60. 30 Years of Auto Industry Disruption with Scott Painter

Brock Briggs  0:00  

Hello and welcome to the Scuttlebutt, the place where you can come to learn from the world's most interesting veterans. Today is no exception because I'm speaking with Scott Painter. Scott served in the Army as a Spanish interrogator in the late 80s. And since then went on to found or co-found many companies you've likely heard of including fare.com, CarsDirect, TrueCar, PriceLOCQ, and now Autonomy, a subscription electric vehicle company. He's incorporated 57 businesses over the last 30 years and you now have a front row seat to learning from him. 

Scott talks extensively in this episode about the balance of family life and entrepreneurship. He talks about how he treats his kids like small businesses and make some great analogies on how to build and grow them successfully. We discuss how the auto industry has changed over his time in market and his past influence on it. He talks about how he thinks about different business models and how those feed business valuations. And we close out with his advice on raising money and lessons for young entrepreneurs. You can find this episode and all past episodes of the Scuttlebutt podcast, including show notes, edited transcripts and other resources to keep learning at scuttlebutt.podcast.co. Please enjoy this conversation with Scott Painter.

Brock Briggs

What is something that you're extremely proud of, but maybe never get to talk about or tell anybody about?

Scott Painter  1:36  

Sure. Well, you know, I think that one of the signature qualities of a good entrepreneur has to be persistence. And over the last four years, I've really put that to the test. You know, my house burned down. And I'm 54. So, when I turned 50 that year, my house burned down. And it's been where I've been living for the last 20 years. And I think, you know, one of the things that you don't realize, sort of midlife is how much stuff you accumulate and how many things you have that sort of reflect your life and I lost all of that. And I also got divorced at that same time. And I've got two little girls. 

So I've got four kids, two boys, two girls, but I think probably the thing that I don't get to talk about very often, but that I am most proud of is definitely how I navigated the divorce and rebuilding my house with two little girls that were at a pretty fragile age to go through a divorce. And so, it took a lot. I was also in the process of building a company. And this year, we moved back into our house. We bought the neighbor's. They also burned down as well. We got horses for the girls. So a lot of, I think, happiness comes from, you know, my home life and being able to, you know, continue to provide a great childhood for my kids. 

And so you know, every day I get up, I'm pretty happy where I'm at. I think of my home as sort of a spiritual vortex. And it's where I recharge for sure. So but, you know, I'm very happy with the home that I've built for my family. And you know how we've really bounced back from having lost everything this I mean, the whole property burned down. It was pretty devastating.

Brock Briggs  3:27  

That is devastating. And as a lifelong entrepreneur, I'm sure that the family balance and work balance is something that you're very used to trying to figure out. I mean, you've probably spent your life trying to figure that out if that's a safe bet. You said that you're proud of how you navigated it. I'm gonna dig into that a little bit more, how did you navigate it? What were the things that were meaningful maybe that you did that helped that process be as smooth as can be I guess I should say?

Scott Painter  4:02  

Yeah, you know, I think raising girls is a little bit different than raising boys. You know, with young girls, I think I was particularly sensitive in the process that I went through, you know, with a divorce because I also wanna make sure that I'm giving them a really good male sort of framework for love. And with boys. I think that, you know, you have to teach them character more than anything else. With girls, you've got to really make sure that they are secure and they're, you know, sort of framework of male love and attention. And so I travel all over the world with my kids. And one of the things that we do we sort of travel like a gaggle and you know, tell my sons, they're responsible for their daughters or for their sisters and if anything's wrong, it's their fault. If everything's okay, they get the credit. 

But if a daughter is lost, you know, I'm looking for which son is responsible for that girl and I think that, you know, especially when you're going through a divorce, you gotta make sure that you're over indexing on attention and the good kind of attention. But that whole process was one where I saw my sons become more responsible. They became really, you know, men to my daughters and my daughters got to rely on them in a way that was important to me. And so I'm really, you know, I'm really proud of the fact that my boys grew up, you know, looking to take care of their sisters and that my sisters were capable of and really enjoyed being able to rely on their brothers.

Brock Briggs  5:36  

Well, and despite some turmoil, it sounds like that was maybe a proud dad moment where you're kind of able to, like fall back on that and be like, hey, you know, there's this thing that's going on that maybe is trying to tell me that what I've done is not good. But also you have this example of like, hey, like, you know, raise these boys right. And they're doing the right things.

Scott Painter  6:00  

Well, I think all the way around, you know, there's a lot of gratifying things that come out of being a parent. I probably associated as being a parent more than anything else. I think that building companies, building homes, building families, is all the same stuff. It's building. And I've said it before in the interviews that I sort of think of my kids like little companies. They’re experiments and you have to put the same kind of love, attention and detail into raising your kids as you do as to building a company and four kids or four different companies. And just like companies, all those kids are different. They require different things. And that requires that you're pretty nimble as a leader and as a father. And so I love it. I love being a dad. But that's my number one job.

Brock Briggs  6:44  

I've never heard relationship expressed that way. I personally have kind of like likened my own personal finance life to like thinking about it in terms of a business like, hey, this is what my free cash flow is. And like, this is what I'm able to kind of do with this. But relationships is certainly a different take on that. I really liked that. And I think that we'll come back to that a little later on when we get to talking about business. You mentioned something a minute ago, talking about how you have instilled in your boys that they are responsible for their sisters. Being responsible for somebody other than yourself is extremely difficult and something that is taught and harped on in the military a lot. And so I would love to kind of hear maybe about your early influences and why you joined the army to begin with.

Scott Painter  7:33  

Yeah, you know, I was a very independent teenager and pretty rebellious. I joined the military, if you can believe it, to get away from an authoritarian father. You know, my dad really had a very strict set of rules. And we grew up in a family where, you know, we didn't use credit cards as a family. He just didn't fundamentally believe in debt. He believed in paying for things and affording stuff that you could afford and being disciplined about how you lived your life. And I think when you're growing up, you look at all your friends and you want to go do fun things. I remember when I graduated from high school, I got a bill from my father for all the things that he had to spend money on raising me and 

Brock Briggs

How much was it for? 

Scott Painter 

It was like $30,000. But it was I mean, it wasn't as much about the bill as it was about how detailed it was. It was every single time he came out of pocket. And it included not just the dollars, but the cents. And it was sort of an astonishing thing. I had no idea he had been keeping a list. I don't do that. I sort of decided the father that I wanted to be based on some of the things that happened to me and didn't happen to me as a kid. So for me, the military was freedom. And that really was about growing up in that moment. It was the first time that I was really integrated as well. You know, I grew up in a pretty conservative, very white, you know, sort of protected upbringing where I just really didn't, you know, mix with a lot of different people from different parts of the world. And so joining the army for me was the first time that I was in a fully integrated situation, I met people that were different than I was and I had to figure out how to thrive in that type of an environment. I got to be a leader very quickly. 

So I did very well. And for me, I joined the Army enlisted. I did not join the Army as a military officer or go through, you know, college. So for me when I joined, I started excelling very quickly at the skills you need to be a soldier and I was also very good at testing and so I very quickly got put into a program to become a Spanish interrogator. And almost right out of the gate, I got slotted with a special forces unit that was actually being trained for something at the time. We didn't know what it was, but it turns out everything we learned from geography to military nomenclature to anything that was related to common skills as a soldier had to do with Panama and after two years in the military and not knowing what we were all being trained for and operating, where we went from school to school to school as a unit, we were clearly being trained for the invasion of Panama. 

And going into Panama ultimately happened as I was going through all these different schools and it was you know, airborne and Air Assault and Spanish language school and interrogation school and voice intercept school. And so all of these very cool things where we were learning Special Forces skills, ended up being part of that unit’s ability to then be prepared for the invasion of Panama. We were assigned to the 82nd airborne. I ended up getting a nomination to West Point. And so I ended up leaving the regular army and going to West Point as a cadet and I ended up getting a presidential nomination on top of that, in addition to there's sort of three ways to go to West Point. You have to either get nominated by a senator out of high school and then you end up going in as a fresh plebe. And you come right out of high school and you have no military skills. About 10% of all new cadets come from the military. 

And there are five cadets that go every year that are dominated by the president directly, then they can come from any source. I was a military nominee plus I got a presidential nomination. And then when I got to West Point, you know, West Point is a regular college, but it's a you know, it's also a war college. But when I got there, I showed up. I had a couple rows of ribbons. I had an Air Assault and an airborne badge. I was really, you know, a little bit older than everybody. So most of the, you know, freshmen that were showing up as plebes for duty at West Point, the year I got there were, you know, 19 years old. I had already been in the military for three or four years. And so by the time I got there, I was 21. I was older and had all of those skills already. So it was just sort of like going to school with your little brother and little sister. And so I was just naturally, very, very, you know, quick to emerge as a leader. I became class president. I had to get nominated for that. There's, you know, some interesting stories about how all that happened. 

But for me, I ended up having a very, very sort of unique experience that sort of looks like my life where I very quickly began to emerge as a leader. We, at the time, were going into Desert Storm and Desert Shield. And I think there's probably one really important dimension of that because the worst time to be a soldier is when you're at war. There's nothing exciting about, you know, going to war and you know, I never got the sort of like that glamorous thing that you see in movies where, oh, you know, some people join the military because they wanna go and do high speed stuff and go to war. There's nothing true about that at all. I think the idea that soldiers love war is totally contrary. If you're really well trained, what you pray for is that you don't go to war. And so I thought West Point was, you know, one of those great experiences where you do learn a lot of discipline. 

But certainly being in the military, you understand the concept of camaraderie, teamwork and it was cool to be part of, you know, some pretty high speed organizations and to really have great leadership around me and do fun things. So I looked back on everything I did in the military with great memories. And you know, I ended up playing Rugby at West Point. And then I ended up coming out to Cal Berkeley to play Rugby as well. So in many ways, you know, a very, very high functioning sports team is identical to being in the military and that you're, you know, with another group of people that are really focused on a common objective. And so whether it was, you know, playing Rugby and sports or being in the military, I think both were really, really good experiences for me in terms of how to have an organization that functions well.

Brock Briggs  14:07  

Were you any good at Rugby?

Scott Painter  14:12  

I hope I was good. I was fast and you know, I'm not small. You know, I'm a little over six feet tall and I weigh a little over 200 pounds and always have. So Rugby was a great sport for me. It also was something that I didn't know anything about. When I got to West Point, I was redshirted for soccer and track and I've always been good at you know, being athletic and whatnot, but pretty fast. And then I went and tried out for Rugby. It was an intramural sport, but at West Point. We played varsity teams and we got to travel. And so you know, Rugby was a great outlet for me. It was you know, a place where just somebody who was fast and big could actually do really well and so I was the kicker and the winger and ended up playing fall back. So I really loved Rugby. It was a, you know, a great hardcore sport, you know and I did some kicking for the football team. So a lot of fun things that were all related to the Rugby experience. And the Rugby culture, I think, is great.

Brock Briggs  15:16  

During this period of time, when all of these things that were happening, was this kind of like serendipitous? Or did you really have the mindset of like, kind of grabbing life by the horns? And you were like, were you the driving force behind some of these things?

Scott Painter  15:31  

Well, you know, there's a couple of things. You know, probably to the drivers that took me into the military into West Point, were just always, I wanted to do things that people didn't think I could do. I sort of have always had a chip on my shoulder. You know, I had a stepdad and a real father, my real father was really an absentee father. And so much of what I did in my life was to prove to everybody but really subconsciously, him that I could do it. And so I think that West Point was probably the last thing that anybody thought I would or could do. And so getting into West Point on my own and doing it, I guess, “the hard way” where I came up through the military was an important thing for me. And it really set my life out on a course where I was gonna be achieving things and not relying on anybody else to do that for me. 

So that was important. My real father, you know, divorced my mom or my mom divorced my real father when I was about eight years old. And so my paradigm of him is that he was just a dirtbag. And part of the reason to go to West Point was I very much, you know, understood what West Point was. And it was this symbolic thing about duty, honor, country and it was just this bastion of honesty. And I think, you know, whenever as a kid, I was told about telling a white lie or you know, something where what most kids do sort of crosses line with your parents, one of the things my mom would always say to me is don't grow up like your father. And that, I think, was a big driving force that chip on my shoulder and wanting to be associated with a place that really put a big priority on integrity. 

And that was a choice. I mean, I knew that I valued integrity very, very early on. And I think I still do as a parent. It's one of the bigger dimensions, I think of good parenting and making sure that your kids understand what honesty and integrity really mean. And this sort of prioritization of the truth has always been big for me. So it was really compelling when I learned more and more about West Point to be from West Point and to go through that experience. Of course, one of the things you learn as soon as you get inculcated into a place is that even if you're at West Point doesn't mean that everybody's honest. Everybody's just as human as anywhere else. And you know, one of the really interesting sort of things about West Point is, there is a zero tolerance policy for lying or equivocation of any kind. However, one of the most fascinating things that you learn is that when it comes to etiquette, if somebody serves you a meal and they're being generous to you, if the meal’s awful, you can lie to them. You can tell them, that was great. Thank you!

Brock Briggs  18:26  

As for seconds, you know.

Scott Painter  18:29  

So you arrive at West Point, you're being drilled about duty, honor, country and you go through all this honor code training. And the first thing you end up hearing is, this weekend when you go to your sponsor's house and they feed you a meal, doesn't matter if it's good or bad. You're gonna tell them how great it was. I mean, there is a really, really interesting nuance to honesty that is so contextual, that if you don't understand the difference, you'll screw it up and not everybody gets it, right? And certainly, that's part of maturing. I mean, young kids do not understand the nuance of when it's okay to not use the truth completely. So you know, interesting direction, the conversations taken, I haven't even talked about West Point or the military in years.

Brock Briggs  19:16  

I have to like, bring up this story. I've read this and this was again, like just a minor line and something that I read somewhere. Was it at West Point that you were like, piping cable into the barracks? 

Scott Painter 

Yeah 

Brock Briggs

So you're gonna have to tell us that story. 

Scott Painter  19:32  

Well, you know, there's two types of violations at West Point. There's what they call a regulations violation and an honor violation. And it goes back to this whole conversation about integrity and honesty. And actually, I was on my way to West Point. I had to go through what's called the United States Military Academy Preparatory School, USMAPS and it's in Fort Monmouth, New Jersey. And this is where everybody who comes out of the military who ultimately goes to West Point goes for a full year to bone up on your ACT stuff, right? Because most of the plebes that come right out of high school are just, you know, top 1% in the nation in terms of SAT scores. And that's sort of a check the box threshold thing. So what they do is they take people who have joined the military who are on their way to West Point. 

And just so that everybody is a little bit normalized, they put us through an intense 10 month program that's all focused on making sure that you just smoke the SAT. And you know, my SAT scores when I think from like mid 1200s to mid 1400s. So it was, you know, it certainly, if you train to take a test, you're gonna do better at that test. And so, the prep school is also where you begin to learn the skill set to map everything you're gonna have to do at West Point before you get there. So most everybody who shows up to get to West Point, having gone through USMAPS, just understands all the knowledge, understands all the things you're gonna experience. And so it is literally a preparatory school for that particular, you know, reality that you're gonna go through. And it does operate somewhat like West Point, but it's in traditional barracks, it's in a traditional military environment. 

And you know, you're in full military uniform the whole time. And in military environments, they tend to work like, you know, apartment complexes, where you've got a break room and a kitchen and everybody's got common space. And so I get there, I must have been at the time, you know, 19 years old. I had already been in the military for a couple of years. And I've always been able to make things happen, you know, for whatever reason and one of the things that I had done is you know, I had a wall locker and I had three roommates and we're all living in this room. And every morning, we get up and we'd have a cup of coffee and I had gone down to the local store and I bought a television and put it in my wall locker and put it into a duffel bag. So you could in the morning, open up the duffel bag and we didn't get any TV signal. But the break room had TV signal. So what I had done is gone out and bought all of the equipment to then run cable television to our room in the barracks. 

And I mean literally got up on top of the barracks over the weekend, tuck the cable in, did like a custom installation, bought a splitter, but I also bought a router box and I went ahead and opened up an account. And so I ended up getting ratted out by a cadet who did not make it to West Point. I got my slot and he was very upset that he did not get his slots. So he said, well, I should get my slots. You know, a candidate painter has been stealing television and breaking the rules for the whole damn year. So right as we're going into graduation, I've already got my nomination at West Point. This guy turns me in and then of course, they have to do an investigation and they come in they're like, is there a television in your wall locker? And I'm like, yes, sir. You know, so open up the television and okay, now I'm in trouble. 

And so they went ahead and they turned me in to the onboarding committee for West Point to say, you know, he's done this thing. And they said, okay, we're gonna go ahead and investigate it. This also happens to be why I ultimately got elected president of my class because during our plebe summer, there was a use case of the Honor Code, where they said, what happened here? Did this Cadet break the Honor Code? Or Cadet candidate break the honor code? So they did a full honor investigation, which is sort of like the West Point version of CSI. They basically just exhume everything, right? They interview everybody. How did this happen? And it turned out the saving grace for me was that because I actually had an account and I was paying for the cable but I installed it myself and I broke the regulation, but I did not break the honor code. 

So I ended up getting into West Point. But my plebe summer, before I went to West Point, I was stuck at USMAPS, walking the area, doing effectively detention and painting sidewalks. It was absolutely hilarious because everybody else got to go on a two month break and have a good summer. I was stuck, basically doing, you know, detention and stupid stuff. Because I broke a regulations’ violation. I still got to go to West Point. But I went the hard way.

Brock Briggs  24:21  

Well, it sounds like you did the wrong thing at least the right way. That's respectable. 

Scott Painter  24:26  

Well, and so everybody had been taught that lesson as a way of understanding what the Honor Code is and when not to, you know, be truthful or how to navigate these things. And you know, it doesn't mean that you're not gonna get in trouble. It just means you're not gonna get kicked out, right? And so when it came time at the end of plebe summer for people to vote, there's, you know, 36 different companies and all 36 had to nominate one cadet to be the candidate for class president. We're out at Fort Buckner so it's, you know 1000 people and everybody sort of who and they say, okay, we've got 36 candidates for you know class president. 

And there was, you know, an officer who's in charge of our class and he stands up in front of the whole group. He says, okay, we're gonna make this very easy. We're gonna go ahead and have a vote based on the level of applause for these candidates. I'm gonna go ahead and ask each one of them to speak for one minute no more, tell you who they are and why they should be your class president. And then when we're all done, we're gonna then go through and just have you vote by a plus. So this was a very, very inexact science. I just grabbed the mic first. And I said, hi. This is who I am, you all know me as the cable kid. And if you will elect me class president, I will have a toga party. As I plead class, I will get a field trip to New York on chaperone. I just said, we're gonna do things nobody's ever done before. And I mean, it was absolutely bananas. 

And you know, everybody who was sort of helping to sort of organize things, like what are you talking about? I said, everybody else is gonna get up and tell you that they were class president and that they were the best in their high school and they're gonna be really good at class committee and all these things. I'm none of those things. But I'm gonna get you the toga party. And we're gonna go to New York and we're gonna have an unchaperoned trip. And we'll have more fun as a class and we'll get away with more and we'll have a good time. And literally, I was a landslide winner. Everyone's like, okay, he's class president. That was it. And literally every single person who got up after me, I was class president in high school. I did all these things. I was president of my this and that and I did all these extracurricular. They gave their bona fide’s and everybody was completely boring and exactly what you would expect from a West Point cadet.

Brock Briggs  26:46  

Straight narrow, just straight shooter type

Scott Painter  26:48  

Was absolutely none of those things. So I was class president, we had a toga party. And we did go to New York unchaperoned the entire plebe class for the first time in Cadet history, went to New York on buses, without any shirt. I mean, I'm like, we are going to be military officers. We can go to New York. We're gonna be okay. We went to New York in uniform, nobody got in trouble. It was amazing.

Brock Briggs  27:12  

Oh, my gosh, this is killing me. So man, there are just a lot of different ways that we can go with this. So first off, like this is telling me that you have kind of like this mindset of like, we're gonna just like shoot for literally the moon on like everything. Have you always been like that? You're saying that it has never been done before. Did you actually know that it wasn't gonna happen? Or were you just saying that? Or like, what did you do? Who did you have to convince to make that happen? And like, how did you go about that?

Scott Painter  27:48  

I had to convince everybody and you know, the cadet system at West Point is really run by officers who then manage the cadets and the officer sort of system goes up to a commandant and a superintendent. These are military officers who live on post. I ultimately get elected class president and the first thing that somebody made me do is go and speak to the commandant and say, what I had promised and he literally sat down and said, what were you thinking? I was like, we're gonna go and you're gonna let us because how can you say that cadets who graduate and become officers are going to lead soldiers into battle and run these, you know, these companies and battalions and regiments and be our future military and not be able to go to like? Is that a real thing? I mean, there's an allotted period of time, let's plead parent week, we're gonna go and it's gonna be something that nobody ever forgets. And you know, it puts them in a position to have to say no or you know, dig in. 

And nobody said, no. I definitely understand what's likely possible. And I certainly understand what's reasonable. But that was a reasonable request. I mean, how could you deny military officers that time if we behaved as a class. One of the things that was really important is that, you know, talking about a bunch of college kids on spring break and well, West Point is different. It's not that different. We're all that age. We're all restless. We all want to get out and we're all cooped up in what's the equivalent to a prison. And this idea of going to New York, of course, the buses are gonna stop all over New York City and we're not gonna just be tourists. We're gonna, I mean, we ended up leaving West Point at like five in the morning. We showed up in New York at like 9:10am and then we ended up boarding the buses at 4 or 5pm to come home. 

All we did is go to bars all day. I mean, the entire fleet class just got dropped off in New York City and we just all just immediately took off our uniforms, put our stuff in bags and then ended up going to bars and everybody looked out for everybody else and took care of everybody. And it was a really, really interesting exercise in just you know how to get something done. We organized ourselves as class. I was able to have private auditorium time where we said, you know, we need to be able to talk without having any oversight or supervision. So we can all talk about the things we have to do to look out for each other and sort of that team cooperate and graduate. We definitely had a lot of that going on. But everybody took care of everybody and nobody got in any trouble for anything. 

Brock Briggs  30:23  

You mentioned it right there. But I am just astonished that you were able to pull that off because also having been a junior troop with a bunch of other young testosterone fueled guys down in, my school was in Pensacola, Florida. So it's like, it's spring break every day, year round there. And it just is like you can't even get a grasp on containing and wrangling those guys. Like it's wild. So good on you. I have one final question about that. And then we could probably talk about this all day. But I want to make sure we get to some other topics. What were you doing to kind of rally them around? Surely that conversation about talking to them in private was probably talking to, hey, don't screw this up for us. What kinds of things were you trying to instill to the class about like, rallying them around making sure that you have a good time but also making sure that the limit wasn't tested?

Scott Painter  31:23  

You know, I think it has to do with this whole theme of parenting and teaching other people. And you know, being a little bit older than all of my classmates was very helpful. You know, one of the big things that you do at West Point during plebe year is you box. Everybody has to go boxing. And boxing is not for everybody. Boxing, I think, is mostly mental. I have a younger brother, who's three years younger than me. And while he might be stronger than me and he might be more athletic than me and a whole bunch of things, I'm gonna kick his ass every single time. And that mental edge of being able to know that you're able to win or dominate or get something done is a really important life skill. I mean, it's important next to succeeding at anything. You've got to come to the table with a certain mindset. 

And so for me, being class president and having been in the military for a couple of years prior and gone through all these high speed schools and know most everything that we were learning as soldiers at West Point, you know, I already knew. And the things that I was interested in at West Point, were, you know, really military history, military strategy, things that I was not as interested in were, you know, sort of biology and math. But you know, I love physics. I mean, so the things that I ultimately leaned into and did very well at, I did extremely well on the things that I didn't enjoy. I didn't do very well at all. And so for me, I love being class president. I loved helping everybody to think about responsibility and what to do. 

But again, no different than parenting, it's always been something that I've enjoyed. And I think that, you know, when I'm building companies, I'm usually taking really ambitious young engineers. They tend to be more, you know, at the very early start of their careers or wanting to lean in learning how to build product. And I've now had 57 incorporations in the last 30 years. And so that gives me enough reputation at this point to really be a good coach and a good mentor. I've seen most of this stuff before. And so I think that, you know, that was all part of my journey. You know, being able to really be a good mentor and a good coach.

Brock Briggs  33:42  

I'd love to kind of use that segue to like, dive right into your experience in the auto industry, entrepreneurship business building all of that. You started your first company, I believe you talked about this, Scott's auto company, age 14. What gets you interested in the car space? And you've also talked like since then, obviously, about the size of the market and cars and I've read, I think everything you've written on medium and all these other places about total addressable market. I'm guessing that you probably had an earlier interest in cars prior to that understanding now.

Scott Painter  34:20  

Well, you know, there's, you know, everybody talks about doing what you love. I think great entrepreneurs, great companies solve a particular problem. It's really fascinating. If I think about my life, I can almost string everything together with what I was driving at the time. And cars for me have always been a milestone, a reflection of where I'm at. And getting a car almost always happens when good things are going on. I mean, you get a car when you graduate, when you start a family, when you grow your family, when you get a promotion, when you move to a new city, when you know all of these things are really, you know, joyful milestones that reflect the progression of your life and the American love affair with cars is pretty deep. I mean, cars are our avatar. I live in Los Angeles, you couldn't have a bigger you are what you drive city. There's a lot of people here who drive more than they should. 

But I think that for me, a car really meant freedom. And joining the army at 17 years old, is a pretty intense reflection of a need for freedom and independence. And so for me, cars always had a special place. I had my first car when I turned 15. I didn't have a driver's license to drive it. I had a very long driveway. We lived in rural Sacramento and I would drive that car up and down that driveway at higher and higher and higher speeds and forward and reverse. I got incredibly good at being able to not just drive the car up the driveway backwards, but also drive it around the loop and not hit anything. I mean, for me, you know, that car was everything. And Scott's auto detailing was really a Tom Sawyer type enterprise. It was all for one thing, you know and we all ultimately commit ourselves to things because we get something out of it. For me, all of my neighbors had very nice cars and I wanted to be able to drive their cars. 

And having my own detailing service meant that I could go to their houses on Saturday morning, drive their car from their house on rural roads to my house, usually less than a mile or two. And then I ended up employing almost every kid in the neighborhood. And so I had this business that would detail the car. I love cars. I love the idea that I can make the cars look better. But then at the end of the detail, I drive the car back to its owner. And so I spent my entire weekend driving a dozen cars all over Sacramento roads totally illegally, but also making money getting paid. And I had my own cash and most everybody works for me. So that was really, I think my first experience in running a you know, a small business. But the payoff for me was I got to drive, I got to learn how to drive. And you know, I probably wouldn't want everybody who used Scott's auto detailing at the time to know how aggressively I drove their cars. 

But it's where I learned how to drive and race and really, you know, have a good time with a car. So I've made it my thing. And I look back on my career and say, you know, it's clear that I have a love affair with cars. But this belief that buying and owning a car is a milestone moment and a reflection of where you're at in life is ironically at contrast with the reality that buying and owning a car sucks. It is a high friction experience. It is a double digit percentage of everybody's total sort of gross income that is spent on mobility and getting around. Three out of four Americans need a car to get to work. And as a father of daughters, hearing the statistics that, you know, 75% of women say they need a man with him to go buy a car. That is just a horrible reflection of a broken system. And I've become a student of it. And I think that technology can make it easier. 

And I think that the asymmetry of information is where I started, you know, this idea that the reason why you have a high friction, intimidating, high anxiety experience in buying a car as you go into your doing battle with a trained car salesman that they do this every day and you just don't have good information. So you walk on the line, you're like, oh, tell me about this car or you know, just the cadence of the conversation that you have with the car salesman is fascinating. Because now at this point in my life, I've also learned exactly how car salesmen are trained. I understand the paradigm, the context of what they do to sell you a car, and how that conversation isn't a real conversation from the salesman's point of view. The conversation they're having with you is to get information about what you do and what you do not know. Because they're also trained on exactly what matters in that negotiation. What did they have to get out of it in order to make a profitable transaction? That's a fascinating sort of context. 

And the training that goes into being a car salesman isn't random. You know, it's not like one day they just say, you know, it turns out, you're a really good car salesman. There is a methodology for how you get your front end back end gross as a car dealer. And it really is something that if you understand it, it's a little bit like knowing the magician's handbook in magic, where if you know that stuff, you can then begin to solve those problems using that knowledge. And so almost every company that I've had over the last 25 or 30 years has been focused on that same journey about making buying and owning a car easier using technology. And so whether it was, you know, auto access, 1-800 car search, carsdirect.com, True car, Fair, and now Autonomy. All of these businesses have had the exact same mission statement.

Brock Briggs

Which is? 

Scott Painter

To make buying and owning a car easier using technology. And you know, buying and owning a car should be great. And it can be great. There's no reason why it isn't. But I don't think people feel that way. You know, along the way, I've also done things other than cars. I was, you know, for a while focused on dentistry. I had a company called Dental Advantage. And then I also was at a company called 1-800 Dentist. And I came into 1-800 Dentist as the head of marketing and really deeply understood, you know, how to create direct response advertising to get people to help help them find the dentist that's going to help them and their family. How you market a service like that when people associate dentists with putting a drill in your mouth and blood. And it's just it's absolutely fascinating what you learn about what works and what doesn't. 

But that whole business is about, you know, putting $1 bill on the table to advertise a thing that people don't want to hear about and getting them to respond efficiently. I would say that, you know, the three things that have emerged in modern life that people just universally don't like, is going to the dentist politics and buying a car. And so for me, being an entrepreneur in a space where there is a very well recognized problem is sort of easy, right? Because if you're there as a innovator to solve a particular problem, understanding the problem is step one.

Brock Briggs  41:33  

I think you hit on something really a lot of interesting things there. But you mentioned becoming into the dentist position or that company as a marketing role. And looking at your track record, I think that marketing maybe the most important part of the problems that you're solving. Because you know, there's a lot of car companies, you know, but it all comes back to how are you going to position yourself differently and get the customer like you said, to understand that you're offering something different. And it's not like, they just shut their ears off as soon as they hear the word dentist car or politics. So I guess what have you learned maybe about marketing that helps break through and communicate a problem and how you're gonna solve it?

Scott Painter  42:22  

Well, I think that company building starts with a fundamental recognition of a couple of axiomatic truths. One of them is that customer acquisition cost or CAC, as it's known in company building is like cancer, it's the thing that kills almost any company at any stage. And it's also the metric that reflects your brand equity and your product market fit and your momentum and whether or not you're going to succeed as a business. Because if you can attract customers at a low enough cost, it must mean that you've got a thing that is desirable or that solves a problem efficiently. And so in my particular case looking back at, you know, whether it's Fair or TrueCar or Cars Direct or even now, Autonomy, these companies all symbolize something very basic, right? True car was about integrity. Cars Direct was about cutting out the middleman and being just totally, you know, upfront. Fair was about this sense of equity. 

And this, you know, delivering an experience in automotive, that is fair is the last thing that most people expect. Autonomy is about freedom. You know at one point, just going through my second divorce, my therapist said, you know, with all these companies, whether it's Direct or Fair or True, I mean, do you think you're working something out? I mean, part of the arbitrage in all of these companies is I've built clarity on brands that can attract customers for less than the competition. And you're right in that the auto space is one of the most crowded categories of all because everybody thinks they understand cars and everybody has this sort of relationship to what they drive. And it's something that's very relatable. And so getting into a category with a very low barrier to entry, like car sales, means that you've got to do something pretty remarkable to create contrast. 

And so all of these companies for me was about, you know, can I attract customers for less than, you know, the average car dealer? And I remember when I was starting out in this business, there was a car dealer named Cal Worthington. Cal Worthington would have these famous commercials where he was a cowboy and he would always have like a tiger or a lion or some big animal. And he's like, come on down. I'm Cal Worthington. I'll take care of you know and you know, if you come on down, I'll eat a bug. I'll stand on my head all these crazy things, but he always had this 10 gallon white hat. And I mean, could you have a more symbolic gesture than a white hat car dealer in a black hat space? I mean, he was just saying I'm different. You can trust me come on down. I'm approachable. I like animals. But Cal Worthington was really phenomenal. That marketing was always on TV. 

But you know, come on down and go see Cal, go see Cal, go see Cal. And he was this very, very trustable figure in the auto space. And I thought that was really interesting to me. All of these companies were about sort of going up market with that same concept while he was trying to be the better car dealer. I think, if you look at some real success stories in this area, you know, CarMax was started by the Circuit City guys. You know they created CarMax as a way of going into a used car space. CarMax doesn't have you know franchised car dealerships. They don't represent any brand, they are all used car locations. How unlikely is it to create a brand that people trust in the used car space. And yet CarMax was, you know, their whole tagline for years and years was, you know, we'll buy your car, you don't have to buy yours. 

I mean, that's a pretty interesting. I mean, so they've really sort of crafted their position around the idea of being trusted around. If there's anything more intimidating than buying a car, it's selling the one you're driving. You know, this idea that you have to become a used car salesman. You gotta invite strangers over to your house and you got to tell them all about this car. And you know, many people are not comfortable saying oh, the car is fine, when they know it makes a noise if you turn left or whatever, you know it. It's a cold start on, you know, early mornings. So I think that for me, this recognition that customer acquisition cost can be solved with brand equity and creating a very, very obvious experience. TrueCar was about introducing trust. And unfortunately, some car dealers felt like it was a bit of an indictment. If they weren't on TrueCar, they weren't trustworthy. 

But TrueCar was about creating a hero brand where people could trust and the way we did that is by transparent information, the practical impact of TrueCar. And you know, we had dealers who loved us and dealers who hated us, but the dealers who loved us recognized that we could take cost out of their equation because we removed trust as an issue to get over in the transaction. Customers would get the information from TrueCar. And come in and in car salesmen terms, they would be a lay down, they would be customers ready to buy. Because the last thing you do before you buy anything is you find out what the price is, you find out what and if that is a good price. What we did at TrueCar is we published a pricing distribution of what everybody paid for a new car configured a certain way. 

And because of the velocity and the new car market, we were able to give people the information to say how would I configure my car? You'd put all that information into the computer. And then we would go ahead and basically normalize that information to all the other transaction data, plot you on a curve and we could tell you exactly how you're doing. And it made first time car buyers experts instantly. And what ultimately happened is the price distribution narrowed from 30% between the person who paid the most and the person who paid the least for a car to 3% inside of 90 days in markets where we were introduced. And that was not something that the detractors, the dealers who tended to sell the cars for a little bit more than the average liked. They did feel like we were publishing the magician's handbook. 

But if a dealer liked it and they embraced it, they lowered their costs. And it worked very well for them. We also had a very cool dimension of our business where you didn't have to pay for advertising unless it worked. So instead of charging dealers $30 for a lead and just going out beating the drum and saying to customers come over to us and we'll give you information, we would go ahead and say to the dealer, you have to tell us what you'll sell the car for. We're going to publish that offer in the context of what everybody else paid. And that way bad prices will get exposed, good prices will get accepted. 

And when the customer comes in and buys a car, then you pay us $300. The benefit was a traditional lead might close 3% of the time. A TrueCar introduction was closing 30 or 40% of the time. So while it's $300 per sale, it's still 500 or $600 per sale if you were buying leads one at a time. And you have to do less work to close a TrueCar transaction. So there was a lot about the business model that was unique. There was a marketplace play and doing all of that. But I became the face of all of it, right? And dealers who loved it, loved what we were doing left me, dealers who did not wanna be in a transparent marketplace did not like me at all.

Brock Briggs  50:00  

Yeah, I was gonna say there was like some very noted backlash and unrest from the dealer side. And I mean, as a consumer, I would, if I'm looking at your company and the dealers and hearing them get mad, that instantly tells me that they have something to hide. And so they're almost kind of exposing their hand by saying, hey, we are selling cars at incorrect prices or at least prices that aren't fair, if you can be disrupted that easy. 

Scott Painter  50:29  

You know building that company was probably one of the more difficult things for me to have ever done as an entrepreneur. You know, even though we ended up taking that company public and we got 2A two plus billion dollar market cap, dealers are some of the best entrepreneurs in the country, I mean, in the world and they're very resilient. But dealers have effectively a monopoly on the new car side. Once you're a franchisee, the franchisor can't really take that away from you and you're protected from competition with other franchisees. You got an area of influence. So you've got a little monopoly going. And you know, dealers in America are the backbone of the local tax system because the sale of a car is a big ticket item and it generates good tax revenue. But in most small towns around the country, the sponsor of the high school billboard is a car dealer. So they generate tax revenue. 

I mean, I've gone and testified before Congress in investigations into, you know, fair practices and how to reform buying a car and to enforce these things in the name of consumer protection with the FTC and looking at these things. And you know, I've testified right before and after car dealers who got up and said, you know, we're the backbone of America. We are the biggest charitable donors in our towns. We’re the source of tax revenue, we, you know, blah, blah, blah and all these really positive notable things. But not one mention of business practices and are they, you know, are they ethical? Are they moral, you know at sort of a consumer level? It doesn't mean that, you know, selling a car is unethical, it just means that because car selling requires a human really sort of convincing another human to do a big ticket thing. It's just a big area where there's an opportunity to have bad outcomes, right? 

And it's not like car dealers are bad as a species. I think that car salesmen tend to want to cut corners because they want to get a transaction done. But when you have generally smart people with a very, very, you know, hard to enforce guardrails around how to do a thing, it just creates a lot of opportunity for mistakes. And one of the things that I always loved about building software and building internet and technology based experiences is that the higher the compliance and the higher the regulatory requirements that are required, the easier it is to comply if you're actually writing code and creating very, very binary experiences. Laws tend to get broken when you have 1000s. And you know, in the car business, you've got literally 2 million people that work at car dealerships in this country. And you've got 60,000 car dealers and almost 2 million employees, that leaves a lot of opportunity for interpretation about laws. 

And laws tend to have sort of a letter of the law and a spirit of the law. If you don't understand the spirit of the law, you're never gonna be able to chin to the letter of the law very easily. And so a lot of these rules get broken very, very unintentionally because we leave it up to the individual humans to then perform these things in a consistent way. When you write software, you write code. You can have a lawyer look at everything and it can all be compliant. And so I tend to like working in high compliance, high regulation driven environments because you don't have any interpretation issues. You don't have to wonder whether or not you are, in fact, following the law. But one of the things that I spent a lot of time talking with our lawyers and our young product managers about is the letter of the law versus this sort of the spirit of the law versus the letter of the law. And I'll give you an example. 

In the name of consumer protection, laws were passed that an automobile advertisement had to be in 12 point font. Part of that was because the dominant way that cars were being advertised was in the classifieds. And it turns out that newspaper print that goes below a 12 point font becomes almost illegible. And so if you end up running an ad in eight point font, you can't really read it. And one other corollary sort of law that was required is that when you advertise a used car for sale, that you publish a VIN number on that car. And the reason you have to publish the VIN number is because dealers are pretty famous for doing this thing called baiting and switching. They run an ad and they say, you know, Honda Accord, you know, use this many miles. Here's all the information and it's $18,500. You go down to the dealership, you say, I'm here for my $18,500 Honda Accord. 

And the dealer says, yeah, that one was sold. We don't have that one. So the laws really evolved in response to protecting the consumer. So if by law, you gotta go ahead and publish the VIN number and you have to do it in 12 point font so that it's legible. That is the letter of the law. Well, nobody who passed that law anticipated that everybody who's selling a car would shift from classified advertising to digital advertising. And today, 100% of car dealers who sell cars list those cars digitally on about five or six different platforms. So all of the classifieds have digitized. And today, cars.com and autotrader are the modern day classifieds. In fact, cars.com is literally getting data feeds from all of the nation's newspapers and is the modern day version of the classifieds. 

Well, in a world where font size and legibility is infinite, does it matter that you've make it in 12 point font? If I can actually zoom in and I can enlarge the screen and I can still read everything, isn't that what matters? The spirit of the law is about legibility and tricking the customer and making sure that the customer has the ability to hold the dealer accountable to the advertisement, right? So I'm not so worried about whether or not we have 12 point font and it turns out 12 point font might actually screw up a web presentation or a technology based introduction all together. So and you know, I've had many, many rounds with lawyers about, oh, it's got to be in 12 point font, it's like, no, it really doesn't, that's not what they meant. You know, you gotta sort of look at the spirit of the law. That law is clearly there to protect consumers. 

And it's about whether or not the advertisement is truthful and legible. Let's go ahead and operate to the spirit of the law. If we get cited for violating the letter of the law, we'll win that argument if we have to defend ourselves in court. That's how the system works. So we tend to do that a lot. And it does take an entrepreneur or somebody like me, that's willing to take that risk. Because below the line, if you're a product manager and you're working with your legal department and the legal department says it's 12 point font, you don't really have the authority to go ahead and put the business at risk and say, no, you know what? They didn't really mean that, right? That's the job of a CEO or a founder. And so I think that's a good example of, you know, how I see most of these things. I really do care about the spirit of a thing and deeply understanding why those regulations or compliance driven requirements are in place.

Brock Briggs  58:07  

Well, it would take somebody intimately familiar with the industry and like the rules and regulations that have transpired over the last however many years that there's been laws around that to know, hey, this is what is actually being intended. And I think that that type of experience that you have is difficult to replicate. I wouldn't be lining up to compete against you with that type of like, just background and expertise.

Scott Painter  58:40  

Yeah, you know, so I've had 57 incorporations in the last 30 years. So I've always raising money for one, two or three companies at a time. And once you start a business, you sometimes have to start other businesses to help that business. And that's partly because not every supply system or ecosystem is built. You have to sort of do some of these things on your own to be able to pull this off. And so I usually start businesses that are a little bit complex that do require other core competencies. And sometimes it's good to build those things outside of your core business. Not everything has to be built in house. You can independently finance those things, they can serve other customers. But I think that one of the moats in this business is the fact that we've decided, I've decided I'm still on the same mission. 

You know, I get asked all the time about Autonomy like okay, so what is Autonomy? Well, Autonomy is here to accelerate the mass adoption of electric vehicles by making them more affordable. Well, that ladder is right up to making buying and owning a car easier using technology, which just means that we're applying that to electric cars now because electric cars are going through a minute where we're transforming from what we drive ice vehicles internal combustion engines to electric cars. And that transformation is gonna be more profound on every level than the original introduction of the car almost 100 years ago. So you've got, I think, a lot of things that we recognize as students of the industry are gonna change. But because we understand these laws so deeply, you know, I just gave you one early example. 

But understanding the laws that govern leasing and rental law and how that unlocks an experience. You know, one of the unique attributes of what we've built at Autonomy, for example, is that you're not buying a car. Now, having two sons, one who's 16 and he just turned 16 a month ago and one who's 20. So he's been driving now for four years. Those boys think about their first car in the exact same way that I thought about my first car. It was their ticket to freedom and it's their car. But this idea that somebody who's just getting started in life, my 16 year old wouldn't be able to pay for a car on his own. If you take the you know, the average used car has gone up in price. But, you know, take a $20,000 used car. How is a 16 year old gonna buy a $20,000 used car? 

And the answer is they're not unless their parents get it for them and figure out how to help them. A 20 year old who's now out on his own, got a job earning his own money, he's got the worst credit of anybody in the system. If he's gonna go get a car loan for $20,000 to buy a used car, he's gonna go out and spend, you know, 20-25% of his total income getting a 13% car loan spending more money on the money than the car. It's absolutely insane because the entire system is based on debt. And we currently across the planet, put people into about $10 trillion of automotive debt every year at an average interest rate of 10%. More than half of what everybody pays for their car payment doesn't even go to the car, it goes to the money to get the car. And it's sort of, you know, mass oppression in some way. So I just don't think that you have to put somebody into soul crushing debt to give them access to mobility, 3 out of 4 Americans still need a car to get to work. 

But my boys both drive a subscribed to car from Autonomy. You couldn't possibly convince them that that's not their car and that that's not their ticket to freedom and that it's not effectively the same thing as owning the car. They just aren't in this construct of going into debt to get it. They're using it for what they need. I've got a son, the 20 year old, he's in college, he needs to get around. It's really about what's his monthly payment. So I think there is a modern version of ownership that has been the byproduct of everything that I've done. But at this point, it would be, I think, hard to have the level of comprehension and access to the solutions that it's not just me but my whole team. I mean, I've got a team of 110 people at Autonomy, almost all of them are refugees from some of my other companies. And I've got a partner who's been in the industry for his entire adult life. He's in his 70s now, who is really considered the father of modern car leasing. The level of expertise that we have at the company and passion to solve this particular problem. And we're at this point, we're all crusaders on this journey. But it does, it becomes a real moat for the business.

Brock Briggs  1:03:32  

Earlier you were talking about business model and how customer acquisition costs can be one of the things that cripples early stage businesses. A lot of the businesses in your history revolve around code and software and are likely very, very high margin businesses. Recently, you guys just spent 1.2 over a billion dollars buying EVs for subscription things and that's kind of a different or a change in that, like buying cars is extremely capital intensive. As your position about capital intensity and business model thoughts, has that changed? Or what am I missing there?

Scott Painter  1:04:19  

Yeah. You know, so I've never said that, you know, my thing is building businesses that have software like margins. Although I'm definitely a technology driven entrepreneur. I was the first class at West Point to be actually given computers. We were given Zenith Heathkit computers, we had to put together the motherboards build the computers and we were writing you know, you know, C++ and we were writing, you know, computer programs as one of the first Cadet classes that was being given any kind of a computer so these were all green screen computers. And we were writing really basic code. But I've always had a deep understanding of, you know, technology and computers. I was probably one of the first sort of digital citizens where I really made that part of my life. I remember getting one of the very first cell phones.

As soon as I left West Point, went to Cal Berkeley you know, I started a car company there and I had a cell phone and people just thought it was absolutely bananas. So for me, I've always had a good understanding of how technology can transform an experience. It sometimes leads to great profit margins, it doesn't mean that you have to have a SaaS business model. I think that to unlock the experience that we're trying to unlock with Autonomy, being a capital intensive business is okay if you can do it efficiently. And right now, believe it or not, even though we are in probably the most challenging economic times over the last 50-100 years, you've got more debt and more access to capital and more money floating around than ever before. The world is a wash in capital following really the internet boom. And you know, the last 20 years have been pretty fantastic. 

So it's an asset. It's something that's hard in this market being a business that borrows money to buy assets and put them to work, which is really sort of more of a REIT business model than a SaaS business model, where we are, you know, having to basically go borrow money to buy an asset and put it to work. It's hard because when interest rates go up, everybody says, well, if you've got $100 million or $200 million of debt or a billion dollars of debt, how does that affect your overall margin. And you know, while interest rates rise the tide for all boats. If you're trying to get a car loan as a consumer, your cost of getting that access to mobility is going up everywhere. It takes a minute for all of that to sort of level up and for that to normalize. So we probably tend to lag, where when interest rates go up like they did this last month, we didn't immediately raise our prices, but ultimately, we're gonna have to in order to retain our margin. 

That's hard because at some point, you do recognize that the cost of your thing becomes unattainable for most people. And the hard truth is that the cost of that thing no matter how you finance it is gonna become less attainable for some. And so I think the table stakes are much higher. But again, I think about what do we do that other people can't do. And we're very, very maniacally focused on unlocking a better customer experience. You know, the value propositions of what we do start with it's cheaper. Being cheaper isn't like, we're like 5% cheaper, we're five times cheaper than a car rental. We are 30-40% cheaper than a competing car loan. We are just a binary option that doesn't exist for people below a certain FICO score in terms of the car lease. So I think that you gotta be radically better at a thing, if you're gonna disrupt a market. If you're gonna innovate, you have to be so remarkably better that that's the only way you're gonna get market share. 

You know right now, we are competing on price. It's a very, very skinny business. And it's very hard to go and convince large sources of capital that that's a good idea, especially in a market where they don't have to take that kind of risk. So I'm mindful of that, you know, this has been a harder company to raise money for than anything I've done before. Even though I've got credibility and momentum and people who know that I can build companies that create real value. I think that to the extent that we are resilient and that we stick with our focus on solving a customer problem, we're gonna get the capital we need to continue to build the business. What we don't do badly is execute, right? So you know, we have software that works. We have an experience that is cohesive. 

As we get more well known, our cap will come down, our efficiencies will go up, our margin expansion over time is gonna be a reflection of our product and our brand working. But it's hard. I remember, you know, almost 20 years ago, some of the early radio ads for Amazon. And I would hear, you know, interviews with Jeff Bezos, where he was talking about the fact that in order for Amazon to get market share, they had to sell books at the price that would be unlocked when they get to scale. And what that meant is that they would lose money. And if you're thinking about this thing called Amazon and the kind of scale that he was talking about at the time, he was making an argument for losing money for a long time. But he's right in the sense that if you have to charge a premium for being inefficient and small, in the early days, you weren't going to get market share because people have rational choices. 

And people aren't going to be in a charitable mood to give you better margin just because you're aspirational as a young company about solving a big problem. So the fact that Amazon was able to convince investors that they were gonna lose money for almost, you know, 10 to 12 years is pretty astonishing given the scale of that business. It's harder to do when you go from a book to a car. But I do think we're close to solving the problem. I think that it's also important to note, you know, when we put in our order for $1.2 billion of cars, that's also not something that you have to pay for the next day. What that does is it gets everybody's attention. And then you get to go talk to all the car companies. And there's right now 17 different manufacturers that make 38 different trim levels of electric car and not everybody's ready. 

Our intention in announcing that order was to get everybody's attention at the top of every organization and say, are you ready? And I can tell you that now that we've talked to the car companies about that order, half aren't ready to fill the order. So it doesn't even matter that we put in the order. And what we're doing now is we're reallocating our order to those who are ready. And right now, you know, sort of the simple truth is that Tesla is dominating the electric car production side of things. And so we'll probably over index on Tesla in the near term, but others like Mercedes and you know Toyota and Volkswagen are all sort of coming. Big guys like General Motors and Ford. They've got great electric vehicles, but they are certainly right now vexed with supply chain issues and chip shortages. 

Those cars are coming, but they're not here yet. Well, that's really important to understand. And then you've got now seven or eight completely new entrants that have multibillion dollar market caps. Many of them are pre revenue, pre product, but they're trading in the billions of dollars. That's fascinating. And those companies are all direct to consumer, they've never had really a fleet channel. And all of those conversations were buying cars were a customer to buy cars, but not all of them are ready to deliver cars and you've got, you know, very exciting companies. So you start with Tesla, but then you got Rivian, Polestar, Lucid, Fisker, Canoo, VinFast, BYD, you've got all these, you know, really, really cool cars coming to market. It's a great time to be a consumer. So back to my reasons for being in the car business, I think it's sort of cool that you're gonna get to drive all these new cars that nobody's ever seen before. But we're gonna wake up in five years and we're all gonna be driving an electric car.

Brock Briggs  1:12:29  

I love that vision. And it's so cool to talk to somebody that is living and kind of bringing that future into existence. So thank you for that. The America and the rest of the world, I think, will thank you. I have like a million more questions. I know, we're gonna be pushing up on time here in a second. So I'm gonna kind of turn these into sort of a rapid fire type question. And then we'll kind of close out. First one, what is one tip for people who are in the business right now of raising money? You've written extensively on it. How do you sum up all of your knowledge about how to raise money effectively?

Scott Painter  1:13:10  

You know, I think that fundraising is about two things. One, it's about being able to tell a story. And it's also about making sure you're pitching the right thing to the right people at the right time. You know, one of the things that's conspiring against me at Autonomy right now is I'm trying to pitch debt in a world that, you know, interest rates are rising. That's a horrible moment to try to do that. So you know, if I was giving myself advice, I probably would have said, a storm Is coming a couple of years ago and recognize that and try to get ahead of it because much of what's going on in the world today is a pretty predictable, you know, shadow from the pandemic. But things are a little bit more chaotic and a little bit more volatile today than they were even during the pandemic. So I think that much of that could have been avoided if we were just thinking about what to sell at the right time. 

You know, fundraising like anything, is about timing. I think anybody raising any money right now is gonna have a harder time than they should. And that's unfortunate. So you might want to think about, you know, how to do low cost development of a thing for now until the macro economic conditions change a little bit. I don't think we're going to necessarily have an easier fundraising climate for the next 6 months to maybe 18 months. So it's going to be a little bit of a minute. You know, there are a lot of things that affect that macro climate. But my advice to people who are fundraising right now would be to find a way to do more with less and not necessarily be dependent on fundraising as a way of getting to the next sort of level up in your business. Do things that are gonna cost very little for the foreseeable, you know, period of time. And that's like 6 to 18 months.

Brock Briggs  1:15:07  

Next question, you've written on advice for young entrepreneurs. If you can elaborate on this sentence, you said the most important thing is to know financial statements, legal documents and figure out whether you're actually an entrepreneur or not. 

Scott Painter  1:15:23  

Yeah, I speak at business schools everywhere. And you know, when you go to a business school and it's an entrepreneurship course, you walk into a room and you got 50 people and one of the things that I sort of love doing is just saying, how many of you are trying to start a business? And it turns out, you know, in any room at any business school around the country, about half of the students are trying to do something. So I said, if you're starting a business, stand up, right? Because if you're not even trying to start a business, you're not really an entrepreneur. If you're in business school and you're just a student, I mean, you're not really sort of hustling on the side to do your own thing. So it starts with just isolating who in the room is even really a candidate to be an entrepreneur. If you're not trying, you don't get to stand up. 

And then you know, one of the real sort of defining things of being able to start your own business is how much risk how do you actually take? How much of your own money are you putting into this thing? And then what I usually say is, you know, who is in personal debt to start their business? About half the people sit down and then you know, say, of those who have personal debt, who is personally in debt for more than $100,000? And then usually have two or three people standing and say, who's in for 150. And I just keep doing that until I find the last person in the room who's most levered up to start their business. I said, that's your entrepreneur, right? And entrepreneurs must be optimists. You have to be able to see the good. And the upside in the thing, you know, it's important to be a very disciplined thinker and a very pragmatic thinker. But one of the, you know, the real ironies of a guy like Elon Musk, for example, is that he is the most realistic about what's likely to happen, which comes off as massive pessimism, you know.

But I've never met anybody who's more optimistic than him about what's possible. So this fatal optimism, this belief that the thing can be done, the belief that as a pleated class, we're gonna go on a toga retreat. And we're gonna have a unchaperoned trip to New York, that is the kind of blind optimism, fatal optimism that I'm talking about. And not everybody has that. And you know, I've also written about sort of the dark side of being entrepreneur, it's very lonely. And you know, one of the cool words that gets tossed about as you start to succeed is visionary. Visionary is a really interesting word because it means that you see something that people don't. But to be a visionary, you also have to fight for a thing to be a real thing when others don't believe it. It means you have to really stand there in the face of real opposition and defend your idea, defend your company, pivot and be very, very flexible about what you're doing in order to incorporate good ideas. 

You know, fundraising is sort of like a voting machine that has a very binary outcome. You're asking people to vote with their wallet. And if they don't give you money because they don't think your thing is gonna work. That's sort of the bottom line. And one of the great things about being able to pitch a lot of people that are really, really smart about a thing is you get feedback from them along the way. And I think a good entrepreneur has to be able to listen to them and understand. Now, there are very simple things that can get your business not funded, that have nothing to do with your idea. That's why I say, understand the financial statement and understand all of the legalese of what goes into an investment from a contractual point of view and taking your lawyer and taking your accountant to lunch. And really just talking about the fundamentals of a balance sheet income statement, statement of cash flow and pro forma, understanding how that works. 

Knowing that when you look at those documents, which line on the page to look at, that's a fundamentally important thing to be able to do. And they don't teach it in business school. I mean, I speak at all these schools. And you know, unless you're taking an accounting thread, where you're gonna go and learn those things, they don't really talk about it. But it is one of the most important things to be able to navigate the boardroom is to be able to know the difference between a balance sheet and the statement of cash flow. If you don't know a statement of cash flow, you're gonna run out of money. And if you really know how to look at these documents, you're gonna understand how to value your business. There's only three simple variables that go into enterprise value, its top line, bottom line and growth and understanding that you can have a smaller top line and a smaller bottom line as long as you're growing. 

Growth is by far the biggest variable that matters and you know, companies sort of fit into high, medium and low growth. And you know, hyper growth companies anything over 40% annually. 20 to 40% is sort of a, you know, middle growth company or medium growth company. If you're below 20%, you're not really a growth company. As your company gets bigger, it gets harder and harder. But you know, companies that are already fully mature, they may not grow as much, but they're not as valuable relative to their top and their bottom line. And there's no better example than Ford versus Tesla, you know. Ford is a 20 times larger company historically and 1/20 of the value. So you've got, you know, a company and Ford that was putting huge profit to the bottom line over the last decade and they grow at 2% a year. 

You know, people wonder why Tesla is valued at a trillion dollars. It's because they've been growing at a 100% compounded annual growth rate for 10 years on a billion dollar base of sales. That means that every year, they grow 100%. And they've been doing that for 10 years. And for most of that time, they haven't been making money. But that growth rate puts them into this rare category of you know, there's maybe a half a dozen companies that grow like that for greater than five years. And it really doesn't matter if he's selling cupcakes or cars. If he can grow like that on that base of revenue at a billion dollar threshold, you're gonna get a trillion dollar valuation, that's just how it works. And so understanding, you know, the legal terminology that goes into an investor rights agreement and all of the things you know, that you'd be surprised how many entrepreneurs don't understand the difference between pre and post money. 

And just because I have visibly raised a lot of money, I get a lot of entrepreneurs, young entrepreneurs that come and say, help me to raise money. And the biggest misconception is that they're gonna sell 1 or 2% of their company to finance the business. You're gonna sell 30% of your company every time you raise money. Nobody wants to invest in a business and own too little of it. And nobody wants to invest in a business. Some people do, but very few, certainly in the early stage, want to invest in a business and own control of it because then they're responsible for the decisions. So there is a natural glide path that investors will always fit into. And you want to remove as much of the hurdle in terms of being able to get your business funded. But if you're not completely fluent in all of these terms, you can't speak investor. And you know, there's a lot of axiomatic things that having raised money now for 57 companies and billions and billions of dollars. It doesn't matter who you are, every investor wants $10 for every dollar they invest. 

Everybody wants a 10x return. The average is about one and a half. That's a pretty important thing to understand. Because if you can speak to investors about the potential of your business to deliver a 10x return and then deliver a 3x return, you're not gonna just get a Christmas card. You're gonna be one of the most high performing outcomes that most investors will ever see. So you know, you got to speak in 10x, chin to 3x. And know that if you don't deliver one and a half X, you got a problem and you probably shouldn't be an entrepreneur, right? One other important thing that I think is shocking to most young entrepreneurs that I talked to is, stop thinking about equity investments as if people are betting on you and you don't owe them that money back. If you think about equity investments like loans, you'll fundamentally spend that money differently. If you know you have to pay back every dollar that you take, you're a much more responsible Entrepreneur. And I think that's the right way to think about equity.

Brock Briggs  1:23:38  

Last question for you. What is the endgame for you? You mentioned a line earlier that I wrote down and told myself to come back to, you said we all get something out of it. Like referring to building businesses, I get the feeling that you're in this for much more than money. What is your endgame? And what are you getting out of this?

Scott Painter  1:24:00  

Well, I think money is important. But I will tell you that I love what I do. I love being an entrepreneur. I love the life that I've crafted, everything that I do supports my ability to be an entrepreneur. So you know and I live pretty authentically, it's about the journey not the destination kind of thing. And so you know, I am not money driven. But at the same time, if you're going to live a high quality life in a city like Los Angeles with four kids and two ex-wives, you've gotta be pretty good at being able to monetize what you do. 

I think the end game for me is ultimately having enough kids so that as I get older, I don't get put into a home. I wanna make sure that I've got people around me who love me. I think that the only unconditional relationships are between parents and children. And you know, I'm very proud of my kids. You know, I want them to be a big part of my life going forward. And I think that to the extent they could be part of my businesses or they could have businesses that I could help them with that would be the definition of success for me is just having a great family life for the balance of my time on planet.

Brock Briggs  1:25:17  

Scott, this has been a really fun conversation. How can myself or anybody listening be of use to you? Where do you want to send them? 

Scott Painter  1:25:25  

Yeah, I think if people go to Autonomy, I mean, I do go 

Brock Briggs

Rent a car?

Scott Painter

We're gonna be driving electric cars. I don't think that, you know and we certainly didn't talk about it today. But you know, it's not just about the electrification of automotive and having cool things to drive. It's also about the end of ownership and the end of debt. It's about the fleetification of cars. We've got the data now to know what a car is worth. That unlocks the ability to finance that car differently, rather than forcing individuals like my son to go into soul crushing debt to get access to a car. Let's go ahead and give him access to a vehicle and do it in a way that actually makes sense for the business. 

So I think that Autonomy is a very low risk thing, right? If you're thinking about an electric car, you've got range anxiety, battery anxiety, all of those things. It's a great way to try it. But what we need more than anything is just a, you know, a group of customers who become crusaders. And I think, ultimately, you know, businesses like ours are gonna succeed by word of mouth. It's gonna be because people who try it, love it and they tell their friends and they tell their friends. And so I think that, you know, give it a shot. And it's not just us. I mean, everybody's gonna be sort of presented with subscription opportunities and it's gonna be a really, really fun time to fall in love with cars again. And again, we're gonna just be driving a different thing.

Brock Briggs  1:26:49  

Scott, I really appreciate your time. Thank you so much for coming on today.

Scott Painter  1:26:53  

Alright, Brock. Thanks for having me.