Caryn Seidman-Becker: Rebuilding CLEAR - [Invest Like the Best, EP.432]

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1:12 Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review along with all of our podcasts at joincolosis.com. Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Some.

1:48 This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc. My guest today is Karen Sidman Becker. Karen is the chairman and CEO of Clear.

2:11 She bought the company personally out of bankruptcy for six million dollars in 2010 and has built it into the identity platform millions used in airports and stadiums today. Her Wall Street background, investing in Apple, Amazon, and Priceline, taught her to recognize when products become platforms. Would shape provision for clear as the definitive security identity platform. Far beyond travel. Karen shared the gritty early days of literally hunting down hardware and airport storage facilities and rebuilding the entire business from scratch.

2:38 She embodies an incredible bias for action. We discussed turning around the business, scaling a platform, and why she believes your face will soon be your key to everything. Please enjoy this incredible conversation with Karen Seidman Becker. So Karen, I think a great place to begin is to just talk a little bit about clear first. We're gonna rewind the clock in a few minutes and go back to the beginning and tell your entire story.

3:02 Everyone knows clear because they've experienced it in the airport or at a stadium or something else. So they know that version of it. I more wanna know The version of clear that people might not appreciate. the business and the product having just experienced it that way.

3:17 Let us in on a little bit of the surprising elements of clear the business and the product that get you excited about it today and in the future. So when we started clear Fifteen years ago. What we said is today it's a travel centric company and tomorrow. It's the de facto secure identity platform and leisure access commerce. We didn't say health care.

3:36 So it kind of Fallsy vision. But one that came from my experience on Wall Street of watching products become platforms. And the concept of identity To make experiences safer and easier physically and digitally.

3:48 Was the foundation of clear. This concept of enrollments used everywhere. As a woman, I'm like always digging through bags for all these plastic cards to prove who I am and what I have access to, and I think that's ridiculous because nobody ever really looks and it's incredibly clunky, it's incredibly expensive and inefficient, not secure, and a bad experience. That is the foundation of clear. We're really at the

4:09 earliest stages. So when you think of The magic or the secret opportunity. It's that over thirty million people today have enrolled. What I love about that is it's privacy protected. It's Data secure.

4:23 We will not sell or share your data. We hir to deliver you amazing experiences. And we're here to deliver our partners enhanced security. reduced fraud, which has become a big problem. So The basic secret to clear is that identity is foundational across so many industries.

4:41 And people don't think of identity as a problem, they think of fraud or compliance or frictionless experience. Whipping out cards or Insider risk now. There's actually a story today in the Wall Street Journal about North Koreans infiltrating workforces, which is a real problem. That's all identity. And bringing it to life both

5:00 with the government and a public private partnership and airports. And in other sectors. Health care. and online where anonymity rules and that creates all sorts of problems. Or to secure workforces, I think is

5:15 The secret and the opportunity at Clear. What did you learn about the product platform? switch or flip that happens in companies from your Wall Street days? I invested in a broad spectrum of companies, started out in risk arbitrage and then went on to асет менеджмент а геч фонд а не твіта

5:32 We started Aryan's Capital, which stood for Art and Science, which is my view of investing. It's highly quantitative and highly qualitative art and science. We had the good fortune, although every day it didn't necessarily feel that way. Of investing in Apple. Amazon and Priceline in two thousand and two. And when you looked at Apple

5:49 They used to have signs in their boardroom that said five down and ninety five to go, and that was their market share. They had candy colored Macs and this iPod with a big Why Dial in the middle that people thought might ultimately crush. Or you thought about Amazon, which was books and books, music and video, then a few more categories.

6:07 Lots of people thought they were gonna go out of business. He was on the cover of Time magazine. I think it was Amazon Bust or something of that nature. And then price line was opaque travel. and almost went bankrupt after nine eleven. And those were all products that you watched become platforms.

6:23 price line turned into bookings and a global OTA offering you a lot more than opaque travel. And Apple and Amazon speak for themselves. And I Saw unconventional leaders. As sort of the old GE leadership.

6:37 Well Unconventional лідерs Delight consumers innovate, do really smart acquisitions and capital allocation. And create these Platforms of which they could build multiple verticals on top of. And so when I looked at Clear, which was bankrupt.

6:53 I saw the same thing. I saw this. identity platform Travel was where it died and where we brought it back. And I thought where security, identity, and customer experience absolutely collided. But that you could use it in so many other places and connect you to all the things that make you you. Identity is completely contextual. I'm always Karen. But when I check in at the doctor's office, I'm Karen with United Health with an ex copay with a medical record that by the way I should own.

7:18 And have access to and be able to share anywhere I want. I go into a building I'm Karen, I'm an employee, and I have access to the tenth floor. Or I'm Karen and I'm a visitor and I'm going to the forty eighth floor today from noon to three. But I'm always caring, but I'm having to do all these things. My favorite is when they take your picture, they give you a sticker. This is useless. So this concept of a secure identity platform was definitively modeled off what I experienced as an investor. the old Bill Gates line definition of platform was this idea that

7:47 More economic value was created on top of the platform then was captured by it. And at that point is when You became a real proper platform or something like this. It's evolved a lot where there's third party platforms in the sense that it enables outside businesses to build. And then there's more first party use of the

8:04 Install base. fundamental identity layer in your case. that you've created through a product that lets you create all sorts of other things. How do you think about that difference opening up? identity as an API to outside developers versus owning the experience.

8:20 Yourself. Here's how I look at it. I like analogies and I would look at American Express as a vertically integrated financial service company. They have the customer, they have the Merchants they have the bank.

8:32 Certainly American Express I think is some of the best experiences when you lose your credit card or I had fraud on mine yesterday, you send a new one, the bills go right through because they're vertically integrated. It's a better customer experience. I look at Clear and think we're a vertically integrated identity platform. We have our members on the platform. We have the enrollment, we have the verification.

8:53 We have APIs and SDKs for our partners to connect into them. We have real estate in airports. We have awesome ambassadors at airports. We have hardware, we have software. The opportunity

9:07 to have all those assets and be able to use them in different ways. is really important. And I would argue It's a little bit open in that we are Connecting for our partners and bringing that member to a partner, whether it be Home Depot, whether it be LinkedIn, whether it be a hospital. Айдер фотофорс орден.

9:26 But I like us bringing our different assets. Some of our Partners want hardware. They want someone to check in at the front. We're really working on e gates and automated end to end lanes in real estate in our airports to drive that end to end frictionless more secure experience.

9:42 How could we use our ambassadors and our concierge products? I like having the assets being vertically integrated and being able to disaggregate them. That's how we're looking at clear. It'd be fun to break the story fifteen years now into chapters and talk about each chapter a little bit. Now everyone knows Clear. Obviously you bought it out of bankruptcy. So everyone a lot of people listening will know Clear.

10:04 We welcome them to the platform. We'll welcome them all. The origin stories are super interesting to me and how these things get started. So you were a professional investor. I remember the first time you talked, you said You didn't want necessarily some of your IRR or something to be on your tombstone and have that be the thing you were known for. I didn't want to die and have people say I pick good stocks. So maybe talk about the pure origin of

10:26 why you went searching for a business in the first place, how you found this one, what it's like to buy something out of bankruptcy. first couple days. First of all, I will say in media's race, bankruptcy is a completely surreal experience. And I talked to a few CEOs who I had invested with through the years, Bobby Kodak. Martin Franklin at Jardin. They said bankruptcy is decided on the courthouse steps and it's true. I definitely believe and I tell my kids that life is a journey.

10:50 I started off in risk arbitrage in nineteen ninety-four when I graduated the University of Michigan. I didn't even know what Proforma or EBITDA was, but I figured it out real fast. That was the M and A period of aerospace and defense under Secretary Les Aspen. I really got to know the aerospace and defense industry. Of which biometrics has been in the defense industry for a long time. So that was my first understanding of biometrics. Also in the nineties, we invested in cable wireless and satellite subscription based businesses. Again, we were buying wireless spectrum in the nineties.

11:19 Direct TV was really starting to grow and Echo Star cable companies, Microsoft invested in Comcast with a billion dollars in nineteen ninety seven. That was a really big deal. And they started to do broadband. So I understood the power of subscription based businesses. also did bankruptcy when I was doing risk arbitrage. So Love a turnaround. I like to say happiness is a low bar and there's not a lot lower than bankruptcy.

11:39 And then you get into the two thousands with after the dot com bust and the turnarounds that we saw in products that become platforms and incredible companies. Like Apple and Amazon and Priceline. That were built. I had all that experience which meant I believed.

11:55 I saw the art of the possible. I'd also seen giant failures like Pycho and Enron and WorldCom. So the thing that everyone thought was gonna be great and wasn't. Ultimately. Had Invested in Lorale, which got sold to Lockheed Martin, which turned into L3, which was a management buyout of Lockheed. It stood for Lonza, La Penta, and Lehman. We invested in that. Biometrics were there.

12:16 La Penta left and started L one. And he was rolling up the biometrics industry and we helped fund that. Just a big believer in biometrics on top of everything else. It was used in the early two thousands in Brazil for voting. For Asia for financial services. So the consumerization of biometrics was happening outside the US, whereas I had only seen it in the defense.

12:36 Area in the US I believed in the consumerization of biometrics. That is the whole journey put into clear shuts down on June twenty second, two thousand nine. We went to cash at Arrians Capital in September two thousand eight, a little late, not too late. And then investors said, Great, you're in cash. When are you gonna invest again? We'd never been a cash or either a hundred and twenty percent invested, two hundred percent, eighty percent long, short. We were nothing. I had three little kids. I had a one year old, a three year old, and a five year old.

13:03 And I was like I don't know if I want to do this anymore. I did done it twenty-four-seven for 15 years. I loved it. I thought it was the greatest industry. I met the greatest people as a front row seat to business. My late husband was in private equity. At Apollo and I was like, That looks awesome. Buying companies, controlling cash flows.

13:20 really able to Create and build So I was like Wanna buy something that makes the world a better place. My parents were in the government. I'm originally from DC nine eleven.

13:31 I was twenty nine at the time, really Changed me. I felt responsibility and a moral obligation to help make this country a better place, and that we were lucky to be here and That we are all responsible for it as citizens. When I found clear

13:46 Which L one, the company we had invested in, had been uh Subcontract or two for the first go around. А вас like product that could become a platform that could make our country safer, make consumers lives easier. It was biometrics, which I believed in the consumerization subscription based businesses are incredible. It was the convergence. of my entire professional career, so

14:08 We being Myself, my husband. Some advisors. at the time my co founder Went into a room in a law office.

14:17 And We're bidding against another group of people who were former employees of Clear. And we had money in escrow. You're reading other people's documents, trying to understand what you should do. You have a maximum number. And we bid six million dollars in cash, which I think was a little lower than the existing bid, but it was a hundred percent cash that night.

14:37 Given to them. We one, and you're in this room going back and forth with the documents and strategy and talking. For like ten hours. Couldn't eat, barely drank. And then you leave, and it's almost like bringing home a new baby. I what this company now. Shoot, what do I do with it?

14:53 We had a double in different storage areas and there was a hundred and ninety thousand members who We're like, Where's my data? And I didn't get service and airports who were mad and TSA who was mad. At some level here, ignorance might be bliss.

15:11 Got a great idea. We've got some capital. We felt the business model makes a tremendous amount of sense. We've seen other leaders, we've seen what to do and what not to do. Off we go. We'll call that the prologue before we get to chapter one. I have a couple of questions from everything else you said. The first is a little bit abstract and away from clear specifically, but y you said that you didn't know what Proforma and Ebita were.

15:33 You've over and over again in your life and career immersed yourself in new areas and seem to learn quite quickly. What can you say about That experience and getting better at that over and over again and not being afraid. Of not knowing. the performing EBITDA of the other fields that you explore.

15:51 I'm a voracious reader. I think my team knows I send them articles now from somewhere between three AM to midnight. I am enormously curious. I grew up there was no internet, but I read in my room every night from sports illustrated to books, magazines, newspapers. I love learning. I love the question why. And trying to get to the bottom of it.

16:14 I also think when you went to public school in Maryland and the University of Michigan as a political science major, I don't know that people had Enormous expectations of me. I did of myself, my parents did of me. My grandparents certainly did who were immigrants. So I had no fear of failure'cause there wasn't too far down to go. My uncle who was an investment banker lived in New York City his whole life and I would come here from Maryland and he would take me places and I just thought he was the smartest, most interesting

16:41 Man and I love the movie Working Girl and Let the river run and the coach briefcase and the coffee and the Wall Street Journal. That's what I wanted. So that's what I was gonna do. And I think I have blinders on when I'm focused on something. So whether it be Proforma Ibita or learning the Herfendahl index when you're in risk arbitrage. I believe that everything

17:00 X a few really scientific things are learnable and now with AI I'm not sure what's not learnable. I actually just signed up for an AI design class that I I haven't fully immersed myself in yet, but I just think Лайфориосин, а лифон лена, а

17:16 No fear of Not getting it and no fear of asking questions. I was gonna ask later, but I'll ask it now'cause it's relevant. about how your ancestors show up in your life. You said something which was There was high expectations across multi generations.

17:31 Can you say a bit more about that? My grandfather, who was my idol Hyman Sidman. Came to the US at seventeen years old in nineteen twenty two. There's actually enormous documentation about him coming here. He almost got sent back. Most of his family stayed in eastern Europe and ultimately Died, he had one sibling who went to Israel and one sibling who was here.

17:51 So to come at seventeen years old. Bottom of a boat, the USS Constantinople. To not speak the language, to have no money. To work in a hardware store that he ultimately took over Sidman Hardware, which was across from the Berkeley Center.

18:05 That's hard. Everything else seems a lot easier when you have that perspective. He used to tell me to pull yourself up by your bootstraps. Keep on moving. That's just very empowering when

18:17 You see what he'd been through and lost a lot of family and was optimistic, loved this country. Ad enormous gratitude, positivity, joy, fun. Never angry Uh What had happened to his family

18:32 I believed in the art of the possible. He put his family through college. They were all successful, went on to build families and My dad served in the military, my uncle did to do right by our country. I have gratitude and I have belief in the art of the possible because I Seen it. I think optimism versus pessimism is such an interesting

18:53 Thing. Are you just wired optimistic? I am. One of my favorite sayings that I keep on myself when I saw Shimone Peres speak. Right before he died. And he said optimists and pessimists.

19:04 die the same way, but they live very different lives. And I thought that that was a very powerful statement. If you don't have optimism, if you don't have hope. But he has. Well you needed it going into the clear thing with your six million bucks. But I'm curious about what was going on with clear prior. How did it itself start before your involvement?

19:23 And why did it ultimately fail the first time? Clear started as a response to nine eleven when Congress at the time stood up TSA. It was a republican led Congress. They wanted public private partnerships. If you look at the founding of the Department of Homeland Security, which I think is one of the largest and fastest startups. I might have these numbers slightly wrong, but it's two hundred and fifty thousand total employees of the Department of Homeland Security, which has all these

19:48 Sub areas, whether it be CBP ICE FEMA TSA. Those are a lot of subsidiaries, if you will, under one corporate umbrella. Congress wanted to make sure that there were public private partnerships to drive innovation to expedite the traveller experience.

20:05 They put this program together called the Registered Traveler Program. Gave out a few licenses. for the registered traveller program for people to Try and see what they could come up with in the world of

20:18 public private partnership and innovation. Steve Brill had written a book. Nine twelve. Which was the day after nine eleven. He received one of those licenses and

20:29 Started Clear. And there were a few other companies who started as well. And ultimately he was the most successful. He got into sixteen airports.

20:39 I think he raised about a hundred million dollars of capital and then had Some debt on top of that. And was building this concept of a trusted traveler program, a registered traveler program with biometrics on a smart card. So it's this one to one match.

20:56 It had a hundred and ninety thousand customers. Then two things, maybe three things happened. One being the two thousand eight downturn came. So it started in two thousand three, but didn't launch in Orlando till two thousand five. The highest percentage of first time travelers in America go through the Orlando Airport. Strollers, balloons, the whole thing. It creates a little bit of a customer experience and security challenge. So that was the first place. People are like, Why'd you start in Orlando? I'm like,'Cause they wanted us. He's launched in two thousand five. The economic downturn hit in two thousand eight, which significantly hit business travel. And also he had debt coming due in two thousand and nine, in the middle of a lot of other people being bankrupt and having debt like GM and Chrysler.

21:35 Ultimately the company shut down. They were sort of before their time from a cost on the tech side. Not to mention the economic downturn, not to mention I think it was probably hard to convince some airports that they wanted biometrics. And so it shut down it I know obviously clear is in lots of places beyond airports, but it's the visceral thing that we can all call to our minds and they've probably used.

21:59 If I think about the airport, it's such an interesting physical supply limitation. You mentioned the public private partnerships and then certain number of licenses. I can't imagine what it would be like to launch a clear competitor in an airport. Maybe it's possible, but there's not real estate. There's certain number of lines and whatever. What are the pros and cons of having a business that has such a unique

22:19 physical supply. Bottleneck and barrier to entry, but also barrier to scale. If everyone signs up for it, is there like a diseconomy of scale or now the clear line's longer than the TSA line or something? Such an interesting business dynamic, and I would love you to just riff on it as many angles as you can. Yeah. I didn't know much about airports when we started. Clear in two thousand and ten. You're right. There are these really interesting structures. There's four hundred and change in the US, but at the end of the day in the world of eighty twenty. eighty percent of the traffic goes through The top.

22:50 sixty, eighty airports in the US. There are these houses, and within them are municipal employees, airline employees. federal employees with T S A or if there's custom C B Локол поліці та фір депардс плає роль.

23:07 You don't necessarily have all the constituents going in the same direction because everybody has their own stakeholders and their own priorities. Airports are a really interesting place to do business and they are capacity constrained both on runways and physical real estate. We always viewed clear as a force multiplier, bringing technology in.

23:30 that could help the throughput and enhance the security. Not to mention bringing badged and trained employees into the building to help partner. And we viewed ourselves as Switzerland. with the federal government to help security.

23:45 with the airlines to help get their passengers through happily and safely. With the airports and the municipality. To help Інhanс the experience to help. drive revenues'cause we pay them a percentage of our revenues to create jobs in cities that are great jobs. So we viewed it as like a win win win.

24:02 And that as the Волю Both we would have technology we just launched our NV technology that's five times faster. But over time you could create new opportunities, if you will. So for instance We invested in a company called Landline.

24:19 Which is replacing regional jets with buses and able to go to the back of the airport as opposed to the front door. Because you're right, you can't put millions of people through the front door. And today there's three million people every day going through airports. Our numbers are by twenty thirty you're gonna have four million, another million people a day. And again Most of them are coming through the major buildings.

24:40 You couldn't put them through today. And so the question is What other doors can you put them through? Can you do offsite screening and bring them through on buses? We're trying to launch end to end automated lanes, so you can have greater throughput. Can you privatized the physical screening? Opportunities so that you can have greater throughput because oftentimes it's a staffing issue.

25:01 The equipment is there. But there's not enough people to staff it. And airports are also super interesting because you have these peaks. If you watch an airport, which I never thought I would be doing, but I do. The volume goes from this to this to this.

25:14 You have to staff for піcs. Which is really hard in a staffing business, and so you do need automation, you do need e gates, you do need off site screening, you do need people to come to the back as opposed to Through the front, there's all sorts of opportunities. If you're innovative and creative and partner oriented. To drive secure throughput with a better customer experience at airports.

25:37 And at any time. You get a little stuck and then you need to move and try new things. What is the NV tech? What is it specifically? So the Envy is our new face first technology that we've not off the line but so it is now uh in all of our airports. Going back to chapters, our first six years were smart cards until we went to the cloud. And then we went to the cloud in two thousand sixteen, at the same time we partnered with Delta.

26:00 And that was a really transformational moment for Clear, both in terms of scale and technology, because you didn't need a smart card. You could enroll and use it immediately, but that was fingerprints and eyes. To us, it's clear that face is one of the really important biometric winners. We are face first with our envs. Which makes it Five times faster to verify

26:21 Many people don't have good fingerprints. Little known fact if you're in teacher, if you're working with chalk. Certain ethnicities don't have great fingerprints. Eyes can be a little bit of a chicken dance, even today, face first is we call it NB and enrollment and verification. How do you think about this problem? There's two things that happen with scale. I had the experience recently of using Clear at like an NBA arena. And it was amazing'cause there was this incredibly long line to get in and then I just literally waltzed right in. No line at all.

26:48 And then the converse is So many people have cleared an airport that not often, but there's been times when I've been And had to skip the clear line'cause it was literally longer than the other lines. How do you think about that problem, maybe an airport specifically that you're a victim of your own success? When more people have it, because you don't control

27:05 the whole airport. So you're Subject to some constraints. That you can't change. I think there's a really important point, which is Working with the government can be hard.

27:15 The last four years with the Biden administration was really hard. In fact, they put some policies in place. that really challenged our throughput and the customer experience and we're on the other side of that. When you can innovate to drive throughput.

27:29 When you can leverage technology. А те с під That The private sector is capable of. You can solve bottlenecks with willing partners.

27:39 We did not have that in the Biden administration. We certainly feel like we have that. In the Trump administration. They definitively care about making airports great. They definitively care about throughput and the customer experience and security. And believe in innovation in the private sector and partnering together to do that. And I've been very public about it, that our customer experience degraded in twenty three and part of twenty four, which caused throughput.

28:00 Issues it wasn't because of volume, it was because of policy decisions that were put in place that impeded the customers. I'm curious. What I can say is that they put in some Fіzikal escorting Policy so that a clear employee who verified you had a stand with you, which created all sorts of challenges. All of your team members are standing in line.

28:22 Also they Wanted to recheck. at a extremely high level. Identity documents. And that created all sorts of backups and I think

28:32 That is about building trusting relationships with the public and private sector and being able to communicate There's a lot of great people. At TSA and at DHS. Who do believe in innovation in public private partnerships. But as I like to say, deep banking didn't just happen in crypto.

28:48 And it was a very eye opening experience to be on the other end of that. To not Have Transparent partners. Who wanted to work through things together, but instead

29:00 Just wanted the government to do everything. That was very eye opening. And also, I think made us better. Made us more innovative. And I think has positioned us to work.

29:10 really well with an administration Усі інфраструктура. as a major need here in the US and in order to be competitive, you shouldn't have better travel experiences in Singapore, Dubai, Tokyo and London than you have here in the US when we have the greatest companies. I was in Singapore on Christmas. My kids were like, What are you doing? I was taking pictures of E-gates and banks of E-gates. You go to Dubai, it's the same thing. You absolutely should have end-to-end automation, and there's so much you can do to transform the travel experience. So on a very personal and professional level.

29:39 Watching our customer experience degrade when I knew we could do so much about it. Was horrifying nuts, I'm sure. And not being able to say much about it because they were pretty retaliatory. was also pretty painful. I think we're on the other side of that, and there's so much you can do to drive through put the airport experience should be and can be amazing. People love travel in the US.

29:58 quite frankly around the world. And I actually give huge credit to Airbnb. They transformed the travel industry by creating infinite capacity. And I don't think people have fully wrapped their heads around that. You just be like, Oh, I want to stay at the Marriott and wherever and it's full, so I guess I'll have to wait. There's always a room somewhere for you if you want to go. You see what's happening with air traffic control.

30:18 Our systems are rigid and a little bit analogue, they have to be invested in. We have to partner. Travel is such an important part of the economy and I think it's also an incredible part of families and experiences and growth and learning and curiosity. I know for my family it's been our best memories. And our time together. feel really fortunate.

30:38 We're hell bent. and driving innovation to make travel safer and easier. And also learned a lot from our experiences in twenty three. And early twenty four to make sure that We move forward and not backwards.

30:51 Can we go back to chapter one and no longer have your six million bucks. You now have clear. What was the process like of figuring out what the business could or should be? Development of the business model to market. All the Basic, basic stuff.

31:07 What did you do and what did you learn in that first chapter? I wish I documented more of it. Number one, you had to find where the inventory was. Let's go to the real basics. It was where's the equipment? And we would go to the San Francisco airport. We were like, Hey, where'd you put the clear equipment? And they would take us to a storage facility and it was all the way back there. One airport threw them away. I was like, you threw away the hardware because in it we bought ten million dollars of PPD, but about ten million dollars of hardware. So I was like for six million dollars, we bought a brand.

31:34 That we were too cheap to change. People were like, Why don't you change it? It's really sullied. I was like, I don't know, I think it's pretty good. And We don't have a lot of money. So people know what it is and we're sticking with it. Ultimately we changed the logo and I love the name. We bought a hundred and ninety thousand members biographic and biometric data.

31:51 They had to opt back in. They had to come back to clear and we would give them whatever months they had left. I think in Agrate about seventy five percent of them did come back. And then we bought ten million dollars of hardware. I also say we bought a hard drive of what to do and what not to do. Bankruptcy is really interesting. You get the hard drives of the company. So you were looking at their old documents and learning. But first it was

32:12 Finding the hardware. That was left. We were gonna reuse it. Number two was actually rebuilding the software from the ground up because we didn't buy software. They didn't own their own technology.

32:24 And we wanted to rebuild the software. From the ground up. Number three was We closed in April. And the Orlando Airport wanted clear to come back and you need one person to go first, and they wanted to, so we had to win that.

32:37 So we wrote the RFP for the Orlando Airport. Other people did too. And then they protested our wind. So you had to go down to the Orlando Airport and share with the board and the community why clear would be good and Serve them well. From a marketing perspective, I wrote the email, I signed my name to them. I was in customer service, and we said Clear is coming back.

33:00 It was two hundred and ninety thousand people. We knew who they were. One of the beauties of being an identity Company to actually know your customer. We told them we were gonna do right by them. And make them whole.

33:13 We got some nasty emails back. This one guy said. My grandma had big balls and you have bigger balls than my grandma and I was like, First of all, interesting. Okay. So I called him. You're an owner operator. And I was like, Hey, it's Karen from Clear, I got your email and he kinda shrunk and I was like

33:29 People will write anything in emails'cause it's totally anonymous going back to identity. We told people we were re launching at the end of October, and that they could come back. We then hired Twenty people in Orlando. Ten for each lane.

33:45 I had read setting the table. It's amazing book. Danny Meyer is one of my great heroes and he became an investor in clear and That was awesome. So we hired Union Square hospitality. I think it was called hospitality quotient. to do the training of our team members in Orlando.

34:01 Okay, I read the book. I like that. We wanna be hospitality and service oriented. I think it's missing in the airports. We gotta rebuild the software, we gotta find the equipment, we gotta hire some people. I don't even remember how we hired them. I went down to Orlando, I participated in the training. I got to know all the people at the Orlando Airport. You're making it up as you go along. And then every day you're like fuck, didn't think of that. We have a playbook now that we're in fifty nine airports and more to go, but

34:28 You fake it till you make it. I would just keep talking to people, and I had seen great operators and I would ask them questions. Ed Breen is one of my great heroes. We had invested in general instruments, which then got sold. uh Motorola and then he became the CEO of Tyco to turn it around after Dennis Kazlowski. So I would ask Ed lots of questions and These leaders were so generous with their knowledge and their experience. Every day or just

34:51 hacking at it. And then I was on the floor of the Orlando Airport at four thirty in the morning when we Launched and Піповодс. And then you knew you had something. When we were rolling out the

35:04 Old kios from storage, and people were hugging us. that we were bringing it back. That was the greatest feeling'cause to know that it meant something to people. That they were rooting for your success. Plenty of people rooting against your success, but

35:18 That gets you up every morning to know that you can make a difference in someone's life. Security is job one. And then that someone could have breakfast with their family'cause they had a more planful and less stressful trip at the airport. I happen to be a neurotic flyer, so I'm worried about turbulence and terrorism.

35:34 And I didn't like leaving my kids and so To know you could change that for someone. That's a giant win. I'm curious to hear a little bit about thinking versus action in your business life. You exude this intense bias to action. That's one of our core values.

35:49 I promise I didn't know that or look that up. It's sort of just Comes off you. I'm curious. When

35:55 You've needed to stop that, if at all. And like Retreat and think. I'm very interested in this dichotomy of Brian Armstrong from Coinbase has this great simple phrase, which is that action produces information.

36:07 And so actually you can learn faster through action than through thinking. Say a little bit about action orientation versus Stepping back to think. I have a very busy mind, so at some level I'm always thinking

36:20 Being a girl, the power of blowing your hair gives you twenty minutes to think. I am Always thinking my friends will laugh. I can be a little spacey sometimes if I'm driving the I'm like, oh I didn't know how did we get here? My mind was twenty different places.

36:34 Bias for action can sometimes lead to impulsivity, and I think you need to guard against that. I have consistently surrounded myself with people Including my late husband who was like you gotta stop. Just push pause on that for one second. Slow your roll.

36:49 I respond very well to that. But one of my sayings is that every week is two percent of a year. So when someone's like, Let's meet on that in three weeks, I'm like, we're gonna wait six percent of the year to have that conversation. That's insane. If you believe life is short, and I definitely believe that, I don't wanna waste time. I love data, I love information. Working in the stock market makes you more decisive. You're never gonna have perfect information.

37:13 You gotta put together the mosaic. You have to understand your thesis, you have to see how that is Weighing relative to your thesis. And you need to move out. Maybe you don't need to take an eight percent position, maybe you want to start with a two percent position. Wall Street gives you incredible discipline. You better have done your work before you need to do your work. So when I head into a meeting, I'm like, we should know them better than they know themselves. We should really understand.

37:36 And have war roomed this ten ways from Sunday because It's all about the preparation Kevin Durant, the basketball, all the practice that he does before the game. I do feel that I think a lot, probably too much, and so that actually my bias for action. I'm playing chess in my head all day long. Well what if well what if well what if Things were always coming out of left field.

37:57 I seen a lot of these scenarios in my head before. What if we did that and what if we did that and how would that and then you have the data and you're like, Well that would make that go up by five hundred basis points. That would have a negative implication over time, that could drive my margin to this. I like to move. Bezos talks about the door and if it's a really big decision. Yeah, one or two doors. Yeah. And so I buy into that.

38:18 My middle daughter always tells me it's just not that deep. Can you go back and change that? I think if you raise your price and then you have to lower your price, I don't think that's good. I think sometimes doing things that would make your workforce feel not stable, so you wanna be Thoughtful. But one of our other core values is embrace change. I think the only thing constant is change.

38:37 I'm really good with that. I sometimes forget other people are not as good with it. So it's something I'm trying to be more thoughtful of. I love it. I won't forget the two percent. It's crazy. Let's meet in a month. Really? Ten percent. I'm curious how you originally thought about the trade offs in the business model itself. And maybe just to hear a little bit more about the business model itself of Margins and pricing and product. I'm always fascinated by the things left on the cutting room floor that like maybe you almost did but didn't do and you went this way instead.

39:06 In the early days as you were thinking through How could this be a big sustainable business? And I'm also curious to hear about how you financed all this. You started with six million, but everything else you're doing costs a lot of money too. What were you working through in those early days as you got your arms around what the business model should be?

39:22 We had built a model when we started. We come from finance, we'd build models garbage in, garbage out. But we did think that this could be a good business if you Own your own technology.

39:35 If you own your own labor, which the other company didn't, it had outsourced the labor and the technology, which really impeded the margins. But again, going back to the power of a subscription based business. And Cost per gross ad and L T B to CAC. Those things were in my blood, and I understood them deeply. Understanding what we thought it would take to break even from a subscriber basis, looking at every MSA, understanding Denver and Orlando and San Francisco and New York.

40:00 What was the volume of the airports? What percentage of that volume did you need or what percentage volume of that population seemed realistic. We owned wireless companies. Nextel actually was one of them. What percentage of the city is on next hell and what do you need to break even? I like coming at things bottoms up and top down and

40:19 S We said that the TAM was thirty five to forty million people that traveled five or more times a year. What percentage of those people did you think you would have? Then looking at the cities. all sorts of different ways. So we thought that this could be a good business model. If you

40:34 got to certain penetrations. of certain cities. All that being said, it took longer and it was harder. I did not take a salary for the first five years and Got paid in stock and

40:46 To me that was A privilege. We turned cash flow positive. Six and a half years in, and we had burnt through fifty three million dollars of cash to get there. We were very chip.

40:57 Very efficient. Airports are a really interesting place. Think of it like concentrated shopping malls. I didn't think oh I wanted to start a business in an airport. I thought I wanted to build a secure identity platform, but airports are the great place To start a business because you have millions of people coming through these buildings every day that see your brand.

41:16 A tipping point for us. Was when we allowed our ambassadors to do the selling for us. Social media is a really noisy place to try to get someone's attention and certainly getting noisier. Having an ambassador Who gets a commission so that they can make more money and they're awesome people say

41:32 Sir, would you like to learn about Clear, sir, would you like to be a Clear member or you coming over and saying it sometimes we put out candy bowls, we did different things. Who doesn't want to mint when they're traveling or hand sanitizer in the twenty twenty time frame. It was great ways to get the word out and to educate and to have Team members who could make more money and to have People bring technology to life.

41:53 Innovations about bringing people what they did not know they wanted. And people don't Google biometric security at airports, specifically not at the beginning. Having people explain the technology, explain the privacy. That was crucial. We believed it to be a very efficient and powerful business model. We run the business for members' bookings and free cash flow.

42:13 I have said that for fifteen years. Members, bookings, free cash flow. Members, bookings, free cash flow. Free cash flow is the ultimate measure of a business. As a girl who comes from Wall Street. That's how we ran the business and when we turned positive in two thousand seventeen. So we raised capital in two thousand ten from Myself. the gentleman who started it with me and some outside investors mostly here in New York City. And Bill Miller, who was a strategic partner at Orient's Capital and one of my great mentors and partners.

42:44 He was on our board for the first years and as an early investor in Amazon. He was certainly great to get his wisdom and his advice. And then in two tausent twelve we raised some capital. from those same outside investors, really individuals. Went to Silicon Valley. I came back with zero in two thousand twelve and zero in two thousand fifteen. Which was fine.

43:04 One of the guys said to me. I won't say the name of the fund. He said what makes you think not going to, but I do keep his picture. In my photos. He's no longer there. So it's fine. Let your haters be your motivators. He said to me, What makes you think you can be the CEO of Clear in my mind I was a good question.

43:21 But I leaned over the table and I said, Because I am a complete fucking animal. So that was that meeting. And he still said no? He still said no. Wow. We're creating a new industry in identity. But even before you get to identity, we started here in two thousand ten, pre check started in two thousand eleven. People thought that was gonna kill us.

43:39 Little did they know we could integrate. And now we actually sell pre check. Our view was great, you wanna start other kinds of trusted traveller programs. We're a great enrollment. mechanism this is exactly what we do. For the past year we have been enrolling people in pre check and it's a great partnership and I think there's so much more to go there.

43:56 So then they thought Precheck was gonna kill us. There's always something else. It's like guys dead end. Пило травили, і невішен і арпос, і нет публік-приват Партніші. А when you have willing partners in the public sector. You can do great things together, and if you go through airports, they don't look materially different than the past twenty years. Such a huge opportunity to be frictionless from home to gate. What if you knew you had a reserve parking spot or where the Uber should drop you off and a concierge could meet you and you went through an automated

44:26 end to end lane and then you had your coffee waiting for you on the other side or you knew you could get into a lounge. Shangri La and then you knew that You were on the flight and that it was two hours late and Uber sent the car for you as opposed to everyone doing this when they land. And what if you used it as a mobile key? Those are all the things we're doing. You said great investors, it was the name of your firm is Art and Science. It's qualitative, quantitative together. So many investors are trying to analyze things.

44:52 When ultimately the creation of net new value. can't be analyzed ahead of time other than in very broad strokes. You're betting on the airport or this. You being a complete fucking animal and the airport being a great place to apply that energy. Now having done it from both angles, being the investor and the founder, builder, or CEO.

45:11 How would you invest differently? Then you did. prior to the experience. I think about that. And truth be told, I have not bought a single stock since we ended Ariance because if I can't focus and do it, I'm not doing it. And I own a lot of clear stock and have investments in other places, but I'm focused here. I think I would be such a better investor. So

45:32 Number one. We invested in Amazon, they announced Prime and it went down. The stock went down. Really cool. And then the shipping and what are the losses? Let's start with the total addressable market of if you had Amazon Prime.

45:45 Let's start with the art of the possible. And if those people signed up and if they were stickier and if they did more, so what could that be? What could the incremental margins be? I did analyze org charts. I would spend a lot more time on org charts and people. And systems We are in the midst of changing our billing system to stripe and we are super excited about it. And the opportunity set there is important. I remember every time someone had an SAP transition, like the stock blew up.

46:10 Understanding The culture and the people And the systems And the total addressable market and their penetration, and then all the second derivatives of that. And at any time.

46:22 One metric can be a little wonky. The question is what is your ultimate thesis and is that derailing of it? Nothing is straight up and to the right. Almost nothing. Maybe open AI is right now.

46:34 There is a lot of gyrations along the way. To understand that those gyrations are part of бізнес. We would go visit Kodak and Ultimately under Hudak and Kmart and lots of companies.

46:46 They can go away. I live with that paranoia every day for fifteen years. You can go away, you can become totally irrelevant. What are you doing? What is your product roadmap? What is your innovation roadmap? When will you get there? What will the impact be? I think that's really important.

47:03 For clear, I look at subscribers and RPU and say, Where can we go? Those are things that I think I did at Orion's. But not with as long a term perspective as I think was required. And to really map out the art of the possible and then probability weight.

47:20 the getting there. What can Amazon Prime be? What can the iPhone be in the ecosystem of the apps and then the economy that that's gonna create? Can't just be like, Yeah, they're creating an iPhone and they're gonna set it ten million or ten billion. What can that B.

47:34 And I think to really map that out and then the impact on the margins. Is Game changing and allows a lot more patience. Does that boil down to imagination about Market.

47:46 And belief in Leader. Are those the two Things that You would focus more on as a result of this experience?

47:55 Yes. And again I would focus on free cash flow and optionality, which we did. And I think those two things create That free cash loan optionality. Look at priceline. They bought bookings and active those were transformative acquisitions. But you need the free cash flow or the balance sheet to be able to do those things and you need the management. Who has that

48:15 Foresight. I also think you gotta be decently paranoid. I prefer management teams that are Humble. Nose to the grindstone.

48:23 The answer to this will be a lesson for every business owner. What does optimizing for free cash flow feel like? as a leader. I used to tell our management teams when I was an investor, like you should just lever up and buy back stock. I don't know why you're not more levered. The optimal capital structure is X. When you run the business and you're responsible for all the employees and you're wanting to invest in the business or leave cash on the balance sheet for potential MA or whatever.

48:48 Levering up doesn't necessarily feel like the great thing. Free cash flow and the optionality it creates. Allows you to think more clearly. When Covid hit. That was a transformative time for Clear.

49:01 We took twenty million dollars, which at the time was our marketing budget to zero. on February twenty sixth or twenty fifth. We took our salaries to zero, and we created a leave of absent plan for our ambassadors. So that when it really happened on March twelfth. We were prepared and pivoted to creating health paths and connecting people to their

49:20 test information and ultimately their vaccine information and connecting those data packets. to professional sports leagues like the NHL, so they could have the Stanley Cup, which they've never missed in all of their history. Or to open table and resie for dinner reservations. It allows you to be offensive, not defensive. And that

49:38 It's a Massive mindset shift. I believe in the growth mindset and so to be thinking offensively about what you're gonna build or What you could Bye.

49:48 It's really freeing, I imagine being very levered. Could be constraining specifically in difficult times. going back to British change, you get tariffs, you've got pandemics, you've got Financial markets, it's incredibly freeing. What are the sorts of things that you've done that have most positively impacted your free cash flow or your free cash flow margins?

50:09 I think it's an output of the business, quite frankly. We run the business efficiently. It's a capital efficient business. We are really thoughtful on resources. We continue to get better at that. How do you drive efficiency? How can AI impact member care?

50:25 We have a little sign like AI to impact every work stream every day. For everyone, whether it be legal or finance or HR recruiting. or member care or scheduling. Or coding. It's always looking for efficiencies. And I was a girl who got all A's and a B and my dad would say, Would you get the B in?

50:44 Every day I do think we can do better. So How can we do better? How can we rethink that? How can we drive a better marketing campaign? It's everything everywhere. a subscription based business model with High incremental margins.

50:58 Generate strong free cash flow. And we've invested some of that back into our enterprise identity platform, which is a here and now opportunity. to reduce fraud and prevent insider risk and drive compliance and efficiency and automation on the enterprise side. It's awesome. What does Wall Street least understand about

51:17 Business. Where did you get the least credit for in the price or something like that? I think we peaked at a hundred and fifty five million shares, we're at a hundred and Thirty three in change, so we've bought back a lot of stock. All the stuff that we went public with at thirty one, we bought back at a lower price. So if you want to talk about arbitrage.

51:33 I think there's a lot they don't understand. I don't think they understand the opportunity in the travel business. I think they think it's like a zero sum game. We've long known that biometrics were gonna go mainstream. That's been our view. There's a TSA report from two thousand eighteen on their biometric roadmap. We read it. Understanding that we believe biometrics are going to be everywhere. The question is, what kind of experience are you gonna build around biometrics? Biometrics are a feature, not a product. The product is the experience.

52:00 Biometrics going mainstream. It's like new news to people, not to us. I don't think that they believe necessarily in our enterprise identity. Biznes And that's fine. I appreciate show me when we were on the buy side, we called that evidence based investors. When you show them the evidence, they get excited.

52:17 And so in the meantime we buy back stock, we have a dividend and We just keep building. So In fairness and I laugh a little bit in that I was on the buy side and I think I haven't done

52:27 a great job um telling the story or on the IR side. And I think we can do a better job of Creating consistent metrics.

52:37 That we can be measured on. We have to execute and we have to do a better job of Sharing good metrics that people can measure and value the business on. What is the bare case on biometrics, the extent to which there is one?

52:51 I think there's quite a few, quite frankly. I think privacy and data security are a big one. You see some folks on Capitol Hill negative on the government doing it. I think there's certainly a concern about Big Brother. Estonia is the leading country on biometrics, India with Adhar. Brazil with voting China

53:09 There's biometrics. But I think that that also has another side of it, which is concern about privacy, concern about big brother, concern about data security. So I think that's a big one and Us being so transparent about privacy and data security and our ambassadors sharing The story Us having a privacy policy that is very transparent. You can control your own data, you can purge at any time.

53:33 has been really important. I think that's the biggest one. Frankly, which is also why I like being a private company. Doing it. from some countries and our history would say that it can go awry.

53:44 What is the biggest thing in between us today and a future where My face just does everything for me, where I can pay with my face and I can opt into not taking stuff out of my pockets. And just move through the world and get what I want with my face. I don't think a lot.

54:01 Look at Your iPhone or your Google Phone, Samsung. First touch ID started I think in Fifteen or something of that nature. And then face I D.

54:10 I don't think there's a lot in between that. I think it makes perfect sense. I think you need trusted companies to do it, but I think the level of fraud has gotten so high, whether it be financial fraud. You look at peer to peer. Who are you? Who am I. You look at telehealth. Who are you? Who am I?

54:28 A document is not an identity, an ID is not an identity. You need total identity integrity. You need identity with depth. You need connecting you to all the things that make you you. is This anonymous online world rises, which creates all sorts of problems. I think as the world goes more digital We just did this partnership with DocuSign.

54:48 Of course pushing enter is not a secure thing when you're wiring a million dollars or getting a title. That doesn't make sense. Your face should be it. When it makes that much sense and when it's that feasible, and when you're doing it in other areas, it's a here and now moment. And I think as long as it's opt in, if you want to do it, if you don't.

55:07 Do it the old fashioned way, and that's a choice. It's like my mom cash checks at the grocery store for a really long time. I still don't think she's used an ATM card. We're working on her. So I just think it's a moment. Used appropriately. And in a trusted way, look at crypto. How could you get locked out of your account if you can't remember your 12-dibit hash? These things just don't make sense.

55:26 And then you look at the workforce side of the house and People are coming in the front door with fake credentials or credentials that aren't theirs, real credentials, because they got it from the call center or they did it through other scams. You gotta know who people are and what they should have access to. And you need to make people's experience more frictionless in so many different ways.

55:47 I think the next five years will be transformative. I would love to talk about Where the business can expand to physically next and is. So airports, I talked about the NBA arena experience. That I had more recently.

56:00 What is currently happening and where will that proliferate in the coming couple of years. First of all, I think there's a lot more we can do in travel. going for an end to end experience, what we call home to gate. is the opportunity.

56:14 Whether it be a reserve parking spot or your Uber, whether it be the ambassador in our new concierge program taking you either to our automated lanes. which we're working on or ultimately to the gate. I know when I had three little kids and all the suitcases, all you want is somebody to help you. Putting together that journey is still an opportunity in travel, creating off site screening, privatized screening, lots of opportunities to transform travel. In stadiums and arenas with the world cup coming in a year.

56:41 And with the Olympics coming two years after that. I think that there are some big opportunities to enhance the experience and enhance security in stadiums. We're partnered with the Clippers where you can use your face for age verification to buy a beer. Steve Bomber did build the arena of the future, and I think there's a lot to be learned from that. But Why should you need anything when you go into a stadium? You're A guest and

57:03 You should have a great guest experience. There's long lines to get a hot dog, long lines to get a beer, you pass your driver's license and your credit card down, that's super private. To have it come back. None of that makes sense. And so creating better and safer experiences in sports stadiums.

57:18 Ahead of the World Cup, but certainly around the World Cup. We have this new capability to Read your passport and the e chip. That's both real ID compliant, which is A little bit of a hubbub out there.

57:30 Both for domestic but for international fans as well. We want to be welcoming for All the fans who want to come and create safer and easier experiences. But then after that, I think healthcare is an extraordinary opportunity. Ботфос афопатії. To create safer and easier, more compliant, more efficient experiences.

57:50 At check in, at trying to Recover your account. And get the information. On digital health records. I'd like to say in healthcare that

58:00 It was Professional, it became personal when my husband was diagnosed with cancer. trying to get his health. You had to go to the fourth floor to get a CD ROM at Memorial Sloan Kettering. You then brought the CD ROM back to your office so you could digitize it so that you could send those scans. Та other хоспиталс, ветри і бі Хопкінз і Батимор.

58:19 Or in Israel or Japan or Italy. And it was so incredibly hard. I thought this is crazy. This is His data, this is our data. It was so hard to get on the portal if I lost my password. It's insanity, and once you've seen it, you can't unsee it.

58:36 So I think the opportunity to transform health care. Employees who it takes minutes to log on a system. Казар'ян систем, they have to do it multiple times a day. Those are times that they could be helping their patients. На то менше утакс on health care data.

58:52 There's so many ways to transform The workforce and the patient experience. Medical bankruptcy. Is a big problem because you don't know what you have coverage for. You don't know

59:04 what you're gonna be out of pocket for. It's crazy. My husband passed away twenty months ago. I still get bills. Such a bad experience on so many fronts, and it's twenty months later. I know that our health care system needs. Extraordinary

59:18 Help to create safer and easier experiences. And to connect it all, you think about telehealth, you think about rural areas, you think about are you the doctor? Do you have those certifications? You think about temporary staffing. You just keep going for the opportunity set. Per a secure identit platform. That is not a point solution, but can be used.

59:38 In multiple ways. In that industry. It's an industry that operates on pretty slim margins. Clinical trials. I always said I would love to put

59:48 My husband's data up there, and you find us versus I go find you. It is a maddening experience to go through NIH.gov. Which has thousands of clinical trials to see which ones could apply. to you only to find out that He had a procedure or something then meant it couldn't apply to you.

1:00:06 The opportunity for transformation for better outcomes in more cost efficient way are here and now. Identity is foundational across so many industries. We want to make sure clear we're not boiling the ocean. So there's a few areas we're really focused on right now. But I think over time they continue to expand. How were you able to lead

1:00:25 Through. The experience with your husband and Covid. How did you do it? Sometimes I ask myself the same thing. I have these blinders on and I'm very focused.

1:00:36 On what's in front of me. For Covid. You saw nine eleven. People are like, Well, how could that happen here? You saw the financial downturn of two thousand eight.

1:00:47 You sallange фір. Going back to Embrace Change, you saw the dot com bus. Every few years it's different. This is it. What are you doing about it? I don't get Wrapped up in the how could this be?

1:01:00 It just is. Shit happens in the world that you would not expect on the positive and the negative. I believe that it can, and I believe that you need to be prepared, and I seem to do Best under Pressure and stress, which

1:01:14 I should probably try to flip that. And so I am prepared for crisis. I guess also working in the stock market, crisis is All you know. They're like, Can you believe in the market's down? And I actually sent my son a few weeks ago, he's seventeen.

1:01:29 A list of stocks that for the first time I thought were interesting because I wanted to show him the buy low, sell high. It was down during the tariffs, and everyone's freaking out. I was like, This is the moment. And it happens all the time. They only are happy when the stock market goes up. That's not the rule. Covid, it was just head down and have your priorities, which is

1:01:47 First of all, lead from the front, take your salary to zero. put that money in a fund for the people, I think that sets a tone from the first day. We're gonna make it through and We're here for you. We're also gonna have to make some hard decisions.

1:01:59 Communication key. My husband that was a different kettle of fish. I'm the paranoid one who was always like, Is this lump? Do you think this is cancer? Do you think this is cancer? And he was like, Stop and then It was, but it wasn't me. In the

1:02:11 Heat of the moment. It was Fixing him, there's a three percent chance of survival with pancreatic cancer. So going back to blind optimism, why can't we be one of those three percent? We can be forty nine and a half years old, incredibly healthy. So there's that, there's being there for your children. Which is your job?

1:02:29 Gotta be there for them. This isn't about you, so I think I Like helping other people. Blinders on this is the mission and we're gonna tackle it, and failure's not an option. We didn't win that one. And then it's

1:02:43 Well, how are we gonna make sure that other people with the BRCA genetic mutation Are aware of it. How are we gonna honor Mark's spirit and his life? And how are we gonna make a difference in the world? I send my kids off to school every day with the saying, make the world a better place. I think that that's all of our jobs.

1:03:00 And so Really now fighting for genetic screening and really wanting everyone to be genetically screened. In Finland they screen Umbilical cord blood for seventy five cents when a child is born and tell them they're genetic situation when they're twenty one, that's smart.

1:03:17 We should be doing that here. I'm very mission oriented. I care about people deeply. The clear people and Especially my family.

1:03:26 I feel like You have to be a difference maker and you gotta lead from the front. And you just do. Than talking about it and telling us about it. I'm fascinated to learn more about

1:03:37 genetic screening and You mentioned before we started recording that there's this strange ignorance is bliss tendency that we have around our health. Maybe you can say just one degree more about what you've learned about that and how we might change it. I'm incredibly curious and I was not curious about the Braca mutation. I didn't know much about it, besides I had heard about it from Angelina Jolie a while ago.

1:03:59 My husband's brother was diagnosed with pancreatic cancer. In April of twenty twenty one, and it was the first time we found out that he was BRAC a positive. So my husband was screened and I remember he peeked his head into the study in June of twenty twenty one and said, I'm Brock a positive. And I was like, Okay. We're gonna deal with this. So we went and we had him

1:04:18 Scan for skin cancer. And we had a CAT scan to make sure that His organs to baseline it because he was forty nine and a half, his brother was eight years older. It all came back good in July twenty twenty one. Turns out they missed it. And he was diagnosed in January twenty twenty two with stage four pancreatic cancer.

1:04:37 That had metastasized to his liver. what we learned about the Braca mutation at that point was that We're Ashkenazi Jews, that two and a half percent of Ashkenazi Jews are Braca positive. That is one out of forty people. That was a shocking statistic. To me.

1:04:51 We had no idea. And to know that if you're genetically screened early, you can monitor it, you can be on top of it. There's all sorts of things you can do. It significantly raises a woman's chance of ovarian cancer and breast cancer. Skin cancer. pancreatic cancer and for men prostate cancer.

1:05:09 Mark's dad had prostate cancer seventeen years ago. Maybe more than that. But nobody bothered to test him for braca. Our family is on a real mission with our warrior mench foundation in honor of my husband and his legacy. to get the word out on genetic screening.

1:05:25 We bought two thousand kits for our synagogue, thinking if we just give them to you, you'll go home. All you have to do is spit. Send it in. Easy. And so we bought two thousand thirteen hundred were picked up. For the high holidays, and the rabbi who is a dear friend of my husband's

1:05:39 My husband was chairman of our synagogue. Spoke about it. Flyers on everybody's seat. I mean, what else are you doing on the high holidays? You could read it. I mean you can also pray. Three hundred and twenty or so have been turned in.

1:05:51 Only twenty five percent of the tests that were taken. Have been turned in. Of those three hundred and twenty and change, seven of them are positive. Which means that two and a half percent is actually there.

1:06:02 And of those seven that were turned in Then somebody had their sister tested and she was positive. Somebody had their kids tested and they were positive because you have a fifty percent chance of passing on. The Braca mutation if you have it. Right now I think the count is ten or eleven people. Who will be proactive in their health screening and can

1:06:21 Hopefully avoid. Cancer or get it really early. Which is the name of the game. But for the thousand people who didn't turn it in. We made a video, including my son. I thought well if they see an incredible kid without a dad.

1:06:34 They'll be motivated. A rabbi has spoken about it, but to think that a thousand people took it Two hundred and fifty thousand dollars of capital that went into it. And that they don't want to know after that two and a half percent, that means that twenty five people

1:06:47 have it and haven't done anything about it. That's devastating. So really figuring out ways that people can save their Children save themselves. early intervention, genetic screening is so important, not just for cancer, but for other things.

1:07:02 I don't think ignorance is bliss. I think people think it can't happen to them. And I understand that feeling. I used to look at people who lost someone and be like, Oh, that's so sad. They lost someone and now My kids and I laughed that's us. People look at us that way. And we don't wanna be victims, we wanna be change makers.

1:07:18 I have this question I did not expect to ask. What is the most powerful Idea or ritual. derived from your religious tradition and faith. Two things. It is the morning and night prayer that we do with our kids.

1:07:32 Mark led the way on that. the best way to sort of ground ourselves in the morning. And to Help go to bed in the evening. The other thing is Shabbat dinner.

1:07:42 Bringing people together on Fridays for Shabbat. When I grew up it wasn't that much fun. It was like the four of us at a table. But we have lots of people and lots of fun and flowing wine and we do high lows and act of kindness. So everyone goes around the table and talks about the best part of their week, the worst part of their week, and something nice that they did. Some people call it happy crappy. That's been a great way to get our kids to talk, to share. our own vulnerabilities with each other. When my husband died.

1:08:09 Our friends all created a sign up. And everyone hosted it Shabbat. And it held my family up. And a really hard time. Incredibly beautiful.

1:08:16 And powerful. Hard to know where to go from there. I know. Back to biometrics. Back to free cash flow. What do you got? Pro forma? Yeah. Maybe the right question is the power of relationships in leadership. One of the things

1:08:38 about you that interests me most is This incredible energy that you bring to the situations that you're in. You've now led this business for a long time. You've led a lot of people. You've led them through really hard times, you've led them through a lot of success.

1:08:54 Maybe the fun way to ask it is what you respect most in other leaders. I'm sure you've also spent time with so many of the great leaders. What do you most respect? When you see leadership in others. I do love energy.

1:09:08 positive Big. Daring. Energy I love leaders.

1:09:14 Who also can take that energy, stay quiet in a room, and empower others to speak. When you went to Amazon or when you went to Apple back then. There were other incredible leaders who Would share their stories. Ron Johnson was running the stores at Apple. When he spoke, he was the man. You felt like God there's so many big brains around the table. The power of a team. I love sports. I used to want to be a sports reporter. I thought Brent Musberger was all that.

1:09:37 My wife did too. That was her original ambition. I work for the Michigan Daily, but I never quite got to football. I was more on the club, soccer, and volleyball. The power of a team, the joy of winning as a team. I marvel when somebody screws up. I actually couldn't watch the end of the next game last night, and they just help each other up. They cheer each other on. I aspire to do that as a leader.

1:09:59 Yeah. Tough. And they're dedicated. They're creative. They're nonconformist, those are the leaders

1:10:07 That I like and I think if you look at Breen and Jeff Boyd. Bob Mylad and Jeff Bezos and Steve Jobs and a bunch of other leaders, they're all very different. I don't think there's a cookie cutter Way. To be a leader.

1:10:20 But I think it's Антентиси а хумілі. And big thinking and discipline and The five A. M. thing and I love it all and I love that each one is different and what makes them

1:10:32 Tech. As you think about the future and having to lead through Maybe the biggest period of technological change that's ever happened, certainly that we've seen. How do you process that challenge?

1:10:44 I know you're wired for this, that you love change and Are gonna be on your front foot. But when you're facing something this seismic with everything that's happening with AI and lots of other technologies too, in medicine and everywhere. How do you think about Making sure that you benefit from it and don't get destroyed by it.

1:11:02 that knowledge that you could be destroyed by it is really important. Because you've watched companies be destroyed by it. We used to say to Kodak, Are you worried about digital? And they were like, Oh no. And it's like Really? And that was a great company. The logos everywhere. And so To know that you could be destroyed by it, I think, is really important. to get real curious on it and continue to learn, trying to learn every day. Also to know that

1:11:26 through these periods of change, there's a lot of noise in the world. There was in the internet. So keeping your feet on the ground. Staying really smart and really curious and really paranoid. Putting it to work quickly on some low hanging fruit where it can help you. Being not afraid to test and learn and shut it down.

1:11:44 And pivot. That is a whole orchestration as well. Басо тандер. That in a world of AI and synthetic identities, true identity is more important than ever. The fact that we have witnessed identities, we've seen people at the airport. We know that you're a real human actually creates a lot of power.

1:12:03 For clear. It's all of that. It's understanding the risks and the opportunities, it's putting it to work, it's testing We have some really interesting meetings today. It's bringing in lots of people to keep learning and staying ahead of it. But also to keep the noise in perspective.

1:12:17 From a health care perspective. I think it is massive. I do think it changes radiology, I do think it changes clinical trials, I do think it changes drug delivery. I do hope it helps cure cancer in the next ten years and makes a big difference in our society. There's a good place for humans.

1:12:34 But all humans should be using AI. I remember when I started On Wall Street they didn't want to use email. We were still getting faxes because they were worried about security. You gotta be thought to it all. I have a couple questions about company building, a retrospective on fifteen years of doing this.

1:12:50 What have you learned about hiring? But I'm not as good at it as I would like. I'll say more about that. I assume historically that Everyone wants to win and that's why of course.

1:13:02 I have three kids and I show up at the field trip and I don't miss a soccer game at a birthday party, but I'm also sending emails at two AM, so of course you can make it all happen. You want to you just want to run and you're curious and It's not just a job, it's a way of life. And I'm often disappointed and I go in with that bias and I don't ask the right questions'cause I go in with this

1:13:22 Positive bias that You wanna live it and you wanna do it and customer says jump and you say how high And I'm not right. And that is consistently disappointing to me, and so I'm working on that.

1:13:35 I do like Ace Greenberg at Bear Stern's. So poor smart Hungry whatever his say was. That's particularly.

1:13:46 I'm attracted to people who have humble beginnings who Have overcome adversity. Who don't fear fail. Who wanna be a team player, who are a straight shooter and non bureaucratic. Clear's the biggest company I've ever worked at. Hiring those people

1:14:03 Great success, but I need to work on my Bias of everyone wants to do it my way. Also, I'm on the Home Depot board, and I have learned so much about growing people internally from Home Depot. Incredible leaders, an incredible company. They grow people internally in the most magnificent way, they take talent development.

1:14:23 Really seriously. And so I've learned a lot from that. We have great success stories of clear people who've been here eight and ten years on a fifteen year old company. started in one place have had five different jobs and are significant leaders at Clear. And so I love those stories, but people are motivated by very different things. And you have to understand their motivation and their incentives.

1:14:44 than where they fit in the organization. You don't want everyone Like me. Conceptually. Do you have a theory as to why? More people aren't wired in this way.

1:14:54 I don't know how to describe it. This is not a drill type. attitude towards life. Were you always like this? Was there like a moment or a precipitating

1:15:03 Thing. I know no other way. My kids don't get it. Happily they're all sort of wired, like me and Mark. Life is for the living.

1:15:11 This is a great country. I have a lot of gratitude. I didn't start with much of anything. My first job, my salary was twenty four thousand dollars a year. My sister was FedExing me cash because I didn't have enough to pay my bills. So I don't know any other way. I used to watch the last lecture by Randy Pash and We talked about Tigger and Eeyore.

1:15:32 And one of my anniversaries, my husband bought me a tigger stuffed animal. Energy, positivity, V Tigger. Who wants to be around the wall? Life is full of challenges, life is full of disappointments. I've experienced more than my fair share. And I have gratitude and optimism and

1:15:49 I also think when you see the other side, this is it. So live your best life and make a difference for others and pay it forward. Be a change maker. I don't know any other way and I don't understand others who don't. Nothing gets me more energized than someone who cares and loves the thing they're building so deeply.

1:16:07 James Dyson just was making the rounds on the internet for an eight minute keynote. He's seventy or eighty years old or something about his hair guy? The hair dryer vacuum guy. And the guy loves his products. More than a kid loves candy. There's something beautiful about the marketing advantage that comes. Just from the passion that oozes off these people creating these things. And I get that from you.

1:16:29 That's part of the answer. It's just care deeply and love the thing that you're building. What else have you learned about marketing. Since you're running a consumer subscription business, you have to reach a lot of people. What are the good and bad lessons that you've learned about what to do and not to do in marketing? I would say the same thing for genetic testing, that your biggest competitor is inertia.

1:16:47 Getting people to do anything. Again, the test was free. All you have to do is spit. Not hard. Save your life, save your kids' life. Really freaking hard.

1:16:57 Inertia It's really a tough thing to overcome. So trying to incent people to move and to do things. Takes a little bit of time. You gotta cut through the noise. I do think having humans bring it to life, like we did.

1:17:13 With our ambassadors. Word of mouth is powerful. But also, it's a fragile world we live in. So a fund manager used to say it's the staircase up and the elevator down. We've experienced that. somebody tweets something negative, it's one person's opinion in a moment in time. Goes viral and that's the story.

1:17:32 It's fragile. I could do a better job. of sharing our story and telling our story and humanizing our story, I certainly Think we have opportunities on that.

1:17:42 It is hard. And it is fragile. I also think you live in a consumer world of what have you done for me lately. I used to say with Nike. They changed the game. Like there used to be one sneaker every I don't know year and then they started

1:17:55 speeding up innovation and it was like what's the new sneaker? Consumers want to be surprised and delighted. All the time. What have you done for me lately? And so living in that world, you have to be launching features and products. You have to have an accelerated product roadmap. You have to talk about it. Uber and Airbnb have done a really good job of having two launch

1:18:13 points a year to talk about their products and innovation. We just sort of put it out there. Somebody was saying the other day The heavenly Bad the I think the Weston did.

1:18:22 They did some event in Times Square and it was a big deal. They said we have better beds than some of our hotels, but we didn't tell anybody. You f got to capture people's attention and you've got to surprise and delight them and you also have to apologize when you do wrong and make it right. What have you learned about making high product velocity possible in a business.

1:18:42 That's a great question, and something quite frankly we're in the midst of. We have a new chief product and experience officer who actually joined us. She was head of trust and safety at Airbnb. We are roll in on our product roadmap right now because we've changed the foundation of our technology and have the capability to launch more products in a more flexible and expedited way. We were stymied over the past few years on doing what we wanted to do. But we've also changed our internal foundation in order to do it more quickly.

1:19:09 What did Bill Miller teach you? To not be afraid to be contrarian to look to the future. his vision on companies like Amazon. Врели інкреди, сохсі, футр. how that was gonna play out in the financials. Again, going back to the qualitative and the quantitative little story, which is

1:19:27 Bill Bought The name Orient. From me for a dollar. After we closed it, he loved it and he bought it. He named his boat it.

1:19:35 So sometimes I think people see this beautiful yacht sailing around the Mediterranean and think it's mine'cause it's Orient. Which is fine. To not be afraid to buy low to stay with your conviction and Dollar cost average down. Bill's a philosophy major.

1:19:48 As is my daughter. She's a history and philosophy major. He brings a lot of history and philosophy. To investing. And I think it's both incredibly interesting and very relevant. Anything you've learned about

1:19:59 investors that's interesting to you. Being uh company rather than a colleague. Sometimes I'm surprised at The lack of big picture questions.

1:20:09 We're right here. the long term's made up of a bunch of near terms, but I feel like you would wanna understand the long term to understand how the near term fits into it. There's a lack of questions on free cash flow and how we spend the free cash flow. I don't even know that One looks at the cash on the balance sheet.

1:20:27 People tell me that I wouldn't understand how people invest today because there's all these pods and quants and that wasn't there when I left fifteen years ago. So I was a value oriented investor, which means different businesses have different return and growth characteristics and should be valued accordingly. That's how I looked at it. So I thought Apple when we bought it for fourteen dollars with I think nine dollars share of cash on the balance sheet. It's a value stock. And the street thought they could earn sixty cents and I thought they could earn a dollar. And then from there, here's where we go. Apparently that doesn't happen as much. But I still think that

1:20:55 long term value oriented investing. is the thing that yields the greatest fruit. I had the Pleasure of sitting with Charlie Munger two years ago in his backyard. Mesmerizing

1:21:06 I believe that that is how you create long term value. What most stood out from that day. What did he say that most of the time. Probably the fact that he still lives in that house and he was just in his backyard. His grandchild was in the house. the stories that he would tell, the crispness of his mind His humor and his humility.

1:21:27 For someone with that kind of storied success. He signed his almanac. I think it was his humility and his curiosity. Like, tell me about your company. Tell me about what you think biometrics can do. What can the margins be? What's the total market? Could it go global? He was just grounded in Basics.

1:21:45 And he was funny. I felt lucky. I guess I wanna ask the same question. Two more questions for you. The first is

1:21:52 Tell us about your company. Where could this go? If you really put your Dreamer hat on. What happens in the next ten years.

1:22:01 For and because of Clear. I think the world is safer and more frictionless for consumers and for enterprises. We should have triple digit members on the platform using it.

1:22:12 contextual identity. Is really powerful. An identity with depth, what we call total identity integrity is unlocking all sorts of experiences. And that you could actually leave your home with nothing.

1:22:26 Not even a phone. And be able to really transact in the world. That makes companies more compliant, it makes cost more efficient. It drives automation, it reduces stress, it delights people.

1:22:40 And everyone is more productive. I think so much of what we have in this world is'cause we don't trust each other. I think identity is about building trust physically and digitally. Both in the US and outside the US for clear. What part of the next ten years for you personally gets you the most excited?

1:22:58 You're gonna be leading from the front. Which aspect? is the most energizing. I would say two. Making Clear's vision a reality with awesome.

1:23:08 Team members. We're spending a lot of time on Enterprise leadership and one team, one dream and That is very energizing, working with really smart, dedicated, motivated, high integrity creative people who all come together with different skill sets. I think that's awesome. And then I get excited on

1:23:26 The art of the possible with travel,'cause I think travel's gonna continue to boom and we are really gonna start to unlock innovation to transform it. And on enterprise identity. I think the way you apply for a job and Then onboard for a job and then reset your password and get onto your computer and transact. Is gonna be transformed, and I think that that is a really important.

1:23:48 need in a world where Cyber security challenges have risen significantly. So I get excited about the people that I'm doing it with. And the fact that then I can be open to doing other things. I don't have to be sending the emails and talking to the guy about his grandmother. I can do more.

1:24:05 What is happening in the world in the next couple of years that most opens us up to Innovation that entrepreneurs of And make us better as a country. I think the world cup is a real forcing function for our country, and it's only one year away. It was in Doha last time.

1:24:22 Middle East, I think the opportunity to bring it to the cities in the US, major cities in the US, LA, New York, Atlanta, Miami. Is huge. that creates a real need in travel. It creates a real need in sports stadiums and ticketing. To make experiences safer and easier, I think we want to be a showcase for the world on what we can do, how we can entertain. How we can drive security.

1:24:43 For the world cup. Then two years later it's the Olympics. In LA. Which just had these incredible fires, and so how we drive mobility and security. And hospitality in LA for the Olympics I do not think is any easy feat. I think it will require real leadership and innovation.

1:25:01 And I think those are forcing functions. You need forcing functions to galvanize people say, We gotta make it by this date. Not to mention the two hundred and fiftieth birthday of the United States, which comes at the same time. I think that we have not moved fast enough on innovation in this country. We need reasons and pushes to move faster. To drive private sector innovation and private sector capital, I think it aligns with the needs right now.

1:25:23 And I think that those will really create opportunities for great companies. I think you're right. We're lucky to have people like you driving this innovation. I think that V C investor was right. Or you were right in what you told him, I should say.

1:25:36 And I find it to be a total force of nature. And this is a total blast and a privilege. When I do this I ask everyone the same traditional closing question. What is the kindest thing that anyone's ever done for you? Try the letters that my husband left me with. Beautiful.

1:25:51 Thank you so much for your time. Thank you. If you enjoyed this episode, visit joincolossis.com where you'll find every episode of this podcast complete with hand edited transcripts. You can also subscribe to Colossus Review, our quarterly print, digital, and private audio publication featuring in-depth profiles of the founders, investors, and companies that we admire most. Learn more at joincolossus dot com slash subscribe.

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