This is about Carvana CEO Ernie Garcia leading through a 99% stock crash. He says it wasn't one disaster but 20 separate 20% drops, each a blow to the team. He kept focus on the real story: building something hard that customers love, ignoring outside hype or panic. Key holdings: Carvana (now earning $3,900 per vehicle per quarter, selling ~440,000 cars a year), Adesa (bought for $3.2B debt, gives land capacity for 3 million cars a year), and Amazon (once fell 96% and recovered, used as comparison).
At a Glance This episode of Invest Like the Best features a conversation with Carvana co-founder and CEO Ernie Garcia, exploring how he led the company through a dramatic turnaround after its stock price plummeted 99%. The core thesis is that during a crisis, maintaining a clear vision, relying on a
Carvana co-founder and CEO Ernie Garcia recounts the company's journey from its 2021 peak, through a 99% stock crash, to a strong rebound. Core thesis: A 99% stock crash is not the end, but the moment of greatest value creation in the company's history — "If you survive the storm, that's where you reach the other side of success."
Ernie Garcia argues that a 99% decline is not a single disaster but 20 consecutive 20% drops, each representing "a heavy blow to the team."
Carvana's crash stemmed from a confluence of multiple factors:
Garcia notes that from being "the coolest kid at the business party" in 2021 to "being reminded of reality" in 2022, the intensity of this narrative reversal far exceeded the underlying fundamental changes. "99% is just a number, but what's truly terrifying is—you need to endure 20 drops of 20% to get down to 1%. Most people can take one or two heavy hits, but taking 20 is a different story."
Garcia believes that the key to staying calm during a crisis is adhering to the "true story" rather than being swayed by external narratives.
He distinguishes three types of narratives:
Garcia emphasizes that team resilience stems from "confidence born of preparation" — Carvana built up a group of "fighters" early on, many of whom had sports backgrounds and had undergone repeated training in winning and losing. "Confidence = preparation. It's hard to stay confident in difficult times unless you are prepared. And the 'training' for preparing for tough times is hard to find—sports is one of the few places where you can experience winning and losing within 45 minutes."
Key management actions:
Garcia admits that one of Carvana's biggest weaknesses was saying "yes" too often, and learning to say "no" during the crisis became a turning point.
He said: "Startups always say yes, so they are more likely to die from indigestion. Big companies always say no, so they die slowly. We need to find a balance."
The mechanism of saying "no":
1. Identify your own systemic bias: Garcia acknowledges his bias is "always saying yes," so he needs to rely on team members who are better at saying "no."
2. Observe feedback: If things improve after saying "no," continue; only adjust direction when things worsen.
3. Case study: Carvana's marketplace business (partnering with natural sellers) "should have succeeded" from day one, but premature investment led to resource conflicts, ultimately forcing a contraction.
Key insight: When a company advances multiple projects simultaneously, hidden conflicts emerge—different projects compete for the same pool of engineering resources, slowing everything down. "You think eight people are focused on one thing in a room, but when a technical issue arises, they need resources from other departments, and the other seven projects are competing for the same resources. All projects get stuck."
Garcia describes an "extreme accountability" project management system implemented starting in 2022, which became a key engine for Carvana's turnaround.
Three-Level Metric Breakdown:
1. Product Milestones: Whether the project itself is progressing as planned
2. Operational Milestones: How product changes impact operational efficiency
3. Financial Milestones: How operational improvements translate into profit
Weekly Monday Meetings: Each business cluster reviews completion status against these three metrics, with no room for concealment. "When you miss a target, you have to say why. The most common reason is, 'We're still doing other things, and the people we need are occupied by other projects' — which immediately makes you realize there are still too many Yeses in the company."
Garcia emphasizes that this high-frequency review is not a "boss checking work," but rather "enthusiastic participation by team members" — "My favorite time is Sunday night, because I know Monday morning's review will show the new progress the team launched over the weekend. Momentum is contagious. "
Key to Sustainability: Leaders must be "player-coaches" — deeply embedded on the front line, sitting with engineers, designers, and operations staff, rather than managing at an abstract level. "You want your best employees deep in the details of every project. If it feels like the boss checking, that's a problem; if it feels like a team member enthusiastically participating, that's momentum."
Garcia insists that vertical integration is central to Carvana's customer value proposition, not merely an enhancement.
Two core reasons:
1. Economic advantages: Vertical integration allows the company to capture economic benefits from more stages of the transaction, enhancing competitiveness and resilience against risks.
2. Eliminating decision friction: Multiple horizontal layers imply differing incentives, making it difficult to create a simple customer experience.
Strategic value of the Adesa acquisition:
Garcia acknowledges that this $3.2 billion debt-financed acquisition served as the "trigger" for a shift in investor sentiment, but he insists: "Today, we are more excited about this acquisition than we were at the time. The benefits it brings may exceed what we imagined back then."
A caution on vertical integration: "Vertical integration has an insidious characteristic — it always seems economically justified. You must ensure that the problem you are solving is worth the complexity you are taking on."
Garcia describes Carvana's efficiency improvements as "narrowing the gap between the theoretical optimal machine," and self-assesses that it has only reached 50%.
Specific areas of efficiency gains:
Key data:
Garcia emphasizes that these efficiency gains are "fundamental improvements" — reducing costs or increasing monetization without compromising the customer experience. "If you can do better without hurting anyone, that's a true win-win."
On "always being at 50%": "When you solve one problem, you see two new opportunities. So you might always be at 50%. There's no finish line; you keep moving forward."
Drawing from his personal experience, Garcia offers entrepreneurs profound observations about investors.
Investors' Strengths:
Investors' Weaknesses:
Advice for Entrepreneurs:
Garcia argues that the key to maintaining personal balance during a crisis is having "life pillars as independent from one's career as possible."
Specific practices:
Core insight: "If your core relationships are tied to status or material things, when your career hits trouble, it seeps into everything. But if your personal life is as independent as possible, you have a place to go home and 'just be a dad.' Your kids don't care how much your stocks are down. "
| Position | Analyst View | Key Data |
|---|---|---|
| Carvana | Bullish (achieved profitable growth, 1% market share) | Stock down 99% from peak; latest quarterly EBITDA/vehicle $3,900; annualized sales ~440,000 units; Adesa land capacity supports 3 million vehicles/year |
| Adesa (acquired) | Bullish (acquisition value exceeded expectations) | Acquisition price $3.2 billion in debt; second-largest wholesale auctioneer; provides 3 million vehicles/year land capacity |
| Amazon | Used as historical analogy | Once fell 96% |
| Shopify | Used as counterexample | Attempted vertical integration in logistics then abandoned it |
1. "A 99% decline is not a single disaster, but 20 drops of 20% each" (Ernie Garcia) — Each 20% drop is a heavy blow, and the team must endure 20 such blows rather than one or two; that is the real challenge.
2. "Confidence = preparation. It is hard to stay confident in tough times unless you are prepared." (Ernie Garcia) — The advantage of a team with a sports background lies in repeated training through wins and losses, which provides "emotional muscle memory" for crises.
3. "Once the team starts blaming each other, it is a disaster." (Ernie Garcia) — The most dangerous thing in a crisis is not external pressure, but internal finger-pointing at past decisions made by others, using hindsight.
4. "When you solve one problem, you see two new opportunities. So you might always be at 50%." (Ernie Garcia) — Carvana self-assesses its efficiency at only 50% of the theoretical optimum, because each step forward reveals more opportunities.
5. "Vertical integration has an insidious trait—it always seems economically reasonable." (Ernie Garcia) — Advice to entrepreneurs: Do not be seduced by surface-level economics; ensure the problem you solve is worth the complexity you take on.
6. "The calm version of an investor is: I accept that the management team has a plan, I choose to trust them, and then I walk away to think about other things." (Ernie Garcia) — Investors' anxiety from being removed from operational levers is a natural flaw, and entrepreneurs should not outsource their emotions because of it.
7. "In historically successful cases, investor panic has often proven wrong. When it happens, don't worry. Listen, try to learn, but don't let it control your emotions." (Ernie Garcia) — When the stock price falls, teams tend to think "investors know something we don't," but history shows such panic is often misguided.
8. "If you can identify your own systematic bias—my bias is always saying Yes—and then rely on team members with the opposite bias, you can find balance." (Ernie Garcia) — Self-awareness of bias and actively seeking correction is a key mechanism for making the right decisions in a crisis.