The Tesla Playbook for Explosive Growth | Jon McNeill & Ed Mylett

Key Takeaway

Tesla president Jon McNeill reveals the revolutionary 'Algorithm' framework that grew the company from $2B to $20B in 30 months. The five-step process—question everything, delete unnecessary steps, simplify/optimize, accelerate cycle time, then automate last—challenges conventional wisdom. Most critical insight: Don't automate before optimizing. When you automate upfront, you're 'pouring concrete around your process,' making improvements nearly impossible. Manual optimization first allows you to discover the most efficient path, then lock it in with automation.

Episode Overview

Jon McNeill, former Tesla president and CEO of Lyft, shares the systematic framework he and Elon Musk developed to 10x Tesla's revenue in 30 months. The conversation explores how questioning fundamental assumptions—like China's joint venture requirements and traditional car manufacturing processes—led to breakthrough innovations. McNeill reveals how Tesla negotiated the first wholly-owned foreign car factory in China and revolutionized automotive manufacturing through casting technology. He also candidly discusses the personal toll of working in a high-pressure environment and the decision to leave when the role shifted from operations to mental health support.

Full Transcript

Transcript of The Tesla Playbook for Explosive Growth | Jon McNeill & Ed Mylett from The Ed Mylett Show. Auto-generated from episode audio; may contain minor errors.

China's twice us. They do 30 million new cars a year. So, if you're running a car company that's tight on cash, eventually you want to get to China because it's a huge market. 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. So, we we started to question our China team and said, "Is there a way that we could do this without a joint venture?" And they said, "No way. No way.

No way." And so, Elon, I could see he's getting this twinkle in his eyes. He turns to me. He's like, "Would you be up for the first joint venture in China that doesn't share any economics if challenge accepted?" Like to compete with the Chinese, we had to take like 50% of the cost out. Uh 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 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 uh and building the skeleton.

And Doug says, "I think I have an idea to get rid of 50% of this." He comes in the next day. He says, "Here's the idea." and he rolls a Matchbox car across the table at me. I'm like, Doug, what's is this toy car? It's as big as my thumb. He said, "Yeah, this thing isn't welded. It's casted." He's like, "I think we could figure this out." I mean, he's actually said, I think I quote him correctly where he says, "I I don't think we're going to have a workforce anymore.

We're going to have, you know, guaranteed minimum income. Everyone's going to be kind of floating around and the robots are going to do everything." I'm oversimplifying, but not by a lot. What do you see the next five years in the changes, the warnings, the sense of direction you would give? Okay, welcome back to the show everybody. So, today is going to be tremendous. 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.

Um, the author, he's had a little bit of success in his life. Uh he was the president of Tesla. You've heard of them before. CEO of Lyft. He sits on the board of General Motors and Lululemon. He's had a bunch of exits himself. This is a true I'd 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 notetaking 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 McNeel, welcome to the show. Thanks. Thanks for having me, Ed. Yeah, I uh I've told you I've taken screenshots of the book and sending 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've read something I've not read before. And so the book you guys is the algorithm. I 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 Alain? 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 is a framework we developed while we were trying to grow Tesla from two billion in sales to 20 billion in sales in 30 months.

months. months. Crazy. Crazy. Crazy. So 10x in 30 months. No playbooks for that. Uh no like case studies you could go read. So we were really kind of inventing it as we went. And we started to see these patterns in in attacking challenges. And so we we baked that down into what we called the algorithm so that we could communicate it. So people would know like 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. Uh it didn't require me. Uh and so I would say it it was something that we cooked up and invented while we were on this journey, the whole company together. And part of it like as we'll go through the steps here in a second more and more as technologies 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. I would almost call it's a lot about speed and efficiency because you have to move so fast and 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. Uh and so part of the goal here was to equip the front lines. And that's why the book is told through the stories of the people that are on the front lines. Yes. Uh because you can see normal everyday people are doing this. It is. And um one thing and 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 Alain hires you, right? This is a rule for business that I 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 orthogonally is what he calls it. people that have not been in the industry or role before. So the entire management team really nobody had been in the car business and when we were getting to know each other I kept saying to him I don't think I'm your guy. guy. guy. I think you need a big company guy.

I mean your your your company's bigger than twice as big as my biggest company. And uh he said no no that's exactly what I don't need. And I 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 your back your back and going to sleep at night making sure that you can make payroll the next week." week." week." That's a pressure that that big company people haven't faced.

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

Yeah. Yeah. And so we don't carry much cash on the balance sheet. balance sheet. 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. This is Tesla, right? Right. And now as we fast forward, we're looking at in his case, arguably probably the first trillionaire in the country. Certainly creeping on his way. He's on his way. He's he's the odds on favorite if we're going to have one, right? But the company actually had three months operating cash at any given time.

Right. Right. 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. Yeah. Yeah. And again, this is his mindset as an entrepreneur. If you if you fill the balance sheet with a lot of cash, people get soft in his words. So he said, you know, I want imminent death around the corner. Gosh. And it was even tighter than that. Ed, we had 3 months worth of cash. We had 70 days of payables.

That's crazy. That's crazy. That's crazy. So we had 20 days of cash. That's crazy. That's crazy. That's crazy. There was no room for error in this equation. You know what it made me I wasn't this isn't in my notes. I wanted to ask you, but I want to ask your opinion about this. It's not in the book. 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 in now, everybody's raising money. raising money.

raising money. Yeah. Yeah. Yeah. Everyone's giving away equity quickly. It's a raise raise literally. Yeah. Almost daily, probably like you, I'm getting hit with some raise for some thing. thing. thing. 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, etc. Do you kind of think that culturally that's a almost a perversion that's happened in the business marketplace? marketplace? marketplace? I think it's a real watch out and I talked to young CEOs about this about this very topic like if you load your balance sheet up Yeah.

Yeah. Yeah. Everybody in the company knows that. And so therefore people aren't rubbing nickels together. Yeah. They're not being efficient. Uh they're being expedient. And when you're expedient you're burning cash. And when you're burning cash as an entrepreneur you're giving away your equity. equity. equity. That's absolutely That's absolutely That's absolutely so expensive. so expensive. 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 were that are core to how we drive innovation and solve problems.

So uh so I'll just run through the five steps. Then we can talk through some examples of these. But the first step is essentially question everything. everything. everything. Question every requirement that somebody's given you question the status quo. Uh question question so you can rip into what the essentials are that you need to deliver. Once you need to deliver. Once you know that, then then you develop a process from end to end that delivers that the most efficiently. Then you optimize the heck out of that just by doing it manually.

And uh and we'll get into some examples of that. Uh and then you apply speed. Yeah. Yeah. Yeah. Because you cannot have a process deliver quality with speed or without uh you can't have speed without quality. So you get both. And then uh this is surprising the last step given that we're tech people. The last step is automate last. Yeah. Yeah. 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 got to go blast out the concrete of the software you developed.

So uh so those are the five steps of the algorithm. algorithm. algorithm. Let's talk about the application on them. And by the way everybody, you got to get the book because the level of the 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. Yeah. Yeah. And it's sort of known in I don't I'm probably overstating this.

I got 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. business. business. 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 Alain says to you, "No, we're going to own everything in there." And you go over there and get this thing done. So I to me that follows that falls under question everything.

Like is it true that that's the case? Can you tell them that story? that story? that story? Yeah. So we're So uh in the US we produce 15 million new cars a year. Uh and historically we've been the biggest in the world. Uh China's twice us. They do 30 million new cars a year. So if you're running a car company uh that's tight on cash eventually you want to get to China because it's huge market. Um 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 uh they the profits and so that meant we were going to get half of it than we thought we would.

So uh so the first step the algorithms question everything. So we we started to question our China team and said, "Is there a way that we could do this without a joint venture?" And they said, "No way. No way. No way. Uh 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." Uh and so Elon every once in a while gets this twinkle in his eye and he and he and I kind of riff on stuff and I could see he's getting this twinkle in his eye.

He turns to me. He's like, "How would you like how would you be up for or 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'm challenge accepted." Really? Really? Really? 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 base assumptions." And they said, they said, they said, "Okay, two things. One is that in America the best students t t t t typically go t t t t typically go off into business.

They go to Wall Street, they go to consulting, they go to tech. Uh 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 uh as their new graduates of the top schools, they get a neighborhood uh 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 threex their base salary in 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 government government where everybody is operating off the same metric and that is job creation. Okay, Okay, Okay, super powerful and really simple. And they said so industry and government are working hand inand 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 they said that's thing one is creating jobs is a big deal. I 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. M dominate. M dominate. M and this was 2015 and they just published their five-year plan. Okay. Okay. Okay. I said, "What's what's in the five-year plan?" They said, "Five things." I said, "Okay, what are they?" They said, "Electric cars, batteries." Wow.

Wow. Wow. Async chips, autonomous software. And I'm like, "Okay, we have we got like four of 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 negotiated hard for a year. kept saying in these negotiations, we want a JV with no economic sharing. Yeah. Yeah. Yeah. And eventually we got it. That's unreal. That's unreal. That's unreal. Because we questioned that first assumption, 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 will something into into existence. You got like figure it out. Do you think that was easier because you were a essentially a startup company as opposed to implementing this algorithm into General Motors or GE or someone listening to this who's they've they've owned 25 dry cleaners in their family for 40 years, right? And now I don't even know that they know what their legacy thinking has become, right? Like 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 businesses I own like well we've just always done it that way. Uhhuh. Uhhuh. Uhhuh. You know everything is we've 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. way. way. I I it can be both but I think it is to your point it's easier to do it in a startup than it is in a 150 year old company like GM.

But uh but GM has done this uh 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. the line. the line. And so they decided to hand a young engineer named Josh Tavvel, 37 years old, uh their first Hummer EV project. So this was going to be their Halo car that they're bringing to the market, has every feature imaginable. And uh 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 said, "What do you need?" And he said, 'I need you to suspend the rules. rules. rules. Because there are a bunch of like way we've always done it things around here that aren't productive at all. And uh and so he was able 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. That's crazy. That's crazy. And it's it's so it can be done in a 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. thing. 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. Totally. And there's one way to do it and then maybe there isn't anymore. Right. This is a this is a pivot point almost in the company's history. So, many of you have asked how to see me speak live and for the first time ever, you can come see me speak live in person.

All of my speeches have been private events, but now I'm teaming up with Life Surge, speaking all over the country. Life Surge is a one-day faith-based event where you'll walk in hungry for success, and you'll leave ready to build your resources to leave an impact on others. We're talking faithfueled finance, growing your resources, crushing obstacles, and then, yeah, using it all for something way bigger than yourself. I'm joining Life Surge in a few cities this year, and I'd love to see you there. I'll be sharing the stage with legends such as twotime football champion Tim Tibo, star of Duck Dynasty Willie Robertson, and leadership hero of mine, John Maxwell, pastor and author Craig Rochelle, and worship with artists like Natalie Grant.

Tickets are on sale at lifesurge.com. And just for my listeners, you can use the code ED30 for 30% off a ticket. There will be a link in the show notes, so click through and take some time to join us. Cities are being added all the time, so if you don't see one near you now, check back. I hope to see you there. there. there. 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 were we're in a management team meeting one day and he said, "Guys, like to compete with the Chinese," this was after we'd started our Chinese factory and we could see how efficient the Chinese auto industry was. He's like, "To compete with the Chinese, we we had to take like 50% of the costs out." out." out." And so he turns to me and uh and uh Doug Field who was the head of engineering at the time. Now Doug runs EVs at Ford. Uh he turns to us and says, "Guys, can you figure out a way to take 50% of the cost out?" out?" out?" So Doug and I go for a walk.

And we go for a walk in the factory. And the factory is about 2 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 of the car together. And the second half 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 of the car.

And Doug and I are in the middle of the factory between the two halves and we're looking at this at end of the factory that's all robots and uh and building the skeleton. the skeleton. 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. See you tomorrow morning. So we he comes in the next day and he's he says, "Here's the idea." And he rolls a Matchbox car across the table at me.

I'm like, "Doug, what's this toy car? It's as big as my thumb." He said, "Yeah, this thing isn't welded. It's casted." It's casted." It's casted." Yeah. Yeah. Yeah. Meaning they pour metal into a mold to create the the car. And I said, 'Well, Doug, the reason they can do that is because the pressure you have to have to keep uh molten metal in place is super duper high. You can do that for something as big as your thumb scale. You can't do that as uh 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 on 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 uh that is excess aluminum that we could melt?" Right? Right? Right? And I said, "Yeah, we've got a bunch of like scratch and dent wheels that we pull off cars cuz they're scratched and dented and we put them out back and a recycler comes by every week and picks them up." He's like, "Awesome.

Tell the recycler not to pick them up anymore. I'm going to put like a uh smelter back there 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's skeleton and mold it. Unreal. Unreal. Unreal. And this is called castings. And so if you were in the Fremont, California factory, you'd see that half the place is robots and it's uh it's building these skeletons. If you go to the Austin factory where they're building the Model Y, uh there is no half of that factory. Factories half the size because they're just building castings and all you do is stick these two things together.

Unreal. And you got a car. Unreal. Unreal. Unreal. And so we figured this out and it meant it meant that cars were a lot easier to manufacture. One of the toughest things in car manufacturing is get everything to align. Sure. And that's because when you have a skeleton that's got several hundred parts, it's really hard to do that. But when you've got a skeleton has two parts, super duper easy to do that. So it made the manufacturing quality go up and there are all these benefits from that.

But like it's eight years later now. We invented this eight years ago. The car industry is 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 came Why can't you buy the machine? because there's such demand and there's so few of them. Okay. Yeah. Because car companies now are like gosh these guys really totally have changed the industry. industry.

industry. Isn't it unbelievable when you're listening this everybody that a company like Tesla like a pivot point like that. I 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. in them. in them. Totally. Doug Doug's 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 a creative genius. And so for him to come up with that, he completely changed an industry with that one thing. But it also came from a leader saying, "I'm not setting a goal 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 I We'll 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, the 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 anymore? Totally. Totally. 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. cost. cost. It first off he set a tone I assume in the company where bad ideas were okay as well.

well. well. Yeah. Yeah. Yeah. And that's something in most companies too. 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? questioned tradition? questioned tradition? Totally. Like we would fail constantly. And if you look at his other business, SpaceX, SpaceX, SpaceX, I don't know, I mean, dozens of rockets they sent up into the sky that exploded, right?

right? 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 gonna screw up. So, uh we we wanted to learn from the uh from the failures and we kind of had this mantra which is uh which is learn from the failure, don't repeat it. Uh and if people were repeating failures, that's a problem.

Um but if they're learning from it and incrementally getting better, that's what we wanted 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 and this interview is not we all do. Was it hard? I don't mean that. I I have 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.

That's like what I Yeah. Yeah. Just and and oftentimes take the other side of the argument like if if he wanted to produce a car, which he did when we when we launched the Model 3 in 2018, he was he wanted to take the steering wheel and 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. this argument. this argument. If we don't get autonomy done now, we 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? extinction event? extinction event? He's like, "No, I don't." I said, "Yeah, I don't either. So, how about we hold off on this? Because even if we do get autonomy, 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.

Okay. Okay. Yeah. Yeah. 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 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 you're losing who you are. I'm misquing her here. you can you can clean it up for me, but I don't recognize this guy or I'm losing you.

Yeah. Yeah. Yeah. What the downside of working with someone who, you know, Alon's had 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 and Walter Isacson writes about this in his book. Uh Walter was writing his book on Elon and he called me and said, "Hey, I want to talk to you about me uh Elon's mental health challenges." challenges." challenges." And I said, "I'm not sure I want to talk about those." about those." about those." Uh 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, uh 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. But I said, "Walter, like this stuff is so personal. can you just why don't you give me a few hours. I'm going to call Elon and make sure he's okay with this. So, I called Elon. I said, "Look, he wants to talk about this. Are you okay with me going there?" And he said, "Yeah, "Yeah, "Yeah, because I want I want people to know if they suffer from bipolar that that they can get through this, too, and have a successful life." successful life." successful life." So, I got back together with 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 uh severe depression and bipolar." And I found myself dealing with that more and more. more. more. And I was trying as best as I could to help him, but I didn't have the skill set. set. 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 was 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 a ball 90 miles an hour, much much less make a move. And I said, I feel like I'm failing at this. And she said, you need to you need to decide whether this is the role for you.

So, I 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 I'm not equipped." Wow. Wow. Wow. Yeah. Yeah. Yeah. That had to be one of the hardest decisions you decisions you decisions you Totally hard. Totally hard. Totally hard. Yeah. Yeah. Yeah. You What is it like? What's the other side of it? Sell us the dream or the nightmare.

I was 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 some success in my life and and um 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 who was running Nvidia said this or something. If you had to do it all over again, what advice would you give to me?

And he says, I 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 inc. What is that like? Like all these entrepreneurs have a dream. You've been involved with Lyft. You've been involved with Lululemon still. You've been involved with Tesla. I mean, yeah, yeah, yeah, your resume is bananas, right?

But even in the Tesla 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 like use the right side of your brain, left side of your brain. Left side of your brain is like you're analyzing the problem. Right side of your brain is you're you're creating solutions and you become this like ninja problem solver solver solver and out of those solutions then stuff gets created.

And so the that for me was the satisfying part was we're sol we're knocking down 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 going to be able to afford to buy the car. car. car. So now this dream is starting to become a reality. a reality. a reality. The second piece of the satisfaction for me though was teaching people how to do this this 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.

They just had never been in the situation where they were challenged and equipped with the tools to do it. You say challenged is it being pushed? I would say I'll give you an example. There's an example in the book of uh this woman Nikki and Nikki Nikki ran delivery at the factory. So people would fly to the factory to get their cars delivered right off the line which pretty cool experience and she was doing this uh couple dozen times a day uh and had a team doing it and then at the end of the quarter hundreds of cars would come off the line and they 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 charge of this globally. globally. globally. And she looked at me for a second and and looked like she had a look of terror on her face. She's like, "I'm not sure." And I said, "No, I I think you can do this. We're going to help you." Like, "We're going to surround you. We're going to teach you teach you how to do these things, teach you the algorithm and the tools." And about six months later, she had mastered that.

Then we had a problem in the factory that was so vexing that even Elon and I and everybody else that was wrestling with, 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. Uh, I'm going to support you, but you can do this." Uh, and she proved time and time again that she could step up and do that. It's interesting you 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. Yeah. 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 was that your answer do you think? Because that was clearly your first answer. answer. answer. Well, I we for a living now I start companies. And so before I met Elon, I had six companies, not in uh not same time, but uh six companies kind of in a row where we uh wrote the business plan on my uh kitchen table, scaled the company, sold it to a public company, did that six times in a row.

And now I invent companies uh for a living. Uh I'm back to my roots. And the reason I say problem solving is because we'll typically start with a big a big opportunity area opportunity area opportunity area uh 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. life. life. That's interesting.

That's interesting. That's interesting. And uh 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 uh in the cyber or or in the yeah in the cyber security market last 5 years been about 1,200 companies created in cyber security all focused on the cloud which I totally understand because it's easier to write software for Amazon Azure and Google than it is uh 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-sized businesses? Yeah, because they're totally vulnerable and they're vulnerable because their tech stacks are really hard to figure out. Uh, 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 do heck do we do this for an infinity number of tech stacks?

tech stacks? tech stacks? Yeah, Yeah, Yeah, that's where the problem solving comes in. in. in. Very good. And so we spent a year solving that problem and then boom, we've got a company. And we looked like visionaries, but it was like both end. You got to have the vision and you got to like do problem solving to actually get there. get there. 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 five steps I guess or the five parts of the algorithm is culture.

Yeah. Yeah. Yeah. Which is a big thing. If you go to any if I go give a talk at you know 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 in a company you would say what back to I would say like there's this secret sauce uh kind of secret ingredients to cultures that I that 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 meaning so good in the meaning do they use the product? Yep. And I was with a group of bank CEOs and I said, "Hey, raise your hands if you guys use your app, your bank's app on a weekly basis." weekly basis." 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 your banks 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 app and fix it. Um, but you don't use them, so you don't know. So you don't have a feedback loop and the c the company doesn't have a feedback loop and they think if it's acceptable to the CEO, it's acceptable to everybody else. Very good. And and so I believe you got to use your own product.

So I'm a board member at Lululemon. I've been in five stores the last two weeks uh because I want to shop. I secret shop and I send our head of stores notes uh on every store visit like here's what look here's what went great. Here's what didn't go great. And it's a feedback loop that she can get then to fix stuff. very good. But the message there is rather than sitting in headquarters, you want your leaders to be out doing that same thing. Uh and uh Tesla had this approach where we took a car off the line.

If you were on 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. Um, and so the feedback loop of using your own product is super important. important. important. And I'm shocked most people don't do this because it's just an easy hack. Um, that's thing one. Thing two is there's a reason Elon can run so many companies.

companies. companies. Okay. Okay. Okay. And that is he 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. this company. this company. And for him, he says, "I'm only working on those two. I'm gonna delegate everything else in the business, but those two I'm personally involved." personally involved." personally involved." And so, like in the car business right now, uh 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 a chauffeur a chauffeur and uh another company gets there 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 cap didn't 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 at Tesla for one day, uh he's there a day a week, uh he is only talking to the teams that are responsible for th 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. Yeah. They bring their Agame. Yeah. Yeah. Yeah. And they come with solutions and they're moving that problem forward just incrementally, incrementally, incrementally, incrementally, incrementally. incrementally, incrementally. incrementally, incrementally. But because the CEO is personally involved, he can resource those uh those needs uh and 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.

Yeah. Yeah. Yeah. And so if you look in space now, they've been landing rockets uh parts of rockets uh and reusing them for six years, seven years, and nobody can catch up and uh because they're seven years ahead. They're already on to launching their own satellites and creating Starlink, etc. while like Blue Origin's trying to figure out like how do we launch one rocket and catch one fus fuselage and so they've got I think their launch costs are 90% less than the rest of the industry so they've got 90% market share oh my gosh and that just keeps compounding so the second cultural second cultural 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 survivability survivability and are you working that every week so good so good so good and if you do you're going to start to great advantage.

great advantage. great advantage. Do you hire for culture? In other words, when you're 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 humility humility and capability. and capability. and capability. And believe it or not, like everything you'd you'd read about Tesla externally, you'd think, boy, this is big ego-driven culture. It's really a it's very a humb it's very humble culture in the sense that Elon will create these crazy goals and the 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. it out. 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. Um 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. Got it. Got it. Got it. That's interesting because my favorite people friends I I 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 tow that line. These people that have tremendous confidence and bravado with no humility, they become exhausting. exhausting. exhausting. Yeah, they are to be around. 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 in Yeah.

So uh so we call this uh DVX Ventures and what we are is a group of people with an idea disease essentially for businesses for businesses for businesses and uh we create businesses from scratch. So we're kind of uh inventors of companies of companies of companies and uh we'll take these in these have to be in big uh kind of big opportunity areas where we feel like we're moving the world forward. Uh and uh we've created 12 companies in five years. Uh and uh we just have this systematic way of doing this where we we'll come up with the idea for the company.

We'll we'll get the first product into the market. We'll get it to post revenue and then we go look for a second or third time entrepreneur time entrepreneur time entrepreneur who has had success but they don't have their next idea. Yeah. Yeah. Yeah. And then we'll bring them in uh and they can typically bend the curve of this business really fast. Have you had any setbacks the last 10 years? years? years? Oh yeah. Oh yeah. Oh yeah. You can you explain one describe one? Yeah. So, like one of the things I observed at in the ride share 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, in 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 sat on the board of doesn't have that capability. So, Lululemon set their legging prices at $108 like 12 years ago and it had they don't know why and 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 118. They don't know. don't know. don't know. And so I said, you know, we ought to take this insight from rid share 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 S by five grand and sell 25% more cars, which is really great insight, an 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. Uh, 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 in, people that had 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. It's really not, but they think it is. And at the end of the 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. Uh, and uh, and I said, "Yeah, you're right. Like, I thought this was going to be applicable, but I was wrong." Uh, and uh, and so we killed the idea. You'll stop throwing good money after bad at bad at bad at Exactly.

Exactly. Exactly. Do you when you look at business right now, so there's things Alain said that scare me almost about what he thinks is AI is going to do to the world. So, you you were there that entire time, right? And you've obviously had you've proven your algorithm and your success not just in one place but in multiple places. That's why it's a valid theory. When a when something's pressure tested multiple times, then we know it works in multiple contexts. Correct. Large, small. Yeah, small. Yeah, small.

Yeah, you got it. That's why I I found I sound like the better salesman for the book than your even your publicist 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 him correctly, where he says, "I I don't think we're going to have a workforce anymore. I think we're going to have, you know, guaranteed minimum income.

Everyone's going to be kind of floating around and the robots are going to do everything." I'm oversimplifying, 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 reaction is 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. Destruction. Destruction. Yeah. Yep. Yeah. Yep. Yeah. Yep. And we're really good at ringing our hands at that. We are not good at seeing what's on the other side, other side, other side, right? right? right? And the reason is is because we can't see what's on the other side because the the world hasn't existed like that before. So, I'll give you an example. I grew up in very rural America. I grew up in Nebraska. in Nebraska. in Nebraska. Okay? and uh and the whole country looked like the place I grew up in in the early 1900s.

About 67% of jobs were in agriculture. in agriculture. in agriculture. And this thing came along called the tractor. tractor. tractor. And people started to 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. Uh today I think less than 2% of our population is in agriculture. Uh 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 it 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 vest 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 today to computers and pharmaceuticals.

So what jobs get created? Well, car factories need people uh and uh then you got to build roads and so you have construction jobs that get created. And I watched this even in my own life when I was a kid in this rural place to make a long-distance call. I had to push zero on the phone and talk to a human being. And I knew her. She was in my town. She was an operator uh 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 electronic switch. electronic switch. electronic switch. Yeah. Yeah. Yeah. That could connect those two systems without a human having to connect two wires or a wire on a plug on each side. And overnight, 800,000 operators were out of a job. Jobs gone. Jobs gone. Jobs gone. So, it looked a lot like AI. 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 of a sudden, you could dial anywhere in the country for free dialing 1800 something. 1800 something. 1800 something. That created a need for call centers. And now there are millions, not 800,000 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, AI is going to take all these call center jobs away because the AI does support really well and there's going to be massive unemployment. We're going to have universal. 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. Very good. 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 has 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. It's a two-parter. Okay. Okay. Okay. By the way, I've enjoyed today so much. Me, too. Me, too. Me, too. It's we we could do six hours and it would fly by. Yeah. Yeah. Yeah. Um, a commercial for the book. Why should someone get the book?

And then B, 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 E-Myth. He called it having an entrepreneurial seizure. I don't know if you read the E-Myth. He talks about having an entrepreneurial seizure. I think that's a great book as well. I do too. And that's it's like the Vogue thing now on social media. Everybody wants to be an entrepreneur. I'm curious as to your thoughts. So commercial for the book slashfinish with slashfinish with slashfinish with who should be an entrepreneur?

Do you think everybody can be? Do you think it's a genetic thing? Do you think it's a a a uh deal with the projection type thing? just your thoughts on who should be one if someone's watching or listening today and who maybe should be nothing wrong with being a number two and running a business of an entrepreneur. Yeah. So like the reason I wrote the book was I wanted uh 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 there there so that so that we could drive more innovation in this country uh and uh 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 um and then uh should people be entrepreneurs? Like I I teach uh like you do in business schools and uh I'll have people students come up to me at the end of class saying 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? Like this is really hard. Uh, and it's really enjoyable if you're if you're wired for it, but it's super duper hard. And I think, uh, 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, uh, 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." Solving problems.

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

Yes. You just got to be able to ignore that. You have to have the kind of you have kind of like short-term memory and like uh misplaced confidence that you can fix that. Uh and so like if you're just stubborn as hell and you're creative, um 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. Uh today was this was really meaningful. I done a lot of podcasts, brother.

I really really grateful that we did this today. Same. Same. Same. Yeah, I'm really grateful you wrote the book. book. book. Thanks. Thanks. Thanks. You guys get the algorithm. You just take my word for it. Get the book. You're going to be glad that you did. It's going to help you in your business. It's 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 McNeel, thank you for being here today. here today. here today. Thanks for having me. God bless you everybody. Share today's episode. Take care.