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

25:09And so I had to pull him aside and say, let me take the other side of this argument. If we don't get autonomy done, now we've got a bunch of cars without steering wheels and pedals, and we're going to cause our own extinction event. Whoa. Do you want to be the source of the extinction event? He's like, no, I 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. 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.

25:41Okay. One personal thing you share in the book, and then we'll get back to the business stuff. But I've met you. You walk in a room, you acknowledge everybody. You've got tremendous people skills. You've got great energy. But it sounds to me as if over time there, at least your wife says to you at some point, you're losing who you are. I'm misquoting her here. You can clean it up for me. But I don't recognize this guy. I'm losing you. 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 what, and what did it do to you?

26:20Why did you ultimately decide this is the end of the road for me? I found myself, and Walter Isaacson writes about this in his book. Walter was writing his book on Elon, and he called me and said, hey, I want to talk to you about Elon's mental health challenges. And I said, I'm not sure I want to talk about those. He said, well, Elon actually gave me your number. He wants you to talk about those because he wants people to know that if they're struggling, there 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. I said, Walter, this stuff is so personal.

26:57Can 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 and said, look, he wants to talk about this. Are you okay with me going there? And he said, yeah, because I want people to know if they suffer from bipolar that they can get through this too and have a successful life. So I got back together with Walter. Walter said, tell me about the implications of dealing with somebody with bipolar. And I said, well, the implication for me was I'm pretty good at running businesses, but I have no skill set in helping somebody through severe depression and bipolar.

27:32And I found myself dealing with that more and more. And I was trying as best as I could to help him, but I didn't have the skill set. And eventually my wife saw the symptom of that, which was she said, you are stressed out and upset all the time. and I didn't recognize that but she 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 it 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.

28:17So 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. Yeah. That had to be one of the hardest decisions. Totally hard. Totally hard. Yeah. You, what is it like, what's the other side of it? Sell us the dream or the nightmare. I 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 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 was running a video said this or something, if you had to do it all over again, what advice would you give me?

29:02And he says, I probably wouldn't do it all over again. And I'm wondering, what is it like? Take us into what's it like emotionally, physically, the good and the bad of being watching the dream happen for a company coming in when it's an idea, and then taking it to a place that's incredible. 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, your resume's 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?

29:37I think maybe the core skill entrepreneurs have is problem solving. And problem solving, you get to use the right side of your brain, left side of your brain. Left side of your brain is like you're analyzing The problem right side of your brain is you're creating solutions. And you become this like ninja problem solver. And out of those solutions, then stuff gets created. And so that for me was the satisfying part was we're knocking 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.

30:12So now this dream is starting to become reality. The second piece of the satisfaction for me, though, was teaching people how to do this and then watching them do it. And then seeing that 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 this woman, Nikki. And Nikki ran delivery at the factory. So people would fly to the factory to get their cars delivered. right off the line, which is a pretty cool experience.

30:47And she was doing this a couple dozen times a day and had a team doing it. And then at the end of the quarter, hundreds of cars would come off the line and they'd do it several hundred times a day. And I watched how effective a leader she was. And we had this challenge worldwide where we didn't know how to deliver these cars very well and efficiently. And so I gave Nikki a battlefield promotion. I said, Nikki, you're going to be charged with this globally. and she looked at me for a second and 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 gonna help you like we're gonna surround you we're gonna teach you teach you how to do these things teach you the algorithm and 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 we couldn't fix it So I said, Nikki, you're going to get now your second Battlefield promotion.

31:38You're coming to the factory with me. We're moving our desks down there. We're going to solve this together, but you're going to lead it. And so that is not necessarily a push. It's more of a pull. It's pulling somebody onto the playing field and saying, I believe in you. I'm right behind you. I'm going to support you, but you can do this. And she proved time and time again that she could step up and do that. It's interesting. I came here today wanting to learn myself, you know, but 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.

32:15Yeah. The ability to stretch. That's true. 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. Well, for a living now, I start companies. And so before I met Elon, I had six companies, not same time, but six companies kind of in a row. We wrote the business plan on my kitchen table, scaled the company, sold it to a public company. Did that six times in a row. And now I invent companies for a living.

32:49I'm back to my roots. And the reason I say problem solving is because we'll typically start with a big opportunity area. and will say, we've got to create a company in this area. We've got to figure out how to do that. We're going to create a vision eventually, but first we've got to figure out how to really make this company come to life. That's interesting. And a lot of that's problem-solving at the very beginning. So I'll give you an example. We saw that in the cybersecurity market, the last five years have been about 1 ,200 companies created in cybersecurity, all focused on the cloud. Which I totally understand because it's easier to write software for Amazon, Azure, and Google than it is your local dentist who could have any form of a tech stack.

33:36And so we said, hmm, 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. 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 we heck do we do this for an infinity number of tech stacks yeah all right i love when you guys send messages out on social media about the show and lately been getting a few of these messages about my wardrobe i was wearing this sweater this tan sweater and i kept getting all these messages from guys going, where'd you get that sweater, bro?

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35:33Venmo Stash terms and exclusions apply at Venmo.me slash stash terms. Max$100 cash back per month. That's where the problem solving comes 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 and. You've got to have the vision, and you've got to do problem solving to actually get there. It's really good. I've never heard that before. Everybody should rewind that last two minutes. That's new. 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, which is a big thing.

36:05If I go give a talk at Harvard or some business school, I mean, obviously, culture comes up and everything, but you actually break it down into 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 me? I would say like there's this secret sauce, kind of secret ingredients to cultures that I think are super successful. And both of them are really about creating feedback loops. So the first is, does leadership eat its own dog food? This is so good in the book. 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.

36:39your bank's app on a weekly basis. No hands go up. And I said, to be honest, I wasn't surprised by this because I'm a customer of a couple of your banks and your apps suck. And if you use them, they wouldn't suck for another day because you'd be so embarrassed, you would haul yourself down to the people that were responsible for that app and fix it. But you don't use them, so you don't know. So you don't have a feedback loop. And the company doesn't have a feedback loop and they think if it's acceptable to the CEO, it's acceptable to everybody else. Very good. And so I believe you've got to use your own product.

37:13So I'm a board member at Lululemon. I've been in five stores the last two weeks because I want to shop, a secret shop, and I send our head of stores notes on every store visit. Like, here's what 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 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.

37:49And 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. And I'm shocked most people don't do this because it's just an easy hack. Um, that's thing one thing too is there's a reason Elon can run so many companies. Okay. And that is, he'd spend a lot of time thinking about what are the one or two, and there can only be a handful, existential issues for this company. And for him, he says, I'm only working on those two. I'm going to delegate everything else in the business. But those two, I'm personally involved. And so, like in the car business right now, he's determined that there are two existential issues for Tesla.

38:35One is autonomy. me. If you don't have a car that's a chauffeur and 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 be first in that technology. So what that means is that every week when he shows up at Tesla for one day. He's there a day a week. He is only talking to the teams that are responsible for that issue.

39:15And because it happens weekly, there's weekly forward progress because teams, when they meet with the CEO, don't bring their B game. They bring their A game. And they come with solutions and they're moving that problem forward just incrementally, incrementally, incrementally, incrementally. But because the CEO is personally involved, he can resource those needs and really drive forward progress. And essentially what Tesla and SpaceX do then is they're creating a compounding advantage versus their competition every week. And so if you look in space now, they've been landing rockets, parts of rockets, and reusing them for six years, seven years.

39:55And nobody can catch up because they're seven years ahead. They're already on to launching their own satellites and creating Starlink, et cetera, while Blue Origin's trying to figure out, how do we launch one rocket and catch one fuselage? And so they've got, I think their launch costs are 90 % less than the rest of the industry. So they've got 90 % market share. And that just keeps compounding. So the second cultural secret ingredient is, as a CEO, have you figured out what the one issue is in your company that is going to drive survivability? And are you working that every week? So good. And if you do, you're going to start to create advantage.

40:33Do you hire for culture? In other words, when you're hiring, is culture fit important to you? We kind of hire for two things. We hire for, this is going to sound crazy, this combination, but we hire for humility and capability. And believe it or not, everything you'd read about Tesla externally, you'd think, boy, this is big ego-driven culture. It's really a 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.

41:14Or we'll figure it out. And so you want somebody who's got that humility but also that quiet confidence to say, I think I can go slay this. I see that in you. Well, it's, it's, and so then they'll fit in the culture for sure. If they have those two attributes. That's interesting. Cause my favorite people, friends, I've, I've started to deduce like, who do I like to be around in my life? And it's, it's people with tremendous humility, but they nuance it because they also have a high level of self-confidence as well. They told that line. Yeah, exactly. These people that have tremendous confidence and bravado with no humility, they become exhausting to be around.

41:50They are. And then the people that don't have the confidence, you're dragging them through life and business all the time as well. So it's a really unique nuance. 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. Give us the name, and I know it's in - Yeah, so we call this DVX Ventures, and what we are is a group of people with an idea disease, essentially, for businesses. And we create businesses from scratch. So we're kind of inventors of companies, and we'll take these in, these have to be in big, kind of big opportunity areas where we feel like we're moving the world forward and we've created 12 companies in five years and we just have this systematic way of doing this where we'll come up with the idea for the company, 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 who has had success but they don't have their next idea and then we'll bring them in.

42:50And they can typically bend the curve of this business really fast. Have you had any setbacks the last 10 years? Oh, yeah. Yeah. Can you explain one, describe one? Yeah. So like one of the things I observed in the rideshare 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 and so i said you know we ought to take this insight from rideshare and being able to price dynamically and bring this into the consumer market for products.

43:51So 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 plotted out a demand and pricing curve and figured out that we could drop the price on the Model S by$5 ,000 and sell 25 % more cars, which is really great insight and important insight to have. So my idea was, hey, let's start a company to do this. Yeah, great idea. And we looked around and said, well, there's a bunch of carcasses around that have tried to do this. And they turned out to be consulting companies because they couldn't get people to buy software. So we brought a bunch of really brilliant people in, people that have worked at Boston Consulting Group's, Pricing Group, et cetera.

44:28And we start to build this product and we take it out to companies. And companies are 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. Agreed. 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, et cetera. So my team turned to me and said, we have to kill this idea.

44:56And we do this a lot. And I said, yeah, you're right. Like, I thought this was going to be applicable, but I was wrong. And so we killed the idea. You'll stop throwing good money after bad at some point. Exactly, exactly. Do you, when you look at business right now, so there's things Alon said that scare me almost about what he thinks is AI is going to do to the world. So you, you're there that entire time, right? And you've obviously had, you've proven your algorithm and your success, not just in one place, but in multiple places. That's why it's a valid theory. When, when something's pressure tested multiple times, then we know it works.

45:33In multiple contexts. Correct. Large, small. Yeah. You got it. That's why I sound like the better salesman for the book than even your publicist is here today. Just because I believe so deeply in the principles in the book, especially now. Give us just a peek. 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 don't think we're gonna have a workforce anymore. I think we're gonna have, you know, guaranteed minimum income. Everyone's gonna be kind of floating around and the robots are gonna do everything. I'm oversimplifying, but not by a lot.

46:02what 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 yeah and we're really good at wringing our hands at that we are not good at seeing what's on the other side. And the reason is, is because we can't see what's on the other side because the world hasn't existed like that before.

46:38So I'll give you an example. I grew up in very rural America. I grew up in Nebraska. And the whole country looked like the place I grew up in in the early 1900s. About 67 % of jobs were in agriculture. And this thing came along called the tractor. And people started to wring their hands and said, 67 % of Americans are going to be out of a job. This is going to be terrible, not good, terrible. So the tractors roll out, farming gets a whole lot more efficient. Today, I think less than 2 % of our population is in agriculture. But somehow, on the other end of that, there was a second order effect that we didn't understand.

47:20And the second order effect that we didn't understand was a couple things. One is if mass production of food exists, it makes it a lot cheaper. So people need less income to afford food. And then if they have more income, they can invest in other things. The other thing that you could invest in was this tractor was the product of the beginnings of an industrial revolution that then created all kinds of industries, cars and trucks and trains. And you go on and on to today to computers and pharmaceuticals. So what jobs get created? Well, car factories need people. And then you've got to build roads.

47:54And 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 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 that could connect those two systems without a human having to connect two wires or a plug on each side.

48:34And overnight, 800 ,000 operators were out of a job. Job's 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'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 1-800-something-something. That created a need for call centers. And now there are millions, not 800 ,000 people, millions of people employed in call centers.

49:16We couldn't see that on the front side. And so now we say, okay, AI is going to take all these call center jobs away because AI does support really well. And there's going to be massive unemployment and 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. So, like, 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 this could be the first time in history and I could be wrong.

49:45But 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. By the way, I've enjoyed today so much. Me too. We could do six hours and it would fly by. Yeah. 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 ever read the e-myth.

50:16Yeah, I did. You talked about having an entrepreneurial seizure. I think that's a great book as well. I do too. And 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 slash finish 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 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, not only being a number two and running a business of an entrepreneur.

50:46Yeah, so like the reason I wrote the book was, I wanted, first of all, I wanted people to know how Tesla operates and this is largely how SpaceX operates too. And there's this operating system we use and it's called the algorithm. And I wanted to get that out there, that framework out there so that we could drive more innovation in this country. And that was my primary motivation. I've read books like Gerber's books and other books where they've had a profound effect on me and my capabilities. And so I wanted to get this out there in the chance that that has that impact on somebody. It's going to.

51:18And then should people be entrepreneurs? Like I teach like you do in business schools, and I'll have 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? This is really hard. And it's really enjoyable if you're wired for it, but it's super-duper hard. And I think when I was starting my career, there was a guy that I was working for who spotted in me that I was an entrepreneur. And he said, you ought not to stay here as an investor. You ought to go be an entrepreneur. And I said, okay, what do you see in me?

51:57And he said, well, I see that you want to be hands-on 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. Yeah. Tell me how creative you are. Like when you look 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 the rest of us are looking at it. That gives you the creative insight to create something that is going to be meaningful, important. And so that's the vision piece.

52:32And then essentially, are you stubborn as 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 gonna 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've done a lot of podcasts, brother. I'm really, really grateful that we did this today.

53:08Same. Yeah. I'm really grateful you wrote the book. Thanks. You guys get the algorithm. 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 McNeil, thank you for being here today. Thanks for having me. God bless you, everybody. Share today's episode. Take care. This is the Ed Myland Show.

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