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Invest Like the Best with Patrick O'Shaughnessy
Caryn Seidman-Becker: Rebuilding CLEAR - [Invest Like the Best, EP.432]
01:26:55
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- [00:01]
Patrick O'Shaughnessy
Something I speak about frequently on Invest like the Best is the idea of life's work. A more fun way to think about it is that I'm looking for Maniacs on a Mission. This is the basis for our investment firm Positive Sum and it's the reason why I am so enthusiastic about our presenting sponsor, Ramp. Not only are the founders Karim and Eric Life's work level founders certainly maniacs on a Mission, they have created a product that is effectively an unlock for founders and finance team to do more of their life's work by streamlining financial operations, saving everyone their most precious resource time. Ramp has built a command and control system for corporate cards and expense management. You can issue cards, manage approvals, make vendor payments of all kinds, and even automate closing your books all in one place. Speaking from my own experience using Ramp for my business, the product is wildly intuitive, simplistic and makes life so much easier that you'll feel bad for any company who hasn't yet made the switch. The Ramp team is relentless and the product continues to evolve to save you time that you would never have dreamed of getting back. To me. There is nothing more interesting than technologies that reduce friction for other entrepreneurs to be able to build the thing that they want to so much attention has gone to cloud computing, APIs and other ways of making life easy for founders. What Ramp has done and is doing is build yet another set of tools in this category. To get started, go to ramp.com cards issued by Celtic bank and Sutton bank member FDIC. Terms and conditions apply. I'm excited to introduce our newest sponsor, Arcana. Arcana is the world's most advanced portfolio intelligence platform trusted by institutional investors managing trillions in assets under management including Market Neutral, Long Short, Long Only and Capital Allocators. Arcana enables portfolio managers, risk teams, analysts and CIOs to drill into exposures and idio, construct optimal portfolios and decompose performance at incredible granularity. Arcana is the only real time intraday system in the market with extensive live scenario analysis, custom screening and tagging and a slate of one click lightning fast portfolio construction tools, mock portfolio trackers, reporting and single stock crowding. This is the kind of tool I wanted when I was managing public equities and I am sure you will benefit from the insights the system has to offer. Visit Arcana I.O. to request a demo and learn more. Ridgeline is hosting their annual Basecamp conference this September 22nd through the 25th in Deer Valley, Utah. I will be there and sold over 50 top investment management firms from around the country, now in its fourth year, Basecamp has become where the future of investment management is created. Ridgeline gets the most influential changemakers in the same room, learning and sharing ideas about the latest innovations that are drastically altering how this industry operates. It's truly a must attend event for anyone who wants to understand and be inspired by what's coming next for investment management. Again, I'll be there, but space is limited and attendance is curated. You can request an invitation by heading to ridgelineapps.com Ridgeline gets me so excited because every investment professional knows the core challenge that they solve. You love the core work of investing, but operational complexities eat up valuable time and energy. That's where Ridgeline comes in. It's an all in one operating system designed specifically for investment managers, and firms are flocking to Ridgeline for good reason. You don't have to put up with the juggling multiple legacy systems and spinning endless quarter ends compiling reports. Ridgeline has created a comprehensive cloud platform that handles everything in real time. Visit ridgelineapps.com to schedule a demo hello and welcome everyone. I'm Patrick o' Shaughnessy and this is Invest like the Best, this show is an open ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in depth profiles of the people shaping business and investing in. You can find Colossus Review along with all of our podcasts@joincolasis.com Patrick O' Shaughnessy.
- [03:56]
Karen Seidman Becker
Is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit Psum VC.
- [04:24]
Patrick O'Shaughnessy
My guest today is Karen Seidman Becker. Karen is the Chairman and CEO of Clear. She bought the company personally out of bankruptcy for $6 million in 2010 and has built it into the identity platform millions use in airports and stadiums today. Her Wall street background investing in Apple, Amazon and Priceline taught her to recognize when products become platforms, which shaped her vision for Clear as the definitive secure identity platform. Far beyond travel, Karen shares the gritty early days of literally hunting down hardware and airport storage facilities and rebuilding the entire business from scratch. She embodies an incredible bias for action. We discussed turning around the business, scaling a platform, and why she believes your face will soon be your key to everything. Please enjoy this incredible conversation with Karen Seidman Becker. So, Karen, I think a great place to begin is to just talk a little bit about Clear first. We're going to rewind the clock in a few minutes and go back to the beginning and tell your entire story. Everyone knows Clear because they've experienced it in the airport or at a stadium or something else, so they know that version of it. I more want to know the version of Clear that people might not appreciate the business and the product having just experienced it that way. Let us in on a little bit of the surprising elements of Clear, the business and the product that gets you excited about it today and in the future.
- [05:43]
Karen Seidman Becker
So when we started clear 15 years ago, what we said is today it's a travel centric company, and tomorrow it's the de facto secure identity platform and leisure access commerce. We didn't say healthcare. So a kind of ballsy vision, but one that came from my experience on Wall street of watching products become platforms. And the concept of identity to make experiences safer and easier physically and digitally was the foundation of clear. This concept of enroll once used everywhere. As a woman, I'm like always digging through bags for all these plastic cards to prove who I am and what I have access to. And I think that's ridiculous because nobody ever really looks. And it's incredibly clunky, it's incredibly expensive and inefficient. Not secure in a bad experience. That is the foundation of Clear. We're really at the earliest stages. So when you think of the magic or the secret opportunity, it's that over 30 million people today have enrolled. What I love about that is it's privacy protected, it's data secure. We will not sell or share your data. We're here to deliver you amazing experiences, and we're here to deliver our partners enhanced security, reduced fraud, which has become a big problem. So the basic secret to Clear is that identity is foundational across so many industries. And people don't think of identity as a problem. They think of fraud or compliance or frictionless experience whipping out cards or insider risk. Now, there's actually a story today in the Wall Street Journal about North Koreans infiltrating workforces, which is a real problem. That's all identity and bringing it to life, both with the government and a public private partnership in airports and in other sectors, health care and online, where anonymity rules and that creates all sorts of problems or to secure workforces, I think is the secret. And the Opportunity at Clear.
- [07:35]
Patrick O'Shaughnessy
What did you learn about the product to platform switch or flip that happens in companies from your Wall street days?
- [07:42]
Karen Seidman Becker
I invested in a broad spectrum of companies. Started out in risk arbitrage and then went on to asset management and hedge funds. And in 2002 we started Arian's Capital, which stood for art and science, which is my view of investing. It's highly quantitative and highly qualitative. Art and science. We had the good fortune, although every day didn't necessarily feel that way, of investing in Apple, Amazon and Priceline in 2002. And when you looked at Apple, they used to have signs in their boardroom that said 5 down and 95 to go and that was their market share. They had candy colored Macs and this ipod with a big white dial in the middle that people thought Zune might ultimately crush. Or you thought about Amazon, which was books and books, music and video, then a few more categories. Lots of people thought they were going to go out of business. He was on the COVID of Time magazine. I think it was Amazon bust or something of that nature. And then Priceline was opaque travel and almost went bankrupt after 9 11. And those were all products that you watched become platforms. Priceline turned into bookings and a global OTA offering you a lot more than opaque travel. And Apple and Amazon speak for themselves. And I saw unconventional leaders as sort of the old GE leadership. When unconventional leaders delight consumers, innovate, do really smart acquisitions and capital allocation and create these platforms of which they could build multiple verticals on top of. And so when I looked at Clear, which was bankrupt, I saw the same thing. I saw this identity platform travel was where it died and where we brought it back. And I thought we're so security identity and customer experience absolutely collided, but that you could use it in so many other places and connect you to all the things that make you you. Identity is completely contextual. I'm always Karen, but when I check in at the doctor's office, I'm Karen with UnitedHealth, with an ex copay, with a medical record that by the way, I should own and have access to and be able to share anywhere I want. I go into a building, I'm Karen, I'm an employee and I have access to the 10th floor or I'm Karen and I'm a visitor and I'm going to the 48th floor today from noon to three. But I'm always Karen, but I'm having to do all these things. My favorite is when they take your picture, they give you a sticker this is useless. So this concept of a secure identity platform was definitively modeled off what I experienced as an investor.
- [10:00]
Patrick O'Shaughnessy
The old Bill Gates line definition of platform was this idea that more economic value was created on top of the platform than was captured by it. And at that point is when you became a real proper platform or something like this. It's evolved a lot where there's third party platforms in the sense that it enables outside businesses to build and then there's more first party use of the install base, fundamental identity layer in your case that you've created through a product that lets you create all sorts of other things. How do you think about that difference? Opening up identity as an API to outside developers versus owning the experience yourself.
- [10:39]
Karen Seidman Becker
Here's how I look at it. I like analogies and I would look at American Express as a vertically integrated financial service company. They have the customer, they have the merchants, they have the bank. Certainly American Express I think is some of the best experiences. When you lose your credit card or I had fraud on mine yesterday, you send a new one, the bills go right through because they're vertically integrated. It's a better customer experience. I look at Clear and think we're a vertically integrated identity platform. We have our members on the platform and we have the enrollment, we have the verification, we have APIs and SDKs for our partners to connect into them. We have real estate in airports, we have awesome ambassadors at airports, we have hardware, we have software. The opportunity to have all those assets and be able to use them in different ways is really important. And I would argue it's a little bit open in that we are connecting for our partners and bringing that member to a partner, whether it be Home Depot, Whether it be LinkedIn, whether it be a hospital, either for the workforce or the patient. But I like us bringing our different assets. Some of our partners want hardware, they want someone to check in at the front. We're really working on E gates and automated end to end lanes in real estate in our airports to drive that end to end. Frictionless, more secure experience. How could we use our ambassadors and our concierge products? I like having the assets being vertically integrated and being able to disaggregate them. That's how we're looking at clear.
- [12:09]
Patrick O'Shaughnessy
It'd be fun to break the story 15 years now into chapters and talk about each chapter a little bit. Now everyone knows Clear. Obviously you bought it out of bankruptcy, so not everyone. Well, we're getting it. A lot of people listening will know Clear.
- [12:21]
Karen Seidman Becker
We welcome them to the platform we'll welcome them all.
- [12:24]
Patrick O'Shaughnessy
The origin stories are super interesting to me in how these things get started. So you were a professional investor. I remember the first time you talked, you said you didn't want necessarily some of your IRR or something to be on your tombstone and have that be the thing you were known for.
- [12:36]
Karen Seidman Becker
I didn't want to die and have people say I picked good stocks.
- [12:38]
Patrick O'Shaughnessy
That wasn't good, it wasn't good enough. So maybe talk about that pure origin of why you went searching for a business in the first place, how you found this one, what it's like to buy something out of bankruptcy.
- [12:50]
Karen Seidman Becker
First couple days First I will say in media's Reese bankruptcy is a completely surreal experience. And I talked to a few CEOs who I had invested with through the years. Bobby Kotick, Martin Franklin at Jardin. They said bankruptcy is decided on the courthouse steps. And it's true. I definitely believe and I tell my kids that life is a journey. I started off in risk arbitrage in 1994 when I graduated the University of Michigan. I didn't even know what pro forma or EBITDA was, but I figured it out real fast. That was the M and A period of Aerospace and Defense Under Secretary Les Aspen. I really got to know the aerospace and defense industry, of which biometrics has been in the defense industry for a long time. So that was my first understanding of biometrics. Also in the 90s, we invested in cable, wireless and satellite subscription based businesses. Again we were buying wireless spectrum in the 90s, DirecTV was really starting to grow and Echo Star cable companies. Microsoft invested in Comcast with a billion dollars in 1997. That was a really big deal. And they started to do broadband. So I understood the power of subscription based businesses. Also did bankruptcy when I was doing risk arbitrage. So love a turnaround. I like to say happiness is a low bar and there's not a lot lower than bankruptcy. And then you get into the 2000s with after the dot com bust and the turnarounds that we saw in products that become platforms and incredible companies like Apple and Amazon and Priceline that were built. I had all that experience which meant I believed, I saw the art of the possible. I'd also seen giant failures like Tyco and Enron and WorldCom. So the thing that everyone thought was gonna be great and wasn't ultimately had invested in Laurel, which got sold to Lockheed Martin, which turned into L3, which was a management buyout of Lockheed. It stood for Lonza Lapenta and Lehman we invested in that. Biometrics were there. La Penta left and started L1 and he was rolling up the biometrics industry and we helped fund that. Just a big believer in biometrics on top of everything else. It was used in the early 2000s in Brazil for voting for Asia for financial services. So the consumerization of Biometrics was happening outside the US Whereas I had only seen it in the defense area in the U.S. i believed in the consumerization of biometrics. That is the whole journey. Put into clear shuts down on June 22, 2009. We went to cash at Arian's Capital in September 2008. A little late, not too late. And then investors said, great, you're in cash. When are you going to invest again? We'd never been in cash or either. 120% invested, 200%, 80% long short. We were nothing. I had three little kids. I had a one year old, a three year old and a five year old. And I was like, I don't know if I want to do this anymore. I'd done it 247 for 15 years. I loved it. I thought it was the greatest industry. I met the greatest people as a front row seat to business. My late husband was in private equity at Apollo and I was like that looks awesome. Buying companies, controlling cash flows, really able to create and build. So I was like, I want to buy something that makes the world a better place. My parents were in the government. I'm originally from D.C. 9 11. I was 29 at the time. Really changed me. I felt responsibility and a moral obligation to help make this country a better place and that we were lucky to be here and that we were all responsible for it as citizens. When I found clear, which L1 the company we had invested in had been a subcontractor to for the first go around I was like, product that could become a platform that could make our country safer, make consumers lives easier. It was Biometrics, which I believed in the consumerization. Subscription based businesses are incredible. It was the convergence of my entire professional career. So we being myself, my husband, some advisors at the time, my co founder went into a room in a law office and were bidding against another group of people who were former employees of Clear. And we had money in escrow. You're reading other people's documents trying to understand what you should do. You have a maximum number and we bid $6 million in cash, which I think was a little lower than the existing bid, but it was 100% cash. That night given to them, we won. And you're in this room going back and forth with the documents and strategy and talking for like 10 hours, couldn't eat, barely drank. And then you leave and it's almost like bringing home a new baby.
- [17:08]
Patrick O'Shaughnessy
And this company now, shoot, what do.
- [17:10]
Karen Seidman Becker
I do with it? We had a double sided five page list of things to do because it was all shut down and the hardware was in different storage areas and there was 190,000 members who were like, where's my data? And I didn't get service and airports who were mad and TSA who was mad. And at some level here ignorance might be bliss. We've got a great idea, we've got some capital, we've built. The business model makes a tremendous amount of sense. We've seen other leaders, we've seen what to do and what not to do. Off we go.
- [17:40]
Patrick O'Shaughnessy
We'll call that the prologue. Before we get to chapter one, I have a couple questions. From everything else you said, the first is a little bit abstract and away from clear specifically, but you said you didn't know what pro forma and EBITDA were. You've over and over again in your life and career, immersed yourself in new areas and seemed to learn quite quickly. What can you say about that experience and getting better at that over and over again and not being afraid of not knowing the performant EBITDA of the other fields that you've explored.
- [18:09]
Karen Seidman Becker
I'm a voracious reader. I think my team knows. I send them articles now from somewhere between 3am to midnight. I am enormously curious. I grew up, there was no Internet, but I read in my room every night from Sports Illustrated to books, magazines, newspapers, I love learning. I love the question why? And trying to get to the bottom of it. I also think when you went to public school in Maryland and the University of Michigan, I was a political science major. I don't know that people had enormous expectations of me. I did of myself, my parents did of me, my grandparents certainly did who were immigrants. So I had no fear of failure because there wasn't too far down to go. My uncle, who was an investment banker, lived in New York City his whole life. And I would come here from Maryland and he would take me places and I just thought he was the smartest, most interesting man. And I love the movie Working Girl and Let the River Run and the Coach Briefcase and the coffee and the Wall Street Journal. And that's what I wanted. So that's what I was going to do. And I think I have blinders on when I'm focused on something. So whether it be pro forma Ebitda or learning the Herfindahl Index, when you're in risk arbitrage, I believe that everything X a few really scientific things are learnable. And now with AI, I'm not sure what's not learnable. I actually just signed up for an AI design class that I haven't fully immersed myself in yet. But I just think life is about curiosity and I'm a lifelong learner and I have no fear of not getting it and no fear of asking questions.
- [19:39]
Patrick O'Shaughnessy
I was going to ask later, but I'll ask it now because it's relevant about how your ancestors show up in your life. You said something which was there was high expectations across multi generations. Can you say a bit more about that?
- [19:51]
Karen Seidman Becker
My grandfather, who was my idol, Hyman Seidman, came to the US at 17 years old in 1922. There's actually enormous documentation about him coming here. He almost got sent back. Most of his family stayed in Eastern Europe and ultimately died. He had one sibling who went to Israel and one sibling who was here. So to come, at 17 years old, bottom of a boat, the USS Constantinople, to not speak the language, to have no money, to work in a hardware store that he ultimately took over Seidman Hardware, which was across from the Barclay Center. That's hard. Everything else seems a lot easier when you have that perspective. He used to tell me to pull yourself up by your bootstraps, keep on movin', keep on. That's just very empowering when you see what he'd been through and lost a lot of family and was optimistic, loved this country, had enormous gratitude, positivity, joy, fun, never angry at what had happened to his family. I believed in the art of the possible. He put his family through college, they were all successful, went on to build families. And my dad served in the military, my uncle did, to do right by our country. I have gratitude and I have belief in the art of the possible because I've seen it.
- [21:08]
Patrick O'Shaughnessy
I think optimism versus pessimism is such an interesting thing. Are you just wired, optimistic?
- [21:13]
Karen Seidman Becker
I am. One of my favorite sayings that I keep on my cell phone, I saw Shimon Perez speak right before he died. And he said, optimists and pessimists die the same way, but they live very different lives. And I thought that that was a very powerful statement. If you don't have optimism, if you don't have hope, what do you have?
- [21:31]
Patrick O'Shaughnessy
Well, you needed it going into the clear thing with your 6 million bucks. But I'm curious about what was going on with Clear Prior. How did it itself start before your involvement and why did it ultimately fail the first time?
- [21:44]
Karen Seidman Becker
Clear started as a response to 9 11. When Congress at the time stood up TSA, it was a Republican led Congress. They wanted public private partnerships. If you look at the founding of the Department of Homeland Security, which I think is one of the largest and fastest startups, I might have these numbers slightly wrong, but it's 250,000 total employees of the Department of Homeland Security, which has all these sub areas, whether it be cbp, ice, fema, tsa, those are a lot of subsidiaries, if you will, under one corporate umbrella. Congress wanted to make sure that there were public private partnerships to drive innovation, to expedite the traveler experience. They put this program together called the Registered Traveler Program. TSA gave out a few licenses for the Registered Traveler Program for people to try and see what they could come up with in the world of public private partnership and innovation. Steve Brill had written a book, 9 12, which was the day after 9 11. He received one of those licenses and started Clear and there were a few other companies who started as well. And ultimately he was the most successful. He got into 16 airports. I think he raised about a hundred million of capital and then had some debt on top of that and was building this concept of a trusted traveler program, a registered traveler program with biometrics on a smart card. So it's this one to one match. It had 190,000 customers. Then two things, maybe three things happened, one being the 2008 downturn came. So it started in 2003 but didn't launch in Orlando till 2005. The highest percentage of first time travelers in America go through the Orlando airport.
- [23:29]
Patrick O'Shaughnessy
Interesting.
- [23:30]
Karen Seidman Becker
Strollers, balloons, the whole thing. It creates a little bit of a customer experience and security challenge. So that was the first place people are like, why'd you start in Orlando? I'm like, because they wanted us. He's launched in 2005. The economic downturn hit in 2008, which significantly hit business travel. And, and also he had debt coming due in 2009 in the middle of a lot of other people being bankrupt and having debt like GM and Chrysler. Ultimately the company shut down. They were sort of before their time from a cost on the tech side, not to mention the economic downturn, not to mention, I think it was probably hard to convince some airports that they wanted biometrics. And so it shut down. It went into bankruptcy at the end of that year.
- [24:09]
Patrick O'Shaughnessy
I know obviously Clear is in lots of places beyond airports, but it's the visceral thing that we can all call to our minds and have probably used. If I think about the airport, it's such an interesting physical supply limitation. You mentioned the public private partnerships and then certain number of licenses. I can't imagine what it would be like to launch a clear competitor in an airport. Maybe it's possible, but there's not real estate, there's certain number of lines and whatever. What are the pros and cons of having a business that has such a unique physical supply bottleneck and barrier to entry, but also barrier to scale if everyone signs up for it? Is there like a diseconomy of scale or now the Clear line's longer than the TSA line or something? It's such an interesting business dynamic and I would love you to just riff on it as many angles as you can.
- [24:52]
Karen Seidman Becker
Yeah, I didn't know much about airports when we started clear in 2010. You're right. There are these really interesting structures. There's 400 and change in the US but at the end of the day, in the world of 80, 20, 80% of the traffic goes through the top 60, 80 airports in the U.S. there are these houses and within them are municipal employees, airline employees, federal employees with TSA or if there's custom cbp, local police and fire departments play a role here. You don't necessarily have all the constituents going in the same direction because everybody has their own stakeholders and their own priorities. Airports are a really interesting place to do business and they are capacity constrained both on runways and physical real estate. We always viewed Clear as a force multiplier. Bringing technology in that could help the throughput and enhance the security. Not to mention bringing badged and trained employees into the building to help partner. And we viewed ourselves as Switzerland. With the federal government to help security, with the airlines to help get their passengers through happily and safely with the airports and the municipalities to help enhance the experience, to help drive revenues because we pay them a percentage of our revenues to create jobs in cities that are great jobs. So we viewed it as like a win, win, win. And that as the volume grew, both we would have technology. We just launched our NV technology that's five times faster, but over time you could create new opportunities, if you will. So for instance, we invested in a company called Landline which is replacing regional jets with buses and able to go to the back of the airport as opposed to the front door. Because you're right, you can't put millions of people through the front door. And today there's 3 million people every day going through airports. Our numbers are by 2030, you're going to have 4 million, another million people a day. And again, most of them are coming through the major buildings. You couldn't put them through today. And so the question is, what other doors can you put them through? Can you do off site screening and bring them through on buses? We're trying to launch end to end automated lanes so you can have greater throughput. Can you privatize the physical screening opportunities so that you can have greater throughput? Because oftentimes it's a staffing issue. The equipment is there, but there's not enough people to staff it. And airports are also super interesting because you have these peaks. If you watch an airport, which I never thought I would be doing, but I do, the volume goes from this to this to this. You have to staff for peaks, which is really hard in a staffing business. And so you do need automation, you do need E gates, you do need off site screening, you do need people to come to the back as opposed to through the front. There's all sorts of opportunities and if you're innovative and creative and partner oriented to drive secure throughput with a better customer experience at airports. And at any time you get a little stuck and then you need to move and try new things.
- [28:00]
Patrick O'Shaughnessy
What is the NV tech? What is it specifically?
- [28:02]
Karen Seidman Becker
So the Envy is our new face first technology that is now in all of our airports. Going back to chapters, our first six years were smart cards until we went to the cloud and then we went to the Cloud in 2016. At the same time we partnered with Delta and that was a really transformational moment for Clear both in terms of scale and technology. Because you didn't need a smart card, you could enroll and use it immediately. But that was fingerprints and eyes. To us, it's clear that face is one of the really important biometric winners. We are face first with our NVs, which makes it five times faster to verify. Many people don't have good fingerprints. Little known fact, if you're a teacher, if you're working with chalk, certain ethnicities don't have great fingerprints. Eyes can be a little bit of a chicken dance. Even today. Face first is we call it envy and enrollment and verification.
- [28:53]
Patrick O'Shaughnessy
How do you think about this problem? There's two things that happen with scale. I had the experience recently of using Clear at like an NBA arena and it was amazing because there was this incredibly long line to get in. And then I just literally waltzed right in, no line at all. And then the converse is so many people have cleared an airport that not often, but there's been times when I've been and had to skip the clear line because it was literally longer than the other lines. How do you think about that problem, maybe in airports specifically, that you're a victim of your own success when more people have it because you don't control the whole airport. So you're subject to some constraints that you can't change.
- [29:27]
Karen Seidman Becker
I think there's a really important point which is working with the government can be hard. The last four years with the Biden administration was really hard. In fact, they put some policies in place that really challenged our throughput and the customer experience. And we're on the other side of that. When you can innovate to drive throughput, when you can leverage technology at the speed that the private sector is capable of, you can solve bottlenecks with willing partners. We did not have that in the Biden administration. We, we certainly feel like we have that in the Trump administration. They definitively care about making airports great. They definitively care about throughput and the customer experience and security and believe in innovation in the private sector and partnering together to do that. And I've been very public about it that our customer experience degraded in 23 and part of 24, which caused throughput issues. It wasn't because of volume. It was because of policy decisions that were put in place that impeded the customer experience.
- [30:24]
Patrick O'Shaughnessy
What were those? I'm curious.
- [30:26]
Karen Seidman Becker
What I can say is that they put in some physical escorting policies so that a clear employee who verified you had a stand with you, which created all sorts of challenges. All of your team members are standing in line also they wanted to recheck at a extremely high level identity documents. And that created kind of defeats the purpose, all sorts of backups. And I think that is about building trusting relationships with the public and private sector and being able to communicate. There's a lot of great people at TSA and at DHS who do believe in innovation and public private partnerships. But as I like to say, debanking didn't just happen in crypto. And it was a very eye opening experience to be on the other end of that, to not have transparent partners who wanted to work through things together, but instead just wanted the government to do everything. That was very eye opening and also I think made us better, made us more innovative and I think has positioned us to work really well with an administration who sees Infrastructure as a major need here in the US and in order to be competitive, you shouldn't have better travel experiences in Singapore, Dubai, Tokyo and London than you have here in the US when we have the great cities. I was in Singapore on Christmas, my kids were like, what are you doing? I was taking pictures of Egates and banks of Egates. You go to Dubai, it's the same thing. You absolutely should have end to end automation. And there's so much you can do to transform the travel experience, experience. So on a very personal and professional level, watching our customer experience degrade when I knew we could do so much about it was horrifying.
- [32:01]
Patrick O'Shaughnessy
Nuts, I'm sure.
- [32:02]
Karen Seidman Becker
And not being able to say much about it because they were pretty retaliatory was also pretty painful. I think we're on the other side of that. And there's so much you can do to drive throughput. The airport experience should be and can be amazing. People love travel in the U.S. quite frankly, around the world. And I actually give huge credit to Airbnb. They transformed the travel industry by creating infinite capacity. And I don't think people have fully wrapped their heads around that. It used to be like, oh, I want to stay at the Marriott and wherever and it's full, so I guess I'll have to wait. There's always a room somewhere for you if you want to go. You see what's happening with air traffic control. Our systems are rigid and a little bit analog. They have to be invested in. We have to partner. Travel is such an important part of the economy and I think it's also an incredible part of families and experiences and growth and learning and curiosity. I know for my family it's been our best memories and our time together feel really fortunate. We're hell bent on driving innovation to make travel safer and easier. And also learned a lot from our experiences in 23 and early 24 to make sure that we move forward and not backwards.
- [33:08]
Patrick O'Shaughnessy
Can we go back to chapter one and you no longer have your six million bucks. You now have clear. What was the process like of figuring out what the business could or should be, development of the business model, go to market all the basic, basic stuff. What did you do and what did you learn in that first chapter?
- [33:27]
Karen Seidman Becker
I wish I documented more of it. Number one, you had to find where the inventory was. Let's go to the real basics. It was, where's the equipment? And we would go to the San Francisco airport and we were like, hey, where'd you put the clear equipment? And they Would take us to a storage facility, and it was all the way back there. One airport threw them away. I was like, you threw away the hardware? Because in it, we bought $10 million of PPD. We bought $10 million of hardware. So I was like, for $6 million, we bought a brand that we were too cheap to change. People were like, why don't you change it? It's really sullied. I was like, I don't know. I think it's pretty good and we don't have a lot of money, so people know what it is and we're sticking with it. Ultimately, we changed the logo and I love the name. We bought 190,000 members. Biographic and biometric data. They had to opt back in. They had to come back to Clear and we would give them whatever months they had left. I think in aggregate, about 75% of them did come back. And then we bought 10 million of hardware. I also say we bought a hard drive of what to do and what not to do. Bankruptcy is really interesting. You get the hard drives of the company. So you were looking at their old documents and learning. But first it was finding the hardware that was left. We were going to reuse it. Number two was actually rebuilding the software from the ground up. Because we didn't buy software, they didn't own their own technology, and we wanted to rebuild the software from the ground up. Number three was we closed in April, and the Orlando airport wanted Clear to come back. And you need one person to go first, and they wanted to. So we had to win that. So we wrote the RFP for the Orlando airport. Other people did too. And then they protested our win. So you had to go down to the Orlando airport and share with the board and the community why Clear would be good and serve them well from a marketing perspective. I wrote the emails. I signed my name to them. I was in customer service, and we said, clear is coming back. It was to 190,000 people. We knew who they were. One of the beauties of being an identity company.
- [35:24]
Patrick O'Shaughnessy
Know your customer very well.
- [35:25]
Karen Seidman Becker
Know your customer. We told them we were going to do right by them and make them whole. And we got some nasty emails back. This one guy said, my grandma had big balls, and you have bigger balls than my grandma. And I was like, first of all, interesting. Okay. So I called him, you're an owner operator. And I was like, hey, it's Karen from Clear. I got your email. And he kind of shrunk. And I was like, people will write anything in emails because it's totally anonymous. Going back to Identity, we told people we were relaunching at the end of October and that they could come back. We then hired 20 people in Orlando, 10 for each lane. I had read Setting the Table. It's amazing book. Danny Meyer is one of my great heroes, and he became an investor in Clear. And that was awesome. So we hired Union Square Hospitality, I think it was called Hospitality Quotient to do the training of our team members in Orlando. Okay, I read the book. I like that. We want to be hospitality and service oriented. I think it's missing in the airports. We got to rebuild the software. We got to find the equipment. We got to hire some people. I don't even even remember how we hired them. I went down to Orlando. I participated in the training. I got to know all the people at the Orlando airport. You're making it up as you go along, and then every day you're like, fuck, didn't think of that. We have a playbook now that we're in 59 airports and more to go, but you fake it till you make it. I would just keep talking to people, and I had seen great operators and I would ask them questions. Ed Breen is one of my great heroes. We had invested in General Instruments, which then got sold to Motorola, and then he became the CEO of Tyco to turn it around after Dennis Kozlowski. So I would ask Ed lots of questions. And these leaders were so generous with their knowledge and their experience. Every day you're just hacking at it. And then I was on the floor of the Orlando Airport at 4:30 in the morning when we launched, and people would hug us. And then you knew you had something. When we were rolling out the old kiosk from storage and people were hugging us that we were bringing it back. That was the greatest feeling, because to know that it meant something to people, that they were rooting for your success. Plenty of people rooting against your success. But that gets you up every morning. To know that you can make a difference in someone's life. Security is job one. And then that someone could have breakfast with their family because they had a more planful and less stressful trip at the airport. I happen to be a neurotic flyer, so I'm worried about turbulence and terrorism. And I didn't like leaving my kids. And so to know you could change that for someone, that's a giant win.
- [37:58]
Patrick O'Shaughnessy
I'm curious to hear a little bit about thinking versus action. In your business life, you exude this intense bias to action.
- [38:06]
Karen Seidman Becker
That's one of our core values.
- [38:07]
Patrick O'Shaughnessy
I promise I didn't know that or look that up. It sort of just comes off you. I'm curious when you've needed to stop that, if at all, and, like, retreat and think. I'm very interested in this dichotomy of. Ryan Armstrong from Coinbase has this great simple phrase, which is that action produces information. And so actually, you can learn faster through action than through thinking. Say a little bit about action orientation versus stepping back to think.
- [38:33]
Karen Seidman Becker
I have a very busy mind, so at some level, I'm always thinking. Being a girl, the power of blowing your hair gives you 20 minutes to think. I am always thinking, my friends will laugh. I can be a little spacey sometimes. If I'm driving, I'm like, oh, I didn't know. How did we get here? My mind was 20 different places. Bias for action can sometimes lead to impulsivity, and I think you need to guard against that. I have consistently surrounded myself with people, including my late husband, who was like, you gotta stop. Just push. Pause on that for one second. Slow your role. I respond very well to that. But one of my sayings is that every week is 2% of a year. So when someone's like, let's meet that in three weeks, I'm like, we're gonna wait 6% of the year to have that conversation. That's insane. If you believe life is short, and I definitely believe that. I don't wanna waste time. I love data. I love information. Working in the stock market makes you more decisive. You're never gonna have perfect information. You gotta put together the mosaic. You have to understand your thesis. You have to see how that is weighing relative to your thesis. And you need to move out. Maybe you don't need to take an 8% position. Maybe you want to start with a 2% position. Wall street gives you incredible discipline. You better have done your work before you need to do your work. So when I head into a meeting, I'm like, we should know them better than they know themselves. We should really understand and have war roomed this 10 ways from Sunday, because it's all about the preparation. Kevin Durant, the basketball, all the practice that he does before the game. I do feel that I think a lot, probably too much, and so that actually my bias for action. I'm playing chess in my head all day long. Well, what if? Well, what if? Well, what if? Things are always coming out of left field. I've seen a lot of these scenarios in my head before. What if we did that? And what if we did that? And how would that? And then you have the data and you're like, well, that would make that go up by 500 basis points. That would have a negative implication over time. That could drive my margin to this. I like to move. Bezos talks about the door and if it's a really big decision.
- [40:33]
Patrick O'Shaughnessy
Yeah, one or two way doors.
- [40:34]
Karen Seidman Becker
Yeah. And so I buy into that. My middle daughter always tells me it's just not that deep. Can you go back and change that? I think if you raise your price and you have to lower your price, I don't think that's good. I think sometimes doing things that would make your workforce feel not stable so you want to be thoughtful. But one of our other core values is embrace change. I think the only thing constant is change. I'm really good with that. I sometimes forget other people are not as good with it. So it's something I'm trying to be more thoughtful of.
- [41:01]
Patrick O'Shaughnessy
I love it. I won't forget the 2%.
- [41:02]
Karen Seidman Becker
It's true.
- [41:03]
Patrick O'Shaughnessy
It's crazy.
- [41:03]
Karen Seidman Becker
Let's meet in a month. Really?
- [41:06]
Patrick O'Shaughnessy
10%. I'm curious how you originally thought about the trade offs in the business model itself. And maybe just to hear a little bit more about the business model itself, of margins and pricing and product. I'm always fascinated by the things left on the cutting room floor that like maybe you almost did but didn't do and you went this way instead of in the early days as you were thinking through how could this be a big sustainable business? And I'm also curious to hear about how you financed all this. You started with $6 million, but everything else you're doing costs a lot of money too. What were you working through in those early days as you got your arms around what the business model should be.
- [41:40]
Karen Seidman Becker
We had built a model when we started. We come from finance, we'd built models, garbage in, garbage out. But we did think that this could be a good business if you own your own technology, if you own your own labor, which the other company didn't. It had outsourced the labor and the technology which really impeded the margins. But again, going back to the power of a subscription based business and cost per gross ad and LTV to cac. Those things were in my blood and I understood them deeply. Understanding what we thought it would take to break even from a subscriber basis, looking at every msa, understanding Denver and Orlando and San Francisco and New York. What was the volume of the airports? What percentage of that volume did you need? Or what Percentage volume of that population seemed realistic. We owned wireless companies. Nextel actually was one of them. What percentage of the city is on Nextel and what do you need to break even? I like coming at things bottoms up and top, down and sideways. We said that the TAM was 35 to 40 million people that traveled five or more times a year. What percentage of those people did you think you would have then? Looking at the cities all sorts of different ways. So we thought that this could be a good business model if you got to certain penetrations of certain cities. All that being said, it took longer and it was harder. I did not take a salary for the first five years and got paid in stock, and to me that was a privilege. We turned cash flow positive six and a half years in and we had burnt through $53 million of cash to get there. We were very cheap, very efficient. Airports are a really interesting place. Think of it like concentrated shopping malls. I didn't think, oh, I wanted to start a business in an airport. I thought I wanted to build a secure identity platform. But airports are the great place to start a business because you have millions of people coming through these buildings every day that see your brand. A tipping point for us was when we allowed our ambassadors to do the selling for us. Social media is a really noisy place to try to get someone's attention and certainly getting noisier. Having an ambassador who gets a commission so that they can make more money and they're awesome. People say, sir, would you like to learn about clear? Sir, would you like to be a clear member or you coming over and saying it? Sometimes we put out candy bowls. We did different things. Who doesn't want to mint when they're traveling or hand sanitizer in the 2020 timeframe? It was great ways to get the word out and to educate and to have team members who could make more money and to have people bring technology to life. Innovation's about bringing people what they did not know they wanted. And people don't Google biometric security at airports, specifically, not at the beginning. Having people explain the technology, explain the privacy, that was crucial. We believed it to be a very efficient and powerful business model. We run the business for members bookings and free cash flow. I have said that for 15 years.
- [44:32]
Patrick O'Shaughnessy
Members bookings, free cash flow.
- [44:34]
Karen Seidman Becker
Members bookings, free cash flow. Free cash flow is the ultimate measure of a business. As a girl who comes from Wall.
- [44:39]
Patrick O'Shaughnessy
Street like a good hedge fund, that's.
- [44:42]
Karen Seidman Becker
How we ran the business. And when we turned positive in 2017, so we raised capital in 2010 from myself, the gentleman who started it with me, and some outside investors, mostly here in New York City, and Bill Miller, who was a strategic partner at Ariance Capital and one of my great mentors and partners. He was on our board for the first years and as an early investor in Amazon. It was certainly great to get his wisdom and his advice. And then in 2012, we raised some capital from those same outside investors. Really individuals went to Silicon Valley. I came back with zero in 2012 and zero in 2015, which was fine. One of the guys said to me, I won't say the name of the fund. He said, what makes you not going to. But I do keep his picture in my photos. He's no longer there, so it's fine. Let your haters be your motivators. He said to me, what makes you think you can be the CEO of Clear in my mind, I was a good question, but I leaned over the table and I said, because I am a complete fucking animal. So that was that meeting.
- [45:45]
Patrick O'Shaughnessy
And he still said no.
- [45:46]
Karen Seidman Becker
He still said no.
- [45:47]
Patrick O'Shaughnessy
Wow.
- [45:48]
Karen Seidman Becker
We're creating a new industry in identity. But even before you get to identity, we started here in 2010. PreCheck started in 2011. People thought that was going to kill us. Little did they know we could integrate, and now we actually sell Precheck. Our view was great, you want to start other kinds of trusted traveler programs. We're a great enrollment mechanism. This is exactly what we do. For the past year, we have been enrolling people in Precheck and it's a great partnership and I think there's so much more to go there. So then they thought Precheck was going to kill us. There's always something else. It's like, guys, some dead end people love traveling. You need innovation in airports, you need public private partnerships. And when you have willing partners in the public sector, you can do great things together. And if you go through airports, they don't look materially different than the past 20 years. Such a huge opportunity to be frictionless from home to gate. What if you knew you had a reserved parking spot or where the Uber should drop you off and a concierge could meet you and you went through an automated end to end lane and then you had your coffee waiting for you on the other side or you knew you could get into a lounge Shangri La, and then you knew that you were on the flight and that it was two hours late and Uber sent the car for you as opposed to everyone doing this when they land. And what if you Used it as a mobile key. Those are all the things we're doing.
- [47:00]
Patrick O'Shaughnessy
You said great investors. It was the name of your firm is art and science. It's qualitative, quantitative, together. So many investors are trying to analyze things when ultimately the creation of net new value can't be analyzed ahead of time other than in very broad strokes, you're betting on the airport or this, you being a complete fucking animal and the airport being a great place to apply that energy. Now, having done it from both angles, being the investor and the founder, builder, CEO, how would you invest differently than you did prior to the experience?
- [47:34]
Karen Seidman Becker
I think about that and truth be told, I have not bought a single stock since we ended Arian's because if I can't focus and do it, I'm not doing it. And I own a lot of Clear stock and have investments in other places, but I'm focused here. I think I would be such a better investor. How so? Number one, we invested in Amazon, they announced prime and it went down, the stock went down. We're like, oh, and then the shipping and what are the losses? Let's start with the total addressable market of if you had Amazon Prime. Let's start with the art of the possible. And if those people signed up and if they were stickier and if they did more, so what could that be? What could the incremental margins be? I did analyze org charts. I would spend a lot more time on org charts and people and systems. We are in the midst of changing our billing system to Stripe and we are super excited about it. And the opportunity set there is important. I remember every time someone had an SAP transition like the stock blew up. Understanding the culture and the people and the systems and the total addressable market and their penetration and then all the second derivatives of that. And at any time one metric can be a little wonky. The question is, what is your ultimate thesis and is that derailing of it? Nothing is straight up and to the right. Almost nothing. Maybe OpenAI is right now. There is a lot of gyrations along the way. To understand that those gyrations are part of business, we would go visit Kodak and ultimately under Kodak and Kmart and lots of companies. They can go away. I live with that paranoia every day for 15 years. You can go away. You can become totally irrelevant. What are you doing? What is your product roadmap? What is your innovation roadmap? When will you get there? What will the impact be? I think that's really important for Clear. I look at subscribers and Arpu and say where can we go? Those are things that I think I did at Arien's, but not with as long a term perspective as I think was required. And to really map out the art of the possible and the probability weight the getting there. What can Amazon prime be? What can the iPhone be? And the ecosystem of the apps and then the economy that that's going to create can't just be like yeah, they're creating an iPhone and they're going to set it 10 million or 10 billion, what can that be? And I think to really map that out and then the impact on the margins is game changing and allows a lot more patience.
- [49:59]
Patrick O'Shaughnessy
Does that boil down to imagination about market and belief in leader? Are those the two things that you would focus more on as a result of this experience?
- [50:13]
Karen Seidman Becker
Yes. And again I would focus on free cash flow and optionality, which we did. And I think those two things create that free cash flow and optionality. Look at Priceline, they bought Bookings and Active. Those were transformative acquisitions. But you need the free cash flow or the balance sheet to be able to do those things. And you need the management who has that foresight. I also think you gotta be decently paranoid. I prefer management teams that are humble, nose to the grindstone.
- [50:40]
Patrick O'Shaughnessy
The answer to this will be a lesson for every business owner. What does optimizing for free cash flow feel like as a leader?
- [50:49]
Karen Seidman Becker
I used to tell our management teams when I was an investor like, you should just lever up and buy back stock. I don't know why you're not more levered. The optimal capital structure is X. When you run the business and you're responsible for all the employees and you're wanting to invest in the business or leave cash on the balance sheet for potential M and A or whatever, levering up doesn't necessarily feel like the great thing. Free cash flow and the optionality it creates allows you to think more clearly. When Covid hit, that was a transformative time for clear. We took $20 million, which at the time was our marketing budget, to zero. On February 26th or 25th, we took our salaries to zero and we created a leave of absence plan for our ambassadors so that when it really happened on March 12, we were prepared and pivoted to creating Health Pass and connecting people to their test information and ultimately their vaccine information, and connecting those data packets and to professional sports leagues like the NHL so they could have the Stanley cup, which they've never missed in all of their history, or to open table and resi for dinner. Reservations. It allows you to be offensive, not defensive. And that is a massive mindset shift. I believe in the growth mindset. And so to be thinking offensively about what you're going to build or what you could buy, it's really freeing. I imagine being very levered could be constraining specifically in difficult times, going back to embrace change. You get tariffs, you've got pandemics, you've got financial markets. It's incredibly freeing.
- [52:18]
Patrick O'Shaughnessy
What are the sorts of things that you've done that have most positively impacted your free cash flow? Your free cash flow margins.
- [52:26]
Karen Seidman Becker
I think it's an output of the business, quite frankly. We run the business efficiently. It's a capital efficient business. We are really thoughtful on resources. We continue to get better at that. How do you drive efficiency? How can AI impact member care? We have a little sign like AI to impact every work stream every day for everyone. Whether it be legal or finance or hr recruiting or member care or scheduling or coding. It's always looking for efficiencies. And I was the girl who got all A's and a B and my dad would say, would you get the B in every day? I do think we can do better. So how can we do better? How can we rethink that? How can we drive a better marketing campaign? It's everything everywhere. A subscription based business model with high incremental margins generates strong free cash flow. And we've invested some of that back into our enterprise identity platform, which is a here and now opportunity to reduce fraud and prevent insider risk and drive compliance and efficiency and automation on the enterprise side. It's awesome.
- [53:32]
Patrick O'Shaughnessy
What does Wall street least understand about the business? Where do you get the least credit for in the price or something like that?
- [53:39]
Karen Seidman Becker
I think we peaked at 155 million shares and we're at 133 and change. So we've bought back a lot of stock. All the stock that we went public with at 31 we bought back at a lower price. If you want to talk about arbitrage, I think there's a lot they don't understand. I don't think they understand the opportunity in the travel business. I think they think it's like a zero sum game. We've long known that biometrics were going to go mainstream. That's been our view. There's a TSA report from 2018 on their biometric roadmap. We read it, understanding that we believe biometrics are going to be everywhere. The question is what kind of experience are you going to build around biometrics Biometrics are a feature, not a product. The product is the experience. Biometrics going mainstream is like new news to people, not to us. I don't think that they believe necessarily in our enterprise identity business. And that's fine. I appreciate. Show me. When we were on the buy side, we called that evidence based investors. When you show them the evidence, they get excited. And so in the meantime, we buy back stock, we have a dividend and we just keep building. So in fairness, and I laugh a little bit in that I was on the buy side and I think I haven't done a great job telling the story or on the IR side. And I think we can do a better job of creating consistent metrics that we can be measured on. We have to execute and we have to do a better job of sharing good metrics that people can measure and value the business on.
- [55:05]
Patrick O'Shaughnessy
What is the bear case on biometrics, the extent to which there is one?
- [55:08]
Karen Seidman Becker
I think there's quite a few. Quite frankly, I think privacy and data security are a big one. You see some folks on Capitol Hill negative on the government doing it. I think there's certainly a concern about Big Brother. Estonia is a leading country on biometrics. India with Aadhaar, Brazil with voting. China, there's biometrics. But I think that that also has another side of it which is concern about privacy, concern about Big Brother, concern about data security. So I think that's a big one. And us being so transparent about privacy and data security and our ambassadors sharing the story, us having a privacy policy that is very transparent, you can control your own data, you can purge at any time has been really important. I think that's the biggest one, frankly, which is also why I like being a private company doing it, but from some countries and our history would say that it can go awry.
- [56:02]
Patrick O'Shaughnessy
What is the biggest thing in between us today and a future where my face just does everything for me, where I can pay with my face and I can opt into not taking stuff out of my pockets and just move through the world and get what I want with my face?
- [56:17]
Karen Seidman Becker
I don't think a lot. Look at your iPhone or your Google phone. Samsung first touch ID started I think in 15 or something of that nature. And then face ID, I don't think there's a lot in between that. I think it makes perfect sense. I think you need trusted companies to do it. But I think the level of fraud has gotten so high, whether it be financial fraud, you look at peer to peer, who are you? Who Am I? You look at telehealth. Who are you? Who am I? A document is not an identity. An ID is not an identity. You need total identity integrity. You need identity with depth. You need connecting you to all the things that make you you. As this anonymous online world rises, which creates all sorts of problems I think as the world goes more digital, we just did this partnership with DocuSign, of course pushing enter is not a secure thing. When you're wiring a million dollars or getting a title or D, that doesn't make sense. Your face should be it when it makes that much sense and when it's that feasible and when you're doing it in other areas. It's a here and now moment. And I think as long as it's opt in if you want to do it, if you don't do it the old fashioned way and that's a choice. It's like my mom cashed checks at the grocery store for a really long time. I still don't think she's used an ATM card. We're working on her. So I just think it's a moment used appropriately and in a trusted way. Look at crypto. How could you get locked out of your account if you can't remember your 12 dividend hash? These things just don't make sense. And then you look at the workforce side of the house and people are coming in the front door with fake credentials or credentials that aren't theirs. Real credentials because they got it from the call center or they did it through other scans. You got to know who people are and what they should have access to. And you need to make people's experience more frictionless in so many different ways. I think the next five years will be transformative.
- [58:07]
Patrick O'Shaughnessy
I would love to talk about where the business can expand to physically next and is so airports. I talked about the NBA arena experience that I had more recently. What is currently happening and where will that proliferate in the coming couple of years?
- [58:23]
Karen Seidman Becker
First of all, I think there's a lot more we can do in travel. Going for an end to end experience. What we call home to gate is the opportunity, whether it be a reserve parking spot or your Uber, whether it be the ambassador in our new concierge program taking you either to our automated lanes which we're working on, or ultimately to the gate. I know when I had three little kids and all the suitcases, all you want is somebody to help you. Putting together that journey is still an opportunity in travel. Creating off site screening, privatized screening, lots of opportunities to transform travel in stadiums and arenas. With the World cup coming in a year, and with the Olympics coming two years after that, I think that there are some big opportunities to enhance the experience and enhance security in stadiums. We're partnered with the Clippers, where you can use your face for age verification to buy a beer. Steve Ballmer did build the arena of the future, and I think there's a lot to be learned from that. But why should you need anything when you go into a stadium, you're a guest and you should have a great guest experience. There's long lines to get a hot dog, long lines to get a beer. You pass your driver's license and your credit card down. That's super private. To have it come back. None of that makes sense. And so creating better and safer experiences in sports stadiums ahead of the World cup, but certainly around the World cup, we have this new capability to read your passport. In the eChip that's both Real ID compliant, which is a little bit of a hubbub out there, both for domestic but for international fans as well. We want to be welcoming for all the fans who want to come and create safer and easier experiences. But then after that, I think healthcare is an extraordinary opportunity, both for workforce and for patients, to create safer and easier, more compliant, more efficient experiences. At check in at trying to recover your account and get the information on digital health records. I like to say in healthcare that it was professional. It became personal. When my husband was diagnosed with cancer, trying to get his health records, you had to go to the fourth floor to get a CD ROM at Memorial Sloan Kettering. You then brought the CD ROM back to your office so you could digitize it so that you could send those scans to other hospitals, whether it be Hopkins in Baltimore or in Israel or Japan or Italy. And it was so incredibly hard. I thought, this is crazy. This is his data. This is our data. It was so hard to get on the portal if I lost my password. It's maddening, it's insanity. And once you've seen it, you can't unsee it. So I think the opportunity to transform healthcare to employees who it takes minutes to log on a system because there's different systems and they have to do it multiple times a day. Those are times that they could be helping their patients. Not to mention, you look at cyber attacks on healthcare data. There's so many ways to transform the workforce and the patient experience. Medical bankruptcy is a big problem because you don't know what you have coverage for. You don't know what you're going to be out of pocket for. It's crazy. My husband passed away 20 months ago. I still get bills. Such a bad experience on so many fronts. And it's 20 months later. I know that our healthcare system needs extraordinary help to create safer and easier experiences and to connect it all. You think about telehealth, you think about rural areas, you think about, are you the doctor? Do you have those certifications? You think about temporary staffing, you just keep going for the opportunity set for a secure identity platform that is not a point solution but can be used in multiple ways in that industry. It's an industry that operates on pretty slim margins. Clinical trials. I always said I would love to put my husband's data up there and you find us versus I go find you. It is a maddening experience to go through nih.gov which has thousands of clinical trials to see which ones could apply to you, only to find out that he had a procedure or something that meant it couldn't apply to you. The opportunity for transformation, for better outcomes in a more cost efficient way are here and now. Identity is foundational across so many industries. We want to make sure it clear we're not boiling the ocean. So there's a few areas we're really focused on right now, but I think over time they continue to expand.
- [62:40]
Patrick O'Shaughnessy
How were you able to lead through the experience with your husband and Covid? How did you do it?
- [62:48]
Karen Seidman Becker
Sometimes I ask myself the same thing. I have these blinders on and I'm very focused on what's in front of me. For Covid, you saw nine, 11 people are like, well, how could that happen here? You saw the financial downturn of 2008. You see challenges every few years going back to embrace change. You saw the dot com bust. Every few years it's different. This is it. What are you doing about it? I don't get wrapped up in the how could this be? It just is shit happens in the world that you would not expect on the positive and the negative. I believe that it can and I believe that you need to be prepared. And I seem to do best under pressure and stress, which I should probably try to flip that. And so I am prepared for crisis. I guess also working in the stock market crisis is all, you know, people, they're like, can you believe in the market's down? And I actually sent my son a few weeks ago, he's 17, a list of stocks that for the first time I thought were interesting because I wanted to show him the buy low, sell high. It Was down during the tariffs and everyone's freaking out. I was like, this is the moment and it happens all the time. They only are happy when the stock market goes up. That's not the rule, Covid. It was just head down and have your priorities, which is first of all, lead from the front, take your salary to zero, put that money in a fund for the people. I think that sets a tone from the first day. We're going to make it through and we're here for you. We're also going to have to make some hard decisions. Communication key. My husband, that was a different kettle of fish. I'm the paranoid one who was always like, is this lump? Do you think this is cancer? Do you think this is cancer? And he was like, stop. And then it was. But it wasn't me. In the heat of the moment, it was fixing him. There's a 3% chance of survival with pancreatic cancer. So going back to blind optimism, why can't we be one of those 3%? We can be. He's 49 and a half years old, incredibly healthy. So there's that. There's being there for your children, which is your job. Gotta be there for them. This isn't about you. So I think I like helping other people. Blinders on. This is the mission and we're gonna tackle it. And failure's not an option. We didn't win that one. And then it's, well, how are we gonna make sure that other people with the BRCA genetic mutation are aware of it? How are we gonna honor Mark's spirit and his life? And how are we gonna make a difference in the world? I send my kids off to school every day with the saying, make the world a better place. I think that that's all of our jobs. And so really now, fighting for genetic screening and really wanting everyone to be genetically screened. In Finland, they screen umbilical cord blood for 75 cents when a child is born and tell them their genetic situation when they're 21. That's smart. We should be doing that here. I'm very mission oriented. I care about people deeply, the clear people, and especially my family. I feel like you have to be a difference maker and you gotta lead from the front and you just do.
- [65:50]
Patrick O'Shaughnessy
Thanks for talking about it and telling us about it. I'm fascinated to learn more about genetic screening. And you mentioned before we started recording that there's this strange ignorance is bliss tendency that we have around our health. Maybe you can say just one degree more about what you've learned about that and how we might change it.
- [66:07]
Karen Seidman Becker
I'm incredibly curious. And I was not curious about the BRCA mutation. I didn't know much about it besides I had heard about it from Angelina Jolie. A while ago, my husband's brother was diagnosed with pancreatic cancer. And in April of 2021. And it was the first time we found out that he was BRCA positive. So my husband was screened. And I remember he peeked his head into the study in June of 2021 and said, I'm BRCA positive. And I was like, okay, we're gonna deal with this. So we went and we had him scan for skin cancer, and we had a CAT scan to make sure that his organs to baseline it. Cause he was 49 and a half. His brother was eight years older. It all came back good in July 2021. Turns out they missed it. And he was diagnosed in January 2022 with stage 4 pancreatic cancer that had metastasized to his liver. What we learned about the BRCA mutation at that point was that we're Ashkenazi Jews. That two and a half percent of Ashkenazi Jews are BRCA positive. That is one out of 40 people. That was a shocking statistic to me. We had no idea. And to know that if you are genetically screened early, you can monitor it, you can be on top of it, there's all sorts of things. It significantly raises a woman's chance of ovarian cancer and breast cancer, skin cancer, pancreatic cancer, and for men, prostate cancer. Mark's dad had prostate cancer 17 years ago, maybe more than that, but nobody bothered to test him for brca. Our family is on a real mission with our Warrior Mensch foundation, in honor of my husband and his legacy, to get the word out on genetic screening. We bought 2,000 kits for our synagogue, thinking if we just give them to you, you'll go home. All you have to do is send spit and send it in easy. And so we bought 20001300 were picked up for the high holidays. And the rabbi, who was a dear friend of my husband's, my husband was chairman of our synagogue, spoke about it. We had little flyers on everybody's seat. I mean, what else are you doing on the high holidays? You could read it. I mean, you can also pray. 320 or so have been turned in. Only 25% of the tests that were taken have been turned in. Of those 320 and change, seven of them are positive, which means that two and a half percent is actually there. And of those seven that were turned in. Then somebody had their sister tested and she was positive. Somebody had their kids tested and they were positive. Because you have a 50% chance of passing on the BRCA mutation if you have it right now, I think the count is 10 or 11 people who will be proactive in their health screening and can hopefully avoid cancer or get it really early, which is the name of the game. But for the thousand people who didn't turn it in, we made a video, including my son. I thought, well, if they see an incredible kid without a dad, they'll be motivated. A rabbi has spoken about it. But to think that a thousand people took it, $250,000 of capital that went into it, and that they don't want to know after that, two and a half percent, that means that 25 people have it and haven't done anything about it, that's devastating. So really figuring out ways that people can save their children, save themselves. Early intervention genetic screening is so important, not just for cancer, but for other things. I don't think ignorance is bliss. I think people think it can't happen to them. And I understand that feeling. I used to look at people who lost someone and be like, oh, that is so sad. They lost someone. And now my kids and I laugh. That's us. People look at us that way. And we don't want to be victims. We want to be change makers.
- [69:35]
Patrick O'Shaughnessy
I have this question I did not expect to ask. What is the most powerful idea or ritual derived from your religious tradition and faith?
- [69:45]
Karen Seidman Becker
Two things. It is the morning and night prayer that we do with our kids. Mark led the way on that. The best way to sort of ground ourselves in the morning and to help go to bed in the evening. The other thing is Shabbat dinner, bringing people together on Fridays for Shabbat. When I grew up, it wasn't that much fun. It was like the four of us at a table. But we have lots of people and lots of fun and flowing wine and we do high lows and act of kindness. So everyone goes around the table and talks about the best part of their week, the worst part of their week, and something nice that they did. Some people call it happy crappy. That's been a great way to get our kids to talk, to share our own vulnerabilities with each other. When my husband died, our friends all created a sign up and everyone hosted a Shabbat. And it held my family up in a really hard time.
- [70:33]
Patrick O'Shaughnessy
Incredibly beautiful and powerful. Hard to know where to go from there.
- [70:36]
Karen Seidman Becker
I know Back to biometrics and back to back to free cash flow, ebitda. What do you got?
- [70:44]
Patrick O'Shaughnessy
Pro forma.
- [70:46]
Karen Seidman Becker
You met the guy at that VC fund.
- [70:48]
Patrick O'Shaughnessy
Yeah. Maybe the right question is the power of relationships in leadership. One of the things about you that interests me most is this incredible energy that you bring to the situations that you're in. You've now led this business for a long time. You've led a lot of people. You've led them through really hard times. You've led them through a lot of success. Maybe the fun way to ask it is what you respect most in other leaders. I'm sure you've also spent time with so many of the great leaders. What do you most respect when you see leadership in others?
- [71:24]
Karen Seidman Becker
I do love energy, positive, big, daring energy. I love leaders who also can take that energy, stay quiet in a room and empower others to speak. When you went to Amazon or when you went to Apple back then there were other incredible leaders who would share their stories. Ron Johnson was running the stores at Apple. When he spoke, he was the man you felt like God, there's so many big brains around the table. The power of a team. I love sports. I used to want to be a sports reporter. I thought Brent Musburger was all that.
- [71:55]
Patrick O'Shaughnessy
My wife did too. That was her original ambition.
- [71:57]
Karen Seidman Becker
I worked for the Michigan Daily, but I never quite got to football. I was more on the club, soccer and volleyball. The power of a team, the joy of winning as a team. I marvel when somebody screws up. I actually couldn't watch the end of the Knicks game last night. And they just help each other up, they cheer each other on. I aspire to do that as a leader. They're tough and they're dedicated, they're creative, they're non conformist. Those are the leaders that I like. And I think if you look at Breen and Jeff Boyd, Bob Mylod and Jeff Bezos and Steve Jobs and a bunch of other leaders, they're all very different. I don't think there's a cookie cutter way to be a leader, but I think it's authenticity and humility and big thinking and discipline and the 5am thing. And I love it all and I love that each one is different and what makes them tick.
- [72:50]
Patrick O'Shaughnessy
As you think about the future and having to lead through maybe the biggest period of technological change that's ever happened, certainly that we've seen, how do you process that challenge? I know you're wired for this, that you love change and are going to be on your front Foot. But when you're facing something this seismic, with everything that's happening with AI and lots of other technologies too in medicine and everywhere, how do you think about making sure that you benefit from it and don't get destroyed by it?
- [73:19]
Karen Seidman Becker
That knowledge that you could be destroyed by it is really important because you watch companies be destroyed by it. We used to say to Kodak, are you worried about digital? And they were like, oh no. I was like, really? And that was a great company. Their logos everywhere. And so to know that you could be destroyed by it I think is really important. To get real curious on it and continue to learn, trying to learn every day. Also to know that through these periods of change there's a lot of noise in the world. There was in the Internet. So keeping your feet on the ground, staying really smart and really curious and really paranoid, putting it to work quickly on some low hanging fruit where it can help you, being not afraid to test and learn and shut it down and pivot, that is a whole orchestration as well. But also to understand for us that in a world of AI and synthetic identities, true identity is more important than ever. The fact that we have witnessed identities, we've seen people at the airport, we know that you're a real human actually creates a lot of power. For clear it's all of that. It's understanding the risks and the opportunities. It's putting it to work, it's testing. We have some really interesting meetings today. It's bringing in lots of people to keep learning and staying ahead of it, but also to keep the noise in perspective. From a healthcare perspective, I think it is massive. I do think it changes radiology, I do think it changes clinical trials. I do think it changes drug delivery. I do hope it helps cure cancer in the next 10 years and makes a big difference in our society. There's a good place for humans, but all humans should be using AI. I remember when I started on Wall street they didn't want to use email. We were still getting faxes because they were worried about security. You got to be thoughtful to it all.
- [75:03]
Patrick O'Shaughnessy
I have a couple questions about company building. A retrospective on 15 years of doing this. What have you learned about hiring?
- [75:09]
Karen Seidman Becker
But I'm not as good at it as I would like.
- [75:12]
Patrick O'Shaughnessy
I'll say more about that.
- [75:13]
Karen Seidman Becker
I assume historically that everyone wants to win and that's wired like you, of course. I have three kids and I show up at the field trip and I don't miss a soccer game at a birthday party. But I'm also sending emails at 2am so of course you can make it all happen. You want to, you just want to run and you're curious and it's not just a job, it's a way of life. And I'm often disappointed and I go in with that bias and I don't ask the right questions because I go in with this positive bias that you want to live it, you want to do it and customer says jump and you say how high? And I'm not right. And that is consistently disappointing to me. And so I'm working on that. I do like Ace Greenberg at Bear Stearns. So poor, smart, hungry, whatever his saying.
- [75:59]
Patrick O'Shaughnessy
BSB or whatever, desperate to Richard NBA.
- [76:02]
Karen Seidman Becker
Right. I'm attracted to people who have humble beginnings, who have overcome adversity, who don't fear failure, who want to be a team player, who are a straight shooter and non bureaucratic. Clear is the biggest company I've ever worked at, hiring those people, great success. But I need to work on my bias of everyone wants to do it my way. Also I'm on the Home Depot board and I have learned so much about growing people internally from Home Depot. Incredible leaders, an incredible company. They grow people internally in the most magnificent way. They take talent development really seriously. And so I've learned a lot from that. We have great success stories of Clear people who have been here eight and 10 years on a 15 year old company started in one place. I've had five different jobs and are significant leaders at Clear and so I love those stories. But people are motivated by very different things and you have to understand their motivation and their incentives then where they fit in the organization. You don't want everyone like me conceptually.
- [77:06]
Patrick O'Shaughnessy
Do you have a theory as to why more people aren't wired in this way? I don't know how to describe it. This is not a drill type attitude towards life. Were you always like this? Was there like a moment or a precipitating thing?
- [77:21]
Karen Seidman Becker
I know no other way. My kids don't get it. Happily they're all sort of wired like me and Mark. Life is for the living. This is a great country. I have a lot of gratitude. I didn't start with much of anything. My first job, my salary was $24,000 a year. My sister was FedExing me cash because I didn't have enough to pay my bills. So I don't know any other way. I used to watch the last lecture by Randy Pausch and he talks about Tigger and Eeyore and one of my anniversaries. My husband Bought me a Tigger stuffed animal. Energy, positivity. Be Tigger. Who wants to be around the Wawa. Life is full of challenges. Life is full of disappointments. I've experienced more than my fair share and I have gratitude and optimism. And I also think when you see the other side, this is it. So live your best life and make a difference for others and pay it forward. Be a change maker. I don't know any other way. And I don't understand others who don't.
- [78:18]
Patrick O'Shaughnessy
Nothing gets me more energized than someone who cares and loves the thing they're building so deeply. James Dyson just was making the rounds on the Internet for an eight minute keynote. He's 70 or 80 years old or something about this hair guy, the hair dryer, vacuum guy.
- [78:33]
Karen Seidman Becker
Amazing.
- [78:33]
Patrick O'Shaughnessy
The guy loves his products more than a kid loves candy. There's something beautiful about the marketing advantage that comes just from the passion that oozes off these people creating these things. And I get that from you. That's part of the answer is just care deeply and love the thing that you're building. What else have you learned about marketing? Since you're running a consumer subscription business, you have to reach a lot of people. What are the good and bad lessons that you've learned about what to do and not to do in marketing?
- [79:01]
Karen Seidman Becker
I would say the same thing for genetic testing, that your biggest competitor is inertia. Getting people to do anything. Again, the test was free. All you have to do is spit. Not hard. Save your life. Save your kid's life. Really fricking hard. Inertia is really a tough thing to overcome. So trying to incent people to move and to do things takes a little bit of time. You got to cut through the noise. I do think having humans bring it to life like we did with our ambassadors, word of mouth is powerful, but also it's a fragile world we live in. So a fund manager used to say, it's the staircase up, in the elevator down. We've experienced that somebody tweets something negative. It's one person's opinion in a moment in time goes viral, and that's the story. It's fragile. I could do a better job of sharing our story and telling our story and humanizing our story. I certainly think we have opportunities on that. It is hard and it is fragile. I also think you live in a consumer world of what have you done for me lately? I used to say, with Nike, they changed the game. Like, there used to be one sneaker every. I don't know year. And then they started speeding up innovation and it was like, what's the new sneaker? Consumers want to be surprised and delighted all the time, often. What have you done for me lately? And so living in that world, you have to be launching features and products. You have to have an accelerated product roadmap. You have to talk about. Uber and Airbnb have done a really good job of having two launch points a year to talk about their products and innovation. We just sort of put it out there. Somebody was saying the other day, the heavenly bed that I think the Westin did, they did some event in Times Square and it was a big deal. They said, we have better beds than some of our of hotels, but we didn't tell anybody. You've got to capture people's attention and you've got to surprise and delight them. And you also have to apologize when you do wrong and make it right.
- [80:54]
Patrick O'Shaughnessy
What have you learned about making high product velocity possible in a business?
- [80:59]
Karen Seidman Becker
That's a great question and something quite frankly, we're in the midst of. We have a new Chief Product and Experience Officer who actually joined us. She was head of trust and safety at Airbnb. We are rolling on our product roadmap right now because we've changed the foundation of our technology and have the capability to launch more products in a more flexible and expedited way. We were stymied over the past few years on doing what we wanted to do, but we've also changed our internal foundation in order to do it more quickly.
- [81:26]
Patrick O'Shaughnessy
What did Bill Miller teach you?
- [81:28]
Karen Seidman Becker
To not be afraid to be contrarian. To look to the future. His vision on companies like Amazon were really incredible. So he could see the future, he could talk about it. He could understand how that was going to play out in the financials. Again, going back to the qualitative and the quantitative little story, which is Bill bought the name Arians from me for a dollar after we closed it. He loved it and he bought it. He named his boat it. So sometimes I think people see this beautiful yacht sailing around the Mediterranean and think it's mine because it's Arjen, which is fine to not be afraid to buy low to stay with your conviction and dollar cost average down. Bill's a philosophy major, as is my daughter. She's a history and philosophy major. She brings a lot of history and philosophy to investing. And I think it's both incredibly interesting and very relevant.
- [82:16]
Patrick O'Shaughnessy
Anything you've learned about investors that's interesting to you, being a company rather than a colleague?
- [82:22]
Karen Seidman Becker
Sometimes I'm surprised at the lack of big picture questions. We're right here. The long term is made up of a bunch of near terms. But I feel like you would want to understand the long term to understand how the near term fits into it. There's a lack of questions on free cash flow and how we spend the free cash flow. I don't even know that one looks at the cash on the balance sheet. People tell me that I wouldn't understand how people invest today because there's all these pods and quants and that wasn't there when I left 15 years ago. So I was a value oriented investor, which means different businesses have different return and growth characteristics and should be valued accordingly. That's how I looked at it. So I thought Apple when we bought it for $14 with I think $9 a share of cash on the balance sheet was a value stock and the street thought they could earn 60 cents and I thought they could earn a dollar. And then from there, here's where we go. Apparently that doesn't happen as much, but I still think that long term value oriented investing is the thing that yields the greatest fruit. I had the pleasure of sitting with Charlie Munger two years ago in his backyard. Mesmerizing. I believe that that is how you create long term value.
- [83:28]
Patrick O'Shaughnessy
What most stood out from that day? What did he say that most stood out?
- [83:31]
Karen Seidman Becker
I mean probably the fact that he still lives in that house and he was just in his backyard. His grandchild was in the house. The stories that he would tell, the crispness of his mind, his humor and his humility for someone with that kind of storied success. He signed his almanac. I think it was his humility and his curiosity. Like tell me about your company. Tell me about what you think biometrics can do. What can the margins be? What's the total market? Could it go global? He was just grounded in basics and he was funny. I felt lucky.
- [84:05]
Patrick O'Shaughnessy
I guess. I want to ask the same question. Two more questions for you. The first is tell us about your company. Where could this go? If you really put your dreamer hat on? What happens in the next 10 years for and because of Clear I think.
- [84:21]
Karen Seidman Becker
The world is safer and more frictionless for consumers and for enterprises. We should have triple digit members on the platform using it for various use cases. That contextual identity is really powerful and identity with depth, what we call total identity integrity is unlocking all sorts of experiences and that you could actually leave your home with nothing, not even a phone and be able to really transact in the world that makes companies more compliant, it makes costs more efficient, it drives automation, it reduces stress, it delights people and everyone is more productive. I think so much of what we have in this world is because we don't trust each other. I think identity is about building trust physically and digitally, Both in the US and outside the US for clear, what.
- [85:12]
Patrick O'Shaughnessy
Part of the next 10 years for you personally gets you the most excited? You're going to be leading from the front. Which aspect is the most energizing?
- [85:20]
Karen Seidman Becker
I would say 2. Making Clear's vision a reality. With awesome team members, we're spending a lot of time on enterprise leadership and one team, one dream. And that is very energizing. Working with really smart, dedicated, motivated, high integrity, creative people who all come together with different skill sets. I think that's awesome. And then I get excited on the art of the possible with travel, because I think travel is going to continue to boom and we are really going to start to unlock innovation to transform it. And on enterprise identity, I think the way you apply for a job and then onboard for a job and then reset your password and get onto your computer and transact is gonna be transformed. And I think that that is a really important need in a world where cybersecurity challenges have risen significantly. So I get excited about the people that I'm doing it with and the fact that then I can be open to doing other things. I don't have to be sending the emails and talking to the guy about his grandmother. I can do more.
- [86:22]
Patrick O'Shaughnessy
What is happening in the world in the next couple of years that most opens us up to innovation, that entrepreneurs could take advantage of and make us better as a country?
- [86:33]
Karen Seidman Becker
I think the World cup is a real forcing function for our country. And it's only one year away. It was in Doha last time, Middle East. I think the opportunity to bring it to the cities in the US major cities in the us, Louisiana, New York, Atlanta, Miami is huge. That creates a real need in travel. It creates a real need in sports stadiums and ticketing to make experiences safer and easier. I think we want to be a showcase for the world on what we can do, how we can entertain, how we can drive security for the World Cup. Then two years later, it's the Olympics in la, which just had these incredible fires. And so how we drive mobility and security and hospitality in LA for the Olympics I do not think is any easy feat. I think it will require real leadership and innovation. And I think those are forcing functions. You need forcing functions to galvanize you'll say we got to make it by this date. Not to mention the 250th birthday of the United States, which comes at the same time. I think that we have not moved fast enough on innovation in this country. We need reasons and pushes to move faster to drive private sector innovation and private sector capital. I think it aligns with the needs right now and I think that those will really create opportunities for great companies.
- [87:45]
Patrick O'Shaughnessy
I think you're right. We're lucky to have people like you driving this innovation. I think that VC investor was right or you were right in what you told him. I should say and I find you to be a total force of nature and this is a total blast and a privilege. When I do these, I ask everyone the same traditional closing question. What is the kindest thing that anyone's ever done for you?
- [88:05]
Karen Seidman Becker
Probably the letters that my husband left me with.
- [88:08]
Patrick O'Shaughnessy
Beautiful. Thank you so much for your time.
- [88:10]
Karen Seidman Becker
Thank you.
- [88:12]
Patrick O'Shaughnessy
If you enjoyed this episode, visit joincolas.com where you'll find every episode of this podcast, complete with hand edited transcripts. You can also subscribe to Colossus Review, our quarterly print, digital and private audio publication featuring in depth profiles of the founders, investors and companies that we admire most. Learn more@joincolasis.com subscribe SA.