Managing Risk to Build a Moonshot Venture w/ Marc Lore & Austin Russell | EP #103

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0:57Getting to 99 % is actually relatively easy. It's all about that, that last one percent. You're faced with these tough decisions all the time where you're getting new information in every day and you have to remain totally objective. Where there are times in every venture where it almost failed. Yeah.

1:18When you're going for a moonshot, you've got to be hit with a lot of skepticism. You're asking people the question, why? Why doesn't this work? Why does that make sense? And if you're not getting good answers back, if you're like, hmm, I'm not convinced. You didn't convince me why this thesis doesn't work. Then you know you've got something. The guts it takes to actually stop and say, no, no, no, the data says we have to go here. And reverse, reinvest, that's hard to do. So when you can create economic value, you can do good for the world at the same time. It's about that impact that you're having.

1:57Where do you both fly in from? You just landed from where? I just landed out. Yeah, I was just with the Nvidia leadership over at the GTC up in the Bay Area actually, and then here in the Gnaut Florida. Awesome. And Mark yourself? New York. New York. Yeah, so I've really gone to know you guys just over the last couple of years and so grateful to have you here and Your journey is epitomized Resilience and risk and so what I'd I'd love to do is just begin so everybody can understand in The essence of your story then I'll go into some of the key questions So Mark would you recount your entrepreneurial journey real quick from to get to wonder and where you are now and Congratulations on $700 million raise last week, I think.

2:46It's amazing, extraordinary. So diapers .com, jet .com, wonder, please. Please. Yeah, I spent both diapers .com and jet .com were e -commerce companies. So I basically started diapers .com back in 2004 -ish, 2005. 2005 and it was basically a website for new parents to buy everything for their baby and eventually everything for their pet and eventually everything and sold that to Amazon in 2011 worked inside Amazon for a couple years and then started another e -commerce company called JEP .com and then two years later Wal -Mart bought that and how much? 3 .3 billion? Not bad. Two years later you heard that part.

3:36Exception not the rule. Yeah, and then and then when it became the CEO of Walmart e -commerce for about four plus years and and then yeah Then started wonder and you happen to own a sports team or something like that Minnesota timber wolf. Yeah, yeah, pretty amazing um, and uh, yeah, I guess uh, who just came in oh Eric Schmidt came in with you on that recently, didn't he? I can't confirm where to die. Oh, okay And and uh wonder does what because we'll come back that in a little bit Yeah, I think the best way to explain it is we're creating the super app for me all time, but it's a next generation of food delivery.

4:13It's completely vertically integrated. So, you know, just like a normal delivery aggregator that does the delivery and sells the food via app, we have that, but we also own all the restaurants on the platform. And we've invested hundreds of millions in food science and culinary engineering to be able to cook 30 different cuisines out of a 2800 square foot kitchen with only three pieces of electric cooking equipment. There's no hoods, there's no gas, no open flames, no waste, very lightly skilled, lightly trained labor. So we're able to pump out an extraordinary amount of volume in a small space.

4:44We can locate very close to the customers. We don't deliver more than six minutes in the city from the physical location. And we can deliver very fast hot food, really high quality. You could order multiple restaurants from a single checkout. and we have everything from fast fine food like steakhouse, Jose and Jerez, you know Michael Simon, Mark Murphy, and we have barbecue burgers, Chinese Japanese, Mexican Italian, basically anything you could want at a single location, and it's got a little sit down but mostly pick up and delivery. So, memory talked about the 60s of exponentials, right? He's basically digitized and dematerialized, demonetizing and democratizing all those restaurants to a convenient venue.

5:30And we'll come back to that. Thank you for that quick summary. I don't think you've ever done it that quickly. Let's chat about your life experience here Austin. I just heard backstage that you were a competitor or one of our early exprises. Yeah, yeah. It's funny. I mean, going back, I think what back on I was like 16, 17, I remember the exprises, like an inspiration there. Which express was it? Yeah, this is, yeah, this was actually the tricorder there too. That was, yeah, there was like an OG. I think there's still some like OG video of me for like 10 years ago as like trying to be like a team lead trying to go pro -corder, yeah.

6:11But yeah, no, there's amazing stuff that you guys have and then obviously later on, I'll get it up building up. What does Lumenar do? Yeah, so Lumenar, we create these laser sensing systems, a LiDAR and the AI software for major automakers to be able to enable next generation safety systems and autonomous driving capabilities on production cars. So, you know, a whole idea is basically, you know, there's a lot of companies that have been trying to, you know, replace drivers with like fully driverless vehicles, rubble taxes, anything. The whole goal we've had is, you know, enhanced drivers, you know, increase the capabilities and ultimately be able to create sort of the uncraschable car, so to say, by enabling when the step -car sentence is that, if you're going to get into a collision scenario, take over the braking system, take over stirring wheel, get you out of that.

7:00And that's enabled by this breakthrough LIDAR technology that we created and the software that automakers have really started adopting in mass. Now LIDAR, I think a member, it's like laser imaging radar type of, is that what it roughly means? Yeah, yeah, basically it's using these custom lasers we build to measure the exact distance to different objects on the field of use. I remember when the first Google autonomous car came out, it had a valedine light on the roof. That was a spinning thing. It cost about $150 ,000 and weighed like it was like coffee can. So what is one of your light hours cost now?

7:40Or it looked like now? No, no, it's a great question because it's funny. I mean, I'm sure you guys have all seen like the autonomous test cars and other things that are out there. And this is a huge problem from a cost and economic standpoint. You know, they've historically been like the huge roof racks full of sensor and a supercomputer in the trunk that's required all run the thing. So the whole point of what we were doing is creating something from the ground out, from the chip level up that could have significantly improved performance and get the cost down from $100 ,000 down to under $100 ,000 down to $100 ,000.

8:10and that's exactly what we did. So that basically we've transformed that from those, kind of, Tucky Fried chicken bucket -looking things to, I seamlessly integrated, you know, sensor on production cars, and now that's getting to go out in amazing brands like, you know, Everett Ranging from Volvo to Mercedes to beyond. And congrats to both of you for your extraordinary success on these. I want to talk about an underlying theme that I've spoke to you both of you about here, which is when you're going for a moonshot, whether it's building Luminar or building your multiple companies, Mark and Talosa, which is your vision of a city of the future, you've got to be hit with a lot of skepticism.

9:00like you're crazy for a 20 year old or for somebody who's, you know, not had restaurant experience. And so can you talk one second and name this theme, the theme after our conversation mark, embracing risk and resilience in moonshot ventures. I think that's probably one of the most important elements we can talk about here. How do you think about that? I mean, first I think it starts with having a native day. You know, I think I've been in e -commerce a long time. I sort of know too much. It's hard to have that clean blank slate to rethink a completely new vision. You kind of know too much in your brain.

9:42It's programmed to think a certain way. And so when people bring me e -commerce ideas, I have a really hard time. I can point out why it's not going to work and see it very clearly. It's hard to have that clean slate to like rethink without any information. And I think that's one of the things entrepreneurs do really well is when you don't know, and it's true, didn't know anything about the restaurant industry specifically, but can rethink from a clean slate like what might a step change look like, and then really think about that vision and then do all the things to work back which from that vision and then start knocking down all the barriers along the way.

10:16But you have to have that naivete to sort of rethink. I don't know if... Yep. Yeah, that's the same way, right? Same thing. I mean, you weren't in the automotive industry, you weren't in the restaurant business, and I mean, but the reality is most disruptions in industry is a curve from people who are not in the industry. Yeah. In fact, I know very few companies that have gone from one generation of technology to lead the next generation of technology. I don't think like anybody. And so how, what's your advice for entrepreneurs to embrace that kind of, I mean, when people You'll tell them you're crazy, you have no background.

10:56How did you develop sufficient confidence in yourself? By the way, we didn't see this as well with Elon, had no rocket business, no car business before. I'm just starting with something simple like diapers, for example. When started diapers .com, the thinking was, you know, had a baby at the time and you couldn't get diapers delivered to your door at normal prices. If you went online to Amazon or whatever, they were like $10 more box. And I just thought that was strange. Like it makes like parents are busy. One type of diapers delivered. And so when I started asking people and said you want to start a D -commerce company where we delivered diapers overnight to people at Walmart prices.

11:36That was sort of the original like vision. And people in the industry said that's not going to work, that's crazy, it's too heavy, too expensive to ship, it's already a loss leader. In Walmart now it's going to be a bigger loss leader, the math doesn't work. And so everyone Someone just kind of ruled it out. Proctin gamble and Kimberly Clark, the diaper manufacturers, wouldn't sell us diapers for years because they kept saying, it's never gonna work. So we don't wanna be caught up in this and selling you that. But to answer your question, you ask all the people in the industry questions and you keep questioning and see if they've got an answer to the sort of original thesis and the thesis was, yes, it's a loss leader and it's gonna be a bigger loss leader but you also have many more products online to monetize the loss over.

12:24And when you start hitting people and say, yeah, I know it's a loss, but there's a reason why it's a loss for Walmart. It drives traffic and they buy everything else. So what if we use it as a loss, a bigger loss, albeit to sell them everything online? There's millions of products we can sell them online. And anyone who's there to buy diapers, they're likely needing the other things as well. Yeah, and by everything. And now, you know, it's pretty commonplace now that online people will sell diapers at a huge loss because it's a great way to attract and retain new parents, which are big spenders online and all the math works out.

12:56But you're asking people the question, why? Why doesn't this work? Why does that make sense? And if you're not getting good answers back, if you're like, hmm, I'm not convinced. You didn't convince me why this thesis doesn't work. Then you know you've got something. So it's good to have your - You have to stand by your convention if it's a convention, if it's a question question, question. and not fool yourself as well. Austin, I know your first investor. Yeah, yeah. No, I mean, it's amazing, amazing journey views. You know, what's funny and what's even true like in the early stages of what we had to do is that it's that same kind of situation where when you try to hold Rob Stard -Luminer.

13:42You know, it's like 16, turning 17 at the time. So, you know, his... And your vision was what? What did you say when you like, did you have a PowerPoint deck? More like a lab? More of a lab. You know, then a PowerPoint. Hardware talk, bullshit walk. Yeah, exactly. Exactly. It's much easier to create the PowerPoint than it is to do it. So... Yeah. But yeah, it knows the same exact kind of situation there too, where you have all the naysayers, you have the folks who like, you know, there's no way you're going to do this much less like, as a 16, 17 year old, trying to create some new, lidar system to like, you know, beat out the Googles and apples and never major automakers to delving a technology.

14:27So you have to bet on yourself. Obviously, you have to be very well researched and really know what you're talking about and have the conviction to do it. But, you know, it's, yeah, it's the same kind of situation. And you encounter those same kind of cycles all throughout the journey. That's not something that's even just necessarily unique. It's just done very different forms, right? And so, are you constantly just like rechecking your premises and heading out with greater conviction and finding evidence to support yourself? Yeah, absolutely. And that's where we deal with the same kind of stuff today there.

15:01And I think in this case, for example, for the broader autonomous vehicle industry, you'd sort of gone through this whole transition, you know, in that broader like in this case now it's the, you know, the Gartner cycle, you know, you could call it. It's, you know, gone up, you have the peak of inflated expectations. It's probably at the bottom of the trough of disillusionment phase and now like onto the enlightenment phase and that's, you know, probably rightfully justified because, you know, most of the stuff in the broader autonomous vehicle industry of these promise of, well, these self -driving cars, you know, taking over cities, you know, doing everything.

15:35Didn't quite, quite materialize, right? Do you remember our conversation with Elon? Yes, yes, I do. So we had a friend's birthday party in Elon's there and Austin is there and I pull Elon over and say, I pulled East Austin over and said, okay, Elon, meet Austin, Austin, meet Elon. Austin makes LiDAR and Elon's like, nope. He's a human driver, can see with visual eyes only, then autonomous cars only need visualized. He's very convinced. Yeah. Yeah. No, I mean, and I think that absolutely unquestionably was the, what he was right on was in 2015 when he had to make the decision for that around like, hey, what kind of systems are you?

16:19Like, what are you gonna do? Use that $100 ,000 or like spinning bucket and put it on every car? Like, that's not gonna happen. So, I think, you know, part of the whole point is that now for the first time, there actually is a solution that can enable the next generation of safety and autonomy. I mean, the reality is, our bet is that it was gonna be way more difficult than what people were anticipating to do this, and that the existing system for just not gonna be there enough to solve the problem. And that's part of the whole point. It's with the LiDAR, it's not just guessing what's going on.

16:48You actually know with ground truth exactly where it is, because for safety systems and self -driving and all that, it's not about the 99%, getting to 99 % is actually relatively easy. It's all about that last 1%. You know, you can't run over one of the memory, 100 people that you see, for example. So, you know, it's like a, it's very, very real folks. So, you know, yeah, freak through it. So, that's what it takes. Everybody want to take a short break from our episode to talk about a company that's very important to me and could actually save your life or the life of someone that you love. Companies called Fountain Life.

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19:36You could have, you know, you sold your companies, you had, you know, what is it? that many, many, many, many commas in the bank, worth of capital for your successes. You could have set back. You didn't. What, what was the creative process of getting to wonder? What were you, were you just a junky about creating something? You, what was it that let you on fire to go and why that industry? Yeah, I think, you know, like most entrepreneurs, you sort of can't, you love to bail, I love to bail stuff from nothing. but then you see a problem and you think you have maybe a possible solution to it and then it just starts to build and build and build and then it has to be.

20:20So what was the problem that you saw? I think while watching food delivery explode in the US, we're 100 billion now in food delivery in the US expected to go to 500 billion by 2036. Was it during COVID? It was at the beginning. Just before COVID. Just before COVID. Before COVID. And was just watching what was happening in food delivery. people were paying an incredible premium for convenience and they were tolerating slow delivery cold food, you know, inaccurate orders, bad customer service. It just didn't feel like that was the future. Reminding me the early day to be commerce where we had marketplaces and things and then Amazon comes along with this vertically integrated first -party elevated customer experience.

20:59And I just felt like that was the next generation of food delivery. Somebody was gonna come and vertically integrate and take the value proposition to a whole level and be able to live a little bit of food. Fast, hot, with great customer service, and all the things that weren't happening. And that was really original thinking, but that's the way the idea started. Then it was... But let's talk about what your original idea there because you did a major pivot, which is, I wanna talk about that pivot as well. So your original idea was you were gonna build these kitchens on wheels, right? Yeah, so the vision was to vertically integrate and take the customer value prop to hold a level.

21:37and the thinking was, why do we cook and then deliver? What if we delivered then cooked? And so we basically, in the back of a Mercedes -Benz Sprinter Band had one piece of technology, and we were able to cook really high quality food, really fast, under like 10 minutes, where the driver who drove there was actually able to cook because it was so simple. And that was the original thinking. And it worked. Customers absolutely loved it. You rolled this out wearing you Jersey, wasn't it? New Jersey suburbs, yeah. We had 400 trucks on the road. Customer scores, repeat rates were incredible. Customers loved it.

22:13We got to economic positive. Things were going really well. But, and this is where the buck comes in. Yeah, I wasn't the CEO at the time, so I was the executive chairman. But we had tested doing the same thing out of a brick and mortar with a couple seats in the front and pick up and delivery. And the thinking was if we said a really tight delivery radius, can we get the same scores that we got on the trucks? We also would be able to have multi -restaurant ordering, which you couldn't do on the truck as each truck had one or two restaurants. But if you get all 30 restaurants and you can get them all delivered together, that was on the customer side.

22:51We proved that we can deliver it with the same quality as the truck if we keep the radius, but we had the ability to scale. It worked in urban, suburban, rural area, the brick and mortar trucks. We're really more of a suburban play and the Uniconomics were better because we were able to distribute The labor across many more orders so we're able to do a better job there What's interesting here what I'm hearing is the fact that you were testing along the way you were getting data It wasn't an opinion it was actually the numbers and you weren't trying to take this to scale You were you were doing this on Uniconomics and and a on a square kilometer or basis.

23:28Yeah, this is where risk comes into play, though, I think. I like to say we were digging for silver when we found gold. And as an entrepreneur, you're faced with these tough decisions all the time, where you're getting new information in every day, and you have to remain totally objective, and you can't get wed or hung up on what you told investors, what you told customers, what you told anyone. If there's a better opportunity. You guys reflect on that one second, right? Yeah, it's here for that because the guts it takes to actually stop and say no, no, no, the data says we have to go here and reverse reinvest that's that's hard to do yeah the CEO and he'll say that he couldn't do it He the trucks were working in his mind.

24:17It was profitable customers loved it and And my recommendation was, yeah, but this is so much better. You were the principal owner, right? Was it all your capital at this point? No, we said significant amount of venture at that point. But you had enough capital of your own to be able to say, no, we have to go this direction. Yeah. And that is so important not to get stuck in a local maxima. When you see the evidence that just over the other hill, there is something much better. And to know that if you don't do it, eventually you're going to get disrupted by this better idea. Yeah, everything you've done up to that point is a sunk cost.

24:54You can't count it. Most people, though, they just can't get over that it's sunk. Why already said this? That doesn't mean anything. From today forward, what's the best investment you could possibly make with investors' money? And it took a lot to basically say, we're going to take revenue to zero. We're going to stop the trucks. We're going to sell the trucks. We're going to take a loss on the trucks. And we're going to start over with brick and mortar. And the investors got comfortable and bought into it, but I think we're still skeptical. This is going back 18 months ago. And now, I mean, people don't even know how to say they want to try to.

25:28Don't look back. No, Austin, if you had a similar experience at all? Actually, yeah, it's funny. We had a few that maybe not quite as dramatic in terms of anything for the business. But I would say probably the main one was going back to the driverless vehicles versus enhancing the safety and the safety focus on that was a big thing of where, because it pretty much, you know, I mean, I hit what? Three, four years ago, it was actually funnily enough like considered extremely contrarian to try and do what we're doing to put our technology onto production vehicles. It was almost unheard of to be able to try and do that.