Restructure Your Business Like Elon Musk with Former Tesla President Jon McNeill

We're conducting an audience survey at gun.fms/mylet and we want to hear from you so we can make things here even a better experience for you a great content that you want.

“You know, we all know this. There's ads on our show, right? So, we want to improve the experience.”

But in order to do that, we need to know a little bit more about you. So, my friends in the audience, we want to improve that experience. So, please help us. The survey is quick, easy, and it's a free way to support the show. If you'll take two minutes, you'll be helping us out so much by doing this. So, go to gun.fms/mylet to fill out our audience survey. That's gum.fms/mylet/myletmyletttt. So, hey guys, I'm calling on all my friends here in the audience for a little bit of help. We're conducting an audience survey at gun.fms/mylettt.

And we want to hear from you. So, we can make things here even a better experience for you a great content that you want. You know, we all know this. There's ads on our show, right? So, we want to improve the experience. But in order to do that, we need to know a little bit more about you. So, my friends in the audience, we want to improve that experience. So, please help us. The survey is quick, easy, and it's a free way to support the show. If you'll take two minutes, you'll be helping us out so much by doing this.

So, go to gun.fms/myletto fill out our audience survey. That's gum.fms/myletm-mylet-myletttt. Okay, welcome back to the show everybody. So, today is going to be for minutes. I just finished reading this book. I have to tell you all, it's probably read 2,000 books for the show. I put this in the top 1% of all the books I've read doing this show. The author, he said a little bit of success in his life. He was the president of Tesla. He've heard of them before. CEO of Lyft. He sits on the board of General Motors in Lulu, Leman.

He said a bunch of exits himself. This is a true, I call like a master class in business with a theory and a philosophy that you'll be able to follow today. So, it's heavy note taking as well. I'm really excited to have him here today, and then I didn't know he was a Boston dude as well. So, it's great to have you here today, brother. John McNeill, welcome to the show. Thanks. Thanks for having me, Ed. Yeah. I've told you, I've taken screenshots of the book and sent it to friends of mine.

“As someone who's built some businesses and exited, I think I know when I read something true,”

but I think I also know when I read something I've not read before. It's so the book you guys is the algorithm. Want to make sure I get that in early. And it's really like a five step algorithm that you talk about that. I was asking around like, is this his? Did he learn it from Alon? You know, kind of back and forth. And so, why don't we start with where this comes from? I know from reading the book and then a brief overview of the five steps of the algorithm.

Yeah. So, where this comes from is a framework we developed while we were trying to grow a Tesla from two billion in sales to 20 billion in sales and 30 months crazy.

So, 10x and 30 months, no playbooks for that. I know like K studies you could go read. So, we were really kind of inventing it as we went. And we started to see these patterns in attacking challenges. And so, we baked that down into what we called the algorithm. So, that we could communicate it. So, people would know like if we were if we were working with the team what we were up to, but we also wanted the teams to know they could use this tool too. It didn't require Elon,

didn't require me. And so, I would say it was something that we cooked up and invented while we were on this journey, the whole company together.

And part of it, like, is we'll go through the steps here in a second. More and more as technology has changed.

Now, with the advent of AI, I think this is even more relevant. You correct me if I'm wrong, but part of this is about speed and efficiency. It's almost cool.

“It's a lot about speed and efficiency because you have to move so fast.”

In our case, we were growing from 4,000 people to 40,000 people. So, you've got to have 40,000 humans making very rapid decisions. Way faster than we could make them. And so, part of the goal here was to cook the front lines. And that's why the book is told through the stories of the people that are on the front lines. Because you can see normal, every day people are doing this. It is. And one thing, again, I'm teasing the five, we're going to get into the five parts of the

algorithm here in a minute. By the way, the reason I'm willing to do that is I want you all to know this. The book is so thick with information that just knowing the broad overview of the algorithm is not sufficient in learning what's in the book. So, I think we're comfortable going into it. But I wanted to start out. One thing that surprised me, when a lot hires you, this is a rule for business that didn't think of. He says to you, you say in the book that he was looking for another

entrepreneur to be kind of his right hand and a guy slash that was used to almost running out of cash most of the time. Yeah. That just surprised me. Normally, I'd be thinking, I'm the entrepreneur. I want to hire an operator. But that's absolutely not what he was looking for in you. No, he tends to hire orthogically as what he calls it, like people that have not been in the

And when we were getting to know each other, I kept saying to him, I don't think I'm your guy. I think you need a big company guy. I mean, your company is bigger than twice as big as my biggest company. And he said, no, no, that's exactly what I don't need. That said, why? He said, I need, as you said, he said, I need a fellow entrepreneur. Because you know what it's like to carry the burden of payroll on your back and go into sleep at night, making sure that you can make payroll the next

“week. That's a pressure that big company people haven't faced. And he said, you need to know the”

entrepreneurs kind of life burden, which is in his words, it's staring into the abyss while chewing glass. He's like, I need somebody that's been through that. And he said, the other thing that entrepreneurs know how to do is allocate capital. Because you have, you don't have unlimited capital. You can't go to the market typically as an entrepreneur. So he said, I run this place like a private company. Yeah. And so we don't carry much cash on the balance sheet,

every nickel has to matter. Well, not only do you not carry a lot of cash on the balance sheet, this blew my mind. So this is Tesla, right? And now, as we fast forward, we're looking at in his case, arguably probably the first trillionaire in the country, certainly creeped on his way. He's on his way. He's, he's the odds on favor if we're going to have one. Right. Right. But the company actually had

three months operating cash at any given time. Right. That's incredible to me. Three months

cash on a company on that scale. And that scope that wanted to grow that quickly. Yeah. And again, this is his mindset is an entrepreneur. If you, if you fill the balance sheet with a lot of cash, people get soft. I mean, his words. So he said, you know, I want imminent death around the corner. And it was even tighter than that. And we had three months worth of cash. We had 70 days of payables. That's crazy. So we had 20 days of cash. That's crazy. There was no room for air in this equation.

You know what it may be? I wasn't, this isn't in my notes. I wanted to ask you, but I want to ask your opinion about this is not in the book. Okay. We'll shift just for a second. Based on that and that experience and that philosophy, you know that you know the world we live into now. Everybody's raising money. Yeah. Everyone's given away equity quickly. It's a raise, raise rate. Literally, yeah, almost daily. Probably like you. I'm getting hit with some

raise for some thing. Yeah. And I've always felt like sometimes these folks that are raising money

prematurely are, they've got a false sense of reality in terms of success of the business. In terms of cash, cash on paper, et cetera. Do you kind of think that culturally that's a, almost a perversion that's happened in the business marketplace? I think it's a real watch out. I talked to young CEOs about this about this very topic. Like if you load your balance sheet up, yeah, everybody in the company knows that. And so therefore, people aren't rubbing nickels together.

Yeah. They're not being efficient. They're being expedient. And when you're expedient, you're burning cash. And when you're burning cash is an entrepreneur. You're giving away your equity. That's absolutely so expensive. It is. This is so good. Okay. So based on all of that, now with that backdrop, talk to us about the algorithm. So the algorithm we basically, we came up with these five steps that work that are core to how we drive innovation and solve problems.

So I'll just run through the five steps that we can talk through some examples of these. But the first step is essentially question everything. Question every requirement that somebody's given you a question, the status quo question question question question. So you can rip into what the

“essentials are that you need to deliver. Once you know that, then you develop a process”

from end and that delivers that the most efficiently. Then you optimize the heck out of that just by doing it manually. And we'll get into some examples of that. And then you apply speed because you cannot have a process deliver quality with speed or without, you can't have speed without quality. Okay. So you get both. And then this is surprising. The last step, given the or tech people, the last step is automate last. Yeah. Because if you automate upfront, you're pouring concrete

around your process. And if you discover improvements, it's really hard to improve it. Because now you've got to go blast out the concrete or the software you developed. So, so those are the five steps of the algorithm. That's some of the application on them. And by the way, everybody, you got to get the book because the level of the stories that are in the book sort of illustrate the principles better than even probably what you and I will be able to do today. But one of the

stories in the book, I've tried to do business in China a couple times. Yeah. And it's sort of known. And I don't, I'm probably overstating this. I'm going to be careful. But it's sort of known in the business world. It is the hardest place of the developed nations to try to go do business. It's really hard. And in your case, if you're going to go over there and build a factory, they're getting a piece of it. Right. And you have this great story in the book where Alon says to you,

no, we're going to own everything in there. And you go over there and get this thing done. So to me,

“that follows, that falls under question, everything. But is it true that that's the case?”

Yeah. Can you tell them that's true? Yeah. So in the US, we produce 15 million new cars a year.

new cars a year. So if you're running a car company that's tied on cash, eventually you want to get the China because it's huge market. But as we sat down with our China teams, they said,

“hey, you have to realize that every American company that goes to China has to have a joint venture.”

And the requirements of the joint venture are you split the cash, 50, 50, the profits. And so that meant we're going to get half of it then we thought we were. So the first step they algorithms question everything. So we started a question or a China team and said, is there a way that we could do this without a joint venture? And they said, no way, no way.

This has never happened. GM doesn't have that. Proctor and gamble doesn't have that.

Coca-Cola doesn't have like, no, there's no way this is going to happen. And so Elon, every once in a while, he gets his twinkle in his eye and he and I kind of riff on stuff and I could see he's getting his twinkle in his eyes, turns to me, he's like, how would you, how would you be up for, would you be up for the first joint venture in China that doesn't share any economics? I said, I don't know how to do that, but I don't have a challenge except that. So

I went to China and sat down with our team and said, explain to me the Chinese system so that I could understand the basis assumptions. And they said, okay, two things. One is that in America, the best students typically go off into business, they go to Wall Street, they go to consulting, they go to tech. That's not the way it works in China. Half of the best students go into business, half of the best students go into government, they're sort of split into two groups and they,

as they're new graduates of the top schools, they get a neighborhood and they're the party official in that neighborhood and they have one goal, they get a base salary and they get a two to three extra base salary and bonus for job growth. It's the only metric. Grow jobs in your neighborhood, now you get a part of a city. Do that in a part of a city, now you become a mayor. Do that as a mayor. Grow jobs. Now you're a party official in the province and it goes all the way up to the

top. So they have a system of government where everybody is operating off the same metric and that is

job creation. Okay, super powerful and really simple. And they said, so industry and government

are working hand-in-hand all the time to create jobs because the way you it survive in a single party

“system is you got to keep everybody employed. So that's why this is important. So that it said,”

that's thing one is creating jobs is a big deal. It said, okay, good, check the box. We're going to create a lot of jobs. Second thing they said you need to understand is every year they produce a five year economic plan of industries they want to enter and eventually dominate. And this was 2015 and they just published their five year plan. I said, what's in the five year plan? They said five things. It said, okay, what are they? They said electric cars, batteries, whoa, async chips, autonomous software,

and I'm like, okay, we have we got like four to the five. We are in a strong negotiating position here because every party official wants us because we can help them check their boxes. So we'd negotiate it hard for a year kept saying, in these negotiations, we want to JV with no economic sharing and eventually we got it. That's unreal because we question that first or something, but then you got to like learn what's the what's the what's the chess board look like and how

can you maneuver through this to get to your goal? It's not just you can will something into into existence. Do you think they figured out? Do you think that was easier because you were essentially a startup company as opposed to implementing this algorithm into general motors or GE

“or someone listening to this, they've owned 25 dry cleaners in their family for 40 years, right?”

Yeah. And now I don't even know that they know what their legacy thinking has become, right? Yeah. How do you how do you step back and say question everything? What are the things you should question? That was kind of the thing for me reading the book like in some of the business

I don't like well we've just always done it that way. Uh huh. You know everything as we just

always done it that way and it seems to work pretty well or I always want to wonder are we are we winning in spite of the fact that we've always done it this way or because we've always done it this way? It can be both, but I think it is to your point it's easier to do it in the startup than it is in a 150 year old company like GM. But GM has done this. As they've introduced their latest models, it used to take them two to three years to develop a car from idea to

coming off the line. And so they decided to hand a young engineer named Josh Tovel 37 years old their first Hummer EV project. So this was going to be their Halo Car that they're bringing into the market as a every feature imaginable and and Josh had this goal I'm going to take a 36 month process and make it an 18 month process and to do that the president and CEO of the company

way we've always done it things around here that aren't productive at all. And so he was able

“to and his team were able to suspend the rules and put a team of ninjas together that actually”

delivered the car in 14 months. That's crazy. And it's so it can be done in 150 year old company too. It can be done. Yeah speaking of putting a car together, you know I read the book based on these questions, right? So I just I poured into this thing. Can you tell them about the casting example in the book? Because to me this was a pivotal thing in the development of the company. And there's one way to do it and then maybe there isn't anymore, right? This is a pivot point

almost in the companies. So you know what everybody I really appreciate the comments about you know I've gotten a lot leaner and build more muscle this year and it was really intentional and I was thinking how can I get ahead you know on my fitness because I already pre fit and worked out and it was how I meeting and that's where factor came in. Factor doesn't ask you to meal prep or follow recipes. It just removes the entire problem. Two minutes real food bam done. And so once I started eating

healthier and using factor, not only did I get a lot leaner but I built more muscle and to treat this guys I had more energy. So one of the things I like is going to tell you you can rotate the meals every single week. There's like a hundred different meals high protein calorie smart

“Mediterranean. It's awesome. You should be using factor just like I am. Head to factormeals.com/mylet50off”

and use code my Let50off to get 50% off your first factor box plus free breakfast for a year.

Offer only valid for new customers with code and qualifying auto renewing subscription purchase. Make healthier eating easy with factor. Dell PCs with Intel inside are built for the moments that matter for the moments you plan and the ones you don't. Built for the busy days that turn into all night study sessions. The moment you're working from a cafe and realize every outlets taken. The times you're deep into your flow and the absolute last thing you need

is an auto update throwing off your momentum. That's why Dell builds tech that adapts to the way you actually work. Built with long lasting battery so you're not scrambling for the closest outlet and built in intelligence that makes updates around your schedule, not in the middle of it. They don't build tech for tech sake. They build it for you. By technology, the built for the way you work at del.com/delpcs. Built for you.

So Elon, his method of leadership is to set crazy goals and then have people around him that will accept the challenge of the crazy goal and try to figure it out. So we're in a management team meeting one day and he said guys like to compete with the Chinese. This was after we started our Chinese factory and we could see how efficient the Chinese auto industry was. He's like to compete with the Chinese. We had to take like 50% of the costs out and so he turns to me and Doug

Field, who is ahead of engineering at the time. Now Doug runs EVs at Ford. He turns to us and says guys, can you figure out a way to take 50% of the cost out? So Doug and I go for a walk and we go for a walk in the factory and the factory is about two kilometers long. So it's 1.3 miles,

basically 1.2 miles and a car factory is kind of divided into two. First half of the factory is

a bunch of robots putting the skeleton in the car together and the second half of the factory is people hanging parts on that skeleton and in the first half it looks like an orchestration of hundreds of robots because it is and there are hundreds of parts that are getting welded together to create the skeleton in the car. And Doug and I are in the middle of the factory between the two halves and we're looking at this end of the factory that's all robots

and building the skeleton. And Doug says, I think I have an idea to get rid of 50% of this. And I said, "What is it?" He said, "I got to go home and do some studying and reading about it, but I think I have an idea to see it tomorrow morning." So he comes in the next day and he says, "Here's the idea and he rolls a Matchbox car across the table at me." And my Doug wants his toy car. This is big as my thumb. He said, "Yeah, this thing isn't welded, it's casted, meaning they

pour metal into a mold to create the car." And I said, "Well Doug, the reason they can do that

“is because the pressure you have to have to keep molten metal in place is superty duper high.”

You can do that for something as big as your thumb. You can't do that on car parts. They're too big. Like you blow this factory up, literally trying to pressurize that molten metal." He's like, "I think we could figure this out. Are you willing to go in like an exploratory journey with me to figure this out?" I'm like 100%. What do you want to do? He said, "Do you have anything in the factory that is excess aluminum that we could melt?" And I said, "Yeah, we've got a

bunch of like scratch and dent wheels that we pull off cars because they're scratched and dented. And we put them out back and a recyclac comes by every week and picks them up. He's like awesome.

and with a few engineers, we're going to start dumping these wheels into the smelter and we're

“going to melt metal and we're going to put them into molds. And so we literally start to do that.”

Like we're literally chucking wheels into this smelter. It's melting the aluminum and then we're pouring it into a mold as big as our hand and pressurizing it and getting that to work. And then we're pouring it into something that's maybe a couple of feet wide and we go step by step by step

until we get to the point where we've got a machine that's super powerful and sophisticated that

can take half of the car skeleton and mold it. And this is called castings. And so if you were in the Fremont California factory, you'd see that half of the place is robots and it's building the skeletons. If you go to the Austin factory where they're building the model why, there is no half of that factory. Factories have to size because they're just building castings and all you do is stick these two things together and you got a car. And so we figured this out and it meant

that cars were a lot easier in a manufacturer. One of the toughest things in car manufacturing is get everything to align. And that's because when you have a skeleton that's got several hundred parts, it's really hard to do that. When you've got a skeleton that has two parts, it's super to do breezy to do that. So when you have the manufacturing quality go up and they're all these benefits from that. But like, it's eight years later now, we invented this eight years ago.

The car industry's trying to do this and you cannot buy a casting machine anywhere now because Toyota's trying to figure this out, Ford's trying to figure this out, GM's trying to figure this out, castings are the thing. But it can't you buy the machine because they're such demand and they're so few of them. Yeah, because car companies now are like gosh, these guys really totally have changed the industry. Unbelievable when you're listening to everybody that a company like Tesla,

like a pivot point like that. I got an idea. Let me think about it overnight. He rolls a little matchbox car at you and that completely transformed the ability to build these cars at scale and with the efficiencies in them. Totally, like one of the things I loved about being on these teams is like people were like pretty analytical but really creative too. And Doug's one of those. He's absolutely creative genius. And so for him to come up with a completely changed industry with that

one thing. But it also came from a leader saying, I'm not certain to go for 10% or 5% or 20% I want you guys to whack 50% of the cost out of this thing. Yeah, yeah, it's amazing that we're

get to that in a second. But what's amazing to me is all of these companies essentially had

legacy thinking the entire time. All of them had the means, the capital, engineers, all sitting there that could have done what you guys ended up doing. Yeah, but because they don't question everything because they're not thinking about efficiency because they're not running the algorithm,

“that's what I mean by the blind spot in your business, everybody that you, even if you're a real estate”

agent, it's just every, what is it that everybody's always done that doesn't need to be done any more. Totally. It's so, it's, it's mind blowing to me. The other part I want to ask you. So he throws this thing out. 50% let's cut the cost. First off, he said a tone I assume in the company where bad ideas were okay as well. Yeah. Yeah. And that's something in most companies. Two people are afraid to kind of because if you just kind of fall in line, you're probably going to get a paycheck

that month. I assume one of the good things. I'm sure there are other things that weren't good. But one of the things about working with him is he fostered an environment. Is it fair to say where ideas were welcomed that questioned tradition? Totally. Like we would fail constantly. And if you look at his other business space, I don't know. I mean, dozens of rockets, they sent up into the sky that exploded. Right. Like the total mission fails. And there's hundreds of millions of dollars blowing

up in the sky literally. And it wasn't like people got fired. It was, what can we learn from that? Because we knew we were on this learning cycle. And humans aren't perfect. This side of heaven. You're going to screw up. So we wanted to learn from the, from the failures. And we kind of had this mantra, which is, which is learned from the failure. Don't repeat it. And if people were repeating failure, that's a problem. But if they're learning from it and incrementally getting better,

“that's what we want it. Because the goals were so high that we knew you couldn't achieve them”

on the first whack. Was it an environment there? You said in the book that he has blind spots as well.

In this interview. Yeah, we all do. Yeah. We all do. Was it hard? I don't mean that I, bad friends that are pretty close. So, did you sometimes feel like you were the adult in the room? I was trying to be the steady hand in the room for sure. Yeah. That's like whatever. Yeah. Yeah. Just to end, and oftentimes take the other side of the argument. Like if, if he wanted to produce a car, which he did when we launched the Model 3 in 2018, he wanted to take the steering wheel in the

pedals out because he thought we were that close to autonomy. And so I had to pull him aside and say, let me take the other side of this argument. If we don't get autonomy done, now we're got a bunch of cars without steering wheels and pedals. And we're going to cause our own extinction event. Whoa. Do you want to be the source of the extinction event? He's like, no, I know. I said,

I'm not sure the government's ready to put cars on the road, but that's. So, I said, there's

two strikes against us. I don't want to cause the extinction event here. I know you don't either. And he would come back and say, thank God we had that discussion. Okay. Yeah. You, one personal thing you share in the book, and then we'll get back to the business stuff. But I've met you. You mean, you've, you walk in a room, you know, you acknowledge everybody. You've got tremendous people skills, you got great energy. But it sounds to me as if over time there, at least your wife says to you at

some point, you're, you're losing who you are. I'm misquoting are here. You can clean it up for me. But I don't recognize this guy or I'm losing you. Yeah. The downside of working with someone who, you know, alongside mental health issues that he's been very honest about, the downside of working

in an environment like that long term is, is what, and what did it do to you? Why did you ultimately

decide, this is the end of the road for me? I, I found myself in Walter Isaacson writes about this in his book. Walter was writing his book on Elon and he called me and said, hey, I want to talk to you about, you know, Elon's mental health challenges. And I said, I'm not sure I want to talk about those. I, he said, well, Elon actually gave me your number. He wants you to talk about those, because he wants people to know that if they're struggling, there's, there are other people that are struggling too,

and he's one of them. And you can be successful even if you have mental health issues.

“By the way, Walter, like, this stuff is so personal. Can you just, won't you give me a few hours?”

I'm going to call Elon, make sure he's okay with this. So I called Elon and said, look, he wants to talk about this. Are you okay with me going there? And he said, yeah, because I want people to know if they suffer from bipolar that, that they can get through this tune, have a successful life. So I got back together with Walter, Walter said, tell me about the implications of dealing with somebody with bipolar. And I said, well, the implication for me was, I'm pretty

good at running businesses, but I have no skill set in helping somebody through severe depression in bipolar. And I found myself dealing with that more and more. And I was trying as best as I could to help him, but I didn't have the skill set. And eventually, my wife saw the symptom of that, which was, she said, you are stressed out and upset all the time. And I didn't recognize that, but she had enough perspective to recognize it. She said, why do you think that is? And I said,

I think I know why it is. I'm trying to solve a problem for which I have zero skills. This is like me getting thrown into a major league baseball game. And I'm on the mound and I have no idea how to throw ball 90 miles an hour, much less make it move. And I said, I feel like I'm failing at this.

“And she said, you need to decide where this is the role for you. So I actually went and sat down”

with Elon and said, I love you and I love this job, but this job has become more about helping you with your mental health issues than it is running Tesla. And I'm not equipped. That had to be one of the hardest decisions. Totally hard. Totally hard. Yeah. You. What is it like? What's the other side of it? Sell us the dream or the nightmare? I've had friends of mine that I've asked. I've had, I've been fortunate that I've been involved compared to you, it's ridiculous, but

I've had some small exits and success in my life. And but I've had other friends where we've gathered and talked about that journey and had people ask us, you know, if you had to do it all over again. I think the guy was running a video said this or something. If you had to do it all over again, what advice would you give it to me? And he says, I probably wouldn't do it all over again. And I'm wondering, what is it like? Take us into what's it like emotionally, physically,

the good and the bad of being watching the dream happen for a company coming in when it's an idea, right? And then taking it to a place that's in, what is that like? All these entrepreneurs have a dream, you've been involved with Lyft, you've been involved with Lulu Lemon still, you've been involved with Tesla. I mean, yeah, your resume's bananas, right? But even in the test of the case, what is this process like in your life when you go through it and you see it

“happen? I think maybe the core skill entrepreneurs have is problem solving. And problem solving,”

you get to use the right side of your brain, left side of your brain, left side of your brain, it's like you're analyzing the problem, right side of your brain is you're creating solutions. And you've become this like ninja problem solver. And out of those solutions, then stuff gets created. And so that for me was the satisfying part, was we're knocking on these problems. And now we've got the ability to build a car for half the cost. And if we can do that, a lot more people are

gonna be able to afford to buy the car. So now this dream is starting to become reality. This second

piece of the satisfaction for me, though, is teaching people how to do this and then watching them do it. And then seeing that they had, they were able to do much more than they thought they could do.

to do it. You see, challenge is it being pushed? I would say, I'll give you an example. There's an example in the book of this woman Nikki and Nikki ran delivery at the factory. So people would fly to the factory to get their cars delivered right off the line, which is pretty cool experience. And she was doing this a couple of dozen times a day and had a team doing it and then at the end of the quarter, hundreds of cars would come off the line and they'd do it several hundred times a day.

And I watched how effective a leader she was. And we had this challenge worldwide where we didn't know how to deliver these cars very well. And efficiently. And so I gave Nikki a battlefield promotion.

I said, Nikki, you're going to be charged with this globally. And she looked at me for a second

and looked like, yeah, she had to look at her face. She's like, I'm not sure. And I said, no,

“I think you can do this. We're going to help you. We're going to surround you. We're going to teach”

you how to do these things. Teach you the algorithm and tools. And about six months later, she had mastered that. And then we had a problem in the factory that was so vexing that even Elon and I and everybody else that was wrestling, we couldn't fix it. So I said, Nikki, you're going to get now your second battlefield promotion. You're coming to the factory with me. We're moving our desk down there. We're going to solve this together, but you're going to lead it. And so that

is not necessarily a push. It's more of a pull. It's pulling somebody onto the playing field and saying, I believe in you. I'm right behind you. I'm going to support you. But you can do this. And she proved time and time again that she could step up and do that. It's interesting. I came here today wanting to learn myself, you know, about challenge my own thinking. And if you

would have asked me one of the great qualities of an entrepreneur, the first thing I would have

said would be like vision. Yeah. The ability to stretch. But you said solving problems. That's the first thing that came to your mind. Do you think that that's the difference between a president

“and a founder? Or do you think that that's just, why would that your answer do you think?”

Because that was clearly your first answer. Well, I, we, for a living now, I start companies. And so before I met Elon, I had six companies, not at, not same time, but six companies kind of in a row where we wrote the business plan on my kitchen table, scaled the company, sold it to a public company, did that six times in a row. And now I invent companies for a living, I am back to my roots. And the reason I say problem solving is because we'll typically start with a big,

a big opportunity area. And we'll say, we got to create a company in this area. We got to figure out how to do that. Yeah. We're going to create a vision eventually. But first we got to figure out how to, how to really make this company come to life. That's interesting. And a lot of that's problem solving at the very beginning. So I'll give you an example. Like we saw that in the, in the cyber, or in the, in the cybersecurity market, last five years have been about 1200 companies created

in cybersecurity, all focused on the cloud, which I totally understand because it's easier to write software for Amazon, Azure, and Google than it is, your local dentist who could have any, any, any form of a tech stack. And so we said, how many, how many cyber companies have been created for the local business? None. Isn't it interesting that most of the ransomware is happening in small and medium size businesses? Yeah, because they're totally vulnerable. And they're vulnerable

because their tech stacks are really hard to figure out. And so we just took this challenge and said, let's go create a vision. Here's the vision. Let's create a cyber company for the main street business. To do that, we have to solve a big technical problem, which is how to hack that we do this for an infinity number of tech stacks. Yeah. All right. I love when you guys send messages out on social media about the show. And lately, but getting a few of these messages about my wardrobe,

I was wearing the sweater, this tan sweater. And I kept getting all these messages from guys going, where did you get that sweater, bro? So I'm going to tell you where I got it. I got it. It quince,

“a well-built wardrobe is about pieces that work together and they hold up over time. That's what”

quince does best. Here's the most important part. It's affordable. Don't break the bank, right?

Quince says the everyday essentials I love with quality that last organic cotton sweaters, Polos for every occasion, lighter jackets and keep your warm and changing seasons, everything for everybody. Okay. Go check them out. Quince works directly with top factories, cuts the middle men so you're not paying for brand markup. So refresher wardrobe with quince, go to quince.com/ed for free shipping on your order and 365 day returns. Now available in Canada, too.

That's qu-i-n-c-e.com/ed for free shipping and 365 day returns. Quince.com/ed for free shipping.

problem and then boom, we've got a company and we looked like visionaries but it was like both aunt. You got to have the vision and you got to like do problem solving the accident

get there. It's really good. I've never heard that before. Everybody should rewind that last

two minutes. That's new. That's that's different. The other thing that you touch on in the book in addition to the algorithm of five steps. I guess the five parts of the algorithm is culture, which is a big thing. If I go give a talk at Harvard or some business school, I mean obviously culture comes up and everything but you actually break it down in like three different components as well. So just if I said to you the word culture and a company you would say what back.

“I would say like there's this secret sauce of kind of secret ingredients to cultures that I think are”

super successful. And both of them are really about creating feedback loops. So the first is does leadership eat its own dog food. Meaning, meaning do they use the product. Yep. And I was with a group of banks at yours and I said hey raise your hands if you guys use your app, your banks app on a weekly basis. No hands go up. And I said to be honest I wasn't surprised by this because I'm a customer of a couple of your banks and your apps suck. And if you use them

they wouldn't suck for another day because you'd be so embarrassed you would you would haul yourself down to the people that were responsible for that happen fix it. But you don't use them so you don't know. So you don't have a feedback loop and the company doesn't have a feedback loop and they think if it's acceptable to the CEO it's acceptable to everybody else. And and so I believe you got to use your own product. So I'm a board member at Lulemon. I've been in five stores the last two weeks

because I want to shop a secret shop and I send our head of stores notes on every store visit.

Like here's what look here's what one great here's what didn't go great and it's a feedback loop

that she can get them to fix stuff. But the message there is rather than sitting in headquarters you want your leaders to be out doing that same thing. And Tesla had this approach where we took car off the line. If you were in a senior management team we took a car off the line every night and we would drive it home drive it back to the factory the next day and within a half an hour we'd have notes to the engineers. And so the feedback loop of using your own product is super important

and I'm shocked most people don't do this because it's just an easy hack. That's thing one. Thing two is there's a reason Elon can run so many companies and that is heat spent a lot of time thinking about what are the one or two and there can only be a handful existential issues for this company. And for him he says I'm only working on those two. I'm going to delegate everything else in the business but those two I'm personally involved. And so like in the car business

right now he's determined that there are two existential issues for Tesla. One is autonomy.

If you don't have a car that's a chauffeur and another company gets their first you're going to

“be out of business. This is like a flip phone to iPhone moment and he really does believe this I think”

that if you're a flip phone maker like Nokia Motorola Blackberry were when the iPhone came out your market captain fall by half it went to zero zero. So that's existential you've got to you've got to be first in that technology. So what that means is is that every week when he shows up Tesla for one day he's there a day a week. He is only talking to the teams that are responsible for that issue. And because it happens weekly there's weekly forward progress because teams when

they meet with the CEO don't bring their B game they bring their A game and they come with solutions and they're moving that problem forward just incrementally incrementally incrementally incrementally but because the CEO's personally involved he can resource those those needs and really drive forward progress and essentially what Tesla and SpaceX do then is they're creating a compounding advantage versus their competition every week. And so if you look in space now they've been land

in rockets parts of rockets and reusing them for six years, seven years and nobody can catch up and because there's seven years ahead they're already on to launch in their own satellites and creating starlink etc. Well like Blue Origin's trying to figure out like how do we launch one rocket

“and catch one fuselage and so they've got I think their launch costs are 90% less than the”

rest of the industry. I've got 90% market share and that just keeps compounding. So the second cultural secret ingredient is as a CEO have you figured out what the one issue is in your company that is going to drive survivability and are you working that every week so good and if you do

when you're hiring do you is culture fit important to you or we kind of hire for two things like

we hire for this is going to sound crazy this combination but we hire for humility and capability and believe it or not like everything you'd read about Tesla externally you think boy this is big ego driven culture it's really it's very it's very humble culture in the sense that Elon will create these crazy goals and they response from some of the most brilliant engineers in the world will be I don't know how to do that so it's a really humble thing up front like

I don't know how to do what you're asking me to do but I'll figure it out or we'll figure it out

“and so you want somebody who's got that humility but also that quiet confidence to say I think I can”

go slay this I see that in you well it's it's and so then they'll fit in the culture for sure

if they have those two attributes that's interesting because my favorite people friends

I started to deduce like who do I like to be around in my life and it's it's people with tremendous humility but they nuance it because they also have a high level of self confidence as well they told that line these people that have tremendous confidence and bravado with no humility they become exhausting yeah they are they are and then the people that don't have the confidence you're dragging them through life in business all the time as well so it's a really unique nuance

this you guys in the book this eat your own dog food part will stand out to you and it's outstanding tell us about what you're doing now I'm just sort of interested like give us the name and I know it's and yeah so we call this dvx ventures and what we are as a group of people with an idea disease essentially for businesses and we create businesses from scratch so we're kind of inventors of companies and we'll take these in these have to be in big big opportunity areas where we

feel like we're moving the world forward and we've created 12 companies in five years and we're just have this systematic way of doing this where we will come up with the idea for the company we'll

we'll get the first product in the market we'll get it to post revenue and then we go look for a

second or third time entrepreneur who has had success but they don't have their next idea and then we'll bring them in and they can typically bend the curve of this business really fast if you had any setbacks the last 10 years oh yeah yeah can you explain one describe one yeah so like one of the things I observed at in the right-chair industry was they have this genius ability to be able to price a ride for what you're willing to pay for it and what they can deliver it for

at a moment in time in a street corner and a weather condition whatever super sophisticated and so they have these pricing engines that can determine what people are willing to pay and every product company I've been a part of or set on the board of doesn't have that capability so Lulu lemon set their legging prices in a hundred and eight dollars like 12 years ago and they don't know why it hasn't changed they don't know whether they could sell twice as many at

98 bucks or whether somebody is willing to pay a hundred and 18 they don't know and so I said you know we ought to take this insight from right-chair and being able to price dynamically and bring this into the consumer market for products so you you could understand like hey if I lowered the price on this thing could I sell more and we'd actually done this at Tesla we we plotted out a demand and pricing curve and figured out that we could drop the price on the model as by five grand and sell

“25% more cars which is really in great insight and important insight to have so my idea was hey”

let's start a company to do this yeah great idea and we looked around and said well there's a bunch of carcasses around that have tried to do this and they turned out to be consulting companies because they couldn't get people to buy software so we brought a bunch of really brilliant people and people that worked at Boston Consulting Groups pricing group etc and we start to build this product and we take it out to companies and companies like yeah we really want the product

but we want your consulting more because our business is so unique and one of the diseases I think in business is people think their business is unique really not but they think it is and the other day they thought it was and we couldn't figure out how to create a software business out of this it was going to be a consulting business and consulting businesses are tough they're low profit etc so my team turned to me and said we have to kill this idea and we do this a lot and and I said

yeah you're right like I thought this was going to be apical but I was wrong and and so we killed the idea you'll stop throwing good money after bad exactly exactly do you when you look at business right now so there's things alone said that scare me almost about what he thinks is AI is going to do to the world so you you're there that entire time right and you've obviously had you've proven

“your algorithm and you're success not just in one place but in multiple places that's why”

it's a valid theory when when something's pressure tested multiple times yeah then we know

for the book then you're even your publishers here today just because I believe so deeply in the principles in the book especially now give us just a peak what do you think the next five years

“looks like I mean he's actually said I think I quote and correctly where he says I don't think”

we're going to have a workforce anymore I think we're going to have you know guarantee minimum income everyone's going to be kind of floating around and the robots are going to do everything I'm over simplifying but not by a lot what do you see the next five years of business in general looking like and the changes the warnings the sense of direction you would give someone listening or watching

this today I my reactions a little different I think I think the first part is right I think humans are

really good at seeing the first impact of technology which is typically job destruction we're really good at that destruction yeah and we're really good ringing our hands at that we are not good at seeing what's on the other side right and the reason is is because we can't see what's on the other side because the world hasn't existed like that before so I'll give an example I grew up in very rural America I grew up in Nebraska and the whole country looked like the place I grew up in in the early

1900s about 67% of jobs were an agriculture and this thing came along called the tractor and people started ring their hands and said 67% of Americans are going to be out of a job this is going to be terrible not good terrible so the tractors roll out farming gets a whole lot more

“efficient today I think less than 2% of our population is an agriculture but somehow on the other”

end of that there was there was a second order effect that we didn't understand and the second order

effect that we didn't understand was a couple things one is if if mass production of food exists it makes a lot cheaper so people need less income to afford food and then for if they have more income they can invest in other things the other thing that you could invest in was this tractor was the product of the beginnings of an industrial revolution that then created all kinds of industries cars and trucks and trains and you go on and on to date computers and pharmaceuticals so what jobs get created well

car factories need people and then you got to build roads and so you have construction jobs it get created and have watched this even in my own life when I was a kid in this rural place to make a long distance call I'd have pushed zero on the phone and talked to a human being and I knew where she was in my town she was an operator for the local phone company and what she did physically was take my call and plug a wire into the national system so that

that could create a link for a long distance phone call and she did this all day long and then sometime in the 70s really bright engineers at Bell Labs figured out an electronics switch they could connect those two systems without a human having to connect two wires or a wire on the up plug on each side and overnight 800 thousand operators were out of a job jobs gone so it looked a lot like a yeah big technical revolution all these jobs are going away and this

could be massive unemployment for these people but we couldn't see what was on the other side of that and some entrepreneurs once they discovered that you could switch for free said oh we we're going to make long distance calls free we're going to have this special area code it'll be 1-800 and all this sudden you could dial anywhere in the country for free dialing 1-800 something something that created a need for call centers and now there are millions

9900 thousand people millions of people employed in call centers we couldn't see that on the on the front side and so now we say okay yeah it's going to take all these call center jobs away because the AI does support really well and there's going to be massive unemployment and we're going to have universe I'm not sure that that's the case if you look historically every major technical breakthrough has led to an increase in GDP for humanity very good so like I I don't subscribe to the

doom and gloom we're not going to have jobs I just don't think that's the way the world is worked historically and I could this could be the first time in history and I could be wrong but

“I think we're going to see opportunities get created that we can't even imagine sitting here today”

I'm glad to hear you feel that way okay last question so two-parter okay by the way I've enjoyed that I so much me too it's we we could do six hours and it would fly by yeah um hey commercial for the book why should someone get the book and then be attached to it

I've always wanted to ask somebody other than my normal circle of people that we talk about

entrepreneurial I remember when Michael Gerber wrote the email he called it having an entrepreneurial seizure I don't know if you're ready to email yeah having an entrepreneurial seizure I think that's a great book as well I did too and that's it's like the bog thing now on social media everybody wants to be an entrepreneur yeah I'm curious as to your thoughts so commercial for the book slash finished with who should be an entrepreneur do you think everybody can be do you think it's a genetic thing do you

watching or listening today and who maybe should be another one being a number two and running a business

“of an entrepreneur yeah so like the reason I wrote the book was I wanted first of all I wanted”

people to know how Tesla operates and this is largely how SpaceX operates too and there's this operating system we use and it's called the algorithm and I wanted to get that out there that framework out there so that so that we could drive more innovation in this country and that was my primary motivation I've read books like Gerber's books and other other books where they've had a profound effect on me and my capabilities and so I wanted to get this out there in in the chance that that

has that impact on somebody it's going to and then I should people be entrepreneurs like I teach I like you do in business schools and I'll have people students come up to me at the end of

class and I want to be an entrepreneur and my first response is are you sure like are you really

sure do you know how hard this is this is really hard and it's really enjoyable if you're

“if you're wired for it but it's super dooper hard and I think when I was starting my career”

there was there was a guy that I was working for who spotted in me that I was an entrepreneur and he said you ought not to stay here as an investor you ought to go be an entrepreneur and I said okay what do you see in me and he said well I see that you want to be hands-on solving problems I see that you're a creative you want to create and you can't really do any of those in the kind of

job that you're in right now and so those are the first two things I asked entrepreneurs like yeah

tell me tell me how how creative you are like when you look at it if you're looking at a situation to people often say to you wow you look at you look at that with a different angle than the rest of us are looking at that gives you the creative insight to create something that is going to be meaningful and important and so that's the vision piece and then essentially are you stubborn as hell yeah because you're going to hear no 500 times for everyone yes you just got to be

“able to ignore that you have to have the kind of you have to kind of like short-term memory”

and like misplaced confidence that you can fix that and so like if you're just stubborn as hell and you're creative you're going to have a pretty good pretty good chance of success but if you're not then this probably isn't the thing for you so good you said meaningful today was this was really meaningful I've done a lot of podcasts brother I really really grateful that we did this today same yeah I'm really grateful you wrote the book thanks you guys get the algorithm you just take

my word for get the book you're going to be glad that you did it's going to help you in your business going to help you execute better it's going to give you a philosophy and a theory that he's applied in multiple businesses but particularly Tesla which has done pretty good three months operating cash that still blows my mind john McNeill thank you for being here today thanks for having me god bless you everybody share today's episode take care

from again the verbafloute they showed an anzeigum anzeige that's nerfed and it's a lot too tired stop ross that the recruiting spirit with step-down all jobs become as you all azeigen for a year in a package to a fixed price so sparen see bis to 75% cost approval and are every time flexible now it's time for one on step-down.de/alljobs step-down. einfach die richtigen talentefinden für alle jobs