I was just screwing around. At the time, I was writing more and that YouTube channel was a complement to my writing. What really happened was in December of 2016, I posted a couple of big videos without really knowing it. There was a review of the Tesla Model X, which was early in that space, not that many people had done that.

David: I watched that video multiple times. It's so good.

Doug: The title is like, here's why the Tesla Model X is awful. Then I go through all the complaints that people had about it, and I proved that they were actually fine. That video blew up by chance; I posted that video in December. What happened that month was, I made $21,000 in ad revenue. I was like, oh, my God, this was more money than I was getting paid in my job.

David: You were a "struggling blogger" at this point.

Doug: Previous months, I had made $2000–$4000, maybe some months it would be $6000. It wasn't even enough for me to really register that this is something. $3000 a month, and then you pay taxes on that. It was a fun little side project, but then that month, I made $21,000. I was like, oh, this could be a career.

The next month, it was January of 2017, it went down back down to $5000. I was like, oh, well, I guess that was an anomaly. Of course what I didn't know at the time and had since come to learn and master, is that December has much higher ad rates. That was the beginning of me learning YouTube and how you have to game the system, how you have to know how it works, and all that. It was that December of 2016. It was like, okay, this is a possibility, now I got to figure out how to make it work.

David: This is super cool for us. The window into this, we've gotten to know MKBHD's team a little bit, talking to them, watching and listening to Colin and Samir, who you've been on. They do greatly.

Ben: By the way, everyone should go listen to that episode, Doug, your interview on Colin and Samir was excellent, telling the whole history of your origin story and Cars & Bids. We'll hit some of that here, but I don't want to be duplicative. People should totally just go listen to that there.

David: I naively used to think that, oh, over in YouTube land, creators there just make great content, and then that translates to money, they don't have to think about business. What I've realized is just like you're saying, no, you got to think about business. It's just different.

Doug: I think it's not that naive to think that because I think a lot of YouTube creators, especially when they're getting started, just throw random content on the wall and hope for the best. The smart ones don't. The smart ones are paying attention to a lot more stuff than their viewers will probably ever realize.

I was paying attention to not only the content, but the time of day, the day of week, the part of the month, the part of the quarter. All of that had a big effect on ad rates. If you go back through my videos throughout 2018, 2019, 2021, my best stuff was always uploaded in the last two weeks of each quarter and the last month of the year. I never really talked about that, but that was always something I did, because advertisers always get their last spends done through the end of the quarter. It was always clearly a big thing, and it always had a big effect.

I paid a lot of attention to that stuff. And then it was the content. You would watch some videos do well. Some videos do okay, and then you would think. Okay, that video did well because XYZ, I should do more like that, that video didn't do well because of ABC, I should do less like that. It was a constant, constant, constant following it around and trying to figure out the best.

David: This is so cool. The viewers are like, oh, Doug, he's just in his shorts, and he uses an iPhone. He throws up videos, but behind the scenes, you're putting in a lot of thought in this.

Doug: That's exactly right. I've always felt that one of my biggest reasons for success is because I've been underestimated at almost every turn. Part of that is because I've worn these stupid shorts and a stupid t-shirt. Everybody's like, I could do that. I think a lot of people said I could do that, I could do that right up until I had 3 million subscribers, and they were like, damn, he did it. And I didn't.

The current drivers on the Road and Tracks never really got on YouTube. I think, obviously, they ended up regretting that and they do regret it now, but they were watching this idiot with shorts do it, and they were thinking, we'll do it better. And they just never did. Suddenly, the idiot with shorts is driving a Carrera GT. There's a reasonable thing to that. I think I wasn't as much of an idiot as maybe some of these people.

Ben: To bring forward something that I want to ask you about, your production quality, you have kept it so that you can basically always shoot a video in a single morning and be done with it. I really admire the fact that everything fits in a backpack, it's just a lav mic. I think you shoot on an iPhone. Maybe it's a point and shoot camera, but it's definitely not a Canon Mark 5D hanging from a drone. You're not doing any of that.

A lot of the people who are looking for, how do I compete against Doug DeMuro with five million, six million subscribers, are busting out an insane production pipeline to try to compete against you. It's really fascinatingly a counter-position that you can keep a lean, mean machine, that you can do these videos all on your own and focus elsewhere, not on production.

Doug: That's exactly right. I don't want to call it a mistake, because some channels have been very successful doing a lot of great production. But I will tell you, and I may have told you this story when you were there but not on camera, I have a friend who's a YouTuber who's known for his high quality production. I saw him recently and he was like, I hate myself, I hate my life, I wish I hadn't done this.

It's funny because when I first started low quality production, it was the norm on YouTube, so there's no big deal, but there was a three or four year stretch where I was like, I wish I had done nicer quality stuff. I wish that I represented the car reviews more. I wish they were just better quality. Now over the last year, having talked to some YouTubers who committed to high quality stuff early, I actually have no regrets at all. I think I made the right choice in the sense that it's fairly easy.

I think what people are really looking for is just good content, like simply good. They want to see all the things in the cars, and I do that really well. The really expensive DSLRs hanging off of drones, you can do that stuff, but it slows you down. It limits the amount of content you can do, and then you end up hating your life.

Three, four years down the road, you're married to that. Your audience won't let you get away from it. And you're like, well, I guess I'm firing up the drone again. And it takes you two days to do a car review, whereas I could if I wanted to do four reviews in two days.

Ben: It's the drug. Right before we released this, we released our Costco episode. Costco, famously, the rumor is that they make money on their credit cards rather than it being an expense that they don't have to give the 2% or 3% that other people do. It's because they built their whole business only taking cash and checks. They never had the crutch of like, sure, I'll accept credit card payments. They only did it when it was absolutely on their terms. You never use the crutch of like, I'll make the best-looking video in order to hook people's attention.

Doug: Right, and I think that the results speak for themselves. People can make fun of me, and they do all they want to, but I'm closing in on 2 billion views. At the end of the day, what can you say? I get it, it's not the highest quality.

There are some other YouTubers and some other content creators who do not like me. I think part of it is because I seem amateurish, but I think what they really don't like is the fact that the audience doesn't mind that. I think that they wish that the audience was rewarding high quality production more than they do. But the simple truth is, they want to see the car.

Especially in certain parts of YouTube, I think this wouldn't work for everybody, but it has worked for me. People just want to see the damn buttons and switches. I want to see what they all do. And that worked for me.

David: To this whole theme for me of like, YouTube is a much more nuanced ecosystem than I gave it credit for, it absolutely clearly works for you. I think part of that might be like, it's your style, and it is a style. You can't just like not having a style.

People might be listening and be like, oh, well, all those other creators are so dumb, why don't they just stop doing that? But because of the YouTube algorithm, the YouTube algorithm does reward the quality of the video, too. If they were to stop doing that...

Ben: Careful with that word quality, David, quality of production.

David: Right.

Doug: Well, it's interesting because I think quality can be both. My videos are not high production quality, but they are incredibly high quality in the sense that they're factful. If you watch any other car review, I love all of my car review competitors, compatriots, whatever, they simply do not have as much crammed into a video as mine, period.

Yes, the other people, I don't want to say they make up for that with high production quality, but their high production quality probably gets people to watch, just like my tons of facts gets people to watch. Either way, they get people there. But to your point, a channel that doesn't have as many facts that are holding people's attention and starts to slough off on production quality, that's where you start to lose out.

David: It's YouTube, it's Google we're talking about here. This algorithm is very smart. Some people used to think that it actually is alive. There was that whole controversy. I suspect, if you have built your channel on production quality being a big input to the quality that YouTube thinks, so then if you dial that down, now your creator channel, part of the way the YouTube algorithm thinks about it is production quality. You're lucky you don't have this. But if you have built that up, it's not just the individual people listening. The algorithm, I suspect, is like, oh, well, now we got to bury this.

Doug: Probably, and the sense that there will be some people who wouldn't watch. That would probably start your spiral. Of course, that's the thing that every YouTuber is the most afraid of. If they do back down on production quality a little bit here and there, and fewer people watch, fewer people watch, then suddenly, they start to see all their views declining. That's the fear, basically.

Ben: This is a good time to ask you, when did you have the tick that kept you up at night, that splinter in your brain of like, oh, my God, this could all go away tomorrow, and I need to start another business that sits aside the media business?

David: Quickly, I launched the channel in 2013, but I didn't really start pushing it until 2016. There was that December of 2016 that it really blew up. Throughout 2017 and 2018, I refined it like crazy to really maximize the revenue. By 2019, I was already like, I got to do something else, something in addition. I'm never someone who just stops. I was always nervous. You're just a slave to this algorithm.

We'll talk about this more, I'm sure. But I'm thrilled that I did, because YouTube in general is not quite what it was in 2017, 2018, and 2019. It is still the place to go for DIY videos, Mr. Beast is great, and blah-blah-blah, but TikTok has shown up. TikTok really had an effect, there's no doubt. Every YouTube creator will tell you their views are down. And it's not as monetizable.

Part of me wonders if we will look back at 2017, 2018, 2019, 2020, 2021 as a heyday. I got lucky. It was like I hit a grand slam in the bottom of the ninth, basically. We may look back at that era and be like, that was the time to make money on YouTube. I think there's a possibility that in 5 or 10 years, you may not be able to do it that easily.

I just happened to be, in my heyday, just as YouTube was in what is starting to seem like maybe its heyday, and it really worked perfectly. I was always a little bit anxious. What is going to happen? Is this going to stick around? I'm really, really glad I had those thoughts, because the answer is we're not sure. YouTube may not be as strong in the future as it has been.

Ben: As you are considering business models to take those viewers on YouTube and turn them into Doug's customers, in some way, and have a real relationship with these people, I'm sure you considered a bunch of different businesses in order to secure that metaphorical bag or secure the relationship at least. How did you arrive at Cars & Bids, and did you consider other stuff?

Doug: I definitely considered other stuff. But if you go back to my channel in 2017, 2018, 2019 when it was really huge, huge, huge, I never really did any ad integrations. I never tried to sell people t-shirts. I always knew that I wanted to save all that promo for something. I always knew that when I wanted to do a business, I wanted it to be something other than so many of my fellow content creators sell merch, but I feel like that's just this hamster wheel. You sell merch, you do your videos, you sell merch, you do your videos.

In my mind, that's not a business. Yes, that is a component of your YouTube channel. But if you stopped doing your YouTube videos, the merch business would stop tomorrow. It's not the same.

David: You got to sell a hell of a lot of t-shirts. You, as a content creator, are probably making a buck from each sale, maybe.

Doug: To answer your question directly, I did look at other businesses. The auction site seemed like a great idea. In retrospect, I had no idea how hard it was to put together a marketplace. If I had known, I don't think I would have done a podcast. It was really hard.

David: Do you think though that there's anything else, maybe a podcast, that could have created as much value?

Doug: In retrospect, no, because we happen to launch this thing into the greatest car market honestly since World War II. That's what I hear from dealers who have been in business forever. Their grandpa was running the dealer back then. The last three years have been soldiers returning from war, and everybody was thrilled, everybody had some money, we were buying cars. It feels like that. No is the answer, but I only know that in hindsight that I probably couldn't have created a business this good in any other capacity.

Ben: I never considered the timing. I always thought this is the best business model because it's a marketplace, you need supply and demand. Both supply and demand happen to watch your channel, so you can independently bootstrap a marketplace.

David: And these are very high value transactions, a lot more than a t-shirt.

Doug: And you don't have to hold any inventory. There are some real benefits too. In addition to the drawbacks, which are significant, I complained about marketplaces, but there are some great benefits.

Ben: Back to the timing, can you explain what is going on? Why is this such an amazing time in the car industry?

Doug: We launched this business in June of 2020, which was not the height of Covid, but it was close. We were planning to launch April 1st of 2020, and we pushed through to Covid. We launched in June. Again, not the height, but still people were terrified. I thought it was going to fail immediately because no one wanted to spend money or do anything.

What ended up happening was the car market absolutely blew up. This is something that nobody could have predicted. I'd love to take credit for this. I talked about how I'm an idiot in t-shirt and shorts, and people underestimate me, but actually, I'm smarter than I look. This was not a good example of that. This was pure luck.

David: You were the clown car that drove into the goldmine.

Doug: That's right. It is a good business. We did do it well, I'm thrilled how my team created the website. It worked all great, but we never could have engineered the timing like we did. What ended up happening, which now is the famous story of the car industry over the last three years, and I suspect will be a story that dealers and people are telling for the next two generations, this 2020, 2021, 2022 situation. Obviously with Covid, a lot of car companies had to shut down production lines. And they also underestimated demand.

You have this issue, where the production lines are shut. Automakers are like, we're fine shutting down the production because we don't think people are buying cars anyway, so then supply comes down. Meanwhile, the federal government lowers interest rates to almost historically low levels and pumps a ton of money into the market.

That's a different conversation for a different time, but I think everybody agrees that a lot of money was pumped. Whether it was used fraudulently or correctly, there was a lot of money available, and there was a lot of cheap borrowing available. Suddenly, there were no cars, and there were a lot of rich people.

David: I guess the nature of the pandemic, too, of like, what are you going to do? You want a road trip, you want to drive.

Doug: I think people underestimate the effect that that has. I think that that was a real factor. My uncle went out and bought one of those crazy Sprinter vans. He was incredibly Covid-anxious. He has a house in the north and a house in the south. He did that and didn't get on a plane for two years.

A lot of people made decisions like that, or they were just bored at home and they were like, I want to go and get into a new hobby. Cars are not really something that's risky in terms of Covid. And we also saw a huge uptick in off road overland vehicles over the last three or four years blowing up, because I think that's another thing.

David: Which you are so well-positioned for, given your channel.

Doug: Yeah, it worked out perfectly.

David: The idiot in shorts. You were doing that all along with your defender.

Doug: It all came together just masterfully. It really worked out. That's basically the story. Obviously, what has happened since then is the automakers have scrambled to try to restart production. It has not happened with any speed.

Finally, supply and demand seem like they're starting to equal out. Obviously, we've seen the Fed raise the interest rates more and more and more, which has had the effect of slowing down demand. The automakers are finally starting to catch up with supply. Things are normalizing again.

There was a period that you'd go buy a Toyota dealer. I talked to a Toyota dealership in LA who told me they usually have 800 cars on their lot. During the peak of that, they had zero. In fact, the cars that were coming in were all pre sold.

It wasn't even a situation where they were getting cars. The cards were coming in, they would call customers. Hey, you want a Corolla, right? We have one arriving tomorrow. It's your only chance. Okay. They come down, they pay sticker or over sticker, and that was how it went.

Ben: Over sticker for new.

Doug: People were paying over sticker for Toyota Siennas. In fact, my understanding is they still are. We're talking about minivans, we're talking about highlanders, pilots, we're all going over stickers. It was a crazy, crazy situation that will never repeat itself.

Ben: Sticker is this famous thing in the car industry, where you walk up, you see the sticker, and then you're like, okay, cool, so I get this car for 15% less than that? Great.

Doug: Totally. The dealers had no cars to sell, but they were thrilled because they were making so much money on a per car basis.

David: Because the dealer probably kept all of that markup, right?

Doug: Absolutely. The manufacturer sells the car to the dealer for an invoice, which didn't change. The dealer sells it to the customer for whatever they can get. They try to get close to the sticker price. On some desirable cars, they're able to do that even in a recession or a tougher economy. But in this economy, they could do it on a Chevy Cruze. It didn't matter.

Ben: Did the manufacturers wise up to this, try to raise invoice, and say like, oh, we should split some of this hot margin?

Doug: They tried. On some vehicles, they were able to, but it was difficult to move that quickly for the automakers. At the end of the day, the automakers have these dealer agreements in place with dealers that have more power than people realize. The dealers are, in large part, private businesses that can set their own prices wherever they wish. The automakers were at a loss. They just had to do whatever they had kept doing.

The other fear the automakers had was, if we raise the invoice price this year, what happens when we're in an oversupply situation? Then the dealers don't want the cars again. It's very hard to dial it back. Tesla's direct sales model makes it easier to screw with pricing throughout the year, but the automakers don't have that luxury quite as much.

The dealers made all that money. Let's say they were selling Broncos for $20,000–$30,000 over stickers, that was a common thing. These dealers have been living incredibly large over the last couple of years.

Frankly, people have been very angry about this. All these dealers are making so much money. They're trying to screw everybody. But the truth of the matter is, this was their chance. Dealers in 2009, no one was complaining when supply and demand was working in their favor. When they walked into a dealer, and dealers were begging people to take anything at invoice, suddenly supply and demand has made a little turn, and it's not working in the favor of the customer anymore. Now they're all upset.

David: In general, being a car dealer doesn't strike me as a great business to be in.

Doug: It's a tough business. I think they make good money, but it's also enormously employee-heavy, enormously regulation-heavy, and you need a large space. You have to hold a lot of money in inventory in your floor planning that they call it, that they're paying interest on those cars.

David: It's like the opposite of a Costco.

Doug: Yeah, that's right. It's the opposite of a Costco. It is expensive, difficult, et cetera.

Ben: Is it like a lumberyard? I remember meeting someone who owned a lumberyard at one point. I was asking all these questions about financial planning for the future when you're a small business owner, like how does that work. I was like, how do you think about retirement? He just looked out at the lumberyard and he was like, that's it, all that lumber. I got $8 million in inventory out there on the lot. At some point, I'll just sell all that and then I'll retire.

David: But these dealers, especially I would assume luxury dealers like a BMW dealer, Mercedes, or Porsche might be a little different, but you've got dozens, maybe hundreds of millions of inventory sitting on the lot.

Doug: And they don't own it. They all finance all that. It's really a cash flow business, I think. In some sense, they're just trying to move stuff. Unlike lumber, I assume cars have model year.

There's a push. They got to get these things out the door. They can't have them for all that long. It's like a high pressure business. Everybody I know in the car dealership industry is divorced so many times. A lot of work on Saturdays and Sundays, a lot of pushing hard to get deals done at the end of month.

I don't know if I should tell this story. It's probably true of a lot of automakers. I remember when I was working at Porsche, and we were down to our last couple of sales trying to hit a goal at the end of the month. We were headquartered in Atlanta, and we would call the dealer in Hawaii at 8:00 PM on the last day of the month. They were the only ones still open. Can you punch a couple of cars? You do that stuff. That was just the way; it's a difficult business.

David: Wow. Here, you come along in the middle of all this with a used car. You can't design this any better. Literally, I don't think you are a clown in a clown car, but you drove into a goldmine. This is a historic confluence of events.

Ben: Let's stop oversimplifying this thing. You can be a savvy business person and also, basically, no human can time the market. It was a pretty reasonably good idea, especially given the fact that you had distribution, but you had no idea of the tailwind.

Doug: That's exactly right, period. There's no other way to put it. That's exactly right. We got lucky. We didn't know the tailwind. We made a great business. It's like that famous saying, the harder I work, the luckier I get. We've set ourselves up for success, and then we got additional help from the car market.

David: I guess, too, other people must have started companies, and they would bring a trailer. There were existing players out there, too. It is a testament to your savvy, hard work, and everything that to my eyes, at least it appears, most of this opportunity that got created, you captured more than your fair share of it relative to competitors.

Doug: That's right. Going back again, not that this is a trope of mine, but it's something that's coming up. People underestimate that a lot of other people tried to start one of these businesses. You'd be shocked. You guys aren't obviously paying as close attention to this as I am and as our team is, but I would say 30 other online car auction sites popped up in the last couple of years, and 29 of them have failed, or 27, and the other three are barely hanging, it's that kind of thing. They saw Doug and they were like, if this idiot can do it. So they tried.

Ben: With all the distribution to all the people who want to buy and sell all these cars.

Doug: Some of them were other content creators, honestly. They weren't willing to spend the money upfront to create a great website, which I think was crucial, or they didn't have as large of a following, or they just thought they'd roll the dice and it would take off because the car market's strong. It wasn't as easy as it seemed. But yes, even though we showed up, we had all the people already there.

Bring a Trailer has been enormously successful because they built their audience over a long period of time and then transitioned into auctions, and that's been great. For us, we launched and then had a built-in audience because I had built my audience over a long period of time. Other people who just want to try this, it's not quite as easy.

Big names have tried it. Porsche has a business right now. An auction business called Marqued that they're running from Porsche Digital. It's fledgling to say the least. I think that they and others have learned that you can't just throw money at trying to get an audience. It's not that easy. Having an audience where people love the dude who's at the top, are fans, and want to be a part of his business, makes it even easier to convert them to real traffic as opposed to just some business going out and spending a lot of money on advertising and trying to buy audience.

David: I'm imagining though, and I've heard you talked about this on Colin and Samir and elsewhere too, that part was certainly easier for you than competitors. However, there are a lot of other elements to this business that were probably just as hard for you. Listeners, viewers, think through the logistics of this for a minute. You've got other people that you don't control, buying and selling incredibly valuable assets with a lot of money.

Doug: Use card transactions known to be potentially fraught with [...].

David: Right. How do you make that a smooth experience?

Doug: Yeah, and that was hard. The other really great and lucky thing that happened that I don't talk about a lot on podcasts because it's more difficult to discuss, but I had a business partner who was unbelievable. Without him, it wouldn't have worked. I say it's more difficult to discuss because I can't bring him on here.

I came with the audience, the idea, and the top of funnel, the ability to bring people. He came with a knowledge of how this business needed to operate in order to work. He saw through what were going to be the challenges and that sort of thing, which was crazy because he had never been in the car space before, the auction space, or the marketplace space. He was just able to figure it out. Between the two of us, we had it all.

Ben: When you said he had the skill, have you built websites before?

Doug: Yeah, that's right. He had had some experience building websites and other startup-type businesses and products. He knew in a startup world, what was going to be the stuff that was going to be challenging. I had worked at dealerships before and for an automaker before, so I had an idea in the car sense of what was going to be challenging.

We were both car enthusiasts who had done transactions on Bring a Trailer before. We had the whole concept down. It was a pretty good way to start this if you're going to start it, so we started hiring employees.

It's funny, and maybe we'll get into this, but one of the things you mentioned is maybe we should talk through some things that people don't realize about the business or whatever.

One of the biggest is—your audience will realize this, but a lot of my audience and general audience doesn't—we launched this business, we had 10 employees or something like that, and now it's grown considerably. There's still a large contingent of people who believe that every dollar made by the business goes directly into my pocket. And this is incredibly annoying to me. They're like, oh, Doug made $30,000 today, Doug made $50,000 today. We're paying all these employees for Christ's sake. But I think a lot of people actually thought I just did this by myself, but I didn't.

Ben: Part of the magic of why it worked is the perception that you built it.

Doug: Maybe. That's probably true. This is Doug's website, which I always grimace at, because every leader of a business is always like, it couldn't have been possible that my team. But in this case, it literally couldn't have. I don't know how to do this. I make YouTube videos as a profession. I don't know how to make a website.

Ben: And Dr. Dre doesn't know how to make headphones, but you better believe people bought those because they were Beats by Dre, not Beats by Jimmy and the massive team behind Jimmy.

Doug: That's exactly right. Dre looks like he's the brilliant guy doing it, but there's a whole thing there. That's the case for us, too. We had a good team. We had support people in place. I think that was one of the biggest things, David, you mentioned the difficulty of these transactions, and we knew that was going to be an issue.

We've really doubled down on support as part of it, having direct people to call and deal with if you have issues or whatever. I think that that makes the transaction a little bit less fraught with like, oh, we're worried this is going to fail or something like that.

David: Which, uniquely as a marketplace, I think you could afford to do because the transaction values are so high. If you're a marketplace for, I don't know, make something up, something not very valuable.

Doug: I mean eBay.

David: You can't afford to staff support, because you're only making $1 or 50¢ on a transaction. If you're talking about a $50,000 transaction, you can afford staff support.

Doug: And relatively few of them. Whereas some of these businesses like eBay are selling a zillion things, but the average value is probably $40 or something. We're selling far fewer things but with a higher value. There are not as many transactions that need hand holding.

Ben: What does the take rate look like in an online car? You don't have to be specific to Cars & Bids, but is it 1%? Is it 10%?

Doug: Of submission, the number of cars we accept, or the sales rate?

David: What percentage Cars & Bids keeps of the transaction?

Doug: We take 4½% of the final sale price from the buyer. There's no fee for the seller. The buyer pays us 4½%, and we cap it at the $100,000 car, so $4500. If it's a $200,000 car, we still only take $4500, et cetera.

We make money in some other ways, too. We offer financing, we offer shipping. There's now an inspection that you can get with your car, which we make a little on. There are some other ways to make money, but that's the general gist of it.

Ben: Which I think is the evolution of all marketplaces. I remember when Etsy first launched, it was 100%, the transaction revenue on the take rate. Over time, I haven't looked in a few years, but I remember when it surpassed 50% revenue on the services on the things that they were able to upsell to buyers and sellers became over half of the revenue of the entire company.

Doug: Interesting, that makes sense. You start to realize, there are some holes where you could pull in some more money, and it's the stuff people are looking for, frankly.

David: The financing is huge in this category. You're not quite in this market, this category. You're not quite at homes yet, but most...

Ben: It's the second biggest purchase of any household.

David: Right, but in the home industry, the mortgages, everything around that. That is as much, if not a bigger part of where margin dollars are made.

Doug: We thought financing would be a bigger thing than it is. I think that it is a big purchase. But since we're selling mostly enthusiast cars, more people are buying with cash than you might expect, even for higher value cars. I think that a lot of the people who are buying cars like this, it's not like financing your Ford Explorer as your main family car, and you're going to have it for five years.

It's an enthusiast who wants to screw around with a BMW M3 for a year, six months, and then sell it and get something else. They have $80,000 to play with that are always going up or down depending on what they bought or sold. It surprised me how many people are making cash deals, but it's still a nice chunk of the business and it will continue to be.

Ben: I've never bought a car on the Internet. Could I go sell my Mazda CX-5 on Cars & Bids, or is there some like, we only accept enthusiast cars?

Doug: Yeah, we only accept enthusiast cars. In fact, we only accept about 40%–50% of the cars that are submitted to us. Actually, if you go and look at our Google reviews, a large chunk of the negative reviews are from people who just we didn't accept their car, and they're mad.

It's so annoying to us because they're not even customers. They're like, these jerks didn't think my Pontiac Grand Am was cool enough for their site, we'll screw them. That's not a negative review. What the hell? But that's a lot of the few negatives.

David: That's so great. How did you think about this, though? On the one hand, I'm like, oh, yeah, of course, it's your enthusiast car website, as you say, so often. However, your audience actually is two audiences. You've got your enthusiast audience, and then you've got your audience that wants to buy the Mazda CX-5. that you do the reviews of. How and why did you decide to exclude that part, at least for now, from Cars & Bids?

Doug: That's an interesting question that no one has ever asked me. That is exactly right. I do have two audiences. I have a performance enthusiast car audience, and I have audiences for regular cars. The proof of that is just look at the few numbers on some of the videos I do for regular cars.

I always hold up. I've got a Toyota RAV4 review that has 2 million views. People are like, oh, YouTube's for kids. Sometimes people say that nobody's really watching. Well, go look at my RAV4 review. I don't think a lot of 14-year-old boys were jumping on YouTube to watch Doug review a RAV4.

Ben: You have influenced the purchase of over a million purchases of a RAV4 of in-market buyers.

Doug: Probably. That's probably legit or something else. They watched the video and they were like, you know what, I think I'm going to buy a CX-5. five. I did turn my back on that audience. But I think what I realized was, the simple truth is, the enthusiasts were always going to be more likely to engage in a space.

I think that the people who are in the market for new cars who are watching my videos are watching my videos, and then that's all the interaction they do with me. The enthusiast or watching every video, or not the RAV4 videos, but every enthusiast, and they're getting excited about me.

I think the real key is, if you're going to start a business like this, you want to do it with people who are excited about you, which is the Chernin Group, our investor, it's their major philosophy. Find creators who people are excited to be in your space, because then you don't have to spend as much money on ads to try to get people.

David: Your retention's probably better.

Doug: Absolutely. Wouldn't you rather go to a business of someone that you are a fan of than just some faceless corporation?

David: The positive edge to the double-edged sword of the enthusiast market, relatively less financing in your corner, is people repeat transactions. They buy a car, they enjoy it, then they sell it again on Cars & Bids, and then they buy another car on Cars & Bids.

Doug: It's interesting that you say that. That's very astute. Yes. We've only been around for three years, so you'd think, well, probably you haven't had a lot of repeat people. You misunderstand the degenerate car enthusiast that we are. We buy and sell.

I constantly am buying and selling. I have nine cars right now. Soon, all my friends are doing the same thing. It's always the same. We buy a car we're very excited about, I'm never selling this. Nine months later, I really think that that other car looks cool. That repeats itself over and over and over again. There are more repeat people than you'd think. We've had some cars already sold on the site three times.

David: This is a different market, though. If you're buying a CX-5, that car is going to depreciate.

Ben: This is my decade car.

David: But for the cars for this segment enthusiast, these are not consumption, per se. These are assets. It's freaking crazy to own nine cars. But if you own nine CX-5s, you just blew a lot of money. If you own the nine cars you own, you're not going to lose that much money, and you might even make money by owning those cars.

Doug: That's right. I tell everybody to the detriment of my wife that my car has made more money than my wife did in 2021, which is, in fact, true, but she doesn't like it when I say that.

That's right, the enthusiast knows what they're doing a little bit more, or they should. A lot of them don't, but the sophisticated ones do. They'll buy cars, and they'll get out of them right. They'll sell them after a year, and they only lost a couple of thousand or something, and that's fine. That allows them to continue the hobby.

David: Jenny and I were on vacation last week. I texted Ben. I should have texted you too, although I'm sure you get this all the time. An amazing black 356 just beautiful, parked on the street. It was so pristine.

Ben: If you had David, then our entire text thread would just be us texting 356es to Doug.

David: Whatever that person paid for that, or maybe they restored it, they're not going to lose money on that ever.

Doug: That's exactly right, so enthusiasts who make those decisions. It's actually funny because I hear so many of my enthusiast friends tell me, I wanted to buy whatever, but my wife won't let me. This same person has bought a new Ford Explorer. I'm thinking to myself, you're going to lose so much more money in that family-approved new Ford Explorer than you would in a Porsche 911.

Yeah, it's a lot of money to put into it upfront. And yes, you would do better in the market, of course, but a lot of these cars are just doing fine. In 2020 and 2021, a lot of them were going up, and everybody thought they were a genius. Not that that will repeat itself, but you get the point. Sometimes it is a nice place to park money that you can actually enjoy for a little while.

Ben: If it's a new Ford Explorer, then you're in the first year, losing $20,000. You literally lost the value of two Rolexes?

Doug: Yeah. It would be difficult to buy some of the cars that we sell on Cars & Bids and lose $20,000. It would legitimately be difficult, but it's very easy to do at your local Ford, Toyota, Honda dealership. Just buy a new SUV instantly.

Ben: It's crazy.

David: After we did our Porsche episode, both from learning about the industry through that and then obviously doing it with you, I came away and I was like, I should buy awesome cars and use it. But then you have the problem, which I'm sure is the obvious one you run into like, well, a lot of these cars that hold their value, you can't really use them for your family.

Doug: There's a reason why I have seven expensive cars in my garage, but my daily driver is a Mercedes Benz station wagon with a third row. They're not feasible.

Ben: And side airbags and lots of safety features.

Doug: Absolutely. A lot of car enthusiasts just count that stuff, but I totally agree. I want my kid driving around and myself, honestly, on long drives, in crowded cities, and in a safe car. I can screw around with the other stuff on the weekends.

Ben: Let's not even make it life because that's too ridiculous, but you having a functioning ankle for the rest of your life, if something were to happen in an accident that just crippled your ankle, is far more valuable than all nine cars, even if you lost the full value of all of them.

David: Also, how are you going to put a car seat in a Carrera GT? They don't have the latch system, I assume.

Doug: They actually might. Latch is now mandated, but I don't know when it was mandated. It is funny. I'll get into brand new Ferraris that cost a million dollars, and they have a latch because they have to by law. But that's exactly right.

As a result of that, first off, I try not to buy really old stuff. Actually, Cars & Bids is geared towards more modern cars, we're 80s and up only enthusiast cars. That's the cars that I'm into anyway. The older cars, I hate to say this because there are a lot of older cars I love, but they are a little bit more scary to drive to use. Certainly, you don't want to take any vintage car somewhere you need to go, because there's never a guarantee that it will work, ever.

Ben: I don't know if they're 90s or 2000s, but there are some models of the 911 in the middle that I don't like as much. With that weird exception, as I go back further in time, I liked the design more, and I have more of a lust and a desire to own one. What is the oldest, safe 911 for me to get?

Doug: Safe in terms of physical safety or reliability?

Ben: Physical.

Doug: It depends how safe you want to be. Safe like you would think of a modern car being safe. I wouldn't go past 2005, which was the 997 that came out in 2005. The model before that was safe enough, but not amazing. Before that, I really wouldn't screw around with it. Airbags were a safety feature, but car technology has come so far in terms of crumple zones and also in terms of all these other safety features that are so important.

A lot of car enthusiasts just count all this stuff. Oh, I don't need a blind spot monitor, I don't need a backup camera. Actually, the statistics say that you do, and they say that they help. I find that the more safety stuff I can get in my cars, the better. Get a new 911 if you want the safest one, that's the answer.

David: Pay for the library wine colors. It's so great. Okay, what is a car these days? There was this whole thing about that. Oh, Tesla, it's an iPhone. Forget Tesla. That's obviously a driver of this and a big part of it, but in general, it's wild.

We have a Model 3, and we have a 2013 Acura TSX Sport Wagon, which is great. It hauls a lot of stuff. We just leave it on the street and don't care about it. It's fully depreciated, it's fine. But these are two different product categories when I drive them. What's going on here?

Doug: It's interesting. I think the Model 3 is the preview of where cars are going to go in the future. I think car enthusiasts will be dragged kicking and screaming into this world, and I'm not just talking about electric. In fact, I'm not talking about electric mostly. Electric is obviously coming but maybe slowly.

What really is coming though that Tesla has really pioneered is the technology in cars. There's so much self-driving capabilities—I'm not allowed to say that—driver assist capabilities, that is the politically correct term. There's so much functionality from the screen, there's so much et cetera. These cars, that's really the new thing.

People say, oh, iPhone on wheels is a disparaging remark. Get used to it. That is the future of our lives. For my job, I think it's great because I point out all these quirks and features in cars. The more bizarre things cars are getting in them, Tesla has a drawing pad and video games. I'm like, bring it on, I can put these on my videos. It's easy.

Ben: This is another correct bet. Other car viewers are caring deeply about this particular feature of the engine that most drivers will never experience. Whereas you're like, if you push this button, it does that.

Doug: That's exactly right. That was one of my biggest things. I have told so many potential car reviewers when they ask for advice, I tell them to not drive the car. They're like, what? But I actually don't think people care that much about how cars drive.

Twenty-five years ago, some cars were really bad. In late 90s, early 2000s, the end of the 80s, et cetera, there were legitimately bad cars. You had to go out and read a car review to make sure that it wasn't loud, rough, crashy, or like difficult to hear, whatever. These days, all cars drive well. All electric cars pretty much drive the same. Nobody really cares that much about the driving experience.

Enthusiasts care about sports cars. In that case, I talked more about it. For electric cars, they're more focused on the tech, the styling, the functionality, the cargo, and interior room. Those are the things that are more interesting to people. So yeah. Exactly. Look what this button does is actually more important advice for a lot of new car shoppers than all these old school car reviewers sitting there being like the steering angle and the turn-in feels like this. Nobody cares about that, unless you're a real sports car enthusiast.

Ben: What percentage of people who own a car do you think are in that category?

Doug: In the category of enthusiast?

Ben: Yes.

Doug: I don't know. What do you think, 15, maybe 20, 10? Somewhere around there, though, for sure.

David: I would guess the low end of that.

Doug: I think probably 30% or 40% of people would say that they're interested, maybe even 60%. When I make a car decision, I think about stuff like styling, the way it steers, and all that. They think about that, but they're not really going to understand some of those driving dynamic concepts in a complicated car review.

These people buy jeeps. Oh, I like this, this is cool. That's important to people, but do they really care about all the nitty-gritty technical details? No. There's a big disparity there. The person who cares what they drive is probably most people. The person who really, really gets all this stuff is probably a small sliver of people.

Ben: I think if I went and surveyed Americans, what is the difference between a mid-engine and a rear-engine sports car, I think maybe 3% would know the difference.

Doug: I once read that some unbelievable percentage of people, like 70% or 65%, were willing to switch the car they were going to buy based solely on color. If they had gone to a Mazda dealer, and the CX-5 was white, but they really wanted a silver one, and the Honda dealer with the CRV was across the street, they'd be like, done, I'm good. It's like, wow. That shows you what we're talking about here.

David: For this, however big it is, the small segment of enthusiasts, I think probably this does mean that the differentiation on the driving experience is going to matter more and more and more and more to them as it becomes more commoditized for the rest of the market. I've only driven the Model 3, but I fully expect that every other electric car drives exactly the same pretty much. To get something different, you have to go special.

Doug: That's right. The big differentiation used to be the powertrain, frankly, the engine, the way the engine felt, how smooth it was, and how it accelerated. That's gone. All electric cars accelerate basically the same. Some are faster than others, but the feel of it is basically the same.

There's less differentiation. Maybe enthusiasts start to get boxed into a corner of just steering feel and things like that. I don't know. It'll be interesting to see where car enthusiasm goes in the next 20–25 years. Or maybe the old school stuff just becomes more and more desirable and more valuable.

Ben: Going back to the car industry, you mentioned electric is coming slower than some people want or than we might think. In fact, you have Toyota over there saying, we literally don't live in a world that could support everybody having an electric car, and our bet is on fuel cells. I think you can maybe only buy it in California, because there are only a certain number of places in Northern California where you can even refuel the fuel cell. However it works, I actually don't know. Is that claim reasonable that we actually don't live in a world that could support that in the next 10–15 years?

Doug: I think it depends on who you ask. Whenever I talk to conservatives, they're like, there's no way the grid could possibly… But then I talk to EV adopters who are really excited, they're like, oh, we got tons. I don't know the answer. I think a lot of people know less than they think.

I will say, to me, the biggest problem is not the grid, the "all seeing grid." I think the biggest problem is infrastructure at the end of the day. It's one thing to install a charger at a single family home, which can be quite expensive and difficult. But it's a whole other thing to install a charger and an apartment complex or on the street. A lot of people still park on the street a lot, a lot, a lot of people, even people with garages and single family homes.

It's still so infancy. I want to install a charger on the street, because I park real cars in the garage, and I don't want to put an electric car in the garage instead. The city of San Diego doesn't have the capability. There are no regulations about installing a charger on the sidewalk. They're not there yet. There's a long way to go, I feel like, before there can be widespread EV adoption.

Ben: If you were designing this system from scratch, you could imagine a way to do it would just be hot swappable batteries on cars that, well, if the issue is we can't have chargers everywhere, then we'll just have these big centralized chargers just like we have gas stations, and then people can easily go and get a new battery. That, as far as I can tell with the vast majority of manufacturers, is not the route that anyone pursues.

Doug: You know what I've learned? First off, yeah, that's a great idea. I remember when Tesla announced they were going to do that. And then it fell by the wayside, and I haven't heard anything about that in 10 years. It was a concept they were going to do. But every time I go to an electric car launch, the automakers always try out the same statistic, which is something like 92% of EV owners charge at home 92% of the time or something.

I think the simple truth is that, yes, that would probably be the right thing if you're going to do road trips. I drive across the country every summer. It's the main thing that stopped me from getting an electric car. But for most people, they just need to charge it at their house, and they don't really care that much like the fact that there's no quick swappable.

Now these electric cars are starting to be able to charge pretty quickly, but you have to find the right charging station, et cetera. There are a lot of problems with that stuff, but it will all get solved. It feels like the early days of something that will become a big thing or common thing in 20 years.

David: Yeah. It’s also like, just given the nature of the car industry the replacement cycles on these things, again not for the enthusiasts segment but for family cars, are so long that it just feels to me that it's all going to naturally feather in and the solutions will get solved along the way. The average car ownership lifecycle is 11 years, I think, something like that.

Doug: That's exactly right. The problem will solve itself. It is going a little slower than I expected. If you live in California, it's kind of a bubble. There are electric cars everywhere. All my neighbors have Teslas, EV6es, and all that.

If you come out here, I'm on the east coast this summer, even here in Massachusetts, there's not as many as I expected or thought. It's still a thing where your neighbor gets a Tesla and everybody's like, woah. I'm like, really? Why? In the middle of the country, forget about it. They're not there. It'll be a while.

Ben: Which is so funny because the Model 3 is the new Prius. This notion of like, ooh, you got a Tesla, it's not like who you got a Porsche.

David: Yeah, I don't feel like I have anything special.

Doug: I totally agree with that. But there are still people who are like, oh, every kid I meet at a car show is like 12. It's like, I want a Tesla someday. I'm like, it's like a Honda Accord. The Model Y outsold the Honda Accord last year or the year before. That's insane.

If you'd told me 20 years ago, when I was a kid, that I'd start up electric car, it would outsell the Honda Accord, the mainstay of the car business, that's crazy to think about. But they are everywhere. They are very, very, very common, but not in some places. And it's going to be a slow adoption.

Ben: You get in any new taxi in the last two years, and it's a Model 3.

Doug: I will never forget. Last year, we went to Copenhagen. We were taken to the airport. We were in Copenhagen, where we had to take a taxi to get to the airport to go on to the next city in a Ford Mustang Mach-E. We had the baby and all of his stuff, and it was enormously difficult to deal with it all.

I remember getting out of the car and just looking at it for a second before cramming all the stuff into the package and everything, the luggage and thinking to myself, I just got driven in Western Europe in an American Electric Ford Mustang taxi. What is this? It's so bizarre. That is the future in some places. Some of those countries have crazy high adoption rates like most of Denmark, but some places are really far behind.

David: You do have these little moments of clarity when you're a new parent with a little baby, where most of your life you're just like, this is wild. Then you have these moments where you have an out-of-body experience and you're like, woah.

Doug: Right. Here's something that happened when I wasn't paying attention because I was paying attention to the baby.

David: Okay, I don't think you've done this, because I think I watch your channel pretty religiously, or maybe recorded and haven't released it yet. Have you come up to San Francisco and done the Cruise and the Waymo here in the city and reviewed those?

Doug: No, I haven't yet. But that would be interesting, for sure.

David: Dude, you totally got to do it. I haven't been in them yet. Ruling just happened. It's now fully commercial all over the city. It's obviously not, but it feels to me like 20%–30% of the cars I see driving around on the streets these days have nobody in the driver's seat.

Ben: I'm very familiar with tech people's take on autonomous driving. What do the car guys think of all of this?

Doug: It's going to be a fight with the enthusiasts. They're not supportive. I love it. I think it's one of the greatest things that's ever happened. I love driving my fun cars. I love it. It's so much fun on the weekends, going on a fun road with my friends, going off-roading, or whatever. But when I'm driving up to LA on a Thursday and it's traffic, I'm happy to let the car handle all that.

I think that enthusiast needs to realize that there's a place for both. I really, really, really strongly believe that. I just want to send emails and browse Instagram while it's driving me up the highway, and then go on the weekends with my Porsche, my Ford GT, or whatever, and have real fun. There are still enthusiasts who are like, no, it's fun sitting in traffic, too, we have to stay and drive with cars. I just find that to be insane and contrary.

David: I just have so little use for it in the city personally because I don't commute to an office, but the current product in San Francisco is such a different product than a car. It's not even fully an Uber Lyft replacement. It's a replacement for part of that. I think about it like the scooters. It's certainly not a car you own.

Doug: I think that we're further away from full autonomous vehicles doing a lot of stuff, though, than people think. It works in limited situations very well. It works in good weather. You heard a lot about autonomous cars four or five years ago. Really, the industry was going in that direction. You haven't heard as much in the last year or two in terms of big developments. I think they're getting stuck on some smaller stuff that's actually more difficult to overcome than people think.

Moral decisions have been discussed a lot. That's a big thing that they have to figure out. But whether it's a bigger factor than people realize, there's a reason they're testing all these things in Phoenix, in LA, in the Bay. I can drive just fine in dry, sunny… Where I really want autonomous cars when it's sleeting and there's ice on the road. That's where I would like some help, please.

David: Also just the geographical area too, that's the thing here in San Francisco, at least with this, is it only operates in very specific neighborhoods and parts of the city. It's like geofenced, it can't go out. That's why it's not even a real replacement for Uber and Lyft. It's like, oh, I want to go to Moran, I need to go to the peninsula. You can't take Waymo for that.

Ben: Do they need to go get millions of more training hours on those roads?

Doug: They must be teaching them individual roads, which would eventually work I guess, but has obvious enormous limitations, including when they start doing road construction, and suddenly those roads are different. It would be like a never-ending thing. But that's what Cadillac is doing.

Cadillac's driver assist technologies called Super Cruise, it's the best in the business, no question, but they mapped the highways. They literally individually mapped the freeways in order to get it done. That took a lot of time.

It's amazing. It works incredibly well. You can be totally hands-off in a new Cadillac. You could drive from LA to San Francisco completely 100% hands-off, except when you have to go and refuel. But they had to map the freeways for that to happen, so good luck.

David: You totally should come up here to San Francisco and do both Waymo and Cruise. Just fully review the actual cars.

Doug: One of them is down in LA, and I see it fairly frequently. I just don't remember which one. They're using Jaguar I-Paces, which is a horrible electric car.

David: I think that's Waymo. That's what they use here.

Doug: The only people willing to buy that vehicle.

Ben: It's the Buick Enclave of driverless cars.

Doug: More or less apparently. But it will be the future someday, and I'm ready for it. I'm ready to just sit in traffic and let the car drive me.

David: You drive in a lot of traffic, because you go around to these cars.

Doug: Yeah. I ended up driving up to LA a lot, in Orange County a lot, and it's such a slog. It's so difficult to do. The 405 is just the worst thing that's ever existed. It's a lot. My last car purchase, I bought a Mercedes station wagon pretty much brand new, and I based my decision almost entirely on the quality and efficacy of its driver-assist technology, and it's really good

Ben: By the way, I feel bad for throwing shade on Enclave owners. What I actually mean is the Encore.

Doug: Neither are good. The Enclave is better, but the Encore is [...]. There's also one called the Envision, which is made in China. There are not a lot of Chinese made cars in America, but the Envision is.

David: This is fun. Okay, what is the worst car on the market right now? What should you absolutely not buy? What is the best for each category of purchase here?

Doug: Worst car on the market right now, I really for a long time would have said that it was the Mercedes Benz Metris. Mercedes Benz makes a large van, but I think they took that off the market because no one was buying it. That's a terrible car. A lot of the cheap little stuff is pretty bad. The Mitsubishi Mirage is a horrible car.

David: I can't believe they still make those.

Doug: They might not. They might have just recently stopped. The thing is there are not a lot of bad cars anymore. There was the Dodge Journey. That was a horrible vehicle, but I think that's off the market, too. Not in Mexico, though. You can still go south of the border and grab one.

There are not a lot of really bad cars, though. Most cars are now good. That's just the situation. Every automaker has realized, information is too readily available to people to just make a bad car anymore. People aren't going to stand for that. They just won't buy your vehicle.

David: We can get away with what we used to.

Doug: Yeah, truly, especially the big three, Ford, GM, and Chrysler, would just make trash. A certain subset of people would buy it either because it was domestic or because they didn't know any better. Now there's YouTube.

Ben: Doug will save you.

Doug: Right. I will save you from buying a crappy car. It's actually interesting. I think this is one of the unsaid things about car reviews. I've always made this big holier-than-thou stance that I don't accept anything from the automakers, including plane trips and hotels. If I'm invited to a press event, I would pay my own way and stay in a hotel at my own cost.

I've always been like, I do this to remain impartial. It's a nice position to take, and it does go far. But why end up coming to the same conclusion as the people who the automakers paid to bring there? Because the truth is, the cars aren't really bad anymore. There probably was a day when the automakers would wine and dine these journalists and say, you're going to say nice things, right? But they don't have to do that anymore. Cars are actually good.

David: It was common practice, too. I believe, especially at the big three American automakers, too. Four models that executives were going to drive and test, and reviewers that for those specific cars, they would be different from the cars you bought at the dealership.

Doug: That still happens. There's no question that it still happens. I would say it probably happens across the entire industry. The press department orders cars. There is an option code that most automakers have but hide from their window stickers called press finish. There is a dispute about what that is. Some automakers, there is absolutely no question that press finish adds power. Absolutely no doubt, they have been tested.

Other automakers claim it's just a little extra attention to detail on the line to make sure that there are no glaring issues or anything like that, and I buy that in some cases. You're thinking to yourself, well, I want to buy a former press vehicle then. No, you don't, because then the journalists get into these cars and abuse the hell out of them. A journalist making $63,000 a year getting into a Ferrari is like, this is amazing. You don't want those cars, but they definitely get a little extra something-something at the factory.

Ben: All right, there are a couple of things about Cars & Bids I'm very curious about. You opened by talking about this with why it kept you up at night and what the goal of starting a business was in addition to just the media side of the house. I'm curious after the last four years, has Cars & Bids become a bigger business for you? You can talk about whatever numbers make sense, whatever gross margin, net margin, or maybe top line revenue. Compare the media business to the marketplace business.

Doug: Cars & Bids is clearly bigger than the YouTube side. But I think the real crucial thing is, even when it wasn't bigger than the marketplace business—and we knew this from day one—it had more potential to be. You can only get a YouTube channel to be a certain size.

You can Mr. Beast it, go crazy, and whatever, but that's very rare and very lucky. My channel clearly was not at that trajectory reviewing cars. The Cars & Bids clearly has more upside and growth potential. It is bigger, and I suspect that that divide will only continue to grow, grow, grow.

Ben: I have to imagine the margin profile. Tell me if I'm wrong on this. On the YouTube channel, it's basically 100% gross margin, basically 100% net margin, because for the longest time, it was just you.

David: You don't have drones and Red cameras.

Doug: Except for travel. There were a few things. I was paying an editor. My best friend reads my emails, so I pay her. There was some travel. We were probably 90% net. It was a great business, honestly.

Ben: Yeah, we're familiar. The other side of the house, you probably have 5% or 6% gross margins on Cars & Bids, because you've got a 4½% take rate plus a little bit more. It could be a much bigger volume business, but then your net revenue, that 5%–6%, how does that compare with the revenue from the media side?

Doug: It's a lot lower, especially now, because we took this huge investment. We are investing in growth. It's one of those classic situations where we're knowingly giving up net revenue for the next however many months in order to get the tools in place to grow the business to a place where we need it to be.

Ben: I guess what if you just added up all the 5% on all the car sales?

Doug: No, it would be much, much higher, but then there's the media business much. We're selling basically 30 cars a day, or we're auctioning 30 cars a day. We have about an 85% sale rate and the average transaction value. I don't know, but you could figure it out very easily just from looking at the site. It's somewhere in the $30,000–$40,000 range, so you can do the math. There's real money being made. It's just that there are a lot of employees.

David: The net revenue, gross, whatever. But then like everything between that and profits, there are a lot more on the Cars & Bids side.

Doug: Exactly.

Ben: That's fascinating, two very different businesses that share a top of funnel.

Doug: That's exactly it. They share a top of funnel and other, and they're obviously both in the same field. You could see someone watching videos and then buying or selling cars, but they are very different businesses the way they are run and the way they exist. It's an interesting thing to be part of both.

David: One topic that I think will be really interesting for our audience, Ben, you're probably going to go this way, before the Chernin Group investment, you guys didn't raise any venture capital, right?

Doug: My business partner's company was the one who gave us our seed money, essentially, to get started. I didn't put up any of my own cash.

David: It wasn't like, if XYZ founders were going to go do this, this is the type of business that you would go to. You would do Y Combinator, you'd raise a seed round, you'd raise a Series A, to get to the point where the Chernin Group investment happens pre that. A normal startup would probably be $20 million-plus of capital into the business to get there. You guys didn't do that.

Doug: We did it with a lot less, but the result was we had to be scrappy, and we had to make it work sort of thing. We were profitable pretty quickly. I think the car market helped us out a lot. We also stayed lean, we stayed really lean. But I think the drawback of that was we probably didn't grow as fast as we could when the car market was blowing up so much.

I think that if we had had more money, we probably would have made some more strategic hiring decisions, and that probably would have grown us a little faster. But we did the best we could with what we had, and now we don't have to make those distinctions anymore.

David: Obviously, this is a special case because you're Doug DeMuro. You had the built-in audience and all that. It's just really interesting to me, though, and it's something I've been observing from many different vantage points over my career. The amount of money that startups raise, the correlation between that and success. As best as I can come to, I'm not sure that there's really any correlation.

Ben: I think most of the time, it is negatively correlated. Except for the most extreme outlier successful outcomes, it is required.

David: Specifically to get to a point when you took this investment. At a certain point, yeah, you need capital. You took this investment from the Chernin Group, but you need capital. But to get to that point, whether you raised $0 or you raised $30 million, Ben, you're right, it might be negatively correlated to raise more. Actually, right now, I think there's no correlation.

Doug: Ben's point is interesting, though. It's negatively correlated unless it becomes essential. That's the problem with these VCs and PEs. They'd have to make a decision. Is this going to be one of the negative correlations, or is this going to be one of the essential? I don't know. It's an interesting point, yes.

I don't know a lot about this world. We've gone through this round, obviously, with the Chernin Group. Of course, during that, I learned a lot about this process. I'm the type of guy who spends a lot of time learning about this thing when I'm in it.

One thing I have noticed is that a lot of the people who are in these firms have only been in them since the last recession, and are these young guys who think that they're going to do it. Frankly, they've probably had a great track record so far because the economy has generally been strong over the last 15 years, and that's where all their investments have happened. I think in a lot of cases, a lot of these people have thrown a ton of money at stuff and it's worked whether or not the money helped, or was the reason that it worked.

Ben: Or that they were just surfing market data. They didn't even need to look for outperformance. It was just like, oh, I'm in a market that's doing well.

David: I want to put money in the market.

Doug: Right. Some of me wonders if maybe things are going to change a little bit. I have a suspicion that our event was well-timed. Not that I don't think we're going to continue to grow, but I do think that for the car market especially, there was some unprecedented growth. It'll be interesting to see how these things evolve over the next few years.

Ben: People could stop and Google it. Can you give us the details on when was the investment? Describe the transaction just so people know what we're talking about.

Doug: The Chernin Group is a private equity firm in LA that primarily specializes in these businesses like ours, which is a business that creators lead. There are other ones like MeatEater, which is a hunting YouTube channel that turned into a business, and Barstool Sports is another one they invested in a long time ago. They bought the majority of our business a year ago, basically.

They installed a CEO; they installed me. I went through the whole hiring process and it was quite something; I love them. And obviously put money on our balance sheet so that we could grow the business even further, which we have since the investment. It's going well for everybody.

Ben: What was the total amount of capital there?

Doug: They threw in $37 million or something like that. Some of that was secondary, and then there was additional that they threw on our balance sheet to help us grow.

Ben: This is for the combined [...]. You merged your channel and Cars & Bids for this.

Doug: One interesting aspect of this whole thing is that yes, the two businesses were merged into one business, which I think was a really good thing for the business. In the past, I was serving two masters. The media business was where I was actually getting my paycheck from. The marketplace business was the one we thought we would grow.

At the same time, if I got a great offer to go review something in the media business, I was gone for a few days, and I had to do it because that was my business. And now they're all under one umbrella. The money is made by everybody, and everybody's happy, and the growth of the media business means the growth of the marketplace business and presumably vice=versa. It's a good thing to combine them.

Ben: And the incentives are aligned. It's like this classic thing when you have a conglomerate and two division presidents that are each trying to make their own P&L look better, and now everyone's on one P&L.

Doug: Right.

David: It's interesting. Doug, you obviously know this. Listeners may or may not be familiar with this. Maybe it's more just our whole "creator world" that Doug, Ben, and I are all in. But the hot topic du jour is what Chernin Group does and creators starting these businesses themselves. It's Feastables and Mr. Beast and all that stuff. Everybody wants to do it.

This is a key aspect of it that I think a lot of people don't really think about and understand of, well, the media business, is that part of the other thing or is it separate? Because as you say, once you start building a company, you need employees. You have a separate set of stakeholders, but then you could get a million dollar opportunity in the media business that takes your eye off the ball.

As far as I know, and I don't know, the cap tables have certainly many, if not all of these other media creator businesses, but you're the first person I know that I know for sure. You actually merged the businesses.

Doug: Yeah, but it made sense. I could see no real drawback to it, frankly. I still feel that way a year after it happened. I still think it was the right thing to do. It is a great investment philosophy. It's an interesting thing.

I've said this on some stuff before, but it's a great investment philosophy in some sense because you're investing in these businesses that are creator-led. Like I said earlier, people love the person, so they physically want to give you money. They want to support you as opposed to a regular business, where you have to advertise and all that, and it's a faceless corporation.

The drawback and the weird thing about the way the Chernin Group operates these businesses are thus propped up by individuals who could turn out to be problematic. That's the thing that I'm always like, really? Are you sure you want to invest in this? What if I go on some Twitter rant and then I'm canceled? That's a real possibility.

I think their argument would be, it's worth the risk. I think they think this is how a lot of businesses will evolve over the next 20 years. You see the Kardashians going out starting businesses. You see Mr. Beast's businesses on the back of these followings. That's a real thing. There's real money to be made there and real businesses there. Maybe people are going to gravitate more towards businesses like this as opposed to just the gap.

David: This is where the keeping it all under one roof of merging the media business and operating business businesses, whatever you want to say. I think it makes a lot more sense and can start to solve it, because at least the incentives are all aligned.

Ben: It would be pretty crazy to imagine a world where big swaths of the economy have a leading player that's a human brand. Imagine gas stations. What if there was a...

David: John Rockefeller's face was on...

Ben: Exactly. That's actually where my thought process was. I don't think in the time period, most consumers knew the name John Rockefeller, but they knew Standard Oil. Could we eventually get all the way to a world, where I get my gas from, I don't know if it's Doug's gas station, that has a personality associated with it?

David: I think this is what Mr. Beast wants to do. I think he wants Feastables to be like Procter and Gamble or something like that.

Doug: Yeah, it's an interesting thing. I really do think it clearly is becoming the future of how these things work. When I launched Cars & Bids, I didn't do it intentionally knowing that this was a thing. Honestly, at that time, 3½ years ago, it wasn't as much.

David: It wasn't, no.

Doug: I think that the success of that and several other things has shown like, hey, this is a real thing, let's go do more of these. And the advice I give to all my creator friends is, you need to do something. You need to do something. YouTube is not enough, TikTok is not enough. You need to take your audience and go do something.

David: I would say, starting maybe six months before you did the Chernin Group transaction, friends and other people in the business who started coming to us and be like, what's your Cars & Bids? You guys need Cars & Bids. We've always been like, I think that the dynamics are a little different in podcasting, and we're a unique animal. We haven't done it for various reasons, but you pioneered this. Literally, you became a verb of like, what is your Cars & Bids.

Doug: To an extent, I'm so glad it worked out. I'm so glad I did it. It would have been the worst mistake of my life not doing it. I'm telling you as a creator. One of the problems that these creators have when I tell them this, I've become the elder forefather of the car YouTube space.

Every time I go to whatever bizarre town these guys are located in, and I have dinner with them, they're always asking for advice. I always tell them to start their own business. They always say the same thing, which is, how the hell can I start my own business? I'm so consumed with YouTube. I'm so busy with doing content. The answer is, I don't know, but you better figure it out. There may be a day when you're not as consumed with doing content, and when your audience isn't as engaged, that you wish you would use that opportunity.

Ben: I felt this way having a full-time job for the last eight years while we were doing Acquired. Is it an enormous sacrifice? I basically have to give up all my hobbies in order to create a media thing that people actually care about. Yeah, it is. At the same time, you have to make trade-offs in life. I did it the opposite direction.

Doug: That's exactly right. You can make a jump or not. I hate to say this, because I don't want to get people discouraged. I never feel like that, and it isn't true for everybody. But I think the earlier in life you can do it, the better.

I started YouTube, when I was first off when I was too young to know any better, which I think is legitimately important. It's funny. It's a joke, but it's true. If I had been 37, I think it would’ve been like, that's just stupid. But as a 22-year-old, I was like, I can do this because 22-year-olds think they can do anything.

Also, I just didn't have that many obligations. I just simply didn't have that many obligations. I think that when you're 22, it's hard to realize how few obligations you have compared to someone who's 35. I got two mortgages now, I got a kid, I got another kid on the way. I got nine cars, apparently.

David: Ten by the time this actually releases.

Doug: Actually it's eight right now, it'd be nine when this releases. Anyway, you just can't as easily do it. You don't want to. You can't afford to take the risk, it's just too difficult.

David: When you were planning Cars & Bids and working on it, did you already have your kid at that point?

Doug: We were trying. In fact, we had a miscarriage the week the site launched, which was the most bizarre.

David: Oh, I'm so sorry.

Doug: It worked out. We got our little guy, and we got another one, and it's going to be fine. It was like, holy crap, what a bittersweet, bizarre situation to be in. But no, we didn't have the kid yet.

The thing is, because I had a partner and because we had employees, and we had some money behind it, it wasn't quite as big of a time suck for me, but that first year was really, really hard. Honestly, I missed a lot of early stuff with my son. I'm so happy now that I'm able to take a little bit of a step back, get some breathing room, and be able to spend real time with him. Frankly, I like this two-year-old stage a lot better than the infant stage anyway.

David: Agreed, strongly agree. I have a kid about the same age as yours.

Ben: All right, Doug, before we wrap here, knowing the Acquired audience, it's people in tech, it's investors, it's CEOs of startup companies, lots of founders, anything that you want to leave folks with before we head out here?

Doug: No, not really other than what I just said, which is more of a message to creators. Go do something with your audience. To people who are starting up and founding and running businesses like creators or God, use creators though. Creators are more useful than you think. It's been a lot better investment than digital advertising. If you can partner with creators. I think that's a very, very useful way to run a business and start a business.

Ben: Potentially on the cap table. Instead of media buys, what if someone had come to you and said, I'll give you a big chunk of my company, and you get to be the co-founder, and you don't have to do any work except talk about it all the time?

Doug: I will tell you this, though. Since we launched, we've been trying to do a lot of collabs. Since we combined the businesses, we're trying to do a lot of collabs so that we can get past just my audience, and I've done a bunch with a lot of great people. We've tried to do a lot more. Creators, what a group. What an interesting and bizarre group of people.

People can't come to meetings that are scheduled on Zoom. They're like, oh, I forgot, can we do it tomorrow? I'm sitting there. The cap table is a total opportunity to get people, but a lot of creators are less sophisticated than you think and are difficult to deal with. I think the goal would be to try to find the 7% of creators who can keep a schedule, who understand how Excel works, who can go on a Zoom call. It's legitimately hard, but they're out there somewhere.

David: I imagine, not to disparage anybody else in your category, but I can't imagine anybody else in your category that would be like you.

Doug: Some are better than you'd think and honestly, some are much worse. I've talked to some people. I hear their story and I'm like, I can't believe you've even made it this far. It's difficult work to get this far, but it's the traditional story.

I read the great Vanity Fair piece from years ago about Johnny Depp, his crazy finances, and how he blew all his money. It gets into this. He was spending $300,000 a month on employees. He had 14 homes. It's that kind of thing.

Creators and the creative types need people to rein them in. I think where you strike gold is if you can find a creator who's also like me, which gets the business side and what you actually have to do in order to be a reasonable person. That's harder than it looks, I think.

David: Totally. Okay, one more last thing before we let you go. If anybody in our audience is looking to get into cars as an asset class, wants to do something on Cars & Bids maybe, what would your advice be for somebody that's interested in, oh, I might want to buy a 911 from 2005, or a 350, or whatever?

Doug: There are some cars that I think are undervalued. I think the main key that I would say is to buy analog, gas-powered cars, cars with manual transmissions, big engines, and an old school feel, old school look. As cars start to become more electric, all electric cars have a similar shape because of aerodynamics and fuel range. Gas powered, old school, wedge-shaped exotic V12s are going to be the cars that continue to go up.

Over the last three years, a lot of cars have enjoyed a high rise in value. I think there are still cars that have a high rise to continue going. As the market starts to get more and more and more dominated by EVs and look-alike vehicles, I think there's going to be more and more people who, with newfound money, are going to want to go back to their childhood of fun, old school analog cars.

David: The nostalgia factor is so huge.

Doug: Absolutely. Huge. And that's already happened. I think it's going to happen a lot more, I suspect.

Ben: How do I back your intuition here? Can you start a fund that I can invest in that's Doug's appreciating car fund?

Doug: I think about that.

David: We need an ETF for Lamborghini Countach.

Doug: You know what's funny? I actually have started to develop this thing, I got to do a video on it, but I started developing this thing about the market cap for exotic cars. If you multiply the number they made by the number they're selling for, you can start to see which ones are maybe looking a little undervalued. You have the total market and maybe which ones are looking a little overvalued.

I recently bought a car that plays into that. I think that people should maybe look at that a little bit more. A lot of cars actually fall right into the same area, Carrera GT, Ford GT. A lot of very special cars fall into about the same market cap. Stuff that's wildly high and wildly low, you start to think, either there's a reason for it or maybe there isn't. Either it's over or undervalued. That's a thought that I have.

Ben: If you ever make a spreadsheet and want a second set of eyes [...].

Doug: I do have an Excel running.

David: If you want to share some of that alpha. Seriously, this should be part of Cars & Bids.

Doug: It probably should.

David: You could interact with a whole nother investor class.

Doug: Part of the problem is, for very special exotic cars, there are production numbers printed. For lesser cars like M3s and stuff, it's more difficult to find production numbers. I have a whole exotic car market cap spreadsheet. There are some cars on here that I would definitely be putting some money into, and maybe I just did. I'll announce that soon on my channel.

Ben: I'm Venmoing you right after this call. Count me in.

David: All right, subscribe to Doug DeMuro on YouTube for your instant alpha. There you go.

Ben: Awesome. Listeners, thanks so much. We'll see you next time.

David: We'll see you next time.