Behind the headlines, Jon McNeill has been a key operator and board member across many of the companies that you read about.
He was the president of Tesla. Then, in February 2018, he left to take the role of chief operating officer at ride sharing company Lyft.
At Tesla, he worked desperately to get the company to sell enough cars to hit Tesla’s sales targets. With the rest of the executive team, he said, “We were arm and arm to do the impossible.”
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“For more than two years we operated the company and we just had a quarter’s worth of cash,” McNeill said, recalling a period that Elon Musk has said put the company on the brink of bankruptcy. Tesla was manufacturing vehicles out of tents.
“For sure, bankruptcy was a reality,” McNeill said. “When you’re peering over the edge of death, creativity starts to happen in really unique ways.”
After Tesla, McNeill helped take Lyft public. But his tenure at the company lasted less than two years. His vision conflicted with the ride sharing company’s founders.
Today, McNeill sits on the board of General Motors, CrossFit, and Lululemon — to name a few.
In 2020, he helped found the hatch studio DVx Ventures, which has spun up seven startups so far.
I brought McNeill on the podcast because I wanted to know whether the high-cash burn, blitzscaling model embraced by ride sharing companies like Lyft could survive in the new normal with non-zero interest rates and falling tech stocks.
“I think blitzscaling is appropriate when interest rates are zero, when capital is free,” McNeill told me. “If people are going to hand you free capital — then you make different decisions and there was an era,” he said, “where capital was free.”
But McNeill argued the bliztscaling playbook isn’t going to work anymore.
“You could go out to burn capital to acquire customers in a business that didn’t have its economics figured out yet. And ride share was a good example of that. And you could burn through a lot of investor capital because basically every time you raised it didn’t cost you much in terms of valuation.”
But McNeill told me, “When interest rates are non-zero, I don’t think blitzscaling is appropriate because you can’t afford the cost of capital.”
I asked him, “Can companies escape blitzscaling?”
“Yeah, they can but they have to have super talented leadership to do it.”
He pointed to his old rival Dara Khosrowshahi as one such leader.
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00:00:01
Welcome to the third episode of newcomer.
00:00:03
I'm Eric newcomer excited for you to listen to an interview.
00:00:07
With John McNeil a former Chief Operating Officer lift and a
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former top executive at Tesla, he knows Elon Musk.
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Well, now he's an investor at DV X, which is a hatch investor.
00:00:21
John is also on a bunch of boards.
00:00:24
We talked about CrossFit Lululemon, so someone who really
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sees the breath of of the business world.
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So we talked a lot about management that he learned at
00:00:34
lift and Tesla. I think he's a little spicier
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about lift and interesting to hear his thoughts on mosque, for
00:00:42
sure. And then we talked a little bit
00:00:44
about blitz-scaling and sort of the challenges of that model in
00:00:48
a world where interest rates are higher.
00:00:51
I thought it was interesting pretty girl in light of our
00:00:53
first episode with Reid Hoffman, who has been a big proponent,
00:00:56
give it a listen before we get there.
00:00:58
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00:01:30
And now here's our episode with John McNeil, welcome to the
00:01:33
newcomer podcast. Thanks for coming on.
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John. Yeah, glad to be here.
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I feel like the first time we really spent time together.
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You were the Chief Operating Officer of lift and I was
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following you around in Las Vegas.
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Is you are setting up driver operation stuff there, right?
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Yeah, I think so. We got some quality time when I
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was in that role. Yeah, right 2018 2019.
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So yeah 34 years ago yeah so we're going to jump.
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On your story and there's so much I want to talk about.
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But I mean, you are at Tesla, very senior.
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They're obviously, I met you through the lift context.
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Now you're an investor with a strong thesis, we're going to
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talk about that. You're on a bunch of boards.
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You're on the what GM board are. You also CrossFit is that right?
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Or you have a lemon, how do you cross fit?
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I just I don't know the story at all.
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I don't know what I'm opening up, but what is the story with
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the CrossFit one? So it's kind of a fun.
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Tori. One of the guys that worked with
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my first job out of college, his life was changed by CrossFit and
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so much. So any such a good manager that
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we back in 2010. He and I were having a breakfast
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together and I said, you got to buy that company because you'd
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be just the right person to run it.
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And so, through a series of events, he got to know the
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founder and didn't go anywhere. It almost went somewhere, but
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didn't go anywhere and then in 2019 2020.
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The founder needed a buyer and so he reached back out to my
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friend and my friend ended up winning the deal and asked me to
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join the board. And I'm not a crossfitter but
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I've kind of become one. The process.
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You're like a all-purpose entrepreneur this way, right?
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I mean I'm, there's deep focus in Auto which like with Tesla
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lift, I think you have a company now sort of in, yeah, that space
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and GM board, obviously. Leslie.
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But like you really started with entrepreneurship first.
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My stuff is an entrepreneur, it kind of started as a kid.
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I grew up in this household, that was awesome, but we didn't
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have much money. So we had to figure out a buyer
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on clothes and shoes. And so I started this
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landscaping business when I was 8 years old.
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So I could buy a pair of shoes and that experience was seminal
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for me because I kept it all through high school and it paid
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for my first. Car, it paid for a big chunk of
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my college and I got to college and A new, the only things I
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learned about business were things that I had learned
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between 8 and 18, myself and reading a lot of stuff.
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So, my first job out of college was at Bain Consulting.
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And I happened to sit outside of the conference room, where Bain
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Capital was, and this little group called information
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Partners, which was basically, what is now being Ventures.
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And I started to work with them and do some of the guys very
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closely, and it was through that process, I discovered or
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rediscovered. I was entrepreneur.
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And so one of the guys handed me a business plan and said, I
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think this could be really interesting for you and it
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turned out it was. So I hopped out of venture
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capital in started. My first company with Bain
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Ventures as a backer which was awesome.
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And was that a, was it a start-up?
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It was. And then we start to use the
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word here are start. Okay.
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It was a software company that sold software that runs call
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centers, call centers Winter, a new thing in the early 90s and
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We haven't written much software to help run them.
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And so we did, we wrote the software and we were computer
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scientist. So we said to ourselves, we only
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want one set of code. We want to run off one server
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and we want to serve all these clients.
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So we want multi-tenant single set of code which today you know
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as SAS but we weren't smart enough right to bake a name out
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of it. And so we started this company
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was right place, right? Time it took off and it was
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called first notice systems or FNS, and 18 months later, we
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sold it to a public company. And then I started a second
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company that really came out of this experience.
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My wife had her car was hit by one of our neighbors.
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It was a terrible experience, get it fixed.
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And as I got to know the industry, I figured out that the
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Collision industry was a fifty billion dollar industry with
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like no modern manufacturing or supply chain Approach at that
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time. And so, we started a company
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that today is the largest collision repair company in the
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country. It's owned by Carlisle and it
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was another heck of a ride and that was bought by And auto
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insurance company, Allstate. And then I stayed at Allstate
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for two years and saw all kinds of opportunities to write
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software for insurance companies.
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So start at a third company out of that experience called in
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servio which was a SAS platform that serve the insurance
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companies. So yeah, you've sat at this
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intersection between sort of tech and the real world and I
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wanted to touch a couple just so people could get hurt him, get
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some flavors of that. And I want to just like frame
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this up with sort of a big question which is just Like do
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you believe in blitzscaling? You know I had Reid Hoffman on
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the podcast. He's been a big advocate of that
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you know like Lyft and Uber Wars which you know I wrote a ton
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about felt like all about blitz-scaling and certainly some
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of these electric car companies like a ravine or something.
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It's like okay we're going to raise so much money to compete
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with the likes of Tesla. You know, Tesla probably had a
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slower ramp up there in terms of spend.
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How do you think about it? Scaling and do you believe in it
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and did you ever do you now? Yeah.
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What do you think about? So I love read to and he's
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giving me some similar advice as a friend and as an investor over
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time I think blitzscaling is appropriate when interest rates
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are zero when Capital Street was that for an answer.
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You know, people are going to hand you free Capital.
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Then you make different decisions and there was an ERA,
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like you just described were Capital was free and so you
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could go out and burn. In capital to acquire customers
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in a business that didn't have its economics figured out yet.
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And right there was a good example of that and you could
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burn through a lot of investor Capital because basically, every
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time you raised, it didn't cost you it much in terms of
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valuation because just the way valuations work, when you value
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a terminal value and divide by 0, it's free money.
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Now when you divide by 5% or 6% or 20% depending on what the
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rate of capital is it would lead you to a different conclusion.
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So when interest rates are now nonzero I don't believe
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blitzscaling. Appropriate because you can't
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afford the cost of capital to go do that.
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So you actually have to make the business work in.
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One of the things that I loved about working with a lion was,
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because I had been an entrepreneur before we met.
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I had this mindset of like, really success.
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This had been burned in my brain by a mentor really successful
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entrepreneurs can run a business on minimal cash and be creative
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and you have to have the best people and you got to get a lot
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out of those people. But that was an ethos that I
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shared. When I joined Tesla and I
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totally got the culture because that was it.
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It was like minimal Capital, maximum Talent, applied to big
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problems, and get as much out of that Talent as you can.
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And therefore blitzscaling is an appropriate, do you think the
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companies that were blitzscaling?
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However, conjugating that worried do, you think they can
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make the transition to this interest rate environment?
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I mean, I guess what challenge with blitzscaling if it only
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works in a zero interest rate environment and you learn the
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wrong lessons, For any other interest rate environment and
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most of human Financial history. There are interest rates above
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zero then maybe it seems dangerous, even in that brief
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wonderful moment of free money that you're going to learn wrong
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lessons or can companies Escape blitzscaling.
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That's the question I mean. Yeah, they can and you have to
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have super talented leadership to do it.
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And so like let's use Uber and Lyft is a case study here.
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So you get this professional manager that comes in dhara.
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Ha and dark comes into Uber and is able to create a market cap
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above their amount of capital raised because starts to
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rationalize costs gets rid of all the cash burners that he
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can. So it gets rid of autonomous
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which is burning a ton of cash, gets rid of international
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markets, which are burning a ton of cash, turns those into
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Investments on the balance sheet that end up helping.
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The pl, is they get liquid. And so in contrast you've got
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lift, which is Raised far more Capital than its market cap.
00:09:58
It raised somewhere between 50. How much is it where do I
00:10:01
somewhere between 15 and 20 billion and its market cap today
00:10:04
is less than 5 and you deduct the cash?
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That's on the balance sheet. It's way less than 5.
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And so, I think to have a successful business over time,
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you have to have really professional managers that come
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in, that are capable of taking a company from blitzscaling into
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positively free, cash flow, which door has got to read
00:10:22
between the lines, a little bit on this for the listener, you
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were the chief operating officer.
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Sir of live for what a little under two years, the
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professional management. Like what would you have liked
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to see them do that? They haven't done since you've
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left. Yeah.
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Just if there were a number of at the time who are arguing,
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that we really needed to address the expense base, get pricing
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discipline. So you get more revenue on the
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top line. Address, the expense base on the
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bottom line, there are still more engineers at left than
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there are Tesla. Tesla is approaching a hundred
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billion dollars in a For revenue and hardware and then diversify
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into other lines of business that would leverage the driver
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base, like food delivery. And so you number of us lost
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those arguments and left as a result.
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And unfortunately, the scoreboard reflects the outcome.
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Yeah. Do you think anybody would buy
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lift or like? I think search notice it's a
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colleges, you've got. Yeah, it's very costly there.
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A lot of Bargains in the market today and in this case, you've
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got Founders was super voting shares, which is sort of a very
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difficult issue to get through and maybe a non-starter for most
00:11:29
buyers. The founders have been at it so
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long, I don't know. I would think, at some point,
00:11:34
they would be willing to relinquish power for.
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Yeah. Maybe they get tired at some
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point. Maybe we'll come back to Tesla,
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maybe a little bit more lift, but I wanted to talk about your
00:11:44
investing firm dvx, like, it seems born out of this idea that
00:11:49
we're not in a zero interest rate environment anymore, right?
00:11:52
Or it, can you talk a little bit about sort of Firm and sort of
00:11:57
your ideas behind create like, are you calling a venture firm?
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I guess that's like not really he's like it's not I call it a
00:12:05
hatch platform. For this reason, we only work on
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her own ideas. We really, really research the
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heck out of these ideas and prove them out and then we take
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that idea and start with a little nugget, an MVP minimum
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viable product. Put that on the market, start to
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learn, start the feedback loop and we run these companies
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through series to Stage gate. It's the didn't once we've
00:12:27
proven that they've got product Market fit and go to market fit
00:12:31
that we really launched the scaling chapter.
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That company bringing a team and let them add it in terms of
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running the company. How many partners do you have?
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I have three other partners so therefore of us, we create
00:12:41
companies, some people call it this adventure Studio, some
00:12:44
people would call it an incubator.
00:12:46
I just called a hatch platform in two years.
00:12:48
We've launched seven companies and for externally funded it
00:12:51
which is our validation point. With somebody else comes in and
00:12:54
says, hey we think you've got something here.
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That's Worth investing in and how much Capital are you
00:12:58
investing? We started with the first
00:13:00
tranche of capital of 50 million to start these seven companies.
00:13:03
So it gives you a sense of the capital efficiency is we're
00:13:06
getting them to investable Quality because we're kind of
00:13:09
applying what we've been talking about which is what's not Piper
00:13:12
spend. Let's prove that we've got a
00:13:15
business here and then we'll add Capital to the fire but not
00:13:18
until. And as an investor, like a big
00:13:20
advantage of this, is that you own a much larger percentage of
00:13:24
the company. Going into series.
00:13:27
A that's rights, were a seat, dry seed, investor or what are
00:13:31
the diamonds, right? Yeah.
00:13:32
When we start to company, we want 100% of it.
00:13:34
And so, this is very different economics than Venture where
00:13:37
you're trying to own somewhere between 5 and 20 percent.
00:13:40
It gives us a lot of Leverage as we work through the funding
00:13:43
cycle on these businesses. And how do you attract sort of a
00:13:47
CEO in that situation where we obviously they haven't come up
00:13:51
with the idea. So I imagine they're happy to
00:13:53
have this great company, but what's the dance there?
00:13:56
And in terms of attracting a CEO, it's a really good
00:13:59
question. This was inspired by the as I
00:14:01
was a CEO. I was in different CEO groups
00:14:03
ran across a lot of CEOs who would say I'd love to start a
00:14:06
company but I don't have an idea, right?
00:14:09
And there are a lot of those people walking around in that
00:14:13
are super talented. And so we come to people like
00:14:16
With not only an idea than an idea that's been de-risked,
00:14:19
because we've already done the work to prove product Market
00:14:21
fit, go to market fit, make sure the unit Economics work, that
00:14:24
we've got a big tan for them to go attack.
00:14:27
And so then we can bring a CEO a really cool early stage company
00:14:32
that if they're wired to start something early, but don't have
00:14:36
an idea, we're coming to answer for that.
00:14:38
And for all these companies, the goal still is to raise a series
00:14:41
a from a venture fund. Is that right?
00:14:45
Or are there some that will never need capital or other
00:14:48
sources of capital? Well, no, the goal is for us to
00:14:51
get the right investors and alongside us at series a and
00:14:55
sometimes earlier, but generally it series a because we want to a
00:14:59
prove that if we're not smoke it, our own product and think
00:15:02
we've got a great company and keep pouring capital and but
00:15:05
others are willing to. So this is a check for us.
00:15:08
A check and balance to make sure that we've got something that
00:15:10
other see value in two and that they're willing to validate that
00:15:14
by writing a jacket and vest. These are generally Venture
00:15:18
groups, all right, so which companies for this long?
00:15:21
Are you said 74 of raise money? Yeah.
00:15:25
Walk us through a couple of the faves.
00:15:28
So we've got you'll see like how completely different these ideas
00:15:32
are but they generally come out of experiences, we've had so
00:15:35
alone is in cyber insurance and what we saw there was an
00:15:38
opportunity in a very large Market.
00:15:40
That's growing very fast to come at the problem very differently.
00:15:44
Everybody else in the industry was focusing on the outside end.
00:15:47
So mainly what they do is test a company's defenses and see how
00:15:50
effectively our come from the outside.
00:15:53
We wanted to start from the inside out and say what's the
00:15:55
tech stack is it effectively configured?
00:15:58
Is it turned on for all users Etc?
00:16:01
And getting that data, we knew was going to be really hard, but
00:16:04
a potentially in load. So we figured out how to get
00:16:06
that data. How to price cyber insurance,
00:16:09
and make it super easy for people to understand.
00:16:12
So it's a little bit like car insurance you get today, you
00:16:15
know, you put an app on your phone, you get a driver score,
00:16:16
and Car insurance. In this case, you put our
00:16:19
software in, you get a score, you get Cyber insurance.
00:16:22
So let's company called root and we've got several VC's in
00:16:25
alongside us. It's a huge Market when I'm
00:16:27
really excited for something completely different in the auto
00:16:29
space, we took the team that invented mobile service for cars
00:16:34
at Tesla. One of the things we discovered
00:16:35
at Tesla, was the 80% of what needed to be fixed on a car
00:16:39
could be done in the customers driveway or in their office,
00:16:42
parking lot. And one day, we woke up and said
00:16:45
there's a much bigger market for this.
00:16:47
Much bigger Tam, and that's all cars.
00:16:49
So, why don't we take that team and apply that to all cars?
00:16:52
So, this is a company called Kirby and it's in 29 markets
00:16:56
right now, in Northern California and now it's moving
00:16:58
into Arizona and State starting, its multi-state expansion.
00:17:01
But what they do is they provide on-site Mechanical Services for
00:17:05
cars you wanted to do that. A similar idea left to right.
00:17:08
I mean this sort of mobile or there was an opportunity.
00:17:11
You sir, we did you drivers cars right?
00:17:14
Exactly. Because every time a driver's
00:17:15
car is down there, not making money.
00:17:17
So, the idea was, we could, we could send cars out to get these
00:17:21
cars fixed. It was in service of a long-term
00:17:23
Vision. We have this long-term vision
00:17:25
for Kirby, which is autonomous vehicles are going to operate in
00:17:29
cities. Cities have largely been gutted
00:17:32
of places to get your car fixed and autonomous vehicles are
00:17:36
going to largely be electric, so you don't want to drive them
00:17:38
into a central Depot and waste charge to get them fixed or
00:17:43
service. You want someone to come to
00:17:44
them. And so the long range vision, Or
00:17:47
Kirby is they become the service platform for autonomous fleets
00:17:52
in cities. But along the way, we're serving
00:17:54
regular consumers who need to get their cars fixed to mostly
00:17:57
electric cars, or any kind of car.
00:18:01
Any Cuddy cars? Yeah.
00:18:03
Any kind of cars. What do most people need?
00:18:05
It is like an oil change situation.
00:18:07
Or yeah, you can do anything from an oil change to swap out.
00:18:10
Some of these breaks, two belts and other things, in a
00:18:13
customer's driveway. So anything you don't need to
00:18:16
basically put a car up on a lift for, in good underneath.
00:18:19
You can do in a customer's driveway, so literally Will Row
00:18:22
trucks to take care of just about anything that needs to be
00:18:26
fixed on a customer's car. When I launched my newsletter
00:18:28
first, like, I feel like I had five ten You know, stories are
00:18:32
really wanted to do, you know, I've been thinking about them
00:18:34
for a long time and then you come out of the gate, eventually
00:18:38
write the stories and then you're like oh man I have this
00:18:40
story creation machine and I need to have more than just the
00:18:43
ones that I had a couple years like stew about when I you know,
00:18:47
didn't like, you know what, my boss is Bloomberg.
00:18:49
Thought I'm sure he's some of these ideas clearly came out of
00:18:52
learnings at Tesla and left and elsewhere.
00:18:55
How do you get the confidence that you'll keep coming up with
00:18:58
ideas? And do you have any sort of I
00:19:00
don't know. Method or how do you generate a
00:19:03
new business idea? If you have to keep pumping them
00:19:05
out for new Founders, we have a total method around this.
00:19:08
So we have a method around our entire process and at the
00:19:10
beginning of the process is coming up with these ideas.
00:19:13
And so we have an ideation session once a month at dvx.
00:19:18
Or it's not just Partners, it's the whole firm that comes
00:19:21
together and says, I got an idea.
00:19:23
What do you think about this? And we literally will Riff on
00:19:26
these ideas and that's one source and we've got 35 to 50
00:19:30
ideas. Time, we're looking at basically
00:19:32
are internally generated. There will also do some
00:19:35
proactive work rules say hey there's a big theme happening in
00:19:39
the economy, like electrification and what are
00:19:42
some of the non-obvious things that are going to happen?
00:19:44
Five to ten years from now. If we Electrify like big chunks
00:19:49
of transportation, for instance, and then we'll go looking for
00:19:52
ideas. Proactively within that theme in
00:19:55
will research the themes and then, as I mentioned, will come
00:19:58
up with an idea. If one comes to the Forefront as
00:20:00
really, really Attractive, and it's got a big market.
00:20:03
So three things, we look for a very large markets,
00:20:05
profitability opportunity above 50%, gross margins, and a unique
00:20:10
way for us to win like a moat and if we got all three things
00:20:14
then we'll work into launching a company.
00:20:17
And we run these companies through stage Gates and so far,
00:20:21
we've launched 10 companies 7 have made it through all of the
00:20:25
stage Gates. Three were killed along the
00:20:27
process where we either couldn't get product Market, fit.
00:20:30
We thought Was there. We thought we were going to be
00:20:32
able to get it we couldn't or we couldn't get the Internet
00:20:35
connects to work and we'll kill something.
00:20:37
If we don't think it's going to work but it all starts at that
00:20:40
first idea stage and we've got to have a very big robust,
00:20:42
funnel of ideas. How do you figure out that the
00:20:45
gross margins for something like, Kirby will be above 50?
00:20:48
Getting the get into the business and you start to test
00:20:50
it. So literally, we got into a few
00:20:51
markets in the Bay Area. And the team's first goal was
00:20:55
proof product Market, fit. And once we got to our metrics
00:20:59
on product Market fit, then it was Ew.
00:21:01
Gross margins. And when they were able to prove
00:21:04
a path to gross margins then we said okay now let's prove the
00:21:08
caxton. Ltd's let's prove our go to
00:21:10
market economics and once they approve all three of those
00:21:13
things, they're Off to the Races which Kirby did.
00:21:16
But couple of our companies couldn't get through those stage
00:21:18
Gates, we had to kill him. I mean, back to sort of the big
00:21:21
blitz-scaling zoom out. So there is the blitzscaling,
00:21:24
which is just, you know, we can put a lot of cash into something
00:21:27
even if it's like an Airbnb or more clearly We're sort of
00:21:32
platform business to make it work, but I think there's a
00:21:35
related phenomenon to blitzscaling, which is also just
00:21:39
we can do things in the real world, you know, it's like
00:21:41
Travis it, Uber saying, you know, atoms instead of bits or
00:21:45
whatever, right. It was sort of that idea that,
00:21:47
like, you can make real world stuff work because you're
00:21:51
willing to throw enough money at it.
00:21:53
And I think some people now it's like, okay, there was too much
00:21:56
money but there's also a questioning about sort of the
00:21:59
real world. Peace.
00:22:01
Piece of tech in a higher interest rate environment.
00:22:04
You know, everybody's excited about AI.
00:22:06
Now it's like the least, right? Are sort of tangible physical
00:22:09
real-world thing. I mean, yeah.
00:22:12
Do you think the Venture model can still sustain something like
00:22:16
Kirby or something like, does that make sense is a venture
00:22:19
business in this higher interest rate, environment or do you
00:22:23
think VCS are going to move on from anything that really tries
00:22:26
to move atoms? I think you know, you've got to
00:22:30
have a Set that helps a business get started.
00:22:33
They can deal in the world and those are generally operators
00:22:37
that have been in the real world and maybe the best example of
00:22:40
that is bio Tech biotech. You're moving molecules and
00:22:43
you're getting molecules and proteins to do things that
00:22:46
haven't been done in history. And that's real world science
00:22:50
getting applied. And I don't think any of us
00:22:52
would argue that like Moderno wasn't a good investment if I'm
00:22:55
right. It was Flagship story, much like
00:22:57
us. They start companies from
00:22:58
scratch. They work them through a Series
00:23:01
of stage Gates, and they do that in the physical world.
00:23:04
Not all of our businesses move atoms, but we're not afraid of
00:23:07
businesses that do move atoms because we've run these kind of
00:23:10
real-world businesses in scale. And we know what good product
00:23:13
looks like, what good teams look like, what could go to market
00:23:16
looks like. And so we feel like we're
00:23:18
uniquely kind of skilled to help in a business that like Kirby
00:23:21
that could be very large annually.
00:23:23
People spend more than 200 billion dollars getting their
00:23:26
car fixed except very big market.
00:23:29
So now I can attack a very large Market.
00:23:31
With a high, gross margin model that people love.
00:23:34
Yeah, that's pretty. That's investable.
00:23:36
So Tesla, let's go back. How did you connect with Ilan in
00:23:40
the first place? Or how did you get to Tesla?
00:23:43
So it, as we talked about, I Was a Serial entrepreneur.
00:23:45
I had just started my sixth company which was basically a
00:23:49
software that powers all of the driver scores.
00:23:51
You see, insurance companies now, talking about.
00:23:53
So, if you see the State Bar map, or the Allstate app or the
00:23:57
progressive a poor Geico app that scores you're driving.
00:24:00
That's our Technology, that's driving that.
00:24:02
So I just started that company. And through a series of crazy
00:24:05
events Sheryl, Sandberg introduced Ilana night and we
00:24:10
hit it off because I think our backgrounds is entrepreneurs but
00:24:14
I had had experience in manufacturing.
00:24:16
A lot of experience an auto and so we immediately just hit it
00:24:20
off. We when we met each other.
00:24:21
Ilan said, hey, I want your perspective on this problem, I'm
00:24:26
having the factory. And so like I said I've seen
00:24:29
that kind of problem before we broke down the It's it like here
00:24:32
probably where you're going to find the constraints and then
00:24:35
the solutions. And so we talked through it, he
00:24:38
went and applied what we talked about it worked.
00:24:41
So we got a second phone, call it similar thing but very
00:24:45
different, he said here's problem of having in my in my
00:24:47
distribution sales Channel. What do you think?
00:24:49
And so we work through that problem together.
00:24:51
We're you interviewing in your mind or you know it's like we
00:24:53
were just getting to know each other.
00:24:55
Like I was getting to know somebody and a true like, you
00:24:58
know, his he's got a fascinating mind, he's got a super Super
00:25:01
unique intellect and is very deeply involved in the business
00:25:06
still. And so we are able to get into
00:25:08
the depths of a problem, not at a theoretical level, but at a
00:25:11
factual level because he had the facts because he was involved in
00:25:14
the business and whether it was a manufacturing problem, a
00:25:17
distribution problem, a marketing Problem, whatever.
00:25:20
We just kind of started to brainstorm about these started
00:25:23
to talk more often and then eventually he said, hey, would
00:25:25
you join Tesla? And I said, what did you do?
00:25:28
I haven't, I haven't had a boss in.
00:25:31
Many years. Like it is good.
00:25:32
I don't even know how to do this, but if you're willing to
00:25:35
take the risk, like, I'm going to because I for me, I felt like
00:25:40
I was gonna get a chance to learn from the best practitioner
00:25:44
of my craft as an entrepreneur. You can't point to anybody in
00:25:50
our space who is created as much value as Elon Musk.
00:25:54
What was your title when you came in president?
00:25:57
Yeah, and you were you were the number two basically, the time.
00:26:01
Well, I was on a team of five or six people.
00:26:04
Senior leadership team, all of which like we kind of joined
00:26:07
arms and we really didn't treat each other.
00:26:10
Like we had titles or roles. We are trying to solve big props
00:26:14
and big opportunities and we did it together.
00:26:16
So I didn't feel like a number 2, 3 4 5, I felt like I was on,
00:26:20
I felt like I was on this team with Greg and joy.
00:26:23
Jerome and Doug and Deepak and Franz Etc.
00:26:27
And we were arm and arm trying to do the impossible.
00:26:31
What was the impossible that time or while you were there?
00:26:33
What was the 4chan? Well, when I joined the first
00:26:36
challenge we had, was to make a corner.
00:26:37
They hadn't really made a quarter since they've been
00:26:39
public. And we were more than halfway
00:26:42
through the quarter and half way through the sales goal, not even
00:26:45
close to halfway through this right school.
00:26:47
And so, the first challenge was like, how do we sell enough
00:26:50
units to actually make plan? That was the first Challenge and
00:26:55
business hadn't thought about a funnel before.
00:26:57
So, I introduced this concept of a funnel sales funnel where we
00:27:01
had to pull people, through the sales funnel, and really change
00:27:03
our conversion rates. First of all, we had to know our
00:27:05
conversion rates and then change them in an engineering
00:27:08
environment. That went a long ways for
00:27:10
credibility because people said, this is the first time we've had
00:27:13
an executive. Look at the problem, break it
00:27:15
down mathematically and show us how we can actually hit plan
00:27:20
with math. And so we went out to the team
00:27:22
worldwide and We made our first quarter and that was the big
00:27:25
that was a big Challenge and then we made another quarter and
00:27:28
then another quarter. But then we had to do things
00:27:30
like introducing new models and doing that with no cash
00:27:36
basically in creating manufacturing lines, out of
00:27:39
tense. So we could get these cars out
00:27:42
and get the cash generated to get where you there when Ilan
00:27:46
said he looked back and said, we could have gone bankrupt.
00:27:49
Were you there though? We were yeah.
00:27:51
For more than two years we operated at And we just had a
00:27:54
quarters worth of cash. So that was for real.
00:27:57
Like we could have without the work of all the people who are
00:28:01
Tesla and on the team at that time, for sure.
00:28:04
Bankruptcy was reality and when your peering over the edge of
00:28:08
death like creativity starts to happen and really unique ways.
00:28:13
And we had a bunch of creative people that really helped us get
00:28:16
through that time. You know.
00:28:17
I'm clearly likes the sort of pressure cooker environment,
00:28:20
right? Like, I don't know.
00:28:21
It feels like, you know, For most CEOs, you wouldn't want a
00:28:25
company that close to death, especially a public company that
00:28:29
has some Goodwill. Like the company could have been
00:28:32
run in a way that it wasn't as close to death, right.
00:28:35
Or do you think it was intentional to motivate?
00:28:37
Well, you're tough to capitalize a company completely that it has
00:28:39
never shown positive cash flow and so there was only so much
00:28:44
Capital. You could raise on the way to
00:28:46
each new product launch, but each new product launch takes
00:28:49
billions of dollars. So, there's only so much
00:28:51
Capital, you can raise in. So it's a bit of Pressure cooker
00:28:54
and it's a super hard business. I've never seen a business as
00:28:56
hard as the car business car manufacturing business and it's
00:29:00
why nobody's really created a new successful car company in
00:29:03
almost 100 years. It's really hard and I almost
00:29:06
have maniacal and crazy to attempt it and to get through
00:29:10
it. So by its nature, it's a
00:29:12
pressure cooker and their different ways.
00:29:14
People manage to the pressure and elon's got his way and I had
00:29:17
my way and that was a largely complementary in the rest of the
00:29:19
people on the team to we had this melted kind of approach.
00:29:22
It was somewhere in the tinium of for an attic and somewhere on
00:29:25
the Continuum of calm and between calm and frenetic.
00:29:28
We found a path through now. Super proud to be a part of
00:29:31
that. Is he the CEO?
00:29:32
Like you know he has SpaceX I mean now it's a but he was use
00:29:37
you know doing most of the CEO things you'd expect and not.
00:29:41
Yes absolutely public. Absolutely.
00:29:43
Yep. I mean it's one of the most
00:29:45
famous people in the world. Certainly the most, I think,
00:29:47
famous business person. I mean, what is sort of the
00:29:50
genius like inside the company? I think people see the sort of
00:29:53
Salesman aspect instead of the be able to sort of cell
00:29:56
division. But like, what's his sort of
00:29:59
strength? Yeah, from inside a company,
00:30:01
like, Tessa, I think people will read books about this someday
00:30:06
but he's got a company that has an operating Cadence of seven
00:30:10
days a weekly operating Cadence. And what I mean by that is, if
00:30:14
you're an engineer working on a problem and there are several
00:30:17
problems that really matter and they just presented this at
00:30:20
their investor day. So manufacturing really matters
00:30:23
energy, density. City per dollar really matters.
00:30:25
And so there are a few of these big problems that if you're
00:30:28
working on your in front of the CEO, every week showing
00:30:31
progress. And if you're not showing
00:30:33
progress, you know, there's obviously trouble in running a
00:30:36
company on a weekly, Cadence like that.
00:30:38
A weekly release in Hardware is very unique to the Auto
00:30:43
industry. It's a software approach in
00:30:45
hardware and maybe one of the toughest Hardware businesses in
00:30:48
the world and that is a key part of the secret sauce where you've
00:30:53
got to see. You're challenging, viewpoints
00:30:55
challenging physics, challenging manufacturing theory on a weekly
00:30:59
basis. And the whole company is getting
00:31:01
better as a result of that Weekly.
00:31:04
Do you borrow from that? Do you think many people can
00:31:06
turn, you know, that Cadence requires sort of a lot of effort
00:31:10
and it means that you turn more people.
00:31:14
You are there three years? A lot of people do turn out of
00:31:18
Tesla. Do you think like, I mean, the
00:31:20
celebrity and sort of the mission, certainly the mission,
00:31:23
the ability to recruit people. Yeah.
00:31:25
Something, they believe in. Like, do you think like, I don't
00:31:29
know, your average like software business can replicate sort of
00:31:33
the Elan management style without others, really?
00:31:35
Like, it's all of us as managers have a style, like we have a
00:31:38
personal style, you got a communication style, you got a
00:31:41
management style, and I believe everybody should really find
00:31:44
their optimal style for the way they're wired.
00:31:47
Ilan. Has that for him?
00:31:48
I have that for me. It's different.
00:31:50
If I try to replicate his, it wouldn't work.
00:31:52
I don't think mine For him. But he's got a capability of
00:31:55
doing this model with intensity in a really effective way and
00:32:01
it's Unique to him and that's why he's uniquely successful.
00:32:03
I think have I tried to apply it.
00:32:05
Heck yeah. Like we run on a weekly, Cadence
00:32:08
at edx and we run on a process and we're continually pushing
00:32:11
that process and pushing each other.
00:32:13
And when we recruited people into Tesla, we would use this
00:32:17
analog that you're not getting recruited here for regular army,
00:32:22
you're signing up for Special Forces.
00:32:23
Isis. What does that mean?
00:32:25
That means you're going to be on a small team of Highly capable
00:32:27
people doing highly intense things.
00:32:30
So there is not going to be much down time.
00:32:32
There's going to be a lot of fun, task time, and your talk do
00:32:36
ratio has to be way inverted from maybe where you've been
00:32:39
before, you've got a double, but when you deliver, I guarantee
00:32:44
you, you will be doing the best work of your life and that's
00:32:47
what addictive about working at Tesla is because, you know, you
00:32:50
can go other places in code, you go other places and in Are you
00:32:53
can go other places in manage but you probably won't be doing
00:32:56
the best work of your life because you're not going to be
00:32:58
part of an organization that has that push and Cadence.
00:33:01
But we try to do this at dvx to say if you're here, we want you
00:33:05
to be all in and doing the best work your life.
00:33:08
And this is a method that we use to get there.
00:33:10
Do you think that story is still true today for Tesla?
00:33:15
I do when I watch the investor day in which the guys that are
00:33:17
on that team today, who were there?
00:33:19
We're in more Junior when I was there, but I worked with all of
00:33:22
them. I see that they are continuing.
00:33:25
That raised the bar raised, the bar raised, the bar raised the
00:33:27
bar. I mean, they're our aim is to
00:33:29
take 50% of the cost of the manufacturing base, over the
00:33:32
course of what I think is probably two years that is super
00:33:36
intense, super hard to do. And nobody has done that in
00:33:38
their industry and they're setting out to go do it.
00:33:41
So, yeah, that process on that outcome is definitely
00:33:44
perpetuating today, but they're going to need a new vehicle,
00:33:47
right? Yeah.
00:33:48
When you take 50% of the cost out, you're going to have a new
00:33:50
vehicle. You're going to have a mass
00:33:51
Market vehicle. That is Very different from the
00:33:54
model 3 today. Oh you're saying sort of lower,
00:33:57
the cost of the vehicles are selling a, they're going to have
00:34:00
a slightly different design and different Mechanicals.
00:34:02
Different engineering would probably different chemistry.
00:34:05
I don't know if I mean, he Lon he's good at talking about these
00:34:08
things for so long. I guess the media is so much
00:34:11
expectations versus reality. So, on the one hand we're super
00:34:14
complicit, it's like, oh, he's willing to set these super high
00:34:19
expectations. We've been talking about
00:34:20
self-driving, we've been talking about Chuck, you know, he has a
00:34:24
real truck, you know, the semi like allegedly you know, it's
00:34:28
all so the media you know gets and then we seem really - on
00:34:32
Ilan also because he got us excited about those things early
00:34:36
and we're like where are they? And then we see him sort of like
00:34:39
scold. So I feel like we are
00:34:42
unfortunately getting played by Elon sort of on both sides and
00:34:45
that we're some of the biggest sort of boosters and then also
00:34:49
get to be his foil by being overly - I don't know like Are
00:34:54
there other it's Unique business in the how much they talk about?
00:34:59
How much, the company talks about things?
00:35:01
It hasn't delivered on yet? I mean, would you would you
00:35:04
accept that that there's a lot of forward talk in terms of what
00:35:07
the company can deliver? I think you're seeing in scale
00:35:11
in a very public way, the way a lot of entrepreneurs work and
00:35:16
that is entrepreneurs tend to set really ambitious targets,
00:35:21
entrepreneurs by Nature optimistic, How about how long
00:35:25
and how much capital is going to take to get to those targets?
00:35:27
They always think it's going to be faster than it really is.
00:35:30
But they're setting these ambitious targets out in front
00:35:32
of an organization or maybe out in front of themselves and you
00:35:35
sort of say if I hit 80 percent of that I'm going to be super
00:35:38
sight but it probably not going to be on the time frame that I
00:35:41
think it's going to be but I'm going to push for that
00:35:43
entrepreneurs are doing this every day.
00:35:44
I caught myself doing this in every one of my companies that I
00:35:47
built and people would complain. They would say, you know, you
00:35:50
were way too, ambitious, you're crazy to think we.
00:35:53
This done this fast entrepreneur is here that constantly with
00:35:56
Ilan. You're seeing this in a very
00:35:58
public way but he is unique in that he's not dialing that back
00:36:03
to please. The public markets, to please
00:36:05
the Press excetera. He's very much just being an
00:36:07
entrepreneur and so I think it's combination of setting these
00:36:11
ambitious targets. But at the same time he's a
00:36:14
rational business person. And he says, okay, here's how
00:36:18
much cash flow I can get from these different products.
00:36:21
Here's how much cash flow I can get from a model y.
00:36:23
Versus the Cyber truck. So, guess what I'm going to
00:36:27
choose to produce model y across as many factories as I can,
00:36:30
because the cash flow profile of that is much higher than the
00:36:33
Cyber truck, right? Pickups are largely a North
00:36:36
American and South American product, you don't see big
00:36:39
pickups in Europe, you don't see them in Asia, but you see,
00:36:42
hatchback, crossover, SUVs, or SUVs in every market.
00:36:47
So, he's just making rational decisions at the back.
00:36:49
End of his business to I see maryborough doing this a GM,
00:36:54
she's making very rational Is about the model lineup.
00:36:56
Switch comes when balancing her PL and her cash flows and
00:37:01
working with her team on vehicle lineup as well student, you
00:37:05
know, very similar, really rational logical approach to
00:37:09
managing a balance sheet which is the other aspect that you
00:37:12
have to do. So sometimes the Press gets that
00:37:14
and sometimes they don't, it wouldn't take much for the press
00:37:17
to size the market for model, why sighs the market for cyber
00:37:20
truck and figure out, this is exactly why he's delaying cyber
00:37:23
truck, but I feel like the Press doesn't do their homework.
00:37:25
Go go with what's work. The thing, you know, you can
00:37:28
make money off. What do you do with the thing
00:37:30
that has the larger Tam? And the larger cache free cash
00:37:32
flow profile. And the thing that you're
00:37:34
already producing and make it produce more at scale?
00:37:37
Yeah, you're going to you're going to deliver a divot.
00:37:40
Okay. I'll but are you a little bit
00:37:42
with their questions about the used car market and this signal
00:37:44
that that sending about Teslas Vehicles, right?
00:37:47
I mean, do you worry about? I think what you're moving price
00:37:50
around as much yet, one of the downsides of moving price around
00:37:53
as much as Tesla has moved it around for the last few years.
00:37:56
Is the used car impact of that or the just the value of the
00:38:00
vehicle that somebody has taken a loan out on or somebody's
00:38:04
taking a lease option? And, yeah, they're definitely
00:38:07
Downstream effects to some of those decisions there are not
00:38:11
positive for consumers, right? I mean, but you don't think it
00:38:14
hurts Tesla. The company I would say it
00:38:16
hasn't hurt demand so far, it may in the future but it hasn't
00:38:19
hurt demand. So far, self-driving, cars.
00:38:21
You experience them in some form of Tesla, you know, certainly at
00:38:25
live If there were Partnerships and work, you're on the board of
00:38:29
GM. You were saying, you know, for
00:38:31
Kirby, still premise on a long-term self-driving.
00:38:34
Future, what's your sense of the timeline?
00:38:36
Now you know the timeline has been slower.
00:38:38
I think than people thought and that's hurting times businesses
00:38:41
you have a sense of I don't know how optimistic are you.
00:38:45
That we're going to see real movement there.
00:38:48
I think we're now in the precipice like GM is the
00:38:51
majority shareholder. A cruise cruise is deployed.
00:38:55
Driverless autonomous cars on the Streets of San Francisco
00:38:59
through the whole city. One of the most difficult
00:39:01
environments in the world. They've now deployed them in
00:39:03
Austin in Phoenix and are deploying them across the
00:39:06
country way. MO is doing something similar,
00:39:09
and I think all of the solutions been a long time, coming and
00:39:11
autonomy, now we're actually seeing the rollout of this
00:39:14
technology and the commercialization of the
00:39:16
technology. So now you can go take a driver,
00:39:19
this ride in a number of cities in the US and it's as normal as
00:39:23
hailing any other kind of rad share their the full Coverage of
00:39:26
these cities or Cruz has full coverage of the cities that it's
00:39:28
in. Yeah.
00:39:29
So, including San Francisco. So it's, it's wall-to-wall in
00:39:33
San Francisco. So I do think it's been a long
00:39:35
time coming, but now we're on it and the rollout is happening and
00:39:39
that's really exciting for me, I think a lot of people to see
00:39:43
because the goal isn't just the magical experience of having
00:39:47
nobody in the driver's seat. The goal is eliminating.
00:39:50
The 50 deaths that happened as a result of car accidents
00:39:55
that are Almost 90 95 % + caused by human error.
00:40:00
So if we can get 50 families, not too experienced a
00:40:03
tragedy like a death every year, right?
00:40:06
The big deal. And that's, and that's just in
00:40:08
the u.s. Our roads are safer than the
00:40:10
rest of the rules and in the world.
00:40:11
So if you could roll this out worldwide, you're talking about,
00:40:13
saving a million and a half lives every year.
00:40:15
It's a really big deal, right? I mean it's crazy to me that
00:40:19
human be, I really do think there will be a time where we
00:40:21
look back and it's crazy that we let ya human beings like drive
00:40:24
around it. 70 miles per hour just like right next to each
00:40:27
other and it will seem like right really?
00:40:29
Yeah. All right.
00:40:29
Yeah. Just for another loan while
00:40:31
you're doing that excetera. Yeah.
00:40:32
Totally. But we didn't have the
00:40:34
technology and now we do. And so thank God, like some
00:40:38
really creative people like I like Cruz some really effective
00:40:41
technologists set out to solve this problem and they have I
00:40:45
still feel like, I feel like I would feel it more.
00:40:48
If it were so close or it feels like they're okay, they're
00:40:51
deploying in cities. But most people, you know, I
00:40:53
feel like my friends in San Francisco, doesn't sound like
00:40:55
Taking autonomous vehicles all the time or like, what's the
00:40:58
limiting factor for it to be a real like economic mover for
00:41:04
those cities and forces? I think these, you know, these
00:41:06
cities have literally just opened up over the past few
00:41:08
months to this. And so I think right now you've
00:41:11
got folks that were early adopter including it myself for
00:41:14
doing this and now you'll see it moved to the mass Market.
00:41:17
As you know let's say the next time you and I get together for
00:41:20
a coffee and San Francisco and I say hey I'm going to have a
00:41:23
cruise. How about you?
00:41:23
He'll at Cruise. I'll meet you over here and That
00:41:25
kind of morality is now just starting and so you'll now see
00:41:29
this build over time. It's really like if you consider
00:41:32
like when the first Tesla roadsters were produce, there's
00:41:36
a handful of people in Silicon Valley, they had those.
00:41:39
And these started to notice like oh cheese Steve jurvetson
00:41:42
striving one of these things jurvetson.
00:41:44
Why you driving this? It's a fantastic car.
00:41:46
Hop in and let me show you how fast this thing accelerates and
00:41:48
little by little you had this ver ality start but it starts
00:41:51
from a small base and we're starting from the small base.
00:41:53
So I think with autonomous right now and It will start to become
00:41:56
a movement over time and I think it's not going to take nearly as
00:42:00
long as it took for Rideshare and some other Technologies to.
00:42:03
Well I do we were once an autonomous vehicle together.
00:42:06
I think in that in in Las Vegas Vegas, I forgot which is a
00:42:10
partner was, right? That's that's emotional car.
00:42:13
It was a partner of lifts, but you still have the driver in the
00:42:16
seat of that car. We were and this now would be a
00:42:19
very different experience because now there's there's
00:42:21
nobody in the front seats. Yeah.
00:42:24
I mean, The ride-sharing phenomenal.
00:42:27
I mean, I look back it to me like Lyft line, and pool.
00:42:31
And then autonomous is some point where Sookie to the like
00:42:35
technological vision of ride sharing in that they're, they're
00:42:38
really would be these efficiency gains by building up the
00:42:43
Network's. Yeah.
00:42:44
That didn't happen, right? Why do you think carpooling
00:42:47
didn't work and does that undermine sort of the case that
00:42:52
you know, ride-sharing was a step change over?
00:42:55
Any more than taxi with a phone. If you can't make the carpooling
00:43:00
or autonomous features work, I think we were interrupted by
00:43:04
this crazy externality, a pandemic.
00:43:07
And so let's open the car pooling work until we had a
00:43:11
pandemic. And then like this externality
00:43:14
came in that nobody anticipated and wisely both Uber and Lyft
00:43:18
killed their carpooling product, during the pandemic, because it
00:43:22
would have been irresponsible to do anything else.
00:43:24
And now they're building. It back but we were interrupted
00:43:27
for like two years of adoption when the adoption was super high
00:43:30
and those products because the economics are great and the
00:43:33
social aspects are kind of cool too.
00:43:35
But what happened during the pandemic was, you know,
00:43:38
obviously we didn't want to be in cars with each other and so
00:43:41
people went out and bought their own vehicle as kind of PPE.
00:43:45
And so you remember that like, these were record years for car
00:43:49
sales or the past two and a half three years because people were
00:43:53
buying their own car. So they wouldn't have to be in a
00:43:54
car of somebody. And I think the whole movement
00:43:57
towards far, less cars and cities got setback.
00:44:01
Maybe by a decade or more, and I say a decade, because the
00:44:04
average car park is now 11 to 13 years old.
00:44:08
So that means somebody bought a car this year.
00:44:10
Probably not getting that car for another decade and therefore
00:44:14
they're going to be in Rideshare lesson in carpooling Less in a
00:44:18
public transit less because they have their own way to get around
00:44:21
and they're on the hook for a 72 month loan on that thing.
00:44:25
So, Yeah, I think that externality of the pandemic
00:44:28
really set this Vision back, unfortunately, which also speaks
00:44:32
why, you know, having a delivery business on top of your ride
00:44:36
sharing business. I mean, hard to know that, that
00:44:38
was a pandemic Hedge for Uber, but then that ends up really
00:44:41
hurting subunit. Lived, I mean, I feel like you
00:44:44
can get the message like, oh, you should focus on what you're
00:44:46
good at and then it's like, oh, you should have like multiple
00:44:49
lines of business. I don't how does not improve or
00:44:52
likes or those are just two irreconcilable.
00:44:55
Saleable piece of advice. Generally, I've found that if
00:44:58
you have all your eggs in one basket, that is not a very sound
00:45:01
strategy. So you need to have some other
00:45:04
forms of income or Revenue because yeah things can
00:45:09
sideswipe you like a pandemic that you'll you'll never see
00:45:12
coming and that happens did that having little real world.
00:45:15
So you need to have other products of the revenue streams
00:45:18
that help you weather that storm and so like in Tesla's case
00:45:22
today, if the car market goes suddenly sideways and they're
00:45:24
selling a lot less. Cars they can fall back on their
00:45:27
entire base. They're selling Insurance into
00:45:29
that base. They're selling infotainment
00:45:31
into that base. They have Diversified Revenue
00:45:34
sources just beyond selling the car.
00:45:36
An Uber did that too? Uber said, we need to have other
00:45:39
Revenue sources because the world doesn't work straight up
00:45:43
into the right. And so, if we're only having one
00:45:45
egg in one basket, that's a vulnerable position to be in.
00:45:48
As an entrepreneur, just related to the delivery in your general
00:45:52
expertise, some of these Real World Tech businesses.
00:45:55
I feel The cloud kitchens ghost kitchens thing is like falling
00:45:59
out over the conversation a little bit.
00:46:01
I mean, they operate more behind the scenes and I what?
00:46:04
I think I saw Tick Tock the other day.
00:46:05
Someone's like, oh, I'm ordering from Danny's, which has some
00:46:08
Rebrand as something else. I didn't realize anyway, so
00:46:11
they're clearly still going. But do you feel strongly about
00:46:14
this sort of ghost, kitchen, Cloud, Kitchen business, or
00:46:18
those companies doing well? I don't know, right?
00:46:20
I don't know enough about like where they are today because
00:46:23
they're pretty opaque in terms of You know, how large they are,
00:46:26
what sort of Revenue they're generating was sort of profits,
00:46:28
they're generating. So I just don't have enough
00:46:31
fact-based even answer the question.
00:46:33
Yeah, it's not just not enough to just yet.
00:46:35
People just aren't divulging, kind of how the business is
00:46:37
doing. Have you thought about anything
00:46:39
in food in your sort of company, idea, generation or that's,
00:46:43
that's not yet. Fruit is not hit the radar.
00:46:46
Like we're helping young families with a company called
00:46:49
Loop, that allows them to rent, baby gear, and it just had stuff
00:46:53
that they need. So that, you know, in big
00:46:55
cities. You don't have much room in an
00:46:56
apartment. You can't fill the apartment
00:46:58
with stuff. So we're working on problems
00:47:00
like that. We're working on hi
00:47:01
consideration shopping with a platform that we've gotten beta.
00:47:05
We are working on hva sees High considerations shopping start so
00:47:09
that's men hi consideration purchase so like say an
00:47:12
expensive purchase. Like if you're going to go
00:47:14
purchase a washer and dryer or a car, nobody's really attacked
00:47:18
that problem in a unique way and so we've got a team.
00:47:20
Is it about financing? Or is it a pill?
00:47:22
It's mainly about Discovery and I'm like, okay, you compare
00:47:27
washers and what really matters, it turns out percent of washers
00:47:32
that break our front loaders, not top loaders.
00:47:35
So if you knew that one's act, then that helps your Discovery
00:47:38
process. It says, maybe I'm not going to
00:47:40
look at front loaders. Maybe I should look at top
00:47:42
loaders because they break down a lot less.
00:47:44
We've got a business work in an h v, AC and commercial buildings
00:47:47
and taking 50% of the energy cost those buildings out.
00:47:50
And so we're working across like a lot of these different
00:47:52
problems, but none food-related yet.
00:47:55
Okay. Yeah.
00:47:57
What is the business like is that a consumer report?
00:48:00
Sort of like, wire isn't like a media publication?
00:48:03
Or is it we're in beta on this? We haven't really talked about a
00:48:06
lot of it but okay. Yeah.
00:48:07
Like one of the things that led to this idea was a few of us
00:48:11
were shopping for stuff like a washer and dryer and said isn't
00:48:16
it interesting that like when you go on consumer reports that
00:48:19
the products that they're recommending?
00:48:21
When you go out to buy those products though?
00:48:23
They have the lowest review scores It's like how could that
00:48:26
be? And it turns out that it looks
00:48:29
like the quality of the consumer reports research and
00:48:34
recommendations is gone down precipitously over time.
00:48:37
And so there is a vacuum in that space to go figure out like
00:48:42
could somebody fill this in a different way and so a guy on
00:48:46
our team, he's super talented Rich hung who was part of the
00:48:49
early Google shopping effort. He and I kind of started to Riff
00:48:53
on this idea and shared a vision and so He's built the platform
00:48:56
and now, we're out working on the minimum viable product, and
00:49:00
testing it out in the market. But yeah, it'll be some
00:49:02
combination of media and comparison tools that haven't
00:49:05
existed before and, and some magic that were thrown into your
00:49:09
decision to get in this the hatching business.
00:49:11
Did you think about sort of the more traditional Venture path
00:49:15
and like, I'm curious what? Yeah, I mean, you clearly went
00:49:20
this direction but do you think The Venture industry is going to
00:49:25
be more more challenged now, our was there anything about the
00:49:29
Venture side of things that turned you away from it?
00:49:32
Or it was just the appeal, there were a couple of things.
00:49:35
There's a there's there's a couple things that I thought
00:49:38
were ready to be kind of modernized in Ventura like the
00:49:41
current Venture model of searching for entrepreneurs
00:49:46
raising you know Distributing capital on the part of LPS for a
00:49:50
2% management fee and a 20% Kerry has Has not changed in
00:49:55
decades. And I thought there might
00:49:58
sometimes they get three and thirty you know, that sometimes
00:50:00
I get. Yeah, when you get really good
00:50:01
at it, when you get really good at it like Sequoia and Benchmark
00:50:05
and some others you can get 3 and 30 but I thought maybe the
00:50:08
maybe there's a more systematic way to go about this.
00:50:11
What if there was a systematic way that you could create
00:50:13
companies out of great ideas and so for me it's just a different
00:50:16
approach. I had some friends close friends
00:50:19
who are in the music business and when I discovered like how
00:50:22
the music business Kind of structured.
00:50:24
This really made sense to me and apply to dvx.
00:50:27
There are generally in the music business.
00:50:31
There are songwriters who are generating the content.
00:50:33
There are performers that proliferate that content and
00:50:36
their distribution, that take that content, plus performers
00:50:40
and distribute it. And there are these songwriters
00:50:43
guilds where you have people that have this, like, awesome,
00:50:46
songwriting disease, and they find each other, and they get
00:50:49
together in places like La in Nashville, and Berlin and other
00:50:52
places around the world. Old.
00:50:53
And they generate, they have this gift of generating massive
00:50:57
amounts of content songs. Then they're paired with
00:51:02
performers. Most performers aren't selling
00:51:05
writers, most performers need content, somebody else, writes
00:51:08
hits that somebody else writes, right.
00:51:10
And I felt like we were kind of a Song Writers Guild, but in the
00:51:15
business sense, like we have this disease where we see
00:51:18
opportunities, where other people don't and we kick out a
00:51:21
lot of ideas. Some are good, some are bad.
00:51:23
Add. But we keep holding the best
00:51:25
ones and we've got the capability turning those into
00:51:27
hits. So in that sense were a singer
00:51:29
songwriter and that's an approach that works for us.
00:51:32
It wouldn't work for every VC. I think it works for us because
00:51:35
we've been both idea generators and we've been scaled operators.
00:51:39
And so we're uniquely kind of skilled to attack a problem in a
00:51:42
different way than most species are.
00:51:44
Does that mean like they BC? 1.0 model is dead.
00:51:47
No, it doesn't. But it's mean that there is a
00:51:49
different way that will kind of proliferate.
00:51:51
Now, I think so because you've Got folks like us you got
00:51:54
Flagship to generating you know 75 companies like moderna and
00:51:57
indigo Aggie, consider Hills generating companies like like
00:52:00
prism and pure and snowflake. Exactly systematically did
00:52:05
generating companies and I think there is another way that's
00:52:08
being created and I would call that VC 2.0.
00:52:10
Does it mean that's going to be 100 percent of the market know?
00:52:12
But is it going to be a significant percent of the
00:52:14
market? I'd say probably, isn't it
00:52:16
decade from now it probably is a significant chunk of the early
00:52:19
stage Market. Yeah.
00:52:21
He's if you, if you have the idea, you should you get to keep
00:52:24
the economics, if you don't, you don't.
00:52:28
Yeah, it's you own 50% of that company at the end of the
00:52:30
funding cycle, 50% beats a 20% carry every day that week.
00:52:34
So I think just the capital rational Capital will follow
00:52:39
down this path and you're much more invested in sort of seeing
00:52:43
the company through and working. Well, yeah, in a way that if you
00:52:47
don't, you're like, listen, I'm on to the next one.
00:52:50
You? Good luck.
00:52:51
You have my that's right. Yeah, that's right.
00:52:53
And we're certainly seeing that the downturn where you know,
00:52:56
people are sort of shrugging off their losses and some cases.
00:53:00
Yeah, I think our co-investors know we're not walking away from
00:53:02
this, we're going to make them work and so that gives investors
00:53:05
that invest alongside of us. A lot of Comfort Suite.
00:53:08
John this is great. Thanks so much for coming on the
00:53:10
podcast. Pat, thanks for heavier, been
00:53:11
fun to talk to you. Thanks a bunch.
00:53:14
That was my interview with John McNeil investor at dvx former
00:53:18
executive and lift, and Tesla. Thanks for Inning.
00:53:21
Shout out our editor, Tommy Heron, my chief of staff.
00:53:24
So, Riley kinsella. The wonderful music is brought
00:53:28
to you by Young Chomsky. I'm Eric newcomer, like,
00:53:31
comment, subscribe on YouTube. Subscribe to the newsletter
00:53:35
newcomer dotco. See you next week.
00:53:37
Thanks, goodbye. Goodbye.