Rahul Sonnad from Tesloop

Welcome to the Puck, Venture Capital and Beyond. A show that explores the evolving landscape of the Venture Capital world. We'll have candid conversations with today's VCs and entrepreneurs who are shaping those changes. I'm Jim Beer, managing partner of Bier and Trough and president of CMG Advisors. This podcast brings change makers to the table to discover the inner workings behind decision making strategies and ultimately how they got to where they are today.

Like a test loop, everything for us, all this technology and data feeds and crypto and everything, it's just in service of a simple thing which is when you're in the car, the time you spend in the car should be beneficial to you and not draining, but rather enriching. Today, I'm excited to sit down with Rahul Sanad, CEO of Tesloop, a transportation platform focused on revolutionizing car service in the new age of autonomous vehicles. Sannad is a seasoned entrepreneur and investor with an impressive background in both engineering and software design. So before we jump in Yeah. Tell us a little bit about your background.

I mean, obviously, well educated Harvard, started two companies, exits for two companies. Can you give us a little insight in terms of where your past has led you to where you are today? Yeah. So my background is very much in software, first at Adobe doing, you know, development and extensibility in desktop apps. And then I studied computer science in Japanese.

And because of the Japanese, Microsoft recruited me to design Japanese, Microsoft Word, the word processor. And I did that for a few years then started managing all of Microsoft Office for Asia, which, was a very spread out type of endeavor. And went to business school, went for just one year and at the time, m p threes had kind of hit, and I was a big music fan and I thought m p threes would just be like, wow. It was apparent to me once I got the first m p three that you could have Spotify. So I really wanted to make Spotify and I came back to Microsoft to do that.

And at the time, Microsoft was like, oh, hosted software doesn't make any sense. It's a horrible business model. So they just wanted to sell servers. That was kind of the thinking back then. So I left, pulled out my three favorite people from Microsoft and three favorite people from Adobe and we founded a company called the Platform.

And we got about ninety days into it and, we got a legal bill for DMCA compliance review. And I'm like, so can we do it or not? And they're like, well, it depends on, you know, and there's like no answer. So the next day we switched off music to video because video has a very different like legal structure in terms of licensing and everything. And we created what I think was the first web service, meaning you can programmatically control something on the Internet through interfaces.

And basically, it was a SaaS, like, content management system to publish very large scale video. We did the first subscription service with CNBC. I think we did the first pre rolls with Microsoft and, back ended Hulu, Comcast, Verizon, Qualcomm, cbs.com, ABC News, all these companies. And, and then eventually, that was Spark Capital's first investment. And Comcast ended up purchasing that.

They were a big customer. And I think it's still the back end of TV Anywhere that lets you watch TV on an iPad. It's still in Seattle. They just rebranded it after, what, now it's almost eighteen years or something. So, yeah.

So so that was very much hardcore software, but it was my first experience with the company in in kind of ground up entrepreneurialism. So, after that, YouTube was coming up and I really wanted to go after YouTube and try to compete with them, but Comcast was a little, I would say, conservative in terms of risk taking on that type of spending and such that would have been required. So, so I moved down here, another company I thought, hey, I'll take the same playbook for build a software platform, and instead of streaming video, this time we'll let you publish, Geo apps. And at the time, I had a laptop with this GPS dongle from Microsoft and a Verizon. There used to be these cards you stick in your laptop.

So I think that was the first smartphone. It was GPS and Internet. And back then, that was totally new, and you could see where you were, and now it's just so taken for granted. So based on that, I thought everything would reorganize around GPS and the location. So that was the premise of that company.

It was the same idea, a publishing platform for other big companies to publish. And Universal Studios adopted that for their theme parks, and Clear Channel did all their airport maps and such. But what we thought is that every place would have an app. Every hotel, every store, every restaurant, and that never really materialized. So after a few years and getting up to, I don't know, 3,000,000 revenue or something, the market wasn't there for what we wanted to do.

So we ended up selling that off to our customers. Some Some of that still, again, in effect like in Clear Channel, you see the fines in the Philadelphia Airport still for it. So that was the second venture. In terms of advice you would give entrepreneurs that are thinking about starting a business having had these other companies and now kinda what you're doing? Any war stories or bits of wisdom you wanna share with people that are young entrepreneurs tackling their first startup?

I think there's a few simple things that I find when I talk to people who are about to start businesses that are kind of night and day. And the first thing is nowadays, I think it's super easy to test and verify your idea. And often people have this notion that, oh, I wanna build this app that does this, and the first thing they do is try to find developers to build this app. And to me, that's totally the wrong thing to do. The first thing to do is to make sure you can communicate what you're trying to do because if you can't communicate what you're trying to to do, almost nothing else matters.

So to me, that is the foundation of any entrepreneurial effort is clarity in what you're doing and the ability to describe it and communicate it and really think through it. Like, I think for anybody, the more time you spend thinking about something and for me, the only way I can think about something is by talking to other people. It forces you to think it and they ask questions and it makes you think about the answers. Before I would ever spend a penny on development, I would pitch to 50 people people and and get feedback. And then the second thing, if my idea is I want to create a new door handle that checks your fingerprint and provide some value in that or so whatever the idea is, I would now take out Facebook ads and see if anybody wants that.

I can take out an ad and say, here's a new door handle. Do you wanna buy this? And you can check the traffic on it. You can get people to sign up their email. You don't need a product to validate the idea, validate interest in the idea.

Often people have these, like, two sided marketplace where I'm gonna have a small business join my, like, a class pass thing. They'll offer these, classes, and I'm gonna have consumers do that. Again, you can test that idea with the small businesses by targeting them, see if they wanna sign up and test the consumers by saying download my app. Even if you don't have an app and when they go to that page, say sign up to get the app and, you know, don't be super deceptive about that, but, you know, you can still check the interest level. So my strongest advice for anybody now starting a company is before you do any work, validate the concept and do that in a methodological manner.

To me, Facebook ads are by far the easiest way. You don't need any help. If you spend an hour looking at Facebook ads, you can figure out how they work and, you know, maybe the first $50 you'll waste in not doing it the right way. But couple $100 in, you'll both understand how Facebook ads work, which is incredibly valuable, and you will be able to validate your idea and probably iterate on it to the point where you're like, oh, everybody wants, you know, a different type of door handle, not the one I was thinking of. Now that sound advice.

So let's get back to what you were working on today, TestLoop. When did that start? We started almost three years ago on the premise again, really, of a big technological shift. And this time, it wasn't m p threes or the GPS, but it's the digitization of the car. And and I think what Tesla is doing in the car space is somewhat underappreciated because they're doing a lot of different things.

And the fact that it's electric is interesting. The fact that it upgrades, it's interesting. The fact that it's increasingly autonomous is interesting. But to us, the idea that you put all of this together in a fundamental platform that can run cars and will soon start running semis. This is equivalent, you know, to the difference between tower records and Spotify.

So we think gas cars that are not in the Internet that don't upgrade or kind of tower records, and Teslas are a platform that you can run a purely digital transportation network on. So the world is going as you said from the tower records to the Spotify or the Blockbuster to the Netflix. Yeah. Exactly. The world is changing at this really rapid pace.

Yeah. One of the things we're trying to do with the puck and where the world is going is try to give our listeners an ability to start to keep up with it. Because some of this from a consciousness perspective is just mind blogging because it's it's going so fast. So what got you to jump into this initially? I mean, I've heard some stories about your son was an instrumental part of this.

You wanna tell us a little bit about that? Yeah. Sure. So my son three years ago turned 16 and as is probably on the mind of 16 year olds. He's like, I should get a car this summer.

And I'm like, yeah. Great idea. It sounds like you need a job this summer. And so he's like, what should I do? And I'm like, well, figure out something you really like and we'll try to figure out a job related to that.

And so he was a car freak, which is not uncommon. And first, his idea was to be an auto mechanic. And I'm like, okay. Do you wanna clean tools this summer? And he's like, no.

So I'm like, you should then think of something maybe electric. And at the time, I was in the mid stage of Tesla fanaticism and I would listen to every YouTube of Elon Musk and in the car we'd just be listening to earnings calls over and over. And so he was kind of forced to assimilate just Tesla stuff. So he came back to me and said, okay, I've got an idea. Why don't you buy me a Tesla and I'll drive people to Vegas over the summer on weekends and I'll take out ads in Craigslist and, I'll earn enough money to actually pay for the lease.

So you're buying me the car, but I'll pay for it. It. And at the end of three months, Tesla has kind of a no questions asked return policy. So at the end of the summer, I'll just return it and go back to school. And I thought that was clever, but I'm like, you'll kill yourself.

Like you're 16, you've never driven. And he's like, no. Autopilot will keep me safe. And autopilot had just been announced by Tesla, not released, and it was not clear what it would be or anything. And I'm like, nobody knows what autopilot is or when it will come out.

And he's like, no. It'll be fine. And I said, okay. Ask Elon Musk if it'll keep you safe. And if he says it'll keep you safe, I'll buy you the car.

And I figured that was an unachievable task. So he buys a share of Tesla stock, and we go to the shareholders meeting, which I'd been going to. And at the end, you can just stand up. Well, back then you could stand up and ask questions. So he second in line to ask questions and he asked Elon Musk, is the car gonna keep me safe?

And Elon was like, well, to start with you really have to pay attention, but in three years you'll be able to go to sleep in the car. And that was about three years ago, and I think maybe they're nine months behind or a year behind. And when he said go to sleep, he meant it wouldn't be legal, but the car technically would be enough. At the time, that was really the first time any, I'd say car CEO, like automaker CEO had ever, like, given a schedule for autonomy. And I was with a couple of my now co founders of Test Loop, and we were actually working on another mobile app project.

And when we heard that on the drive back from that shareholders meeting, we all decided to shelve the mobile app project that we just started and join Heiden test loop. And we launched a month later in production. So in terms of where you are today and in the same way Elon was projecting where he's gonna be in three years. Where do you see yourself in three years? So I'd say, like, I would have seen myself farther along over the last three years.

But I think now things are going to rapidly inflect. And, you know, what we really need for the business is access to cars, obviously. And now there's, you know, more and more cars getting produced. There are about 300,000 Teslas on the road now. And in the next year, they'll probably be 80,000 more just in California.

So there's some real scale coming. And then the other really important factor is charging availability. And Tesla in California, which is a little ahead of the curve, but it's almost a three x or four x increase in charging, you know, stations and capacity over the next year that's planned. So we think that's really the foundation to scale out electric mobility. We think the really big things are gonna happen is first, the idea of car ownership is going to rapidly change where it's the differentiation between owning a car and subscribing to a fleet.

It's going to merge into one thing. So you may own a car in the fleet, but you effectively have access to the fleet. Then obviously over the next three years, you're going to have, I think it's pretty pretty certain you will have very strong technical autonomy. Meaning, if you're driving in almost all situations, the car will drive better than you. I still think that very last thing when it's after the football game, you can't get out of the parking lot.

You need humans for that or turning into the Venetian, valet at Christmas or something because people are just not stopping for the cars. But most of highway driving even probably next year is going to become very reliable in Teslas. Not to say that, you know, if there's flares in the road and everything, you won't have to take over, but the common circumstances. So that's gonna really change a lot. That means insurance is gonna come down.

It means the cost of driving is effectively coming down because it's much easier. It's much simpler. It's much less risk prone. So whether it's the cost of you driving your own car or somebody driving you around, that's gonna come down. And then, you know, for us, the really big thing is the idea that you can now query these cars anywhere in the world.

I can open a car door, unlock it, you know, whether it's in Norway or Santa Monica using servers anywhere in the world. So the fact that you can query everything, you know the speed, you can know the tire pressure, you can know battery state, how many miles are in it. It's going to make it really easy to reorganize almost everything you do with cars now in terms of services, tire service, driving, cleaning, financing, all of that is going to reorganize around the data feed of the car. And the bottom line of all of those things is it is going to get very cheap and very efficient to operate cars compared to today. And it's kinda like, again, Netflix or Blockbuster.

Clearly, Netflix is a better solution than Blockbuster. You get everything and don't have to go to the store. It's a slightly nonparallel analogy, but the key thing is if you take a car now that typically maybe you use two hours a day and twenty hours it's sitting, and now you can figure out how to use that five or ten or fifteen hours a day, the price comes down by two x or three x or four x for the same utility. And the fact that it's all gonna become digitalized means it won't be the same utility. It'll be much better.

So what we clearly think will happen by the end of next year is you will buy a Tesla. You will enlist it in a fleet like ours, hopefully ours, and you will then be able, when you're not using it, to share it, to recover money. And then any you know, when you leave to San Francisco, you'll take it to LAX. You'll park it there. And while you're gone, it'll be running to Vegas and back.

And then when you land in San Francisco, you can either check into another car that somebody has left there. Or if you don't wanna drive, you can check into a car that some driver is now driving you. If you look at Uber, which I think has probably been the biggest innovation in cars in the last hundred years, they've created a a two sided marketplace between passengers and then drivers who are the car owners, who are the car cleaners, who are the car maintainers, and who find car insurance. And what is going to happen is slightly different where on the driver's side, that's all gonna become debundled. So one person can own the car, another person can drive the car, a third person can clean the car, somebody else's insurance providing insurance.

So it is going to be a multi sided marketplace of all these service providers mediated by car data in real time. So this is just a really big change from dumb cars that are not on the Internet that tend to break down and have lots of fluids and all sorts of problems. And I think the wonderful thing is this is almost completely net positive for everybody in terms of environment, in terms of costs, in terms of congestion, in terms of parking, in terms of administration and safety and everything. So it's gonna be, I think, really be the biggest change in the next three years. Compared to what Uber did, what's gonna happen in the next three years, I think, is going to dwarf that impact.

So in terms of in your platform, people buy Teslas and put them in your system. What about other brands for instance? Will you eventually be brand neutral where other people can have So what we feel are the four components that you need for a modern digital car platform is you need an electric drive train because the cost per mile in electric drive train, if it's like a Tesla, is about three times cheaper. And I think that's underappreciated. And we've have cars that have 360,000 miles on them.

The next two cars have 270,000. We're driving 17,000 miles a month. So I think we can pretty authoritatively speak on the price of the cars per mile, and it's getting cheaper. The cars are getting better. Manufacturing's getting better.

So you need the electric drive train. And with the electric drive train, you obviously need charging capabilities. And the faster the charging, the better because it means the more you can drive a car. If you have a car like a Leaf or a BMW I three, it might take four or five or six hours to charge, which means for every 100 miles that you drive, you're spending a lot of time charging. So you can't drive those more than six hours a day or something.

Whereas in the Teslas, because of the fast charging, you can drive them a lot, and you'll see a lot of superchargers, as mentioned, sprouting up. So then you need this data feed so you can control it. You can open it. You can lock it. You can know the battery state, know the tire state, all of that.

And then lastly, you want autonomous technologies, which makes them safer and easier to drive. So once you have all four of those, that's a modern car platform. And any car with those features will reap the benefits of a, you know, unified mobility platform such as we're building. And today, that's a Tesla only game. And it's not, like, clear when the next manufacturer will have all that in place.

Really, the supercharging network's the hard thing there. Or I don't know if it's the hardest thing, but it's the most time consuming and onerous thing to get out. So probably in two ish years, you'll see companies like BMW and Hyundai and and such having cars that are electric, that have upgradeable software platforms and increasingly autonomous features. And then the big question is, can they roll out the supercharging networks at the scale that you need to really run mobility? But, you know, the nice thing is Tesla is gonna be the anchor for all of this.

So everything else can just layer on top of of it. So what I find fascinating is you're not only tackling this new technology that's revolutionary and that is evolving at this rapid pace, but you also are gonna combine it with the blockchain and with the Karma token and so forth. And there's all these different industries that are gonna have to spring up to do this. I've heard you talk about the use of tokens and the analogy with airplanes and frequent flyer miles. When you look at tokenization and using tokens in a way that we currently use frequent flyer miles, how do you see that actually being brought down into a practical use for the average consumer?

And is that something also that will happen in the next three to five years? Oh, yeah. So I think when you look at crypto and blockchain technologies, it's a little complicated because it's not just like one thing that's happening. There's a lot of different things happening at different levels. So the way I would break that down is the first level of that is using the blockchain to share data.

And clearly, you can share data on Amazon. You don't need the blockchain. What the blockchain, I think, gives you is the ability to share data without having to trust a lot of parties in the middle. Now the reality is to get there, you need a few things that are not in place now, like you need signed data. So when we get, let's say, the speed out of the Tesla car, right now we get it, we put it on our Amazon servers and we share that with Farmers Insurance, and they can see how fast the cars are going.

And we actually programmatically limit the car speed to 85 miles an hour. So this is great for farmers because normally if you put a 25 year old guy in a Tesla and say, hey, go to Vegas, they might go faster than 85 miles an hour, and I think that exponentially increases the risk and liability. So by, a, being able to programmatically gate it, which is a Tesla feature, you have some huge benefits, but you reap those benefits by letting farmers verify that in fact the cars aren't going faster. And right now, I think they trust us perfectly well, so we don't need to give them a blockchain of that. But if they were insuring some car in Turkey or something, they may not have that level of trust.

And so if the data gets signed as it's coming out of the cars by, you know, Mercedes or Tesla or GM, and then goes on to the blockchain, that gives you the ability to be just much more efficient around insurance. And also slight tangent, but instead of insuring a car for a month, you can insure a car for a specific trip from here to Las Vegas. And if it's 32 degrees and snowing and foggy, maybe that trip costs more. And maybe because of that, it's not a good time to run a car and it's better to run planes because the risk again is exponentially higher then. So the idea of data sharing including, like, I wanna grab the tire pressure because I'm Goodyear, and I want to make sure your tires are always properly rotated and inflated.

That can be facilitated again by the blockchain in a manner that's, you know, highly trusted, where if Goodyear then pumps the tires up and says, okay, we've inflated them. The insurance company can see, yep, tires are inflated. I'm happy again. Risk is low again. So that's the first use of the blockchain for just sharing data.

And again, the big uses of that are financing, service, and insurance. So then the next area is if you just look at that space of saying, hey, I'm Goodyear and I wanna pump your tires. That's gonna cost you $3. How do I pay for that? So you can tokenize and just have a financial exchange through the blockchain, you know, through the tokenized blockchain that, you know, both the data's there and you can now do payments.

And if Goodyear wants to pay to run the infrastructure that lets them sniff the tires every twenty seconds across thousands and thousands of cars, this gives another way for them to pay for this infrastructure that's running. And eventually, we assume that may run on some decentralized network kind of like Ethereum is running now, but I think that's not critical for the short term. So that's kind of the industrial tokenization of value exchange. Similarly, if you lease a car now, you know, if you go over the miles prescribed when you turn the car in in three years, you have to pay the extra money. But really what that does is if you drive the car crazy amounts of miles, the leasing company is underwater and they don't know it because they don't know know how many miles are in the car because they're not monitoring it.

Once you have all that on the blockchain, they again can be assured that, you know, they could charge you more and they could say pay me a penny and a half for every mile over 10,000 miles a month you drive or something like that. So the tokenization supports this industrial payment system. Then on the consumer side, I think you have potential to just create much better network effects. So what I think tokenization lets you conceptually do is to give equity in the network to not only employees like you do now at startups, but also participants. So if you were a car owner and you enlisted your car in our fleet, we could give you tokens that then could appreciate in value so you're kind of a shareholder.

There's some SEC considerations in The US around this, but in other countries, I think you don't have those considerations. So in Japan, you could give everybody tokens, you know, to put their Teslas in a car and create this fleet that those people essentially are the stockholders of that network. You know, it's very hard to do that now in The US. I mean, prior to tokenization, even with tokenization, it's technically much easier. But again, legal considerations also weigh in there.

And then if you extend that ideas like referral bonuses, you know, now when you refer somebody to Uber, you get $25. And if you referred, you know, a 100 people the first year they were in business, you would have had $2,500. But if you'd gotten, like, tokens for Uber back then that were appreciating along with their enterprise value, maybe you would be driving a Tesla or something. So the idea of being able to provide more equity based incentives to your whole network, I think, is a big benefit of tokenization. And similarly, frequent flyer miles, you can hand those out in tokens, which makes them liquid, which makes them tradable, which makes them more valuable.

Then the other, I think, concept with the blockchain and crypto projects is governance. So I think it's interesting if you look at, let's say, a utility a water company. I think there's two models. One is it's kind of municipally owned and the city council sets the rates and people vote in the city council and they kind of determine what's the right rate. So more or less, the water company serving you as a customer.

And the other model model is like United Airlines or let's keep it on the water. Like, you know, there's a private water company and they just set their rates and its market rates and shareholders of that set the rates and they're trying to optimize their profits. It's arguable which is better, but I think if you had something like United Airlines where instead of shareholders voting in management, frequent flyer holders voted in management, my guess is they would optimize around different things. You know? So I think what you have in the crypto space is the opportunity to really set up how you want your governance to work.

And we strongly believe, like, at Test Loop, everything for us, all this technology and data feeds and crypto and everything, it's just in service of a simple thing, which is when you're in the car, the time you spend in the car should be beneficial to you and not draining, but rather enriching. So, you know, now everybody kind of views transportation as, I had to go here in the airport and the four zero five and, you know, nobody's like, oh, I had such a nice drive. You know? Whereas, I think if you have a car and it's got food and drinks and you're matched with great people and there's nice music and all of this stuff, it's promoting, you know, your health and the health of the planet. This now changes that time into value as opposed to taking value out.

So this is just what we're trying to do. Turn the time you spend in the car into good time instead of negative time. My analogy is we're effectively like a rolling Starbucks. What do you get in Starbucks? You get WiFi and charging and food and drinks and a friendly person behind the counter and curated music and nice HVAC and comfortable seating and good atmosphere and bathrooms.

Instead of giving you bathrooms when you need a bathroom, we take you to Starbucks. But, what that means now is that, like, when you leave Starbucks, you're not like, I had to spend two hours in Starbucks. You're like, oh, I I was there. It's nice. I got what I needed.

And we want cars to be like that. So, like, all the crypto stuff I think is in service of that, but it's just around creating efficiencies and creating network effect in a slightly faster, more equitable manner. So you're located in Southern California and when you look at Southern California versus for instance, up north or other places, what do you think from an ecosystem perspective is unique about Southern California and how does that fit into your vision in terms of where you're going with your company? Yeah. So I think the interesting thing about this specific car space, electric cars today are particularly economically efficient when you go long distances because it's the cost per mile that is very low.

The cost of buying the car is more than a gas car, but then the cost per mile because of fuel, because of low depreciation and low maintenance is very low. So the perfect scenario for electric cars is kind of driving them fast, and and to drive fast typically you need to go longer distances. So Southern California is a perfect location for that. Like, if you compare this to San Francisco, there's very few destinations with high traffic near San Francisco that are like one to 200 miles away, which is kind of the sweet spot where you can go there in one charge. You know, you don't have to charge in the middle and, you know, you can do enough miles that you really reap the benefits of the electric drivetrain.

You know, we think markets like Florida, Texas, and SoCal are the ideal biggest markets in the country. I think this is why there's not, like, 10 startups doing this in San Francisco because there's nowhere to go. And also starting a mobility company where you're actually owning owning cars is not for the faint hearted because you have a massive amount of insurance, liability, permitting, regulation, and just safety considerations. So it's pretty complex to do this. And I think what we've really realized is that a lot of this complexity can be eliminated.

Again, with the digitization of everything, it doesn't need to be there. Like, everybody can get what they need in a much more efficient manner from the insurance people to the LAX people to, you know, everybody is trying to manage the cars and kind of has their, you know, fingers in the system can be serviced more efficiently. I have clients and entrepreneurs who are skeptical about what the blockchain will do versus a server for instance. Yeah. And you've been bringing this down.

I mean, by the way, there were people that were thinking they were gonna get videos from Blockbuster forever that didn't see where Netflix was. So there's always a generation of divide where you have people that can use answering machines and that can't use answering machines. Yeah. Or they can use a cell phone and using Go Go Grandma for Uber. There's always gonna be that divide.

You brought up issues which I thought were fascinating about a leasing company being able to, in real time, monitor how many miles you've driven in your car. Makes total sense to me. Not something I'd ever thought about. On the other hand, that data could go to a server. So for instance, I'm a president of an HOA right now and we had some criminals break into our garage so we put video cameras up and all that video feed goes to a server.

Right. And if I wanna go and look at who snuck into the garage Yeah. I can go do that. Absolutely. What is the blockchain gonna do for these companies that a quote Amazon server will not do today?

Yeah. So what the blockchain does is eliminates the need to trust the company in the middle. So if we are sharing the miles on your car, fundamentally, the leasing company needs to say, yes, we believe those miles are true. And the miles you put on your server, which I can have my developer change at any time or write a little script to change them or what have you, he can spoof those. And so if I'm a leasing company and I'm leasing cars in Eastern Turkey where Tesla has super chargers and sells cars.

How do I know that that car is really going those miles? So in a centralized server, fundamentally, the leasing company needs to say, yes, we believe those miles are true. It's not that you couldn't protect it but inherently you don't have that protection. If the data is signed from the car and then put on the Blockchain, once it's there you kind of can't re manipulate it. So it creates something that is very hard to change after the fact.

So it just provides a much better paper trail without having to trust somebody in the middle. I mean, I think that's the real benefit of the blockchain in terms of trustlessness. Now there's another benefit which is kind of operating at a very different level of a truly decentralized architecture. And typically in the blockchain, this is completed with an open source code base. So I think there's a thesis that if I have open source code, it is probably more secure because everybody can see it and everybody knows what it is and everybody can evaluate if there are vulnerabilities.

And this is particularly important for the mobility space because cars have been weaponized, and you can do things with them that, you know, we don't want people to do with them. So the idea that you have open source code, I think, is a benefit for security. And then there's kind of an extension of that saying, do we want, like, one vulnerability where if you take down Amazon Web Services somehow that the whole network stops working? Probably not. So I think the block chain gives you a distributed technical architecture that conceptually lets you kind of run it in a dynamically configured set of servers that live everywhere.

And with the autonomous cars, they have an incredible amount of compute power on them that when you're driving is used for driverless capabilities. But the reality of cars is in general in the future, one out of six cars will be charging at any given time because you gotta charge maybe one out of six hours. So a sixth of all your cars have massive supercomputers and an electricity source and are not being used at all. So, you know, you can put that compute power to work, possibly powering your car network, possibly just doing something else random. But the idea of having a distributed network, I think there's an argument that that is much more robust and less vulnerable to attacks because you take one down, but then just other cars or or other computers reassembles.

Now the reality, I think, is that this is in the automotive space. Like like in some spaces, like currency, I think that thesis on Bitcoin is that you want a currency that is protected from state attack. That if the state wants to shut it down, they can't cause it crawls into the corners and the nooks and the crannies and it can keep operating and the fees go up. So people are more incented to break the law and keep the network running. Now with mobility, it's different because you got the roads.

Like the roads kind of are state controlled more or less. So I think the goal of the blockchain on mobility is very different than, like, in Bitcoin or other currencies. Again, I think this is not kind of a, here's the one reason for the blockchain, but there's other reasons which is, like, I think when you look at the blockchain chain ecosystem, you find this attitude and tool set around decentralization, around sovereign identity where you own your data, where you own your identity, and you give rights for others to use that. But if you have something open source and distributed and where you control your data, I think there's a whole kind of philosophy around blockchain that currently in the crypto community a lot of people are adhering to. It's not, I think, inexorably tied with the blockchain, but it's just kind of evolving in concert with it.

So, you know, a lot of that we find really interesting. And and I think the idea that these tools for managing sovereign identity and privacy protections are going to be developed in this ecosystem, which has a crazy amount of money injected into it. So there's like a lot of innovation happening, I think, faster than outside the block changes because there's more dollars chasing a lot more ideas, a lot of which are clearly gonna prove out to not make sense, but some percentage will make sense. So I think when you get a lot of money in any system, you get a lot of dynamics and you do have this fundamentally new technology of being able to trade value really, really efficiently. And that's kind of the core, I think, of the Blockchain.

You can trade value with very little friction. So following along the lines of the influence or impact that technology is having on people and their relationships with their cars, how do you see that changing or evolving? For example, how do you see the scenario of the way people deal with their cars differ from today and the next three to five years? So I think that's really, you know, the biggest thing that's happening. The technology is going to affect how we all relate to our cars.

And right now, I would say it's super complicated. Like, dealing with your car and and all your car needs is just incredibly complex where you, you know, need to buy a car, you need to figure out how to finance it, and then you're getting service somewhere. And if you have an older car, your frequency of service is kind of exponentially increasing, and then you need to make a decision of, okay, where do I cut and sell this? And then I need to sell that old car and, you know, get a new car. And then that's just the car you own, and, of course, you have all your parking issues and what have you.

So it's super complex. And I think the reality is is all that complexity is a symptom of cars being kind of non Internet devices. And once they become Internet devices as embodied by Tesla's today, it's really easy to rationalize all those and give you everything, all your car ownership, your ride share, your rentals on a single platform. So if you have a pool of cars and you know where they are, basically, the way the system works is for any given car, you wanna know what kind of car is it, where is it, how much charge is in the battery, so how far can I go, and when do I need it back to wherever it And if you have those four factors, now you can decide, okay, what can I use this car for? And you wanna continually put that car to work.

So the first thing you're gonna have is instead of cars sitting around, you can have cars that are continually optimized in terms of utilization. And as that scales out, that gets more and more efficient, which means that everything becomes cheaper. And again, it doesn't become, like, 10 or 20% cheaper. It goes from two hours of use a day to four hours to six hours to like, you can probably do about sixteen hours of use a day on a car. So this is, you know, a probably do about sixteen hours of use a day in a car.

So this is, you know, maybe something like an eight x benefit. Like, so this is huge. Now that doesn't mean eight x cheaper because there's some costs associated with reallocating it. Then the second thing is ownership. So now when you buy a a car, you kind of that's your own thing and you manage it.

But what we see is when you buy a car in the next couple years, assuming it's an electric kind of, you know, modern platform car, you're going to enlist it in a fleet platform. And that may mean that you just get data services and tire services and Goodyear comes and pumps your tires up and rotates them. And you never need to think about that, which is a nice benefit, you know, because who wants to think about their tires. And maybe you never want anybody else in your car because you use it for storage or you don't like germs or you have your kids toys in it or whatever. And that's fine, but maybe you're going to New York for two weeks and you wanna pay $50 a day at the airport, or do you wanna let your car work for you in that circumstance, or do you wanna let your car work for you while you're at work?

This idea of owning a car and then being able to use it as you see fit and being able to choose the policies of others using it, we think is gonna really rapidly emerge. And there's a lot of companies like Porsche and I believe Cadillac and Volvo that are talking about car subscription. But to us, that's still old paradigm where it's like, yeah, there's just a car and you can check it in and check it out. It's much more expensive. So you're paying 3,000 a month instead of 1,000 a month, but you can get any Porsche.

There's probably a market for that for people who like Porsches, but what we want is not the 3,000 a month. We wanna take that from 1,000, you know, down to $250 a month where you can check out any car. And if you wanna get driven in any given time, you can get driven. You can get driven in your car on a Saturday night if you want. And while you're at your evening dinner, your car can be running around, put to work, again, paying for the driver that drove you to the car.

So the idea of instead of buying a car, buying access to a fleet on a very flexible model makes a ton of sense. And the reason it can get super flexible is once you have the data from the cars, you know not only how many miles, but how did you charge the battery, you know, did you peel out and go really fast. So you can really start to create models that very accurately, fast? So you can really start to create models that very accurately measure how much are you depreciating this car. And once you have an accurate model of how much you're depreciating a car, it becomes really easy to give it to anybody, you know, a very efficient market.

So now, like, you lease a car for a month and they don't really know how many miles and they don't care if you're peeling out every day and stressing the engine. They just assume, you know, there'll be some curve on that and some cars will come back in worse shape and some cars will come back in better shape. But once you have all this data, data, you can really figure out how much wear and tear are you putting on the car and how much does that devalue it, which then means the difference between owning and renting and leasing, like, kind of disappears because you can have the actual cost of using the car including the actual electricity at a granular level. So, you know, now again when you rent from Avis, you go less than 70 miles an hour, you pay $9.75 for gas. But if you go more, they charge you $10 a gallon or whatever.

Whatever. It's like, you know, it's strange pricing policy and, you know, you don't know what's going on with an electric car. I know exactly how much electricity used. I know how much that cost based on where it was there. So everything is gonna get really efficient, which means the network will become more efficient and the sharing will radically lower the price.

So it's just like Airbnb to some extent where if you have a, you know, vacation house and you're not using it and now you can rent it out when you're not using it, that house becomes much cheaper. And that is fundamentally what's gonna happen to the car. And it's the data from the cars that makes this relatively simple. Today, only Teslas have these APIs. You can't do it with every car.

But once you have that data, it's not rocket science to make the sharing inefficiencies in in order of magnitude better. So I have a question. It's clear that you see cost coming way down and this efficiency coming in. But you also talked about that somebody will instead of buying a car in a traditional manner or leasing in a car traditional manner, you talked about going to a platform. Yeah.

Eventually, in the same way that I on my iPhone can go out to work and I can take Uber or I can take Lyft and there's competition Yeah. So to speak, will most people sign up to a particular platform or will these cars be going around twenty four hours a day and I can just grab one? Yeah. So I think as a consumer, you'll certainly be able to grab a car. That car is going to be running on some platform.

Right. And I think there's a couple ways that can evolve. One is there's two or three or four proprietary platforms like you see with other spaces where you have proprietary systems. And the other is, you know, something more like Android where there's an open source platform that anybody can start using, or maybe the mobile operating system is the best example we have where there's one proprietary platform and one open source platform. And the open source platform, it is open source, but it's fundamentally kind of almost like a proprietary platform because nobody like Amazon and Samsung have tried to fork that, but they end up not really working.

So our view is that you should create an open source platform that enables anybody to do this, that anybody can then run a service on, and how much you wanna charge, and what music do you play, and what food and drink is in the car, and, you know, what's the policy on sharing your identity with your passenger, and do you go out of the way to pick somebody else up when you're doing ride share? These are kind of service level decisions, and different people are gonna have very different needs. One person doesn't wanna be five minutes late and is gonna pay $50 for the speed, and another person doesn't care if it takes two hours if it's cheaper and is happy to have somebody to chat with along the way. So we think the underlying software can be common even as multiple services are running on top of it. And so the analogy I see there is kind of like airlines where imagine if airlines didn't buy their planes and insure their planes and hire their pilots but just pulled from a pool.

They could still run their airlines and choose their pricing and choose their routes and what have you, but all the infrastructure is kind of common and shared. But we think there'll be tons and tons of airlines, and the MGM casino should have its own car line, its own car service from here to Vegas. And what that looks like is gonna be very different from, you know, maybe the Canyon Ranch wellness car service or something that's gonna have face masks and what have you. So we think again at that level of car experience, you're gonna see a ton of innovation, you know, once the plumbing is sorted out. The permitting and the insurance and all the complex stuff that nobody wants to deal with.

Once you have that solved, then you can have innovation on top of that. When you talk about the efficiency aspect, is the premise of your estimation based on Tesla's and other electric cars including hybrid vehicles as opposed to gas cars that will have data feeds and other electrical components? Yeah. So it's a little bit complex in that. With an electric car, you know, we again have 360,000 miles in our first car.

And it kinda feels and looks new. You know, there's no gaskets to wear out or anything. The air conditioning, we had to replace. You know, we think we can take that another 350,000 miles easily, maybe once more. So it doesn't matter how many miles you drive them, which means on an electric car, the cost of your unused time is very, very low.

So once you buy the car, you just wanna use it as much as possible. On a gas car, if you were to give us, you know, your Mercedes s class car and we drive it to Vegas and back every day for a year, it's gonna have 200,000 miles on it. And then you're basically gonna throw it away. So we've now, in a year, pretty much used up your car. So the efficiency of sharing can still be there, but the cost of sharing is very expensive.

Tesla's at a perfect storm where you both have the technical efficiency and you have, like, almost a zero marginal cost of usage. Join us next time when we sit down with Gil Elpis, CEO and founder of Factual, a pioneer in open information platforms and a leading voice in the age of big data.