Episode 541: Jon McNeill: Why “Less” and “Simple” are the Smartest Growth Strategies

Hi guys, it's Tony Robbins, you're listening to Habits and Hustle. Crush it. Guys, this guy's name is John McNeil. He wrote a new book called The Algorithm, and this guy's resume will blow your mind, okay? You were the president of SpaceX. Tesla. Tesla. Yeah. Tesla. Yeah. But you were also at SpaceX. I was at SpaceX every Friday because that's where our design center is, down in Hawthorne. Oh, so you didn't work? No. So it says here, even on the title of the book, I'm going to read your bio. Normally, I don't. Normally, I read the bio afterwards, and then I input it. But let's just do this together. All right. Okay. Let's see here. The CEO and co-founder of, well, your new company is called DVX Ventures, former president of Tesla, and COO of Lyft, and current board member of GM, Lululemon, CrossFit, and Stash, and a company called Asurion. Asurion. But also, that's just the little bit of it. You were also a consultant at Bain. You exited your own six companies. You had six companies that you already exited. This is just like icing on the cake. Being Elon Musk's number two was just like, oh yeah, and by the way, that's also what I do. Your resume, and I will give it better service, it will be in the intro better, is insanely impressive. I feel like the Forrest Gump of business. I've been able to cobble this together. It's been pretty fun. Really, though? I mean, okay, so let's start with the beginning. Because if you're at Bain, were you at McKinsey also? No, just Bain. Okay, just Bain. They're not picking dummies. So you obviously had a great pedigree even to get chosen to be at Bain. So what was your academic background? I had to bank my way into Bain because I went to a Big Ten school. You went to Northwestern. Yeah. They hadn't hired non-Ivy League kids before. And so I literally had to beg my way into Bain. Really? Okay. Myself and two other guys, we were the first non-Ivy's hired at Bain. Well, that even says something already. Like if you had to beg your way or they took only two non-Ivy leagues, what would make you special enough if they picked you? I think it was that I worked my way through college, and I went to school in Chicago, and I worked at the Board of Trade. Okay. And I was doing these crazy trading algorithms. I was coding in college. Okay. And I think that story got me in because they were like, ooh, this kid's been moving like $10 or $20 million around per trade. He must not be a dummy. Right. Definitely not a dummy. Yeah. And so then you're at Bain. Yeah. And then what I also found super interesting about your story was that usually people who are working at the consultancy, like as consultants, they're not entrepreneurs themselves, right? But they saw something in you that they thought, hey, you should be an entrepreneur. You should get the hell out of here, basically. I don't know what was in the water at being at that point, but they were hiring a bunch of entrepreneurs, and they were kind of entrepreneurs themselves. So they started this venture capital firm because they were so entrepreneurial. And you know the name of one of the people that founded the venture capital firm, Mitt Romney, founded this thing. So out of the 72 kids I was hired with, 45 became CEOs of their own companies. So more than half were entrepreneurs. Really? Any that I would know? You would know SurveyMonkey? so this guy Dave Goldberg was a founder you would know StubHub Chris Sakalakis was CEO of StubHub so all across the valley you find people that we all started together and we were all entrepreneurial so it wasn't hard for them to say hey kid I think you're an entrepreneur and we want to back you and that's what happened to me what did you show them though what trait that they thought when we met with entrepreneurs rather than getting excited about the spreadsheets I was excited to go back to the office with the entrepreneurs and work on the problem with them. And so they saw that enough where they were like, hey, I think you're an entrepreneur and we've got this venture fund. We'd love to back you. So then what happened? So then I looked for like three or four months for an idea in a business plan that made sense and they backed it and it turned out the first company worked. So we went from zero to like 40 million sales in 18 months and a public company came out and bought it and they said, do you have idea number two? And I was like, yeah, I kind of do. What was the first idea though? So the first idea was we were writing software. I was writing software. We were writing software for big call centers. Nobody had written call center software before. And so we were writing software to run big call centers, and it just took off. We were right place, right time, and right team. And then you did that five more times? Five more times, yeah. Not all at once, but in a row. In a row. That's what I'm saying. So the first company got – you sold the first company in 18 months, you said? Yeah, after 18 months. and then started a second company. That company grew to about a quarter billion in sales in three years, sold that to a public company, and then just kept doing it because I loved it. So what was the biggest exit that you had of the six companies? Oh, gosh. Probably company number six. They got more valuable over time. Wow. And so company number six is worth somewhere north of a billion dollars today. That's it? I'm joking. Exactly. How much did you sell it for at the time? So I have rolled into that company. And so I've held stock in that company for 10 years. It's the company I started right before I worked at Tesla. So it's interesting because on your resume, you were the COO, you were the president of this, but you were never the CEO. Why is that? I'd been a CEO six times. Right. And Elon and I met, and he was looking for somebody to come help him and relieve him so he could get back to his first love, Rockets. Oh, let's start. So how did you even meet Elon in the first place? So a mutual friend of ours, Sheryl Sandberg, introduced this to each other. And so Elon and I— Oh, wait. Right. Hold on. Not to interrupt you. Yeah. Because David Goldberg was her husband, who I was very friendly with. No kidding. When he was at a company called, he started a company called Launch. Right here in Santa Monica. Yes, in Santa Monica. And I was very friendly with him. You were? Yeah. Yes. He was a very nice person. And I know his brother also. Yep. And then he started Survey Monkey. Yeah. That's what I was talking about. So you knew David from Survey Monkey from Bain. Yeah. I didn't know he was at Bain. He was. He was at Bain, and we both got assigned this terrible project, our first project out of college. We get assigned to meatpacking plants in Minnesota, Nebraska, and Iowa. Wasn't he from Minneapolis? He's from Minnesota, and I'm from Nebraska. So I think they looked at where we were from. They're like, nobody's going to take these jobs. We'll just put these guys on it. And so we became lifelong friends because what else are you going to do in a meatpacking company? Yeah. Yeah. That's crazy. So when you said Survey Monkey, didn't it click right away? And then when you said Sheryl Sandberg, you were friends with her, it kind of all made sense. So you met Sheryl, obviously, through David. Yeah, she loved my friend Dave, and I loved her for that. She's just fantastic. And so Dave, as you know, passed. Yeah, horrible. Horrific. Did they ever find out or figure out the whole situation besides the treadmill? I don't know. I don't know. But it was just, it was horrific. And so several months after he passed, then Cheryl introduced Elon and I. Wow. Okay. So you met Elon under what context? Was it like, hey, Elon's looking for a number two or, hey, just meet him to talk about business? It was Elon's looking for a number two. Right. And I sort of went into those conversations and said, I don't know if I'm your guy. I've been like my own boss. I've met a boss in like 20 years. And none of my companies were as big as Tesla was at that time. What year are we talking now? We're talking 2015. Okay. Yeah. And so we start to get to know each other, and he's like super intense. No surprise. Yeah. And so right as we start talking, he's like, I have this problem in my factory. And so he starts to describe the problem. And we start to break down the problem, and two hours go by. And we've kind of worked our way to a solution because I'd seen that kind of problem before. What was the problem? It was a production problem with the Model X. I couldn't get the doors to work, the Falcon Wing doors. And so he called me like two days later and he's like, I went to the factory and did what we like worked on. And it turns out it's helping. And he's like, you want to talk again? So we talked again. He's like, I have the sales problem. Have you seen this before? I'm like, yeah, here's how I think about breaking that down. And so we get on these calls. We just problem solve. And then eventually he's like, why don't you join the company? So how long were you on the phone with him problem solving for how long? We could be on for hours. No, no, no. How long of a duration? A couple of months. Yeah. A couple of months, we were getting to know each other. And I just really wanted to figure out if I could help him and be useful. And it turned out there were ways I could be useful. So I decided to join the best practitioner of my craft on the planet because there weren't really no entrepreneurs. I've created like four or five companies. Each of them are worth multiple tens of billions of dollars. No. I mean, and by the way, at that time, Elon, I mean, he's a genius. He is. But he's like a crazy genius. Yeah. Right. But he didn't display that amount of crazy back then as people would say he has now, right? Yeah. But did he have like elements? Did you see? Oh, yeah. Like he's like, he'll tell you like he's out on the spectrum. And I think all geniuses are kind of out on the spectrum in some ways. And yeah, he's fun and nuts and is the smartest person you'll ever meet. Like literally the smartest person you'll ever meet. By a factor. Yeah. Yeah. Yeah. How were you even able to work? How long were you at Tesla for? Close to four years. Right. Were you working with him side by side? Yeah. At the beginning, we'd travel constantly together because we were trying to do this Vulcan mind meld where I could learn as much from him as I could. And he'd get a sense of me. And so, yeah, we were together a lot. So what would be the dynamic? I mean, you being the COO, him being obviously the CEO and like brain basically the the visionary, I guess, that would probably be a very like you'd have to have a lot of like social social emotional IQ to know how to navigate that relationship. We actually asked Cheryl how she and Mark handled it. And we applied a few principles that they had, which is, number one, they had really good, tight definitions around what each other did. We called those sandboxes. And we said, okay, this is your sandbox. So Elon, it was product and engineering and manufacturing. He's like, these are the three things I love. I'm like, all right, I'll take the rest. And so we would respect each other's sandboxes, which was really good. and we spent at least an hour a week together catching up on those two things. We were in sync. So it was clear what he was doing, pretty clear what I was doing and we made it work. Really? So he didn't micromanage you? No, he was like, I think the thing that people don't realize, one of the things that's really fun about working with him is he's kind of figured out the two or three things that he has to work on that are existential for the company and then he gives his team agency on everything else. So literally we had agency to go run the rest of the business. and that was, for me, super fulfilling and a lot of fun because we were taking the business from $1.8 billion in sales when I started. 30 months later, we were at $20 billion, so we 10x the thing. So it wasn't like there was a little bit to do. There was a lot to do. There was a lot to do. All over the place, yeah. So what was your first piece of business to kind of get that company to $20 billion? The first thing, when he and I were getting to know each other, I was trying to figure out, could I be helpful or useful? And so I went to like, I was traveling a lot for the business that I just started. And I went to eight different Tesla stores and took a test drive. And each store gave them a different email address so they wouldn't like catch on who I was, what I was doing. But this super crazy thing happened. Like I did eight test drives and that's supposed to be like the pinnacle of the sales process. But nobody called me back. Nobody followed up. So I called the head of sales ops and I said, hey, look, taking eight test drives. I've gotten all the way through your sales funnel. Nobody's calling me back. What's going on? Am I flagged in the system? He's like, no, you're not flagged in the system. I said, let me ask you a question. How many cars do you have to sell this quarter to meet your targets for Wall Street? He said, 12,000. It was a month and a half into the quarter. I said, how many you sold? He's like, 3,000. I'm like, you're not going to make your number. You're not going to make your quarter. He's like, no. I said, tell me how many, go look in the system. Tell me how many people have done a test drive like me and haven't been called back. He's like, give me an hour. He calls back in an hour. He's like, would you believe it? Like 9,000. I'm like, are you kidding me? Wow. You could make your quarter. All you have to do is follow up with these people. Why aren't you following up? He's like, I don't know. I said, okay, do this. Shut off all new leads to salespeople until they follow up with all their test drives. And once they've followed up with all their test drives, you can give them new leads. And he said, I can do that. I said, great, do it. Calls me back the next day. He's like, you wouldn't believe it. Like we're selling cars. I'm like, yeah, no kidding. You're following up with people. And then it dawned on me. I didn't work for Elon yet. I hadn't joined the company. So I called Elon and I said, look, I'm super sorry. I haven't had a boss in a long time. And I was acting like a CEO. And here's like, here's the context. Here's what I did. And he's got he's got this famous long silence that I didn't know about then. And the call just go silent. I'm like, oh my God, what have I done? And he comes on after like a minute and he's like, you know what? I think you're going to fit in here just fine. So that was the first thing. And that's how we got, it was dead simple, which I found most of the business is dead simple. If you just follow your own, like go to your front lines and figure out what's going on, you usually see what's broken in your business pretty quickly. Well, what's a couple of things I want to say? Number one is I want to know how many cars they ended up selling when they actually followed up. They made their quarter. So did they surpass it? They exceeded it by just a little bit, but it was kind of a miracle because they were halfway through the quarter and less than a quarter of the way to their goal. So how did these people not even know to like, to me, that's like a no brainer, right? Like you're going to go in for a test drive. Like how are they going to make any, like as a salesperson, That's how you make your money is in commissions and percentages and all these things. What kind of salespeople were you guys even hiring that they didn't even know that? Non-salespeople. We were hiring people who were passionate about the environment. And therefore, they were passionate about explaining the car. But they weren't salespeople. They weren't trained to ask for the order. And they weren't paid a commission. So they had none of the mechanics lined up for success. But what we started to do was say we didn't pay commissions, but we started to pay bonuses to the stores based on how many cars that they sold that month. And so we were able to get a team effort going, which was non-commission based and a little bit softer. But we were able to get the incentives lined up with what we wanted to have happen. And so you went into these eight stores without a job. So what was the position with him? You were just like you're just in the midst of like talking about potentially working. I was in the midst of like figuring out, could I could I be an effective number two to him? so you just were like kind of like going around so this is on your own yeah oh like kind of on your own accord hey i'm gonna go to eight stores and just do all this okay so then when you called him of course he's gonna hire you because you went above and beyond you probably sold thousands of cars for free and like you showed your value like which by the way should be like business 101 like everybody should be doing everybody should show value right right if you can like the door swing open for you. A hundred percent. And like you stand out, right? In a competitive environment. Like it wasn't like you were applying to like work at like McDonald's as like the nighttime supervisor. Right. You know, you're like applying to be like Elon's number two. I would imagine there would be stiff competition. Was he like interviewing and talking to a lot of people? He had talked to a bunch of people. I don't know how many people he was talking to a bunch of people for sure. So if you were to, when you asked him or did you ever ask him like why he made the decision? I never asked him that. I never asked him that. Yeah. You never asked him that question. I never asked him that. But we did talk about it because I kept saying to him, like, I'm not your guy. Like, I think you need a big company car guy because you're becoming a big car company. Yeah. And he said, that's exactly what I don't need. I need the opposite of that. I need a fellow entrepreneur. I said, why do you need an entrepreneur? He's like, because you understand how to handle enormous risk. Like, you understand what it's like to not be able to make payroll potentially and what that feels like. And he's like, you know how to allocate capital. And I need somebody that knows how to do those two things. I'm not going to find somebody in a big company who knows how to do that. And so I think that's what he saw was just somebody who was wired like him as an entrepreneur. So can you just tell everybody, what's the role usually of a COO versus the CEO? CEO sets the vision, hires the team, raises the capital. That's kind of the three jobs of the CEO. Set the vision, hire the team, raise the capital. And then the COO or the president has, it sort of makes trains run on time. You achieve the vision along with the team. So if he's typical, that's what the reason why I was asking you is because in my experience is the CEO or the person who was like the founder, like would be the one raising the capital. The COO typically doesn't have that position. No. But yet he wanted you to have that position to like be able to raise capital, you said. Well, to be able to allocate capital. So once the capital is raised, now what do you do with it? Now you do with it, yeah. And where does it get the best return? Because you can put a dollar over here, a dollar over here, a dollar over here. Where is it going to get the best return? Yeah. And that's typically what a president is pretty good at trying to figure out. Okay, now I can make the trains run on time and I can actually allocate capital to create a money machine. When I was going through this book and reading the book, what I really love is how you create these frameworks of how to actually build a thriving and successful business, how to scale, how to do all these things. And there's a lot of great little actionable things that people should really listen to that can really make a difference between a company being good to great. Not to talk about a different book. Jim Collins' book, which is a great book. Exactly. It is a good book. And the first thing you talk about is basically to question all the different requirements, right? Can we talk about that? What do you mean when you say question the requirements? So literally, you start to question the requirements. So to give you an example, we started to say, could we sell cars online? This is 2015. Nobody's bought a $100,000 thing online. And we said, if we could, our cost of sale goes way down. And we were competing against big, big car companies who spend $2,000 to $5,000 per car that they sell. We didn't have that money. So we had to figure out, okay, how did we do this? We can't put a store everywhere. And so we said, how would we sell cars online? Well, you've got to remove friction. Today it takes us 64 clicks to sell a car. Could we get that down to 10? Well, the big source of the clicks is all the loan documents that people have to go through. It's like dozens and dozens of pages. So we started to question the requirements. Like, are all of these paragraphs legally required? Yeah. Are they regulatorily required? And the answer was, actually, no, they're not. They were designed by lawyers over time to protect the banks that they work for. So then we said, okay, what are you really agreeing to in an auto loan? Right. Super simply, you're saying, this is the price, this is the interest rate, this is the payment, and this is the amount of time I'm going to make that payment. And we said, we can put those four things in four sentences in one paragraph. We could have a one-click loan. And nobody had ever done this before. But we just thought, let's first question the requirements, figure out all this stuff is fluff. It's not necessary. So how could we get a one-click loan? We went and talked to dozens of banks. They told us we were nuts and basically threw us out. And then we finally got to this bank in Minneapolis, U.S. Bank, and they said, we'll do it. And all of a sudden, we had taken a 64-click process to buy a car down to 10. And now you can buy a car at Tesla in about the same number of clicks you could buy pizza at Tomino's. It's amazing. That is incredible. That also is another principle that I read in the book, which is simplicity over complexity. Totally. Right? Totally. People make the most simple things much more difficult than it ever has to be in every area of life. Right. Right? Right. And so is that part of how you kind of grew all the businesses, all six of the exits that you had, Tesla, and also Lyft? And is that basically the whole – like whose principle is that? Is that your principal? Was that Elon's? No, it's a guy. I learned this in my second company. I was super lucky to have a board member. Okay. Who's a mentor to me to this day. His name's Fred Massoni. Okay. Fred was the first person taught by the Japanese, their production system, which is all based on simplicity. And Fred told me, like, the best leaders are the greatest simplifiers. And, like, we've all heard the line, like Mark Twain's line, like, I would have written you a shorter letter if I would have taken the time. Yes. Simplifying super hard really hard And so he taught me how to be a simplifier And then when I learned the power of that it a complete hack as a leader And to your point it a life skill too because if you can simplify different aspects of your life, it just gets a whole lot easier to execute than complexity. And also like the time that you save, the efficiency that you save, the stress, the amount of stress that you save, all the things. Give me a few examples of how that would play out in growing a company or in your own life, basically? So in growing a company, I think product is at the core of every company. And if you have amazing product, people will beat a path to your door. They'll rave about it. You might spend on marketing, et cetera. And you think about some really successful companies. So take Apple, take Tesla. They don't have like 100 varieties of their product. They've got like three. And the reason is it's really, really much simpler to get a supply chain producing those three, to get factories producing those, to market them, to sell them, to distribute them, et cetera. And so simplicity like really, really, really pays in product businesses. Totally. If you have the discipline around it. And so like Tesla has one car, the Model Y, that sells 1.4 million units a year, and it's the best-selling car in the world. They don't have 10 or 15 different models. How many does it sell? 1.4 million units. Still? Still. Now, even with all the craziness of Elan, it's still selling that many? Yeah. It's still the number one single-selling car in the world. Wow. Why do you think that is? Because rather than producing like 10 different SUVs, we figured out the one that would work for the biggest chunk of the market. So we simplified. And then we simplified the production and the parts and the manufacturing process, all that sort of stuff. It's so true. Like, you know, I always notice that the companies, I always say start with one SKU, be your hero product. Yeah. And then like, let that be really successful before you branch out and have a million SKUs. Exactly. Right? Yeah. Because then like, you're always going to be like, you're basically competing and cannibalizing your own business. Your own business. Yeah. And we see this like in the athletic market. All the time. The athnesia market where you've got gazillion SKUs coming out of places like Nike and Adidas, et cetera. Yeah. And then they go to compete against On, and On's got like 10 SKUs. And On's got a simpler business to run, and it's faster to grow, and it takes less capital, etc. So yeah, I'm a huge believer in simplicity. And that's kind of the second step of the algorithm was once you sort of question all the requirements, then you've got to super simplify the process to deliver against those requirements. So if you learn this from your mentor, did you implement this at Tesla? Or did Tesla already have this vision? I think Tesla had this in the culture because Elon, he talks about this. He's a physicist at his core. Physics is all about simplifying the complex down to the utterly simple. And it's called first principles. And so there are first principles in physics. And so he kind of already had this mentality of simplify, simplify, simplify. and I plugged into that because I did too. That was completely natural to me. Right. So part of probably why you got along with each other. Yeah, and I think of why I fit in that culture. Right. Yeah. If you're not taking glutathione, you're missing out on one of the most critical foundations for your health. Your body is dealing with toxins every single day. pollution, chemicals, plastics, processed food, alcohol, stress, bad sleep. It's not a question if you're exposed. It's how much. That's where glutathione comes in. 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I really love that team. It was one of the best teams I've ever worked on. We were doing the best work of our lives together. We're still in touch with each other. I still text back and forth years later with the core team that I was on. Really? And two of my partners in my venture firm now were members of that team. By the way, speaking of your venture firm, then we're going to go back. How big is your venture firm and what are you doing at the end? We do this really unique thing. We invent companies from scratch. So rather than funding entrepreneurs, we actually fund our own ideas. And we get those companies growing and then we bring a team in to run them. So it's a new model in venture. It's a reverse engineering. It is. You start with a market and you say, I want to attack this market with this product. We're going to build the product, get our first sales. And then we're going to find a world-class team to come in and run it. So it's a venture model that I had thought a lot about as an entrepreneur and decided to implement. And there's a handful of us doing this in the world, but not many. It's a pretty unique form of venture. That's amazing. Name a company that you're working on now that you've done. So we've got a cyber company called Cork. We've got the number one AI infrastructure ETF trading on the market. That's called VistaShares. We've got a supply chain company called Atomic, payment company called Zumi. We've got a portfolio of 17 companies that we started over the last five years or had a hand in starting. How big is this fund? Now it's going to be close to a couple hundred million dollars. Interesting. Wow, okay, so I just wanted to ask you because I was curious. It sounds like a lot of your background is kind of manufacturing, software. Software, for sure. Software, obviously. It's kind of like in that wheelhouse. Because all the companies you had before, cars, I guess, now. Before you did Tesla, did you have a car company? I had a couple that were in the auto company. A couple of car companies? A couple of software companies in the automotive space. I think it came from my granddad owned an auto repair shop, and that was my first job. And I think it just got in my blood somehow. I love cars. So I've had some touch with the car business my whole career. Do you drive a Tesla now? I have a Tesla because I want to always – I sit on the board of General Motors. I primarily drive their cars. But I have a Tesla because I always want to be driving the best of the competition. And Tesla is the best competitor to GM right now. What kind of GM car are you driving? I'm driving a two. I've got a Cadillac Escalade IQ, which is this beautiful SUV that goes 500 miles. And then I've got a Chevy Silverado EV pickup that also goes close to 500 miles. Wow. I think the pickup might be my favorite right now. Really? Yeah. Wait, where do you live? You live in Nebraska? I live in Colorado. Oh, Colorado. Okay. So, okay. So, let's go back to the Tesla thing. So, basically, you guys were getting along on the fact that you guys have the same type of like mindset or framework ideas about simplicity over complexity. And then you also had something that I heard you talk about, which I thought was fantastic. And I like wrote that down, which was how you kind of weed out the bloats of a company and the people who are underperforming. Yeah. It reminded me a lot of like Animal Farm or you know what I mean? Because you make the people make the decision on their own in a very kind of, kind of like not sneaky, but slick way. Can you? Simple way. Like, yeah. We try to simplify this crazy, crazy thing that happens in companies every year that nobody really likes. It's called performance review season. Right. And so like as a boss, you got to sit down, you got to write a bunch of performance reviews. And there's a bunch of recency bias because you don't remember what that person did all year. You remember what they kind of did in the last few months. So it's not even fair. and everybody kind of hates it. The employees hate it. The bosses hate it. Everybody hates it. So we debated like, how could we like make this actually useful and not a chore for everybody? And what we evolved to was just asking people like, who have, first question, who have you worked with this year? Write it out. And then just put a check mark next to the people that you would want on your team. And that was it. Didn't ask them why. So that was it. So super simple. I write all the people I've worked with. I put a check mark next to the people that I would want on my team. And that creates a list of people that are really useful because you see their name mentioned again and again and again. Those are the people that are up for promotion. You see a bunch of people that are not ever mentioned by anybody. Like they clearly are dead weight on teams because nobody wants them on the team. Those are the people that you can then kind of clean out and reload the talent system. And so it was a really simple way to just identify talent and reward that talent. and then also identify kind of the bottom 10 or 15 percent that probably needed to move on. That's great. And then how would you get rid of them? We would just tell them, hey, like, this doesn't look like it's the place for you. So thanks. But this isn't going to be a place for your future. And did you do that every single year? Did that constantly. How often? Sometimes a couple times a year. Wow. So you're constantly just weeding out like dead weight. The underperformers. Yeah. Yeah. Dead weight. These are super smart people. Like to get an engineering job at Tesla, they get like probably 40 or 50,000 applications for every job now. And so these are super smart people. But for whatever reason, they just didn't work on the teams. But by the way, that's not only at Tesla. You can do that with any place. You can do that with any place. Exactly. You can do it with people like my team. You know what I mean? Like with eight people. You know what I mean? Like it doesn't matter. Right. I just think that when you put the onus on someone else to tell you. Yeah. Because they're telling you based on their own experiences, you can't be everywhere. You don't know everything, right? But the best way to know is to ask the people on the front lines. And you talk about that. Yeah. You know, like the fact that if you really want to know what's going on in a company and what's really bad in a company, you go to the people who are in the front lines who are like doing the work. Exactly. You know. Exactly. It's the best hack ever. I learned this from Sam Walton because I read his book Made in America. and it's basically a book about how he travels from store to store. And the first thing he does when he visits one of his stores, he goes in the back and he talks to the warehouse guy because the warehouse guy knows everything about the store, knows what product is moving, what product isn't moving, knows who's like, who really works up front, who doesn't work. And he got all the information he needed about the store. And then he'd go talk to the store manager and say, hey, look, I know exactly what's going on in your store. I'd be like, how? And then they finally figured out, oh, he's talking to the frontline people who actually know. So I just borrowed that. And I said, like, this is the best hack in the world. Like, I go to the front line. They're dealing face-to-face with customers. So they know what the customers love. They know what the customers hate because they're getting the first brunt of that. Yeah. And you just ask them, like, what do we need to fix about our product? And they're like, oh, this, this, and this. He fixes these three things. I don't have any more complaints. It's like, okay, I can make that happen. And I would have this standard question when I went out to the front lines, which is, okay, you have my job. You have all the keys to the company. What's one thing you do today? And I wouldn't get 500 answers. I'd get like five to 10, like just do this. And so literally my teams got used to, I would be out on Fridays typically on the front lines and I'd send emails and say, here are the three things we got to work on. And they just got used to it. And then they started to do it because they wanted to be out ahead of me, which is the right motivation. What was the most common trait of all the top performers? A couple of things. One is in that culture, believe it or not, there's this really cool combination of humility and confidence, which kind of sounds weird, but the goals were so high. Like Elon's awesome at setting aspirational goals. So the goals are so high and you had a choice. Like when you put a goal in front of you, it was like, you're crazy. No. Or most often this humble confidence would come out where you would say, I have no idea how to do that. They came to me and he said, we need to double this company every eight months and there's no marketing budget. You can't spend a dollar in marketing. And my first reaction was, that's insane. But then I kind of zipped my lip and I said, you know what? I don't know how to do that. But then the confidence comes in a bit like we're going to figure it out, like challenge accepted. And that was core to that culture. And so when you saw people who were really effective there, they had this kind of combination of, I don't know how to do that, but I'm game for the challenge. Let's go figure it out. and then they would work like crazy to figure it out. And what I learned was when you set super ambitious goals for people, then they will work to achieve those challenges. And if you never asked, then they never work to achieve them. Absolutely. Because people never know how much they're actually capable of. That's what I kept saying about, yeah, like I kept saying, man, I didn't know I had this inside of me. And he was pulling stuff out of me that I didn't know I had. And I saw it in the people around me and the teams that work for me too, that people were given what they were able to accomplish much more than they thought they could. Right. Yeah. Because you're constantly challenging them to push themselves. Yeah, exactly. Because sometimes people don't see, they don't know unless they know, unless they do it. Unless they've been challenged. Right. And then the more they do it, they have more confidence in doing a harder thing and more and more and more. Yeah, exactly. How are you able to manage Elon's expectations? I don't think you can manage his expectations. We just had to really work hard to deliver against those expectations because the expectations are reasonable. Like I used to be a founder too. So I had been on the other side of this and it was really setting high goals for people and holding them accountable to achieve them. And so I felt like now that I'm on the other side in the receiving end, I had to be doing the same thing. Right. So I was going to say like, because, you know, if you're going to ask other people to like do exceptionally hard work, you have to, you have, it comes, it basically, it falls from the top first, right? That's right. I heard that he sleeps in the office for days on end. Is that true? He does. We would have problems in the factory and we would be sleeping on the factory for weeks trying to figure out how to solve the problem. So it wasn't like he was dumping the problem in our laps and taking off. He was in the trenches with us. And that then brings a lot of conviction that we ought to be doing it. 100%. Did you do that too? Oh, 100%. Yeah. You slept in the office? Yeah. Oh, yeah. Didn't go home for how long? Days? A couple weeks. Well, I mean, I would go home. Yeah. But it might be two or three nights in a row and go home. And then you go home for you stay at the office for a couple of nights, two or three nights, and then you go home after a few nights. Yeah. And then what, like just come home and come back to the office and then again for a few nights. Basically, because the company was like in survival mode. And so if we didn't solve these problems, we're going bankrupt. and so like it was it was dire straits and i don't know if that happens now as much but in that era like we were almost bankrupt a lot and the press was talking about it i totally remember and they weren't wrong that we were really fragile wow so then like how do you like if you don't mind me asking you could tell me to shut up but then how do you get compensated as a coo for something like that where you're like literally like sleeping on the floor of the plants date for days on end for weeks on end? Because you're not there anymore, right? I know you have stock, probably, but you must have felt like you were a part... There must have been a feeling, even, of being on a team and not letting... I mean, at the end of the day, how are people being compensating for that? Are you nice to this? I think the way the compensation comes... As a leader, the compensation comes from looking around at the team and the people that are involved. So there are literally 7,000 people working in that factory per shift. And if we didn't get this right, they'd be out at work. And that was my motivation. My motivation was I'm working beside these people. I'm looking in their eyes. And that was motivation and compensation enough for me. Like we're not going out of business. You're going to be able to buy groceries, fund your kids education, buy a house, et cetera, if we get this right. And that's compensation enough for me. Because you were there for four years. That's not a lifetime. It's a long time, but it's not a lifetime. No, exactly. And then you moved on to Lyft. Yeah. So were you still working at Tesla when Lyft poached you, or how did that whole thing happen? So I had, like Elon and I had this conversation, and I told him I was going to leave and give him months of time to do a transition. And during that, somehow the investors in Lyft found out about that, and so they reached out to me and said, hey, look, we want to talk to you about taking Lyft public, which normally I just wouldn't return the call. But I'd never taken one of my companies public before. I'd sold all six of mine to public companies. Got it. Okay. And it was something that I really wanted to, like, it's a box I wanted to check. I wanted to have that experience of taking a company public. But wait, hold on. Why were you talking to Elon about leaving? I had, like, Walter Isaacson talks about this in his book a bit, Where in this chapter at Tesla, there was a chapter where Elon was really, really struggling with mental health issues. And my job went from helping to run Tesla to really helping him with mental health issues, for which I am not equipped. I just am not trained. I don't have the skills. And it was burying me because I just was trying to help, but I didn't have the skill set to help. Help in what way, though? Just help get him through a really tough time. Like it's a friend. Yeah, almost as a friend rather than a business colleague, just as a friend. And so Walter has this scene in his book where I'm laying on the floor underneath the conference room table beside Elon trying to help get him on an earnings call. And at that point, I just realized, man, this is not what I'm equipped to do. And so Elon and I had that conversation. I said, I love you and I love this business, but I'm not equipped to do this. And it's burying me. I'm going to go do something else. And that was really the core of that conversation. Wow. So are you guys friends anymore? We're friendly, I would say, and we're in touch every once in a while now. And I'm glad he's in a much healthier place now. He is? Yeah, he is. Wow. Yeah. Okay, so basically you wanted to leave the place. I did. Yeah. I did. Did you have a family? I did, yeah. And so what did they think of your – you probably were working, it sounds to me, like 20 – I was working like a madman. 24 hours a day? They were relieved. Yeah. Yeah. Yeah. And so that, okay, so you wanted to leave. So then people kind of heard about it a little bit. Yeah, somehow like it leaked out. And I don't know how it leaked out, but it somehow leaked out. And so then what? Okay, so now walk me through what happened. So then I agreed to join Lyft. No, no, no. No. So you said, how did that happen? So I got a call from Ben Horowitz at Andreessen Horowitz. He's an investor, early investor in Lyft. He said, I want to talk to you. Isn't he also an investor in Tesla? I don't think. No, the venture firm wasn't investors in Tesla, but it's a pretty small world. And he said, hey, I want to talk to you because Tesla never made really a quarter until you got there. And then they've made a lot of quarters in a row. And so we sat down and he said, hey, look, I need your help getting Lyft public. And I said, you don't know this, but you're pressing a button that you probably didn't know you're pressing, but I haven't taken one of my companies public. I'd love to have that experience. So I joined Lyft as COO. They have two founders. uh so i came in a coo and uh we doubled the revenue doubled the market share and got the public and then that was also around the time that uber was being beaten up right with the was it the sexual like yeah i arrived at just the right time because the delete uber movement was like well underway right and so it made it like much easier than it would have been to double share and double sales because we uh we had this opening where a competitor was really stumbling badly and we were able to come in and scoop up a bunch of market share as a result. What's really, why is Lyft, I mean, I don't know if you know this now, maybe you do, but by the way, isn't Lyft and Uber now merged? No, they're still competing. They're still competing? Yeah. Still competing, two separate public companies. Because I going to tell you I always use Lyft Love it Why Okay I going to tell you why Number one it always a little bit cheaper Yep And like just a little bit Yeah And because it the underdog a little bit Yeah, exactly. And I just, I find it to be people a little bit more friendly sometimes. A little more, it's more of like the quirky, like quirky young sister. Exactly. And that's the brand position. We wanted it to be like against the Darth Vader, we were going to be the quirky young sister. Really? Yeah, totally. And position the brand that way so it's more friendly, more quirky, more fun, and just a little bit less expensive. And so if that was enough. Just a little bit. Exactly. That was enough to tip the scales our way. But wait, but now Uber is like dominating though again. Yes. So at the time, so how long were you at Lyft for? Just about two years, just a little under two years. Okay. And then what happened? So you said they IPO, I was going to say YPO. They IPO'd. They IPO'd and I stayed. There's what's called a lockup after an IPO where all the insiders, including investors, can't sell for like six months. So I stayed for the lockup. And then once the lockup expired, I wanted to go start my own firm because I'd been dying to do this for like five years. So that's when I left to go do my own thing. Tell me how you were able to then catapult Lyft's business, just how you did with Tesla. So this is another like simplification. So I sat down with my team, all who had been there for a long time. Okay. And I said, like, there's a really simple question I have for you, which is where do we make our money? It can't be in like $5 rides that are two minutes long. And there's a really, really smart, savvy guy on my team. His name's David Baga. And David said, we make our money in two places. 80% of the cash flow comes from airport rides and rides to the doctor. And so we tested that. It was like, if that's where the profit, this is called a profit pool. If that's where the profit pool is, we got to go hard after that. And it became apparent at this time that Uber didn't have that insight. So we went hard after airport rides, which are corporate, and hard after healthcare rides, which really, really matter to people. Like there are people that really suffer from chronic disease, like kidney disease, that have to go get dialysis like several times a week. And they have to have a ride to and from because once you get dialysis, you can't like drive a car. So it turns out their health insurance pays for those rides. And so we were able to cut deals with health insurers, with health care providers and with businesses to give those two rides. And that helped us double revenue. And it was just that simplification, that simple insight asking, like, where do we make our money? That's really smart. Well, it looks at it in retrospect. What I was dumbfounded by was nobody had asked that question before. I'm like, so there were a lot of people. Nobody asked that question. There were a lot of people that didn't know that in the business, but luckily David Baggett did know that. And he pointed our team in the right direction. So where did you add value? So it was then, well, it was asking that question and then pointing the business at those two things. So that was your idea, though, to do that? Well, I would say that's the team's idea. That's me asking the question. They come up with the answer, and so now we're all going to implement it together. Well, no, but you ask the question, they're going to be like, shit, I don't know. And then they went down a rabbit hole, hopefully. Well, luckily it wasn't the shit I don't know. It was like, no, here's where we make the money. Okay, if this is where we make the money, then this is where we're going to point all of our resources. Do you know what I find so interesting? You know, my grandmother would always say common sense isn't so common. Right. And what I've noticed is in both scenarios in Tesla with like, why is nobody getting follow-up calls when they're doing their drive? Their test drives. Their test drives. Duh. Duh. That's how you're going to sell a freaking car. And then at Lyft, it's like, where are the most expensive rides? And who is giving the most expensive? Where are those rides? We're not making money off $5 rides. We're making money off of these hospital rides. And the $100 trips to the airport. And the $100 trips to the airport. Focus our attention on the more expensive. Totally. Right? And I always talk about the fact that also that you work just as hard as having a whatever. When you do a partnership that's a million dollars versus 20 bucks, you're still working. The amount of work is usually the same. That's a great example. Exactly. The amount of work is the same. And so why not apply that work to the profit pool? Super simple. Exactly. This is literally things that people just are not focusing on. Right. Give me another one. I think it happens in a lot of businesses. Like at Lululemon, when I asked the question, where do we make our money? Yeah. Lululemon has historically made their money in bottoms, not tops. And so it's the pant wall. That's where they make their money. Yeah. So then you'd ask the question, okay, why do we have all the rest of this extraneous stuff going on then? Totally. Because it's just diluting profitability, to your point. And it's like the $20 deal versus the $1,000 deal. So this happens all over businesses because businesses get complex over time and nobody comes along. It's like a garden that gets weeds and nobody comes along to weed the garden. And I feel like my job is to come weed the garden. Like, let's figure out which of these plants matter and let's water the heck out of them and let's whack the heck out of everything else. You know what, though? This is so true. And I hope anybody who's doing business or interested in business is listening to this. Because if you really think about it, right? Lululemon is a great example. Again, because at the beginning, when Lululemon started, they were dominating, right? because yeah they were known for their like pants because they made girls butts look better or whatever yeah right yeah and like that would be the first thing you see when you go into a lululemon it would be it would be the swords would be a little smaller and the pants would be on the sides and whatever else it'd be like the first focal place that your eyes yeah you go into a lululemon now there's so much like you know as i would say dreck it's a hebrew word it's like there's so much noise and busyness in there with all the bags and the accessories and the bras and 97 different levels of tank tops, like crops and then quarters and this. And then I'm like, where the hell are the pants? And the pants are in the back, back, back. You've got to walk through all this junk and it's like a small wall versus like make more pants. Well, hopefully you'll like walk into Lulu like I've been in two today so far. Yeah, okay. This is part of my spending time on the front lines. I want to be a useful board member, so I go to stores. Yeah. And we've got a new team running North America, and in literally weeks, they have simplified the store, simplified the story, simplified the product lineup so that it's focusing on a few things versus a lot of things. What are they focusing on now? So they're focusing on the three things that Lulu is known for, yoga, train, and run. And so you should walk in and you should see train, run, yoga, and the pants are highlighted. And there's not a bunch of dreck. Yeah, dreck. Thank you. I mean, that's the way I see it, right? Because what were they focusing on for a bunch of years? Well, sometimes you lose your way and you say, I've got to have casual clothes. Well, then you're competing with a lot of people that are not in your core. And you said in the core, it was about workout clothes that made her look beautiful. And that was the mantra. When I started at Lulu, the mantra was, we exist to make her silhouette look beautiful. I didn't say that. You said that. I said the butt looked good. Yeah. Well, we had a little bit more dressed up way of saying it or have. And now they're getting back to that. They're like, we exist to make all shapes and sizes of her body look beautiful. That's what we do. And we do that with a limited set of skews, not a gazillion skews. But the other problem with the lemon is at the beginning, they had much better quality. Their quality has went down over the years. I have people say this to me all the time. The quality is so good at Lulu. I'm wearing stuff that's five years old or six years old. And I've tried Aloe. I've tried Vori. And the stuff wears out. Oh, yeah. Aloe is terrible. That's music to my ears because we really have put a big emphasis on quality, too. See, I don't know. I mean, I find that when Lulu just started, like right when they're just kind of launched. Just starting 20 years ago. Their quality was better. I found it to be better. Well, I think now you give it a run. Really? I know that I agree. The aloe stuff is junk. I mean, it's basically the cheapest. It's almost disposable. It is. I was going to say, it's fast fashion. Exactly. But they're charging massive prices. Yeah. And in fact, they want to be an elevated brand now. They want to be a luxury brand. Right. Which I'm like, they have nice styles, but that stuff does not, it's not great quality. Yeah. Yeah. So how are Lululemon Zembers now? Are they still good? Now we're really in the midst of a real turnaround in North America. They're great in China, great in Europe, but we've really had to renew our focus in North America, and the team's doing that, so it's working so far. What about styles? Are they going to change the styles and kind of be a little bit more fashion-forward? I think... Or you want to stay with the core of what it is? I think the core of what they do is they stay focused on making a few products just absolutely killer. And that can mean it's more beautiful. And over time, they took out some piping and some zippers and things like that that we want to add back in because it adds to the beauty of the product. Well, the other thing that Lululemon, just to kind of not to like, I know you're not like Chip Wilson, but is he still on the board? He's not. Is he still like involved? They kicked him out, right, for all the other. Before I got on the board, yeah. So that was a chapter before I got there. That was a chapter. Wouldn't they kick him out of there again? It was, I think, the comments that he made about, there are certain people that shouldn't be wearing my clothes. I know. I remember that. And they kicked him out. But how was it? Two years ago? That was almost 10 years ago. 10? Yeah. My God. Yeah. I'm in like a black hole of time. Good. Make time go slow. Yeah, right? Yeah. But what I was going to say about the Lululemon is, this is what you guys do all the time. Not you, because I know you're on the board. But you guys take things out that are really popular and then to never be seen again. When things are doing really well, you'll never find them again. So many of the sports bras that I like, gone, completely gone, and they've been replaced by things that are much less adequate. I will take that feedback. I'll go find out for you. No, would you let me know? I haven't been in the bra market, so I've got to go figure it out. Okay, well, I'm going to tell you why, okay? I'm going to tell you this, and then you can do whatever you want with the information. This is good feedback. This is a feedback loop that we're doing right now. You're giving me feedback that I then get to take back to the team. Well, you can, and I want to get a free bra from it. But I'm going to tell you what they have. It's a good consulting fee. I think so. It's very cheap for you. Yes. Very cost effective for Lululemon. They would make a bra that had pockets. It would have two layers. It would be material, and then room, and then the material. So I could put my key. I could put my credit card. I could put my dollar bill. I could put stuff in there. everyone loved this bra everybody loved the bra and it was like really good support yeah gone bra totally gone i'll find out what happened and now they have flimsy bras either they have the bras that like you can't like run in them because they're too like flimsy or they have these like matronly like granny bras that like are like from here to here i'm like i'm not wearing either one where is this other bra and so and they're like and the people i would ask at the stores would be like, yeah, I know. They always do this. It's like they keep on discontinuing the most popular things. I will find out for you what happened. Can you? I can. Perfect. I know who to ask. Okay, good. I know you do. You do know who to ask. Who is the CEO now? So we have co-CEOs while we're doing a full search for a CEO. Oh, okay. So you are doing a full search. When did you guys, who was the last CEO? Calvin McDonald was the last CEO. Until when? Until the end of January. Oh, like just now? Yeah. How long was he there? He was five years and he tripled the business and he did a fantastic job. Then where did he go? He went to a beauty. He came from Sephora. He built up Sephora, came to Lulu. And then now he's at a beauty conglomerate called Wella. Oh, I know Wella, of course. I want to take a quick break to talk about something I genuinely think is a game changer for healthy aging, and that's fatty 15. Here's what you need to know. Scientists discovered the first new essential fatty acid in over 90 years. It's called C15, and it's a big deal. When your cells don't have enough C15, they become fragile and they age faster. And when your cells age, your body ages. Full stop. 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And you can find the link in the show notes. Now let's get back to the episode. So now let's get back to the days of Lyft for a second and Uber, the whole thing. So then here you are, you kind of like basically you made the business go from what to what at Lyft. So I forget what the revenues were, but it was somewhere in the order of going from $5 billion in gross revenue to $10 billion, something like that, order of magnitude. Okay, so then what happens now? What year? This is 2018-ish? 2018-2019. Okay. So how did Uber then, again, catapult them? Like if you did all these good things for Lyft and made it more quirky, it was a little bit less expensive. Yeah. Then why are more people not using it and now everyone only uses Uber? Because Uber, I think, Uber also wasn't resting on their laurels and they have a really good CEO. Now they do. Yeah, and Dara. And a really good president. How long has he been there? He's been there. He got there about 2018-ish. Oh, like around when you were. 2017, 2018. So he's been there eight years. And they didn't rest on their laurels. They saw this opportunity in food. Yeah, Uber Eats. And they said, okay, we've already recruited a driver. Driver's not busy all day long, especially in the middle of the day. and after rush hour, and that sounds like lunch and dinner, so let's get in the food business. And the founders of Lyft were not, and still haven't to this day, they hated the food business. They weren't attracted to it, and so Uber leapfrogged them because they could use their drivers twice rather than once, essentially, or in two businesses rather than one. And that completely changes the economics of the business. And Lyft just refused to do it? Yeah, the mantra was, we don't want our cars smell like Chinese food. well, that's not really how it works. But it's kind of a tragedy because Lyft missed this window. And a lot of us on the team disagreed with the founders, which is why basically the whole management team left. And so Uber took advantage of that too. And so where are they now? Kind of spread all over the place doing amazing stuff. In terms of the leaders, Lyft now is back to half the market share it used to have. Half the market share. What do you think they can do to kind of like, if you had to be back at Lyft, Do they brought you back and said – I don't know now because it would be very hard to enter the food business because it's super crowded now. It's not just Uber Eats, it's DoorDash, Grub, et cetera. Postmates is a million. Yeah, exactly. So you've got a bunch of – so I haven't thought about that, but I think it would be a tough job. Would you take it? No. No. I'm much more excited about what's going on in AI and technology and other places of the business, but not that. What do you think of AI, like ChatGPT, Claw, Gemini? I think, well, in that particular business, like the biggest AI problem, maybe the toughest AI problem is turning a car into a robot. And that's what I think is going to come eat the lunch of Rideshare. Because you see it like even here in L.A., Waymo is like a really superb experience. Oh, yeah. And I think that's the future of Rideshare is it's going to be robotic. So when do you think Waze is going to take over all Rideshare, like Uber and Lyft? I think they are systematically just growing their fleet over time, and they don't have a demand problem because they have more demand than they know what to do with. And so they're a safety-first company, and they're really focused around safety. And right now the technology is good as long as it's not raining or snowing. And so you see them going across this southern belt of the U.S., the Southern Smile. But eventually they'll figure that out, and they'll be in the northern cities too. And so I think they're just being very careful, very systematic and making sure their cars are super safe because they know that as soon as there's a major accident, it's going to be a big blocker in the business. So they're just, I think, being very patient and playing the long game. So do you think other companies are going to come on board pretty soon? I think it's really hard. It's a really hard technical problem to solve. So I don't think there's going to be a lot of companies in this space. They kind of own it today, and there's really nobody that can challenge them because their technology is so much better than everybody else's. How many Waymoths are there even? There's like 3,000 on the road today, so not that many. Not that many. There are 300 million cars in the U.S., so we're talking right now a drop in the bucket. I'm even surprised that there's not more Ubers and Lyfts like other companies that are competitive with them. Right, because that market, when you have to pay a driver, is relatively expensive, and so it's less expensive to drive your own car. So people choose 99 times out of 100, drive their own car. But once you don't have to pay a driver and the car's a robot, then you open up a much bigger market. And so that's what I think we're going to see. How about other places with the AI? Just in terms of Claude, Chat, like I was saying, just basic. Which ones do you like the best? I use Claude the most probably. Me too. For what? What do you use it for? I use it for coding. Really? Yeah. Yeah, so if we have a company idea, you can literally prototype a company using Cloud. You can prototype the product. You can start to test the product. So I use Cloud a lot, and I use Gemini. I use ChatGPT. I kind of use them all because I like to compare them. Yeah. But for tools that we actually use in business building, we're mostly using Cloud. Because it changes so quickly. It does change like every month. It's unbelievable. It's really unbelievable. Yeah. So what do you use Gemini for specifically? What would you use ChatGPT for? Or what would you use? I know for Claude, you said you would use it for prototyping. Yeah. So I use, Gemini has replaced search for me. So I use Gemini for search. Research, like if I want to research an industry, where before I would ask an analyst, hey, let's build a whole picture of this industry. How big is it? Who are the competitors? What's the market share? What are the economics? For that kind of research, I use ChatGPT now. And it does an unbelievable job. And then once we have those answers and want to build a company, then we use Claude. So I kind of have three different use cases for each of those. And they're all incredible tools. So it made us, it takes us half of the people and half the capital to start a company now than it did 18 months ago. It's crazy, right? How are these, like, you know, people are sending me these things all the time with like, you know, this person's not real. That person's not real. This is, how are they creating people? like there's like actual like accounts like who are growing their instagram pages and like social media pages fast they're like beautiful girls or really thoughtful men and they're like talking as like thought like thought leaders i think they're real i'm like okay i'll follow them i'm like and then my friends like oh that was not real that was not real i'm like how are they doing this like what are they using are they using claude are they using chat gpt you're probably using a combo yeah Yeah like there well basically if you go back to the origin of the AI that we have today it really it a prediction model and it predicts what words come next and words can be turned into numbers and that how the math works And so you can get really predictive about words that turn next. And pictures are also numbers. Pictures are made up of these tiny little specks called pixels. And you can understand, the AI can understand which pixels ought to go together based on patterns it's seen. And so it can create images, and it can create text and you can bring those together. And that's like we had bots several years ago that would create fake accounts and create fake followers and all this stuff. Now this is just a souped up version of bots that you're describing because the AI can create the context, it can create the content and it can create the visuals. And so it's wild to see. And I think AI can spot other false AIs. So like I have this little tool that I've created that it senses whether this was AI generated or whether this is real. But it's going to get better over time. It's going to be harder to do. Wow. Yeah. So who's actually controlling it? Like who's creating? Like someone has there has to be a human being who's actually directing the AI. Yeah, for sure. It doesn't create itself. Right. Because AI is only as good as your prompts. That's what I've noticed. Yeah, that's right. And if you're a shitty prompter like I am, I'm getting like very basic information. So who is the experts in the world that are able to create these? There are experts that are doing really productive things and kind of just unproductive things too. But there are marketers that really understand how to use these tools, and they're doing incredible things. And we're lucky to have some of them, Lulu and GM and some of the companies I'm involved with. and they've just made marketing so much more productive because you can get the right answer, the right message in front of the right person with high, high accuracy. And that then leads to product interest and potentially a purchase. And it's amazing. It is amazing. It's a fun time to be alive. It is. It's a really fun time to be alive. I mean, but like, so jobs will be like kind of depleted, but then again. They'll be changed. Like I think humans are really good at seeing the job disruption. Yeah. But we're not good at seeing the jobs that get created on the other side. Largely because it's almost impossible to see that. But so if we were talking about, if we were talking to each other 120 years ago, it wasn't that long ago, six out of eight people worked in agriculture. And then this thing came along called the tractor. And there were a bunch of doomsayers saying, oh my God, like six out of eight people are going to be unemployed. The country's going to implode. Well, it turned out there were a bunch of jobs that got created in that industrial revolution, like car factories and other things that people went and did different jobs. We're not good at seeing that. We're good at the doom and gloom, but we're not good at seeing what's on the other side. Every technical revolution in history has led to an expansion in GDP. So do we believe this is going to be the first one? I don't. I think this is going to lead to expansion of jobs and expansion of wealth. But we just can't see the other side yet. Right. We don't know what we don't know, right? We don't know what we don't know. That's the other issue, right? Yeah. Yep. I mean, so that's what you're really focusing. You're focusing really on your venture fund, basically. creating, you're not even like, it's just you're creating real companies. Solving real problems in the real world. And then actually, what are some other things that you're noticing in the marketplace? I think that's, we want to be solving real problems in the real world that have kind of a physical aspect to them and make that physical process better because we know that's going to be protected in the end from an AI revolution. Wow. So, of course, let me ask you a couple other questions about frameworks from your book. I think that this is a very good book for anybody who is an entrepreneur who is growing a business. Also, what I find interesting, and we can talk about this actually, is that to get a company from zero to, let's say, 100 million is very different than scaling it from 100 to a billion. Exactly. What are some of the things that people get wrong when they're trying to scale a business? I think when you're scaling from zero, it's the hardest chapter of a business. Most difficult. Totally. It's terribly hard. I teach in some business schools, and the students will come up and say, I want to be an entrepreneur. And I'll say, why? It's not the hardest thing ever to take something from zero to get your first million or five million in sales. And so we work a lot on what we call product market fit. And that is, can you get a product that is so attractive that people rave about it? And if they rave about it, then you don't have to spend marketing dollars. And that's a signal that you're onto something. And so we spend a ton of time on the product and polishing it and making it super attractive to our target. And so that says you got to know your target and you got to know what they want and you got to deliver against that. And that tends to take a lot of work. It's another form of simplification that's really, really important to get right. I was with Steve Jobs' chief of staff from way back. and I said, give me an example like how you guys simplified product. And he said, oh, all the work happens up front. I said, what do you mean? He said, that's the hardest thing. You have to get in a room. You got to figure out what you're going to make and why you're going to make it. And it's got to be really simple. So give me an example. He said, okay, get in the Wayback machine. We made the iPod. I said, yeah. He said, Steve and I got in a room. He said, I was in charge of product for the iPod. We got in a room and said, what has to be true about this product? And at the time, all the music players didn't have many songs and they were really janky and clunky. So we emerged and said, we want our music player to have a thousand songs and it only takes four seconds to find a song. That was the total product definition. They came to the engineers and the engineers like, we don't know how to do that. There's no hard drive that will hold a thousand songs and there's no software that can find it in four seconds. We said, exactly. That's what we're going to invent. And we find the same thing in our products. If you're really, really, really simple about the two things that matter or the three things that matter, then you can focus yourself on building that. And your first signal is going to be people rave about it. And if they don't rave about it, then you haven't gotten those two or three things right. You've got to go back to the drawing board. Right. So if people, like, what if you've, like, how about all those times when there's a really great product but really terrible marketing? Yeah. Happens all the time. It does happen all the time. You're absolutely right. Like, I noticed this, like, it's not always the best product that wins. No, it's not. It's the people who have the. It's the best sales force that wins, the best marketing team that wins. And so we realized, okay, these two things have to be true. You have to have a killer product, but you also have a killer go to market. Because that wins. Yeah. And there's a bunch of examples in tech. I won't name names, but I think everybody listening to this can name names of tech products that are not the best, but they won somehow. And usually that's because they had an unbelievable go-to-market. Well, no, give us an example of something because this is what you do for a living. So let's take Microsoft. Yeah. Microsoft did not have the best operating system, did not have the best spreadsheet. Yeah. It used to be something called Lotus 123, did not have the best presentation platform, the best word processor. But the amazing thing that Bill Gates had beside him was a guy named Steve Ballmer who could sell ice to Eskimos. The guy's unbelievable. And he built a sales force of unbelievably talented and capable people. And so Microsoft's a great example of not having the best product but winning market share like crazy. They don't have the best cloud. Amazon does, but Azure's doing just fine. They don't have the best office suite. You could argue Google does, but Microsoft's enterprise sales force crushes Google's enterprise sales force. And so oftentimes, you've got to have kill or go to market to actually win. Absolutely. And so we concentrate on both of those things. So really what I'm gathering is that the most important skill to scale and to grow a business is sales. Is to be able to sell. You've eventually got to be able to sell your product. At the end of the day, you can say anything you want about product being wonderful and this being great and this being wonderful. So at the end, if you don't have a sales team that can sell, you're in big trouble. It's true. It really is both and. It's not either or. You've got to have both great product and a great go-to-market. Or what you just said yourself is you can have a mediocre product and still win. You can win. If your competitors stink at go-to-market, you can win. I know a lot of things that I'm like, wow, I found this nothing product that's so much more dominating. but yet like they have no money to market so nobody knows about it nobody knows about it right yeah and look you can look at all the things on social media tiktok shop crap like stuff from china that costs four and a half cents that like you have a million people just like pushing this shit like all these like moms who are really good sales sales people young girl whatever it is they're selling millions and millions of shots like nothing like tachkas whatever you get it You're like, what the hell is this? But they're selling them because how about the supplement business? Again, it's about having a dominating sales force. It makes up for a lot. You don't have to have anything else. That's why when people say, oh, really work on the product, product, product, really? I believe the product's got to be good because eventually your customer figures it out. No, what I think that happens is people will buy it once and then they'll never buy it again. You just made that point about aloe. No, I made that point about aloe, but aloe is dominating the market. But they're really good at selling. But if you don't have the product, eventually, as you said, people buy it once and then they don't come back. And if they don't come back, you don't have a business. True. So that's why I say you've got to have both. But listen, fashion is a different animal because aloe has not the greatest quality, but their aesthetics are really nice. They've got great style, aesthetics. So it's like you said, fast fashion, like a Fashion Nova or like Zara, because people will keep on buying it because it looks good, and athletic leisure is super popular. It's comfortable, right? So that's why. But in anything else, if the product, that's why you'll keep on buying that. But in anything else, you'll buy it once, and if it's really shitty or not, like a food or supplements is a hard one because you only don't taste the supplement. No, and you can't tell. You can't run a test on your body to figure out if it's really working. No, but you can run a lab test. You can take that stuff to a lab. Before you got here, I was with Ken Wright. We were talking about all the supplement stuff. If you take some of this stuff to the labs, and you'll see whatever they're telling you, oh, it has this and that in it. You'll take it, and it's like zero of the ingredient that they tell you. You know how often that happens? It must happen a lot because it's unregulated. It's unregulated. Yeah. Right? So those are bad examples. But like other than that, like maybe some technology stuff, if it doesn't work, you'll never buy it again. But you'll buy it once. And, you know, but like the product should be good enough. Well, I think like right now we see an AI because like Microsoft has this product called Copilot, which doesn't hold a candle to Claude or to open AI's codex. And so eventually engineers show up and they're like, I'm not using Copilot. I got to use Cursor. I got to use Claude code. and in those cases, the best product wins. Yeah, that's true. Well, Claudia, I mean, that's true. Microsoft, I agree with you. Like, it's clunky. Yeah. You know? Yeah, but really good Salesforce. Really good Salesforce, exactly. Let me share my daily routine game changer with you. It's the Momentus 3. I've been using their protein, their creatine, and omega-3 combo for months now, and the results are undeniable. These nutrients are key for long-term health and performance, but hard to get enough of through diet alone. The Crea Pure Creatine boosts both physical and your mental performance. The grass-fed whey tastes great with no weird aftertaste, and their omega-3 is a must for recovery. 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The first is what we call eat your own dog food, which is use your own product. And I can't tell you how many entrepreneurs and CEOs don't use their own product. And if you don't, then you're foregoing a whole feedback loop. I was with a group of banking CEOs, and I said, raise your hand if you use your app on a regular basis, like weekly, monthly. Almost no hands went up. And I said, I knew that was going to be the answer. You know why? Because I use your apps and they suck. And if you were using them, you couldn't live with that suck for one more day. But you don't use them. And therefore, they're not getting better because you're not in the feedback loop. And so we used to take each of us used to take a car off of the end of the factory line every night to go home and we would drive the car home. We drive it back to the factory and we give engineers notes on the car. And the principle was we have to eat our own dog food. We have to use our own product. And if we are, then we're going to be the first to spot flaws. And as an entrepreneur, as a leader, you can't live with those flaws. Like, why would you want to put your customers through that? So you fix them. It's great feedback loop. So that's thing one. Thing two, and this is kind of the genius of Elon, he concentrates on the one or two things that really, really matter in the company. And he finds those one or two things and he manages them weekly. So let's say I'm on a team that is now the number one issue on Elon's mind at Tesla. I am meeting with him once a week. And two things happen. One is that teams that meet with the CEO don't tend to bring their B game, they bring their A game. And so they're on their a game almost constantly and they show forward progress every week and if you're making progress every week and your your competitor's not doing that you're compounding progress against your competitor that stacks and it gets really hard over time to compete with somebody who's doing that and i think what they'll write about in the future uh about elon's leadership at tesla and spacex and these other companies is this weekly cadence thing that the ceo is driving personally turns out to be a huge advantage builder. And so like 10 years on from SpaceX's first successful launch, they now own 90% of space launches. It gets really, really hard for a competitor to keep up with that or even catch up with that now because they every week are improving the way that that rocket gets built, the way that that rocket gets recovered, and the way that that rocket gets designed. And it's almost impossible to catch people like that. So what would you say the most important quality would be for a leader? I think drive a weekly cadence on the things that really matter in your business and use your own product so that you're making sure it meets your standards as a leader. That's so true because people are not using. I see that a lot, actually. It's unbelievable. It floors me that people don't use their own product. It's why I insist on driving GM cars even as a board member. It's why I was in two Lululemon stores today because I feel like I have to go eat the dog food. But you're not wearing any Lululemon. I'm wearing Lululemon shoes. I got a Lululemon shirt on, another Lululemon shirt on, Lululemon socks. Oh. So I've got, yeah, I want to eat the dog food. How are those Lululemon shoes? These are unbelievable. These are like the most comfortable running shoes I've ever had. What? Yeah. Yeah. And this is a newer product for us, but it's fantastic. You just finished telling me like the core pieces of clothing. Yeah. should be the pants. Yeah. Why would they come up with shoes? Because our three core activities that we... Running. Is run, yoga, and trained. So shoes. So these shoes, our customer actually looks at us for innovation in shoes. And what we found out was when we started to... This is a great example of the algorithm in action. When we said, how are we going to design a shoe that anybody's going to care about? There's a lot of shoes on the market. We said, for women's shoes, how are they designed? So we started to question the requirements. And what we found out was all women's shoes are designed around a men's foot. Men's feet have determined the shape of women's running shoes. And so we went out and scanned tens of thousands of women's feet and created the first shoes. Like this base of the shoe is called a last. It's the first last that's created for a woman's foot. And then we launched that product. It's the first women's shoe design around women's feet. It's amazing. It hadn't been done. Really? We just asked the question, like, how do they get designed? I should try on a pair of those shoes. You should try them on. Let me know what you think. What's the price point of those shoes? This is about $109, I think, something like that. Oh, they're not as crazy expensive. They're not crazy expensive. But what's your cost on them? $8? No, it's well north of that, but I don't know what the cost of the shoes is. Great question. Do you get free clothing at Lululemon? I buy it. You do? Yeah, because I want to go through the process. Yeah. You do? Okay, so what do you like? Do you like the process? there are things I do like about the process like there are people that are passionate in the stores about educating people about yoga run and train and I love interacting with them and they're really passionate about the product are the things we can improve definitely and we're working on some of those would you go to Lululemon they're looking for a CEO I heard no I'm done being a CEO now I'm like now I'm investing in other CEOs damn okay I was trying to catch you to see if you'd ever like that yeah exactly if I'd slip up yeah exactly so no lift again No, I've got a bunch of investors that I've told I'm going to take good care of their money, so I've got to do that. Okay, you've got to do that instead. Okay, I feel like I want to make sure. I didn't even open my computer to ask you the questions I wrote down. Do you know that? But that's okay. I wanted to have a conversation with you. I don't like to usually look at my questions. I like conversations, too. That was super nice. It flowed super well. I mean, did I forget anything else that's important about company and business? Are you sure? Yeah. Because I really like the eat your own dog food. I think that's really important stuff. Okay, I'm going to ask you this because this is a paper that you guys, you know, wanted me to ask. Okay. I never ask these questions. But if you were mentoring a recent college grad, how would you tell them to use the algorithm? Ooh. Right? To stand out early in their career. I think when you come in and you can do two things. You can question assumptions and be a simplifier. You're going to stand out. and if you can do those two things, you tend to be able to figure out where the value is and you can add value. So back to the early part of our conversation, that's essentially how I was able to join Tesla was demonstrate value through simplifying and questioning assumptions. If you do those two things, you can apply the algorithm and I think as a recent college grad, you can become very valuable and stand out from all your peers. So I'm going to ask you one more question about this because I know I've kind of asked you seven different ways, but what is your superpower then? Like you obviously can make the common sense seem calm, like, you know, like you're picking up on like things that are very obvious to some, but obviously not that obvious at most. You go above and beyond. You like kind of like show your value, all those things. But what's that one thing that you're like software we got with all that being said, what is your superpower? It's being able to simplify. I think that's it. Like it's a skill. It wasn't someone I was born with, but it's something I learned over time. Yeah. Yeah. So you do such a good job at it. So important. Yeah. Because I think once you become a leader and people are looking to you, they need you to be very clear about what the goals are and what they and what we're trying to accomplish. And to do that, you have to be a simplifier. Can't take a lot of words. I love it. OK. The book is called The Algorithm by John McNeil, who is just, I guess, is super impressive. I mean, your background is insane. I've been super lucky. Okay, lucky and hard work. Luck doesn't just happen. Usually, luck is opportunity and hard work. Yeah, that's true. That whole equation. Luck favors the prepared. Exactly. So thank you for being on the podcast. Thanks for having me. It's been fun. It's been so fun. And where else can we find more information about you if they were ever so curious? You can find the book on Amazon. and the book or the audio book. And you can find more about me on dvx.ventures. Amazing. Thank you so much. Thank you.