The future of EVs, with Rivian’s RJ Scaringe

0:00The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure. And yet, when it comes to their own wealth, most are running a disconnected stack. A tax accountant here and a state attorney there, a wealth manager who doesn't talk to either one of them. Creative planning was built to fix exactly that. One integrated team of tax professionals, estate planners, investment specialists, all coordinated by a dedicated wealth manager who sees your full financial picture and keeps every piece working together. Proactive tax efficiency, estate strategy, investments all under one roof.

0:44Creative planning where wealth works together. Learn more at creativeplanning.com slash mastersofscale. Hey, folks. Jeff Berman here. Exciting news. Applications are now open for the Masters of Scale Summit. It's happening October 20th through October 22nd in San Francisco, and it is a really special event. Please join our curated community of founders, innovators, and leaders shaping the future. Expect ideas that challenge your assumptions and connections that move your business and maybe even your life forward. It's an experience that can change literally everything. Apply now at mastersofscale.com slash apply26.

1:30That's mastersofscale.com slash apply26. Hi, I'm Molly Graham, host of Work Life, a podcast from TED. The most important lessons about work usually aren't the ones anyone teaches you. They come from experience, from uncertainty, from figuring things out as you go. On this show, my expert guests and I explore how careers really unfold. Through change, through doubt, through the decisions that shape who we become over time. Because those moments aren't the exception. They are the work. Listen to Work Life wherever you get your podcasts.

2:14This Masters of Scale live event presented by Atlassian was recorded at Atlassian Team 26 in Anaheim, California. In instability or comfort in chaos is really actually important. You have to go into it knowing this is like full contact, multi-dimensional chess. And you're doing it sometimes in the middle of a tornado inside of a storm. Multidimensional chess inside a tornado, perhaps also while making dinner, caring for a baby, and writing a Broadway musical. If you're leading a business right now, that description probably feels pretty accurate. So how does Rivian founder and CEO, RJ Skaringe, weather the endless storms?

2:59For me, a recognition that like resilience, and comfort in instability or comfort in chaos is really actually important. With that, we have a whole process inside the leadership team of like checking our own assumptions. Like the world's changing so fast. The thing we thought six months ago, is that still right?

3:20This is Masters of Scale. I'm Jeff Berman, your host this week on the show, RJ Skarin. She's the founder and CEO of Rivian Automotive. Rivian just launched the much anticipated follow-up to its first electric vehicle. This one is the R2. It's a crucial moment in the company's scale journey. In my onstage conversation with RJ, we dig into how he thinks about competing with Tesla, the hard-won lessons of building a company that makes both vehicles and software, and much, much more.

3:59R.G., business is hard. It's not easy leading teams, leading companies. Services are hard. Software's hard. Hardware's hard. Logistics are hard. You're kind of doing all of them? Like, how does that work? I knew it would be difficult. It wasn't something I said, this is going to be an easy path. There's certainly been aspects that are much harder. But a lot of the elements of building any business ring true within Rivian or whether you're looking at team building, organizational structure design, processes, tool sets, supply chains. But yeah, it's definitely, it's a challenging business, but I mean, I'm having a ball.

4:35How do you think about teams working together when they work on such different parts of the business? Yeah, and this is one of the things that's maybe most unique about building a car company. When you really look honestly at what's necessary, you need many thousands of people to develop one product. That product requires, we have to be on the order of about 40 million different decisions to bring it to life. 40 million? 40 million. And there's millions of hours of engineering time necessary delivered. So the only way for this to work is you have to put lots of people working in parallel. So you have ultimately like a team, you know, full size and maybe five and a half, 6 ,000 engineers working at the same time on the same product.

5:17And so it becomes a real exercise in coordination because you're not just talking about homogeneous teams of all the same background and all the same skill. You have chemists that are working, you know, battery cell chemistry. You have structural engineers working on the body design, you know, teams working on designing electronics, teams working on building software platforms across the stack from the lower levels all the way up through the application layer. And then you have to also build a go-to-market team. So you have sales teams, service teams, and then around that you have a manufacturing team, a supply chain team.

5:50So they're very, very different backgrounds, very different experience sets. And the risk is you end up with a sea of many little islands of culture, many little silos that operate very differently. And I think one of the most rewarding things is when you see these very different skill sets with different backgrounds, often from different, very different experiences, coming together around the common vision and coming together to create this amazing set of products. But it takes practice and it takes practice around like, what are the values of the business? How do we interact? How do we challenge each other?

6:21Do we allow for people to actively debate? Do we embrace that as an organizational culture or behavior? So this is something that iteratively we've really worked hard at. But, you know, I think with these large organizations when you're building large, complex products, there is maybe the natural tendency is to have silos and have walls go up and to have, you know, the manufacturing team says, well, if the engineering team would just make it easier to build, we could build these things. And the engineering team said, well, the car could be so much cooler if manufacture wasn't difficult. So those are like natural tensions.

6:52And learning to accept that there's going to be different perspectives on how to solve the same problems is really important. When you've got 40 million decisions that go into making a product, not easy to manage. This this a lot. When there are disagreements within teams, I assume there's a team leader who makes a call. When there are disagreements between teams, how do you manage that? Structurally, we've set up decision processes where here's the vision for the product, here's what we're trying to achieve, here's the frameworks for making these. Certainly, it can't be me making every decision.

7:23It doesn't scale. I learned that early. But often, you'll have these decisions escalate if there's not alignment. And we often have times where there's a point of disagreement. We say there's a disagreement on how we're going to approach this. We're going to make a decision, and then we're in all line around that decision. And that process of accepting we won't always agree, just by virtue of the complexity of what we're building, but we ultimately have to build together, means that once a decision is made, everybody gets on board. You referenced it doesn't scale, and you learn that early if every decision runs through you.

7:56Was there a moment early on where you realized that that was a pain point you had to solve? Well, so I'm an engineer. I started the company when I was 26. And I started the day after I finished my PhD. And I love to build things. I grew up restoring and building classic cars. And so not surprisingly, like day one of the business, the first thing I did is I got my CAD station set up and I started designing parts. So I'm like, oh, let me design this. And it's not as if I wasn't already thinking about what was going to go into the vehicle. So, but very quickly, it's clear that like, wow, there's thousands and thousands of components that go into a car.

8:33This won't work if my job in leading the company is designing all the parts. I have to design the teams and get the teams to work together and participate in creating scale. And so I think for any time an engineer is forming a business, there's a tendency to be really close to the product, which I think is fantastic. It's really a wonderful characteristic of technical founders. But you also need to recognize you can't be in every decision or in every meeting. And as the organization scales, finding ways to have influence or to impact the product, but to do it in a way that doesn't lead to the whole team waiting to say, well, what's, in Rivian's case, what's RJ going to say?

9:12And sort of paralyzed waiting for a decision to come from the top. So I often describe a car company as an exercise in enabling highly distributed decision making that's highly coordinated, which are two things that maybe don't always go together. It's thousands of people making decisions, but it needs to come out as a product that looks as if one brain, one human did everything, which of course you can't do. There's a theory of organizational growth. It's factors of one in three. One company, one person at three, at 10 at 30 and so on. And what tends to happen between 30 and 100 is to your point about silos, companies literally create divisions, right?

9:47It's like one of the worst words in a company you can news. As you were going through that phase, 30 to 100, 100 to 300, et cetera, was there something that you realized you had to do differently than you'd done before, maybe than you'd seen other companies do? Yeah, many times. And one of the things that I was, I look back in hindsight and I say is a very fortunate that things played out this way is Rivian was highly undercapitalized in the early years. And the reason I say it's fortunate is allowed me to learn how to run a company. So it was my first time starting a business, my first time running a business.

10:20One of the things that was helpful for me is we were able to grow slowly, but I was making mistakes. I was learning, but the impact of those mistakes was fairly small because we just, by virtue of us not having huge budgets or a huge team. And so through that, I directly experienced the difference of a one-person team, a 10-person team, a 20-person team. And it was happening at a pace that I was sort of able to keep up my own learning. And I remember early on, the first time we were doing like all hands every week, in the beginning, it was like the whole company met every day because the whole company was all sitting around the same table.

10:55But there's a point where we all didn't fit in one room. So the solution there was all the all hands, we go to like a bigger room. But eventually you get to a point where the room size doesn't matter. You can't have everybody in the room. And you quickly learn that like disseminating and distributing information, both the decisions that are being made for the business, but also how to approach making decisions becomes a real key exercise. And I give this advice all the time to people starting businesses is you also recognize the organizational structure is going to change all the time. And so you need to be really cautious around getting overly fixated on this is exactly the structures.

11:33And the way I characterize it today is the organizational structure is the most efficient way to try to organize people to get work done efficiently. But by virtue of it being a structure, it's not perfect. It's always going to be imperfect. There's of course going to be communication and decisioning happening across the lines. And so we should not look at this as how we communicate or how we work together. It's how we're trying to organize ourselves to be as efficient as possible, but it will change. And so it looked very different at 30 people than it did at 100 people, which looks wildly different than it does at, you know, at, let's say, 1 ,000 people.

12:10Today, we have 17 ,000 employees, and we couldn't possibly all meet in the same room. We couldn't possibly have an open discussion amongst the whole team. And so I think that, like, getting ready for that, for me, was really important. Yeah. At this point, a team meeting's in an NBA arena. Yeah, yeah. At some point, maybe an NFL stadium. One of the things I'm not sure everyone knows about Rivian is you also are a software company, not just for yourself, but you all made a decision to license software to Volkswagen, which is at least nominally, if not actually a competitor. Why? Why? Fair question.

12:44It's a good question. Yeah. Well, I have to wind the story back a little further. So early on in building a business as an engineer, there's a desire to build everything. And so I often joke that if given infinite resources, given no constraints, our supply chain would be we buy land and we'd extract resources and we'd we'd make you know aluminum smell we'd do everything and of course vertical integration no limits we just own pieces of earth and you're not even using atlassian i mean that's how far you're willing to go here unlimited constraints okay and that's like the way at least i'm wired i would i would left unchecked i might end up there um but of course there are constraints and those constraints are not only money, it's time, it's focus.

13:30And so you end up having to be very intentional around what you do build. So you don't end up buying plots of land to extract raw materials, which is funny because now we actually have done some of that. But the way we looked at it is we said, there's a few areas we need to completely own. And so that was the software platform in the vehicle. To do the software platform well, we have to own all the electronics. And we're going to architect the way the vehicle networks, the way the software's integrated into the vehicle in a very thoughtful way where we consolidate computers down to a very small number of what we call zonal computers.

14:03So rather than computers tying to a function, which is what essentially every car on the road does today, where you have a computer that corresponds to, let's say, the air conditioning system or a computer that corresponds to the seats. And there's little ECUs supplied by third-party suppliers with little islands of software on them. We're going to make a very small number of computers where we build all the software. and so I remember making that decision and this was when Rivian was still much younger and we had not a lot of money and our board said to me Arjun you're like you're crazy like you want to build computers and write all this off for yourself and I said this trust me and I was very convicted so I said something like I was emphatic I was like trust me this is what's going to be most important for us from a competitive point of view and from a product differentiating point of view and I obviously made the case we ultimately made that decision but at the end of that conversation i said look if we do this really well who knows we could end up licensing this as another way to monetize this huge investment we're going to make and i was like that's not going to happen anyways fast forward like a decade and we did a 5.8 billion dollar software licensing deal with the second largest car company in the world with volkswagen group and this was after volkswagen group had spent an enormous amount of money trying to build software architecture themselves.

15:18And what drove us to say yes to doing this wasn't just the financials of the deal. It really goes back to the core mission of the business. And core mission of the business, the reason I started it was the desire to have an impact on how we think about transportation and to accelerate the speed at which we as consumers shift towards electrification and increasingly electrification coupled with highly intelligent vehicles so vehicles that are capable of driving themselves and vehicles that are capable of performing a lot of tasks through software and so as we looked at that we said boy we're going to do that with our own products we're going to launch r2 this is our first high volume product we're actually launching it as we speak that's followed by r3 you can imagine there's probably an r4 and r5 we're going to continue to grow our revenue and the business and we want to be a company that's making millions of cars over time but we can also help enable creating really interesting and compelling products with other manufacturers.

16:15And I say this really sort of remarkable. When we were thinking about that, we said that we thought the best brand to start this with would be Volkswagen Group. Because it's such a broad company, there's so many different brands, so many different form factors. It has some really incredible brands within it. Porsche, Audi, of course, their volume brand, Volkswagen, a host of brands in Europe. And we said, boy, that's a really interesting exercise in showing how well we can productize this offer. And so we signed the deal and the first product launches next year. It's a product for Europe. It'll be the lowest cost EV in Europe.

16:50It's going to be very cool. It's called the ID1, VW ID1. So you can Google it, check it out. But I'm so excited for people to buy it and take the car apart. This is common in the auto industry. People buy the products, disassemble them and benchmark. The benchmarking company is going to be blown away. The simplicity and the elegance of the electronics and the network architecture have, are what, you know, in a big part enable this incredible vehicle to be so low priced. And so that like ties right into our, our mission. Which is great. But if I'm on your board, I think I'm at least asking like, well, if the ID one is a hit and it's a competitor to the R2 or R3 or R4, RJ, whatever you're going to end up launching, like, doesn't that cannibalize your own business?

17:31How do you run that analysis? Well, one part of our vehicle is software. and so that's what we've licensed to Volkswagen but we didn't license to them our self-driving platform. We didn't license them our vehicle designs but I'd say put all that aside, there's a deeper held view within Rivian that obviously comes from my perspective on this which is for us to electrify, for us to shift away from dependence on fossil fuels and gasoline-powered vehicles or diesel-powered vehicles, it will only happen if we have a wide variety of great choices and the auto industry is is unique in that it's so big that it's unlikely and it's more than unlikely it's unlikely and not exciting to think about a world in which the hundred-ish million cars sold every year on our planet are provided by one company and you have like two or three choices growing up as a car enthusiast i I think this is a space that benefits from having lots of choice.

18:33And so in the United States, for example, one of the things that I think has really stalled EV adoption is we do have an extreme lack of choice. And so in the, I call it$50 ,000 price point, which is where the majority of the market is, the average price of a new car in the United States is$50 ,000. In that price range today, well, now that R2's launch is different, but prior to R2 launching, I'd say there was really one highly compelling set of choices, the Model Y or the Model 3, the Tesla Model Y, Tesla Model 3. And that vehicle generates 55 to 60 % market share for the whole EV market in the United States.

19:07That is not a reflection of a healthy market. That's a reflection of a market that's wildly underserved. And that's nothing, it's not saying anything negative about the Tesla products. I've owned those products. They're great vehicles and it's why they've accumulated so much market share. But we need other choices. We need different form factors, different brands, different styles. Not everyone is going to want that exact shape or that exact form factor, that exact look. And so Rivian can do a part in that. We're doing as much as we can, but we're very happy to help others do that. And of course, we generate meaningful profit margin on the software business.

19:43And so I think of it as we make money selling vehicles and we make money selling technology and they can coexist. Still ahead, RJ on competing with Tesla, how self-driving cars will transform our lives and more.

20:05The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure. And yet, when it comes to their own wealth, most are running a disconnected stack. A tax accountant here and a state attorney there, a wealth manager who doesn't talk to either one of them. Creative planning was built to fix exactly that. One integrated team of tax professionals, state planners, investment specialists, all coordinated by a dedicated wealth manager who sees your full financial picture and keeps every piece working together. Proactive tax efficiency, estate strategy, investments, all under one roof.

20:49Creative planning, where wealth works together. Learn more at creativeplanning.com slash mastersofscale. I'm Ben Smith. I'm Max Tawney. And we host Mixed Signals from Semaphore Media. The future of media feels like a moving target. So every Friday, we pull back the curtain on the platforms, ideas, and people that are shaping the new media landscape. We'll tell you what really matters and try to figure out what's coming next. Plus, we go behind the scenes with the most important players in media right now. Whether you are yourself a media insider, or just simply curious about who or what will be all over your feed next, Mixed Signals from Semaphore Media is the perfect addition to your media diet.

21:29Listen wherever you get your podcasts. Humans will never be more intelligent than AI. There's going to be two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future that is human-centered? I'm Rana El-Khoyoubi, and on my podcast, Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future, and we take you behind the scenes of the AI that's transforming our lives. Find Pioneers of AI wherever you tune in.

22:17Welcome back to Masters of Scale. You can find this conversation and much more on our YouTube channel. And be sure to check out the link in the show notes to subscribe to our newsletter.

22:33Because you referenced Elon and Tesla, I have to imagine you've benefited from some of the Tesla backlash. I was having breakfast two days ago with my friend Leah Sullivan, who founded TaskRabbit. He's a Rivian driver, loves your product, was like raving about it. And she asked me to ask you, one, what has given you the intestinal fortitude to go up against Elon? And two, what have you learned from going up against him that would help others who are fighting their own evil empires?

23:10I mean, the way this is like a classic way to think about competition, which is an important thing, is we focus on saying, let's make incredible products. Let's make those products super desirable and let's play our own game. And where I think folks have failed in automotive, in competing with Tesla, is where they say Tesla's been very successful with, let's say, the Model Y. And rather than having deep conviction around building a product that links to your brand, there have been a lot of Model Y copies. And so if you were to like take a number of the EVs that are in market that have been unsuccessful and you were to draw like a profile of the vehicle, the centerline profile, and look at the vehicle packaging.

23:58So where are the seats? You know, where does everything sort of sit inside the vehicle? Look at the size and the dimensions. It is remarkable how many companies took the approach of saying, well, Tesla's successful with this. Let's make our own version. And the unfortunate thing of that is if you want to buy a Tesla Model Y, you don't want XYZ company's version of a Model Y. you'll just get the Model Y. And so we've been really clear on, like, if you take in the premium segment, in the flagship space, we have an SUV or R1S. And it's by a pretty significant degree, it's this best selling premium electric SUV in the country.

24:32And so it significantly outsold the Model X. It outsells everything. But it's seven seats. It's got four tires, four sets of doors. it's very quick so all those things i just said would have you could have equally described the model x as that but outside of those characteristics the cars couldn't be more different and i think that's really important it gets back to this point on variety and choice and so tesla was successful with model x that successful with model y and we developed r2 we didn't say we want r2 to try to copy model y we want it to be its own product and so that's like informed a of how we think about the decisioning and we really go back to what what do we believe what's the philosophy we're approaching product development with uh where are we going to make trade-offs you know between cost and features and performance and capability is everything's a trade-off um and our ultimately we create this set of trade-offs that lead into this product and we have a perspective that we think draws people in and so that's where i see the important thing Now, there's lots of noise around Tesla.

25:39I always just sort of try to tell people, like, focus on the cars, you know, and don't get drawn into that. You're running your own race. You're not looking at or thinking about what's going on over there. One other thing I'll say. Yeah, please. This is unique to cars. So I think in certain technology areas, it's not like this. But in the auto space, the largest car manufacturer in the world represents about 10 % of global demand. And I say that to illustrate that this is not a space in which there's one winner. That's not true in all segments, but it is likely, I believe and I hope, there are many winners.