The White Subaru Hell Loop

Summary

Podcast Summary: "The White Subaru Hell Loop"

Introduction

In the November 15, 2024 episode of "Search Engine", host PJ Vogt delves into a listener's frustrating ordeal with Carvana, an online car retailer. Titled "The White Subaru Hell Loop," the episode explores the intricate challenges of car title transfers, the inefficiencies of Department of Motor Vehicles (DMV) processes, and how these factors can trap consumers in bureaucratic limbo.

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Listener Story: Jed and Liz's Carvana Experience

The episode begins with PJ Vogt introducing listeners to Liz, who contacts the show from her workplace in Kansas City, Missouri. Liz shares the distressing situation her partner, Jed, encountered after purchasing a white 2015 Subaru Outback from Carvana.

Jed's Challenge: Jed's troubles began when he needed to replace his car's faulty brakes shortly before relocating from Ohio to Missouri to be with Liz. With limited time, Jed turned to Carvana, attracted by the convenience of online car purchasing.

Notable Quote:

Jed ([04:07]): "I just needed a solution."

Initially, Carvana delivered the Subaru swiftly, but the absence of the car's title—a crucial legal document confirming ownership—created a significant obstacle. While temporary tags allowed Jed to drive the vehicle temporarily, they eventually expired, necessitating proper registration with the Missouri DMV. However, Jed found himself caught in a loop where Carvana insisted the registration required Carvana to provide the title, and the DMV required the title to process the registration.

Notable Quote:

Jed ([08:19]): "This is their whole perspective. It's like, well, that's weird. They should just give you the waiver."

---

Background on Carvana: Interview with Ben Foldy

To provide context, PJ Vogt interviews Ben Foldy, an investigative reporter from The Wall Street Journal who has extensively covered Carvana. Ben outlines Carvana's ambitious mission to transform the used car industry by mimicking Amazon's seamless online shopping experience.

Carvana's Vision: Founded by Ernest Garcia III, Carvana aimed to consolidate the fragmented used car market, which comprises over 60,000 dealers nationwide with each holding a mere 1.6% market share.

Notable Quote:

Ernest Garcia III ([21:35]): "Automotive retail is a trillion-dollar industry... the market is massive."

Ben highlights the innovative yet challenging aspects of Carvana's model, including their unique "car vending machines" and the complexities of handling title transfers across different state DMVs.

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Exploring the DMV and Bureaucratic Challenges: Interview with Tony Hall

PJ Vogt further explores the root of Jed's problem by interviewing Tony Hall, Head of Policy for Title and Registration Modernization at Carvana and a former Texas DMV employee. Tony provides an insider's perspective on the outdated, paper-heavy processes that DMVs employ, which often lead to inefficiencies and delays.

DMV Inefficiencies: Tony describes the cumbersome procedures, such as manual data entry from thumb drives and the need for physical title runners—individuals hired to transport titles between dealerships and county offices.

Notable Quote:

Tony Hall ([40:58]): "Anytime you're doing something new and innovative, even when there's a demand for it, inevitably you're going to be introducing new risk."

Tony underscores the complexity Carvana faces in adhering to diverse state regulations, with each DMV having its own set of rules regarding inspections, emissions, and ownership transfers.

Notable Quote:

Tony Hall ([42:04]): "Every state does things different."

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How the Hell Loop Was Solved

PJ Vogt narrates the resolution of Jed's ordeal, revealing that the root cause was a miscommunication between Carvana and the Missouri DMV. A helpful Carvana customer advocate inadvertently confused Jed by misleadingly stating that a physical title was necessary for registration, whereas only a photocopy was required. This misunderstanding stemmed from systemic inefficiencies and human error within the DMV.

Notable Quote:

Jed ([45:56]): "We're always having problems with Carvana. It's a problem on their end and they need to work it out."

Ultimately, Carvana's internal efforts to liaise with the DMV clarified the requirements, allowing Jed to finally obtain the necessary documentation and register his vehicle.

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Conclusion and Learnings

The episode concludes by reflecting on Carvana's journey through the pandemic-induced challenges. While the company initially thrived due to increased demand for online transactions, it faced significant setbacks from DMVs' operational delays and regulatory hurdles. However, post-pandemic, Carvana has made strides in improving its systems and resolving previous inefficiencies.

Notable Quote:

Tony Hall ([48:43]): "Covid certainly changed the narrative around how antiquated the title and registration process is..."

PJ Vogt emphasizes the importance of understanding bureaucratic logic and the human elements within institutional processes. The episode serves as a cautionary tale about the potential pitfalls of innovative business models when intersecting with entrenched governmental systems.

Final Thoughts: Jed and Liz's story, while initially a source of frustration, ultimately showcases the resilience required to navigate complex bureaucratic landscapes. Their renewed understanding enables them to move forward, now with a marriage license in hand—a testament to overcoming the proverbial "hell loop."

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Key Takeaways:

• Bureaucratic Complexity: Navigating DMV processes can be daunting, especially for national online retailers like Carvana operating across multiple states with varying regulations.

• Human Error: Miscommunications and misunderstandings between companies and governmental bodies can exacerbate delays and consumer frustration.

• Adaptation and Improvement: Carvana's experience highlights the necessity for continuous improvement and adaptation in response to systemic inefficiencies, particularly highlighted during unprecedented events like the COVID-19 pandemic.

Notable Quotes Recap:

• Jed ([04:07]): "I just needed a solution."
• Jed ([08:19]): "This is their whole perspective. It's like, well, that's weird. They should just give you the waiver."
• Ernest Garcia III ([21:35]): "Automotive retail is a trillion-dollar industry... the market is massive."
• Tony Hall ([40:58]): "Anytime you're doing something new and innovative, even when there's a demand for it, inevitably you're going to be introducing new risk."
• Tony Hall ([42:04]): "Every state does things different."
• Jed ([45:56]): "We're always having problems with Carvana. It's a problem on their end and they need to work it out."
• Tony Hall ([48:43]): "Covid certainly changed the narrative around how antiquated the title and registration process is..."

---

Conclusion

"The White Subaru Hell Loop" offers a compelling narrative that intertwines personal frustration with broader systemic issues. By shedding light on the behind-the-scenes challenges of online car retailing and government bureaucracy, "Search Engine" provides valuable insights for consumers and businesses alike, emphasizing the importance of perseverance and clear communication in resolving complex issues.

Transcript

[PJ Vogt]

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[Liz]

Sure. I am Liz.

[PJ Vogt]

Where am I talking to you from? Where are you?

[Liz]

So I am at work at an undisclosed corporation In Kansas City, Missouri.

[PJ Vogt]

Liz, who works for an undisclosed corporation, was calling with a question about a problem that was not afflicting her exactly. It was afflicting her partner, also a listener.

[Jed]

My name is Jed.

[PJ Vogt]

You can literally, if your privacy is important to you, you could just identify as a Jed.

[Jed]

Yeah, I'll just identify as Jedi.

[PJ Vogt]

Jed and Liz, two private people who are overriding their instincts towards privacy to talking to a microphone on purpose because of their curiosity about this event they'd experienced together. This event had to do with a car Jed had bought online. Buying the car had sent him into a kind of bureaucratic purgatory, the sort of hell loop that consumes people. And he wanted to know why that had happened. The whole ordeal began because Jed was moving from Ohio to be with Liz in Missouri, which meant all the usual logistics. Selling his house, opening a new bank account. But nothing was really going right. There were problems moving the money. There were constrained deadlines. It felt like a cursed month. And on top of it, three days before this wretched move, he goes to the mechanic. The brakes have been acting up on his car.

[Jed]

He takes a look at it. He says, I shouldn't let you drive home, and you absolutely can't drive this cross country. So he Sundays, we have two options. One, I can. I think he had to replace the brakes entirely. He said, that's gonna cost significantly more than the car's worth. Two, you get a new car. I had three days to figure this out, and I was working at least nine to five on those days. I didn't have time to go around and visit dealerships, so I started looking at websites. I looked at Carvana. It was like, the only realistic way that I could get a car in three days.

[PJ Vogt]

Carvana, like Nirvana, but cars, a website where with a push of your thumb, you could order a car off the Internet as smoothly as you would buy a pack of batteries off of Amazon.

[Jed]

Oh, it was so easy. I chose a car that night and financed it and was ready to go.

[PJ Vogt]

That's amazing.

[Liz]

I would describe this as, like, atypical Jed behavior. Like, Jed is the kind of guy who, like, when you need to buy, like, new art for the house or, like, a new lamp, he will make a PowerPoint presentation, researching all of the options and, like, present it to you. So this was, like. I think it really was. You were kind of like, at the end of your rope with all of this. So this was probably, like, a pretty unique situation for you.

[Jed]

I would say, yeah, I just needed a solution.

[PJ Vogt]

Garvana promised the car would show up like magic. And on June 2nd of 2023, just two days after Jed hit buy on the website, that's exactly what happened.

[Jed]

They bought my old car with the bad brakes. They dropped off a new one. They were delivering it to my front door. So the plan was they would deliver the car and I would take off at that Mom.

[PJ Vogt]

There was a hitch. Jed says that the 2015 white Subaru Outback arrived with a folder of paperwork, but there was no title to the car. In that folder. A car's title is the document that says you are its legal owner. It's like your deed for the car. Jed also needed registration. That's the document where the state says this car can have a license plate. It can be driven on the road. Carvana was supposed to handle the registration for Jedi, but it needed a couple more documents for him to get this new car registered in the state where he was going to live, Missouri. But for now, Jed was fine. Carvana had supplied temporary tags, which meant Jed could proceed with his plan and drive on. So Jed arrives at his new home with Liz, and for the next several months, he gets busy with work. He doesn't pay much notice to the phone calls and emails from Carvana saying he's missing some documents.

[Jed]

I'm not that worried about it. Like, okay, we're missing a few documents, but this, how hard could this be? When I have a free afternoon, I'll go down to the DMV and I'll take care of it.

[PJ Vogt]

So then what happens?

[Jed]

So one of the documents that they need is what's known as a certificate of non assessment. Just showing that I don't owe any property tax on the car because I just moved to Missouri.

[PJ Vogt]

Yeah.

[Jed]

So to get that certificate, I have to go down to the county courthouse. Fine. No big deal. So I make some time, I go to the courthouse, and they won't even talk to me without a title. And of course they won't. I don't have any proof that I own this car.

[PJ Vogt]

And when you say won't talk to you, what does that look like? They're just like, you take a number, you get to the thing, and they're just like, get out of here.

[Jed]

That's exactly right. I took a number, I waited. It was frustrating, right? I get to the front desk, they ask me, do you have the title? I say, no. They say, well, go get the title and come back. So I call Carvana, and this was the moment when I realized something was up. So the people at Carvana were Remarkably friendly. That's something that stuck with me. Just remarkably friendly and eager to help. Everything's gone really well up to this point. And I'm talking to this nice woman in Arizona, where they're based, and I explain the situation, and she says, oh, so they won't give you the certificate? That's odd. And in the friendliest tone. And as she keeps talking, I realize, wait a minute, I am in the middle of a game of chicken between Carvana and the state of Missouri.

[PJ Vogt]

Oh, no.

[Jed]

This is their whole perspective. It's like, well, that's weird. They should just give you the waiver. And I'm saying, well, maybe they should from your perspective. But they're not going to. I can't talk them into this. You can't talk them into this. Like, we're talking about a state government here. They're not going to yield.

[PJ Vogt]

Yeah. And I will say, like, one of the worst places you can find yourself in American life is between two institutions when you have a problem, each of whom have a representative who's claiming that the other institution would need to solve it. Like, it is the most damned feeling you can have as a citizen.

[Jed]

That's exactly right. And, you know, it's just immediately crazy making. And like I said, this woman is friendly and helpful. Otherwise, she's asking if there's anything else she can do. And I'm saying, wait, but we need to resolve this. There has to be a way through here. And I really don't think the way through is bullying the state of Missouri into.

[PJ Vogt]

They're a strong state.

[Jed]

Into violating their policy. Yeah.

[PJ Vogt]

Jed had officially entered a hell loop. We've all been here. I certainly have. The way a hell loop works. Ordinarily in America, customers actually have a decent amount of power. Corporations want to keep us happy. They're afraid of the various tantrums we can threaten them with to take our business elsewhere, to take our complaints to the Internet. But sometimes your power just goes away. You end up stuck between two institutions, each one assuring you, no, no, no, you're the other one's problem. And you find yourself filled with panic. How many weeks of your life are going to sink into the void? How many numbers will you be asked to take before you get your normal life back? Will you stand in front of a mirror, aging in fast motion, watching liver spots appear on your face while you mutter the words, yes, I'll hold. Will they glue the phone to your ear in your casket as your adult children lower you into the ground, wishing they'd gotten to know you. That's the fear to return to Jed, who was standing on the steps of the Missouri courthouse in the first hours of his hell loop. What he knew then is that both parties were standing firm. Carvana insisted Jed needed the registration from Missouri. The woman at the Missouri courthouse insisted Jed needed the title from Carvana. By this point, Jed's temporary tags had expired so he could not legally drive his white Subaru Outback. He needed to solve this. So he goes back into the courthouse to convince that state employee to give him the one document that he needs.

[Jed]

I took another number and I went back to the desk and I started explaining what was going on. And the woman interrupted me and said, carvana, huh? Oh, and she said, this happens all the time. We're always having problems with Carvana. She said, it's a problem on their end and they need to work it out. Then I went to Google and I started finding stories just like mine found the story of someone else in Missouri the year before who had waited, I think, a year for his title.

[Derek Mundhank]

A silver Subaru Outback with all wheel drive. Derek Mundhank. Thought he'd hit the gym. Jackpot.

[PJ Vogt]

This local News story from Fox 4 Problem Solvers is from February 2022. It's about a guy who bought his Subaru Outback also from Carvana, also in Missouri, and ended up in his own hell loop.

[Derek Mundhank]

He paid in full for this Subaru 11 months ago, but he still doesn't own it because Carvana has never given him the title under Missouri.

[PJ Vogt]

FOX 4 Problem Solvers. They lay it on a little thicker than we do. At Search Engine, Carvana had the nerve.

[Derek Mundhank]

To tell Derek to take the title application to the DM and try to register the car with that instead of the actual title. Well, that didn't work.

[PJ Vogt]

I told the lady I bought a car from Carvana and she chuckled at me. That's because, Derek, you could understand why, for Jed, this might feel uncomfortably like seeing yourself on tv. The hapless customer talking to the nodding reporter. The story goes on to say that Carvana has had problems in multiple states.

[Derek Mundhank]

And states are cracking down. North Carolina's attorney general temporarily suspended Carvana from selling cars in dur after failing to deliver a title. Carvana is also on probation admission that.

[PJ Vogt]

North Carolina suspension had happened in 2021. A year later, regulators in Michigan and Illinois also cracked down on Carvana. To Jed, these stories were more evidence that the problem was being caused by Carvana. And it seemed insane to him that the company wouldn't just Hand over the paperwork, his paperwork.

[Jed]

Why wouldn't Carvana give me the title to the car that I owned and had been driving or that I understood that I owned and had been driving for months? Why don't I have the title to the car that I purchased?

[Liz]

This is when I, like get frustrated and email pj because I am taking this extremely personally because I am the reason that Jed has sold his house, has bought this car to drive across the country, has, like given up everything. And I'm thinking, like, can one thing go right here that makes this cross country move to be with me feel like a good idea?

[PJ Vogt]

Oh, I had not understood that at all because it's like, I mean, not in a judgmental way, but I was like, why is Liz getting involved enough that we're talking to Liz? But I totally understand it when you explain it like that, which is like, I've seen this dynamic in Friends actually recently where it's like someone moves for someone else and then all of a sudden it's like, anything that goes wrong in the new place, the partner who encouraged the move feels like, I'm sorry this is happening. And also, can I fix it?

[Jed]

Oh, that's yeah, Like I'm not the.

[Liz]

Reason this is happening, but it doesn't happen unless he moves across the country to be with me.

[PJ Vogt]

So Search Engine had been consulted. And to be clear, Jed and Liz weren't asking me to solve their problem. They're grown ups. They were asking me to answer their question why titles to cars are not valuable on their own. There's no reason to hoard them. Liz had asked in her email. Given the bad press, I have to assume Carvana has a compelling business reason for refusing to give those titles up right away. What is it? Which I thought was a really good question. Liz first wrote to us a year ago, November 2023. And after months of digging, learning a lot more about used car dealers, a bit more about pickleball and tagging. To Carvana, who you will hear from in the story, I have an answer. Not an answer I would have imagined last fall. That answer and the story that led us there after Surge Engine is sponsored by Vuori Vuori is a new perspective on performance apparel. It's perfect if you're sick and tired of traditional old workout gear. Everything is designed to work out in, but it doesn't feel or look like it. It's extremely comfortable. You'll want to wear it all the time. I promise you it is more comfortable than whatever you're wearing right now. The product is incredibly versatile. It can be used for just about any activity, running, training, swimming, yoga. But it is also great for my favorite form of exercise, which is lounging on a sofa. Also, Vuori is 100% offsetting their carbon footprint. They're using better, sustainable materials for their products. To empower your best active life, Fiori is an investment in your happiness. For our listeners, vuori is offering 20% off your first purchase. Get yourself some of the most comfortable and versatile clothing on the [e-mail] pjsearch that's Vuorie v u O-R-I.com pjsearch not only will you receive 20% off your first purchase, but you'll also enjoy free shipping on any US orders over 75 bucks and free returns. Go to vuori.com pjsearch and discover the versatility of Vuori Clothing.

[Hayley Pollack]

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[PJ Vogt]

Welcome back to the show. So I was a newbie when it came to wondering about Carvana. But I knew a reporter who's been wondering about this company for years. Long enough that I think it may have frayed the edges of his mind. Okay, I feel like you will be able to answer at least the first question.

[Ben Foldy]

Okay, that's a good start.

[PJ Vogt]

Can you introduce yourself?

[Ben Foldy]

Oh, crap. I'm Ben Foldy. I am a reporter at the Wall Street Journal.

[PJ Vogt]

I've referred to Ben as the youngest curmudgeon I've ever met. I stand by that characterization. He has the world weariness and back complaints of someone beyond his years. He's also a formidable journalist. Right now he's an investigative reporter for the Wall Street Journal's finance section. But back in 2019, he moved to Detroit to cover the auto industry for the Journal. First thing he did, bought himself a car. Where did you buy your car?

[Ben Foldy]

On a used car lot. Like a real old school used car lot.

[PJ Vogt]

Did you get a good deal?

[Ben Foldy]

Uh, I don't know.

[PJ Vogt]

Buying a used car from a used car dealer for most of us is not a great experience. But one of the big stories Ben Would wind up reporting on as an autos reporter was about this daring young company that was trying to change all that. What is the origin story of Carvana?

[Ben Foldy]

Ooh. How much time do you have?

[PJ Vogt]

A decent amount of time.

[Ben Foldy]

Okay, so Carvana was started by a guy named Ernest Garcia iii.

[PJ Vogt]

Okay.

[Ben Foldy]

He's a youngish guy for a CEO. He's very, like, energetic.

[PJ Vogt]

How young are we talking?

[Ben Foldy]

In his early 40s at this point.

[PJ Vogt]

Okay.

[Ben Foldy]

He's also a ranked pickleball player, so you can, like, watch him play pickleball on YouTube if you want.

[PJ Vogt]

I don't, but that's fascinating.

[Ben Foldy]

I've done it.

[PJ Vogt]

And he's good.

[Ben Foldy]

I mean, I don't know how to judge a pickleball player.

[Liz]

Ernie, you're also the CEO of carvana, who's our title sponsor for this event. Thanks a lot for doing that for pickleball. Why get into pickleball now?

[Ernest Garcia III]

Well, I personally absolutely love the sport. It's kind of what I do for. For fun these days. It calms me.

[PJ Vogt]

Obviously, we have no Ernie Garcia here being interviewed courtside. He's a handsome CEO with wavy black hair. I guess this reveals some prejudice I didn't know I had, but he looks a lot more athletic than I pictured a pickleball player being.

[Ernest Garcia III]

This tournament this year versus last year is a completely different thing. So we're really excited about where it's going.

[PJ Vogt]

Anyway, that's Ernest Garcia iii. But Carvana's story actually begins one Garcia generation earlier.

[Ben Foldy]

Ernest Garcia III has a father, Ernest Garcia ii. I would assume Ernest Garcia II had still has the largest of what's called a buy here, pay here dealer in America.

[PJ Vogt]

Buy here, pay. So he's selling to people whose credit might not be great.

[Ben Foldy]

By and large, yeah, that's the business model.

[PJ Vogt]

That company owned by the father is called drivetime, an enormous used car retailer with locations in 30 states. The father had made a fortune selling used cars the old school way. The son will try to make his fortune in a new world, the shiny, gleaming world of Internet startups.

[Ben Foldy]

So the younger Ernie, the son, he goes to Stanford as one does, Makes friends with Stanford people and comes out. And he first goes to work briefly in Greenwich, Connecticut, as an investment banker for a banker that had a pretty close relationship with Ernie 2. And then he joins drive time, and he starts working his way up. But Ernie 3, the son, also has this kind of Stanford startup, you know, bug. Right. Like, he wants to, like, go his own way. The family business is not a particularly sexy business. Right. Used car sales to subprime borrowers is like, it's a fine way to make a living, but it's not like Silicon Valley startup. You're not going on the podcast to talk about that usually.

[PJ Vogt]

So in 2012, after some years spent working for his dad at Drivetime, Ernie Garcia III would co found Carvana. And it would end up being a business that would get attention both from entrepreneur podcast hosts, but also the business world at large.

[Ernest Garcia III]

We're incredibly delighted to have you, Ernie.

[Tony Hall]

You guys are about to hear one of the most incredible software stories in the country right now.

[PJ Vogt]

And it just so happens this clip is from 2017, an interview on billionaires.com Ernie III here, clad in a royal purple zip fleece loafers, no socks. The interviewer asked Ernie to tell his founder's story. And Ernie begins by talking about the problem he was trying to fix. Buying a used car in America has not changed for over a century. And it's not an experience that anyone seems to enjoy. Plus, he points out, it's a very inefficient market sliced up among so many different car dealers.

[Ernest Garcia III]

There's 60,000 dealers in the U.S. i mean, 60,000 dealers, that's a tremendous number. You know, the largest one has a 1.6% market share. So competition is really fragmented. And it was just like, what do you want? You know, it's like you've got.

[Ben Foldy]

The question that Carvana was trying to answer is that used cars are an incredibly fragmented market.

[PJ Vogt]

Meaning that there's like all sorts of used car dealerships. There's not like one.

[Ben Foldy]

Yeah, there's like a guy in Queens with like 40 cars in a parking lot and a little booth.

[PJ Vogt]

Right.

[Ben Foldy]

And that's a used car dealer.

[PJ Vogt]

Right. And what the Internet has done to almost not every industry, but many industries to be like, oh, there's tons of bookstores. No, there's one bookstore, it's called Amazon. It's like everything. Scale effects, right?

[Ernest Garcia III]

That's a good way to say it. I think it was just. It felt so obvious. So I mean, if you not to bore people with numbers, but automotive retail is a trillion dollar industry, which to put that in context, the whole economy is 15 trillion. The retail economy is 5 trillion. So for every dollar of physical things that are bought and sold in the US, 20 cents of that dollar is car. So the market is massive.

[PJ Vogt]

I think that massive market, Ernie was saying Carvana might capture it. And he believed that if the company succeeded one day, the idea of buying a used car from a used car lot, it might just be Another story you bored your grandkids with.

[Ben Foldy]

The vision for Carvana in the beginning was they said this a lot in the early days. The Amazon of cars. Why not consolidate and make a giant profit generating behemoth a la Amazon?

[Ernest Garcia III]

So it just felt like, you're never going to get another shot like this. You got to go.

[Ben Foldy]

But there's an issue with the Amazon of used cars, which is what if you think about it?

[PJ Vogt]

Well, I'm going to get it wrong. Okay. One, books are easier to ship than cars.

[Ben Foldy]

Books and everything are easier to ship than cars. Like, like. And not only that, but if you buy, you know, Chinese made fly swatter from company A versus Chinese made fly swatter from company B, like, these are interchangeable products.

[PJ Vogt]

Yeah.

[Ben Foldy]

Used cars by definition are individual little snowflakes.

[PJ Vogt]

Right?

[Ben Foldy]

Right. Like no two cars have been driven the same.

[PJ Vogt]

Yeah.

[Ben Foldy]

Not only do you have these kind of little snowflakes, but they're snowflakes that weigh a ton or two tons.

[PJ Vogt]

Right.

[Ben Foldy]

And then you have to drive them around the country.

[PJ Vogt]

Right. They're not widgets. They're like the opposite of widgets.

[Ben Foldy]

I mean, let's snowball how often we see an Amazon delivery car or truck on our block. Right. Like, we see that seven or eight times a day. You know how many orders are piled onto that, like dolly that they're wheeling around? You can't do that with a car.

[PJ Vogt]

So Carvana is trying to do something very difficult. Something difficult enough that Amazon hasn't been able to pull it off. But Carvana starts building an entire supply chain. A website where customers can buy and sell cars, but also physical spaces to inspect cars and get them ready for sale. A transportation arm to deliver cars to people's homes across America. Carvana builds the chain, but when they're done, they realize that what is missing is the customers. Carvana needed a way to get attention.

[Ernest Garcia III]

We were not a hot Silicon Valley company with venture capital investors that had a lot of attention from the media.

[PJ Vogt]

Here's Ernie Garcia III on the Cars and Culture podcast.

[Ernest Garcia III]

We could not get anyone to cover us to save our lives. And we were trying so hard to get any coverage because for a startup, media coverage is one of the only ways to get your word out.

[PJ Vogt]

In 2015, Carvana hit on a way to finally get the word out. They seized on a diabolical marketing gimmick.

[Hayley Pollack]

The used car business is going high tech with Carvana, the world's first fully automated coin operated car vending machine, launched today right here in Nashville.

[PJ Vogt]

These structures that Carvana Would call car vending machines really meant this. The company would have some physical locations, and those locations would be 75 foot high glass structures modeled to look a bit like the vending machines kids buy little toys from.

[Derek Mundhank]

It's the first complete online auto retailer.

[Hayley Pollack]

In the world that allows you to.

[PJ Vogt]

Pick up your car from an auto vending machine.

[Ernest Garcia III]

The whole thing's automated.

[PJ Vogt]

If you bought a car from Carvana, you could get it delivered to your house the boring way, or you could come get it from one of these snazzy new machines.

[Hayley Pollack]

You come here to the Carvana welcome center, where you're given a coin. You put the coin in this machine, and that starts the vending process.

[PJ Vogt]

And get this.

[Hayley Pollack]

You even get to keep the coin.

[PJ Vogt]

It was completely silly. It had very little to do with Carvana's core business or even what was novel about the company. But it was a hit, and Carvana opened vending machines all across the country. The vending machines, when I mentioned Carvana to people, are still the thing that seems to have stuck in everyone's heads. But the thing that got wall street to pay attention to Carvana was actually something beyond the company's control. The pandemic.

[Ben Foldy]

So the pandemic was, like, amazing for Carvana at first. Right. Because people weren't going out shopping. The last thing you want to do is, like, I was at a car dealership on March 11th or something like 2020, just kind of being like, what are we gonna do? Like watching. Watching a car dealership kind of reckon with the coming sales apocalypse.

[PJ Vogt]

Were people terrified?

[Ben Foldy]

Yeah, the salespeople were scared. Cause they work on commission.

[PJ Vogt]

Yeah.

[Ben Foldy]

And so if nobody's coming, like, people weren't sure if car dealers were essential businesses.

[PJ Vogt]

Right.

[Ben Foldy]

Nobody's gonna, like, put you in the box to talk about your financing, you know, like, that's the last thing anybody wants.

[PJ Vogt]

Or do a test drive with a stranger. Yeah.

[Ben Foldy]

And so there's that new car assembly stopped for a while, which drove up used car prices like crazy.

[PJ Vogt]

Right.

[Ben Foldy]

It was kind of a perfect tailwind for Carvana. They were growing. They expanded super, super rapidly to, like, keep up with their growth trajectory.

[PJ Vogt]

In 2021, Carvana sold over 425,000 cars. The stock price more than quadrupled. And Ernie III was all over TV celebrating his company's extremely good quarter. On CNBC, host Andrew Ross Sorkin asks, essentially, won't the Carvana stock price eventually have to settle down a little bit? It can't just go to the moon.

[Ernest Garcia III]

I think the bigger question for the Market and trying to understand where we are in our economy and what's going on in terms of supply with cars, new cars, used cars, is whether this.

[PJ Vogt]

Is going to sustain itself. Ernie, like any good CEO, instead just answers the question he wished he'd been asked.

[Ernest Garcia III]

If you don't mind, I want to take a moment to take a victory lap and say is our first positive quarter and to thank all the people of Carvana that have worked so hard over the last eight years to make that possible. You know, eight years ago we launched, we sold a couple hundred cars, and this quarter we sold over 100,000 cars. And this year we'll sell a thousand times as many cars we we sold that first year. And to do that and have our first profitable quarter is something that we're really, really proud of. And so thank you to everyone out there on the Carvana team. Great job.

[PJ Vogt]

Ernie's face on CNBC next to a big green hockey stick of his company's stock value. It's hard not to think this is probably something he visualized in the eight hard years of trying to build this company, when nobody paid attention, when he had to go on local TV news in a giant vending machine to try to get Wall street to take him seriously. He's finally in the place where he must have wanted to be and he's about to get knocked out of it because the same pandemic that shut down the brick and mortar competition that made a lot of people desperate to find a car, that pandemic was also shutting down a kind of in person office that Ernie's company actually depended on.

[Ben Foldy]

One of the things that happens is also DMVs shut down and DMVs slow down. And so all of the normal kind of title processing and all the paperwork side gets really screwed up.

[PJ Vogt]

Oh, so at the same moment, they're having a ton of customers come in the door.

[Ben Foldy]

At many state levels, the actual processing of the paperwork gets all messy.

[PJ Vogt]

Interesting. That would not have occurred to me. Turns out the hard thing about being Amazon but for cars isn't just that cars are heavy to ship or that used cars are unique and unwidgety. It's that buying a car is one of the more paperwork intensive purchases in life. To be an Amazon means to take care of pesky logistics invisibly. But with all these state DMVs under stress, those pesky details became quite visible. Without a dmv, you can't transfer a title, which normally means you can't sell a car. But Carvana kept selling cars and the first place Ben saw them get in trouble for this was in raleigh. This is August 2021.

[Ben Foldy]

The first thing that put them on my radar is they had a dealership get suspended in North Carolina.

[PJ Vogt]

A Carvana dealership?

[Ben Foldy]

Yeah.

[PJ Vogt]

And what did the state say? Why were they doing it? Because of it.

[Ben Foldy]

It was because of, like, paperwork issues.

[Ernest Garcia III]

You've likely seen the big vending machine of cars from the Beltline in Raleigh. The machine is now out of order after the state accused them of improperly filing car titles, inspections, and temporary tags.

[PJ Vogt]

Do you remember how our listener Jed would years later hear a news story that referenced Carvana's license being suspended in North Carolina? This is that story.

[Ernest Garcia III]

The DMV claims Carvana violated licensing laws, failing to deliver titles to the dmv, selling cars without a state inspection, and issuing an out of state temporary tag on a vehicle sold to someone in North Carolina.

[PJ Vogt]

And why don't the states like. At the risk of asking a very obvious question, why don't. Are the states bothered by having people driving around with either temporary tags or out of state temporary tags?

[Ben Foldy]

Well, part of it is that licenses are revenue for that state. Right. So, like, if you're the North Carolina DOT and Carvana is dealing with Georgia to get you to be able to drive, like you're not getting the revenue that you should be getting.

[PJ Vogt]

Interesting.

[Ben Foldy]

So that's part of it.

[PJ Vogt]

Yeah.

[Ben Foldy]

Other car dealers who are doing all that paperwork and have to, like, do things the way that things have always been done are grumbling. Car dealers are also a pretty powerful lobby in every state.

[PJ Vogt]

I didn't know that.

[Ben Foldy]

And there are no friends of Carvana.

[PJ Vogt]

Some version of this situation in North Carolina was happening in lots of states. Carvana getting in trouble with local officials, in some instances facing class action lawsuits. 2021 to 2022 was a dark time for the company. Most crucially, Wall street saw Carvana making what it believed was a bad acquisition, taking on a lot of debt. And Carvana's stock price plummeted from A high of $370 to three and a half bucks per share. A 99% drop in value. Good afternoon and welcome to the Carvana fourth quarter and full year 2022 earnings conference call. In an earnings call in 2023, Ernie had to stand in front of everybody and defend his leadership.

[Ernest Garcia III]

Ernie. Thanks, Meg. And thanks everyone for joining the call. Ten years ago in January 2013, we launched Carvana in Atlanta, Georgia. We were a passionate group of people who believed we could build something new in the world that we would be proud of.

[PJ Vogt]

Ernie's voice sounds tight here, almost like an adult in detention. Unlike his previous Victory tour, he does not sound like a man having fun.

[Ernest Garcia III]

Excess Cost, who would be 2022, had a lot of hard days. But we're a scrappy group, and hard days aren't always the worst thing in the world for scrappy people. Scrappy people find a way, and we're finding a way.

[PJ Vogt]

By the time this earnings call happened in 2023, Carvana was saying publicly that it had worked out the kinks in its system. The dmvs the company relied on had long since reopened the paperwork backlogs had been worked through. The source of Carvana's headaches, in theory, should have been resolved that summer. A man named Jed, a man with excellent taste in podcasts, would be moving from Ohio to Missouri to be with his partner Liz, and in a bind, he'd buy a car from Carvana. He'd buy a car, but for months he would not have the title to that car and he wouldn't understand why. Why didn't Carvana just take the title from wherever they were keeping it and send it to him? Only Carvana knew the answer to that question after a short break, Carvana.

[Hayley Pollack]

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[Ernest Garcia III]

What's the best time of day to get a deal? All day with Jack in the box's all day big deal meal. You get to choose from four entrees like the supreme croissant and five tasty sides, plus a drink starting at $5. So hurry in or take your time. You've got all day at Jack. Every bite's a big deal.

[PJ Vogt]

Welcome back to the show. I've spent a lot of time in Judd's paper trail. Frankly, more than I wanted to as somebody who tries to avoid almost all bureaucratic entanglement in my own life at any cost. Meaning I don't want to speak to the manager. I don't want to chase down the refund. If you bring me the wrong food, I will just eat it. It was strange for the search engine team to dive so deeply into someone else's hell loop. But we did. We got Jed's permission to go through his correspondence with Carvana. We talked to Carvana. We emailed with the Missouri dmv. Well, the Missouri Department of Revenue, which oversees the dmv. A fact I never wanted to know. But I now understand what happened. I know who messed up. I know why Jed's title was so hard to get into his hands. And now that I do know it, I also know a little bit more about how the world works and how it sometimes doesn't. So let me take you along to understand this whole problem, like what was happening behind the scenes of the process driving Jed nuts. I want to start by playing you this conversation I had with a man named Tony hall who works at Carvana in a very important role. Can you say your name, introduce yourself and what you do?

[Tony Hall]

Yes, my name is Tony Hall. I'm the head of policy for Title and registration modernization, and I'm part of Carvana's government affairs team.

[PJ Vogt]

Tony works at Carvana now, but part of why I wanted to talk to him is because of where he used to work at an institution Americans have hated maybe since its invention, the dmv. Because the answer to our question really starts with the dmv. And before he worked at Carvana, Tony hall spent a decade at the Texas dmv. Actually, a little more than a decade.

[Tony Hall]

I spent ten and a half years working for the Texas Department of Motor Vehicles. Seven and a half of those were actually on the title, policy and procedure side of the house.

[PJ Vogt]

So you lived for like a decade just in paperwork.

[Tony Hall]

I spent a Decade living in paperwork and trying to move to digital processes.

[PJ Vogt]

Yes, Tony was able to give me a picture not just of how inefficient a DMV actually is. Which way? More than I had imagined. But he was actually able to offer an explanation for why it might be that way. It's something he first began to understand in September 2011 when he was just a young DMV employee. I don't know very much about the Texas dmv. How paper was it when you started and how digital was it when you ended?

[Tony Hall]

When I started, essentially everything was relatively paper based. There were some very old school methods that dealers had where they could enter data into a laptop, put the data on a thumb drive. They would take the thumb drive with the physical paperwork and walk it into the county tax office. The county tax office would plug the thumb drive into the state computer terminal. And then, no joke, they would sometimes literally put a stapler on the enter button and have it run through all the screens on the transactions. And I think the thumb Drive could hold 25 transactions. And then they would kind of post audit the paperwork to make sure, do we have all the documents? Are things signed where they need to? Obviously, if there were paperwork issues, they were sending those back to the dmv.

[PJ Vogt]

Tony said back then there was an entire job for someone called a title runner. Like a car dealer would pay a title runner to pick up the title from the dealership and run it over to the county tax office. I'm an impatient person, so the fact of all this just makes my jaw drop a little bit. There are government offices that aren't like, famous for functioning well, but DMV offices are famous for not functioning at all. What is it about motor vehicle paperwork that stymies local government?

[Tony Hall]

You got to keep in perspective, right? A motor vehicle for many people is the most valuable asset that they ever own. If you own a home, it's your second most valuable asset, generally speaking. Right. So I feel like there's a lot of sense of we've got to make sure as a government agency, we are doing this right and we are protecting all the parties that are involved with it. People rely on a motor vehicle to get to and from work, take care of their kids, take care of family members, whatever the case may be. So what may seem like an innocuous error could be life changing. And I think that innately drives this sense of anytime you're doing something new and innovative, even when there's a demand for it, inevitably you're going to be introducing new risk.

[PJ Vogt]

So, look, obviously, or at least in my opinion, obviously, DMVs are inefficient for many reasons. But according to Tony, there's at least one good one that in some way their slowness might have a logic. They'd rather be inefficient than make a mistake. Because for many people, their car is their most valuable possession. Car dealers, when they sell you a car, they handle the title and registration for you, and they get used to the quirks of the rules of their particular state dmv. Carvana, as a national company, has had to learn the rules and regulations of 50 DMVs and stay on the right side of all of them. Tony said that gets complicated.

[Tony Hall]

Every state does things different. And some states you have safety inspections. In some states you have VIN inspections. In some state you have emissions inspections. Some states you have multiple combinations of those. Who can do those sorts of inspections varies. In some states, dealers can do those themselves. In some states you have to take those vehicles and have somebody else perform those inspections.

[PJ Vogt]

This is a podcast. We're not going to tell you about every one of these rules or every one of these rules exceptions, but things get gnarly.

[Tony Hall]

And you also have state and federal regulations that govern the transfer of ownership of a vehicle. And you're trying to layer all these things specific to a particular person's circumstances.

[PJ Vogt]

So every car is a snowflake, every DMV is a snowflake, and every car owner is a snowflake. Each more beautiful than the last. Jed is our snowflake, a nice man who is in a hurry to move across the country to be with his sweetheart, who just happened to get caught between two complicated and interlocking systems, the Missouri Department of Motor Vehicles and Carvana. So I want to retell you Jed's story. I'm even going to replay some of his quotes. But I want you to hear the story from the behind the scenes perspective that Carvana had. Carvana owned a white Subaru Outback. The company wanted to sell it. The title to that car belonged to Carvana. Again, the title, literally a piece of paper, like a physical piece of paper that says Carvana owns the car. That title sat in. The headquarters of Carvana was literally in a filing cabinet among many filing cabinets in a building in Arizona. That title was in the filing cabinet when Jed pressed the button to buy the car.

[Jed]

I chose a car that night and financed it and was ready to go.

[Hayley Pollack]

We delivered the car to the customer in Ohio on June 2, 2023.

[PJ Vogt]

That's Hayley Pollack, a senior manager of communications at Carvana, she used to work in customer service.

[Hayley Pollack]

The customer provided us a Missouri address that was his home address and then indicated that Missouri was where he wanted to register the vehicle.

[PJ Vogt]

So the car has been delivered. The title stayed in the filing cabinet at Carvana. In order to transfer that title to Jed, here's what was supposed to happen. According to the rules of the Missouri dmv, the Subaru needed to be registered. To register it, the state needed proof of several facts. That this Subaru had passed inspection in Missouri, that Jed, its driver, had insurance, and that Jed had paid taxes on the car. Because in Missouri, everyone in the state pays an annual tax on their cars. I had never heard of that. If Jed could prove those facts to the state, his car would be registered and it could be driven. And if it's registered, then and only then would the state of Missouri print up a new title and give it to Jed. All of this a long way of saying that Jed needed three pieces of paper.

[Jed]

I'm not that worried about it. Like, okay, we're missing a few documents, but how hard could this be? When I have a free afternoon, I'll go down to the DMV and I'll take care of it.

[Hayley Pollack]

Oh, Jed, he had no idea the customer called us. He was actually sitting outside outside the Jackson County Assessor's office, because that's when he received information that he needed the title in his name. Which starts a bit of a cycle.

[PJ Vogt]

This bit of a cycle. This was the hell loop. This was where Jed got stuck.

[Hayley Pollack]

Our advocate is explaining that we can't provide a title in his name. She explains that we do have a title. It's titled in Carvana's name. But we can't provide it to him until the registration is complete. And so he actually walks inside the courthouse on his phone with the advocate.

[PJ Vogt]

Wait, I'm sorry. Can I ask you a question? Is this, like, you're describing this in, like, a very high amount of detail. Is this because, like, when it says, like, your call may be recorded for quality assurance, was this call recorded for quality assurance?

[Hayley Pollack]

Yes.

[Jed]

I remember vividly standing in that courthouse just thinking, I don't know where to go from here. I took another number and I went back to the desk and I started explaining what was going on. And the woman interrupted me and said, carvana, huh?

[PJ Vogt]

Oh.

[Jed]

And she said, this happens all the time. We're always having problems with Carvana. She said, it's a problem on their end and they need to work it out.

[PJ Vogt]

I can now, after months of reporting by search engine, although we were working on other stuff at the same time, confidently report this was actually a problem on the state's end. They needed to work it out. This one state employee, she made a human mistake. She misspoke. It happens. Carvana's customer advocate would wind up calling the state directly, figuring out that Judd did not, in fact, need a physical title with his name on it, that he just needed a photocopy of the title with Carvana's name on it. And Jed would end up showing that emailed photocopy to a state employee who finally gave him what he needed. It makes me understand that a large part of Carvana's job is just to intricately understand bureaucratic logic. Bureaucratic logic is different from human logic. It doesn't pretend to be internally consistent. So understanding why one rule exists won't necessarily help you predict another. But bureaucratic logic has to be followed by human beings who make human errors. The answer to Jed's question, why didn't Carvana just hand over the title to him? Carvana is a car dealer. States expect car dealers to handle title and registration paperwork for the cars they sell. And dealers can't just improvise on the fly. Their state licenses are at stake here. Dealers have to give their paperwork to the state, and the state then issues the new title to the new owner. I did run this bit by the Missouri Department. Department of Revenue runs the Missouri dmv. They confirmed it. Of course. The promise of buying a car on your phone is that, in theory, you're not supposed to have to know about any of this. Carvana is trying to offer a seamless experience. So how often do they actually deliver that? What seems clear to me now is that the cases where Carvana customers do not get title and registration in a timely manner, those were happening much more frequently from mid-2020 through 2021. The company acknowledges this. They shared internal data showing frequency of registration delays. You see some before the pandemic, more during it. But then after the pandemic, after the company takes a big public hit for this, you see things get smoothed out. The tricky cases become increasingly rare. Tony from Carvana said that if you believe the customer experience is really getting better, it might not just be Carvana doing a better job, it might also be the DMVs. He says that the pandemic, which shut so many DMVs down, was also finally the push they needed to plug their systems into the Internet.

[Tony Hall]

Covid certainly changed the narrative around the how antiquated the title and registration process is to the extent that DMVs themselves are having the most substantive conversations about this issue. And I would say they've had more conversations about this title and registration modernization just broadly in the last two, two and a half years than they probably have ever had before.

[PJ Vogt]

It's funny to think like of all the unintended consequences of a global pandemic, one of them would be more pressure on DMVs to have electronic record systems that work. Yeah, I would not have guessed that in the beginning. It's funny, you know, like early in our story, one of the things we talk about is that like the big idea that Carvana's CEO had in the beginning is just like to create essentially like Amazon, but of used cars. Listening to you talk, I'm like, oh, someone who would have been imagining that dream in like 2015. I think it would have been perhaps impossible to like totally understand the amount of tangle that they would ultimately have to untangle. It sounds like you guys are still untangling. It's.

[Tony Hall]

Yeah, I mean, it is a daily evolving process for us.

[PJ Vogt]

So that's Carvana's story. The company seems to be in pretty good shape these days. Most news stories you see are about their comeback, not their problems. And the stock price has mostly recovered. We relayed all this to our listeners, Jed and Liz, who were at first, I think, a little confused. I think it's possible all of us here were maybe judging Carvana by a reputation it may have outgrown. It's a little tough to let go of. Who doesn't love the story of a glitzy startup founded by a pickleball playing CEO that grew too quick and stumbled? We know that story. It's easier to tell and you spend much less time having to learn about the intricacies of how paperwork functions at the Missouri Department of Revenue. Anyway, Jed and Liz, to their horror, now understand all of these intricacies. They will return again to the Missouri courthouse this month, but for much happier reasons. This time, they're picking up a marriage license. Search Engine is a presentation of Odyssey and Jigsaw Productions. It was created by me, PJ Vogt and Truthi Pinamaneni and is produced by Garrett Graham and Noah John. Fact checking by Holly Patton. Theme original composition and mixing by Armin Bazarian. Additional productions for it by Sean Merchant. If you'd like to support the show, get ad free episodes and access to our upcoming board meeting in December, please consider signing up for Incognito Mode. You can learn more at Search Engine Show. Our executive producers are Jenna Weiss Berman and Leah Rhys Dennis. Thanks to the team at Jigsaw, Alex Gibney, Rich Perello and John Schmidt, and to the team at Odyssey, JD Crowley, Rob Morandi, Craig Cox, Eric Donnelly, Colin Gaynor, Matt Casey, Maura Curran, Josephina Francis, Kurt Courtney and Hilary Schaad. Our agent is Oren Rosenbaum at uta. Follow and listen to Search Engine with PJ Vogt now for free on the Odyssey app or wherever you get your podcasts. Thanks for listening. We'll see you next week.