Ex-Tesla President reveals EVERYTHING Elon does to win

Part of the secret to Elon's secret sauce is he sets these order of magnitude improvement goals. So 10x, 100x. He came to me and said, hey, look, we got to figure out how to sell cars online because nobody was buying $120,000 things sight unseen online. And so he turns to me and says, this is your goal, improve digital sales by 20x. So now it's like, oh crap, I got to think way differently about this.

I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's go. All right. So I guess to start, I mean, I almost want to rename the podcast How Lucky Are We? It's like, oh, we get to sit here with the guy who was the president of one of the most important companies of our time, Tesla, for years. You got to work with one of the greatest entrepreneurs ever, Elon. You yourself have this crazy entrepreneurial track record. You've built and sold, you know, 5, 6 different startups. You're like the Forrest Gump of the tech industry, just going into different spaces. And you go into, you know, auto repair and cyber insurance and all these different spaces. And so I'm pretty fascinated that we get to talk today, and I got a bunch of questions for you, but I want to start with less of a tactical question and more of a movie scene. So you go into a job interview with Elon Musk. It might not have even felt like it was a formal job interview, but your first conversation with him, what's that like?

All right. So the setup to the scene is we're introduced by a mutual friend, and he is intense. And the niceties were about 2 sentences, and then he said, Hey, I got this problem in manufacturing. Have you ever seen it before? And then we were right into it and 2 hours flew by because I had had that experience in manufacturing. I'd seen that problem. We started to break it down together and then we started to move deeper and deeper and deeper into the problem. And we looked up in 2 hours. He was like, oh man, like, I, I got a lot out of this. I got to go. I'm going to go down to the factory floor and do what we just talked about.

So that's the first, that's the first combo. He's, uh, so you're problem solving together, he skips the small talk, and then is he testing you or he's just genuinely trying to solve the problem right now? Like, did you get any sense of he was poking around to see kind of where your capacity was, or he was—

So that he can— So he can tell if you're bullshitting.

Exactly. And he can take you super deep because he's in it. And he just likes to know, like, almost like a video game, like, how many layers can this player get through before they're stumped? And so that's exactly what was going on. We were getting to know each other. But 90% of it was he was evaluating.

Later, when you worked there and you're the president, did he try to teach you kind of the method or say like, hey, here's what I'm doing when I'm interviewing? Because I'm assuming for the first X hires at Tesla, the key hires, I think I've read something before that he interviewed the first 1,000 people at SpaceX. I don't know if that's kind of like folklore or real, but, you know, the idea that he's basically figured out how he likes to hire. Did he try to implement that with you and others so that it's a, the whole team is, or is hiring that way, or he just does it in his own idiosyncratic way? You do whatever you want to do.

Wow. 60%. That's unbelievable.

Yeah, but it was super important because you totally win and lose on talent. So like, that's another hack for entrepreneurs to think about is how much of your calendar is devoted to the number one driver of your success, which is talent, right? But he talked to you— the point of your question, he said, hey, we have to determine whether or not these people can demonstrate evidence that they can be world class. And to do that, we've gotta dive deep into these problems. So he basically articulated what he had done with me as we were getting to know each other and going through that interview process. And then we sort of divide and conquered, like we literally were the last interview. And oftentimes I would include in my senior, senior hires, I would include JB and Elon because they were both such great talent selectors. JB especially has this unbelievable knack for talent selection.

So one trap to like try to identify is, did this person actually do the work or are they claiming the work of their team? In other words, a lot of us have been on teams of 8 or 10 or 20 that have done unbelievable work. We've been on those teams, but it wasn't our work. We weren't leading the team, we weren't leading the curiosity or the discovery or whatever. And so that's the trap that you're trying to like dive into so deeply in the problem that you start to determine, did this person actually do the work or not? And it's tricky because there are companies that are fully matrixed. So take like, uh, Nike. Nike's a fully matrixed organization. You pull a marketer out of Nike, that marketer has never had, uh, full P&L responsibility, full creative responsibility, full distribution responsibility. They have a very nichey job, and it's really hard to determine, did this person do the work or not, uh, right? And so you go way deep on trying to figure that out, knowing that it's a risky hire to hire from a matrix like that because you really can't put your finger on who really does the, uh, the breakthrough work. That's kind of— that's one. The second is I would present a— much like Elon did with me, I'd flip the tables and present a current problem of mine. And then I want to see their level of curiosity, their level of analytics, their level of problem solving, uh, their ability to ask really great questions to get some data from me and get me engaged. Right. And so it's basically, it's that basic, like go into a problem of theirs, then flip the table and go into a problem of yours. And that's the knack at Tesla. It was like, let's turn complex into simple. And so if you've been a leader there, you can identify these leaders because they have the ability within a minute or two to take a really complex question and boil it down into a principle.

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I, I 100% agree with that. Like, our head of retail came to me, uh, and he said, hey, I'm hiring a lot of Apple people from Apple stores. And I said, time out. You can work in an Apple store and you are an order taker. Right. Go down the hall to the people at the Microsoft store who have to sell a Slate two doors down from a MacBook Air. Those people know how to sell. The fact that they're, they're not starving is unbelievable. So go hire them.

Well, one of the stories I loved in the book— so I have, I have the book here, so I have like highlighting all my favorite stories as we go— but you have a sale, a Tesla sales story. Can you explain, tell that story? I thought it was a great one.

So the context is, uh, Elon and I are having these discussions. We're getting to know each other, and eventually he pops the question. He said, "Why don't you join?" My first reaction is, "I'm not sure I'm your guy. Your company's twice as big as my biggest company already. Don't you need a big company guy?" And he says, "No, no, that's the opposite of what I need. I need a fellow entrepreneur who knows what it's like—" You negged him.

Yeah, totally.

He's like, "I need a fellow entrepreneur who knows what it's like to chew glass and look into the abyss," his famous quote, "and you know how to allocate capital, and no big company—" person's going to know that. So I said, why don't you let me go poke around the business? What is your biggest challenge right now? And he said, oh, biggest challenge is top line. Like, we've promised the street we're going to sell 12,000 cars this quarter, and it's a month and a half in, we've sold 3. I'm like, oh crap, that's a big problem. I said, I tell you what, I'm traveling a ton the next week, I'll call you in a week. So I went out as I was traveling to Tesla stores and I test drove cars.

So your first move was to mystery shop, which I like, by the way, because you get this idea that it's all intellectual, it's all strategy, and you're like, no, no, let me go, let me go see ground floor truth of what's going on.

He's like, great, it'll be done in 2 hours globally. They weren't calling back not out of laziness, but because the incentive structure, right? They were getting— they, they sort of— commission was tied to the test drive, right? Not onto— not to sales that closed from a follow-up. Is that what— there was some incentive problem, correct?

There was, there was an incentive problem, but there was also a profile problem. We were hiring people that didn't know how to ask for the sale, uh, and that was the root cause. So when you forced them to, uh, then, uh, then stuff started moving. So I talked to the guy the next day, he's like, I already have the results out of Asia and Europe and like sales are flying. And I said, yeah, I said, no surprise, like all you have to do is call people back, like if you want to close the sale, right? Um, and then it dawned on me, oh crap, I made this decision like I was the CEO. I don't even work for Tesla yet. And so I said to the guy, like, I gotta call Elon and tell him what we did. And I said, I'll take the blame. You're not gonna take the blame. I'll take the blame. And so I called Elon. I said, man, I gotta beg your forgiveness. I haven't not been a CEO for 20 years. I've had 6 companies. I haven't had a boss. And when I see a problem, I want it gone like immediately. And so here's the problem I saw on your top line challenge. Here's what's happening in your stores. Here's the change we made yesterday. And by the way, I think with this change you're going to make a quarter. Long silence, like uncomfortable silence. This is before I knew about the signature Elon long silence.

And, uh, what are we talking, 30, 10 seconds, 30 seconds?

It had to be at least 60. And to the point where I was just about ready to ask him, are you still there? And what I have now come to learn is like, that's his processing mode. He shuts down all other sensory inputs and he just lets the compute run. Uh, it's literally like AI, right?

You can say go to, go to think mode and it just, it'll take time.

That is the think harder button. So, uh, he comes back on, he says, you know what, I think you're gonna fit in here just fine. You've proven to yourself and to me you can be useful. So why don't you just join? That's an awesome story.

Yeah. And, you know, you've done this kind of over and over again where you sort of go into problem-solving mode. And I want to talk a little bit about that, a little off book here, because, you know, I was at a dinner somewhere and I got bumped into a dude who had taken over as CEO of Lime Scooters, you know, one of the scooter companies. I knew, like, hot for a while. Yeah, exactly. Bird or Lime. And then it kind of crashed. But they're a public company and they were struggling now. And so this guy comes in and I was like, so what'd you do? Because he actually turned the company around. Like, they got to profitability. They like— it's not like it's the best company in the world, but it was about to die and it did not die. So, you know, as an ER doctor, he did well. And he goes, the first thing I did is I went and I sat in the warehouse and I just took a chair and I just sat there for 8 hours. And, you know, people were like, hey, do you want to do meetings? And he's like, no, I just want to watch. And he just watched. And he's like, okay, he's basically like watching where all the waste is. Because if he wants to make this thing profitable, he has to find out where all the, all the waste and expenses that's not driving revenue to the company. We're going to, you know, we're spending money, but we're not getting paid to do these activities. He's like, oh, so that guy, he's doing this, but there's a bottleneck over here. And that's because they only have one person and they're all waiting for this. And he's just— he's like, I sat there for 8 hours and it kind of like told me what I needed to do for the first, you know, 2 weeks. And I remember thinking this idea of mystery shopping or going and sitting in the factory, going and sitting in the warehouse and just watching what's going on. There's an immense amount of power to that. And I think for most CEOs, we sort of think that a big impact has to come from a big high-level thing and not this kind of roll your sleeves up, just go watch. You don't need a 2,000 IQ, you just need a simple thing.

What's— it's funny, it's like, is there a double slit experiment problem here where as soon as you start observing it, it behaves differently? You know, when you're sitting there watching with Elon, all of a sudden the doors are going through real fast. Is that— is it that or no? Like, it's usually a process constraint no matter how hard they're trying to work.

No matter how hard they're trying to work, it's usually a process constraint. But that does happen. And so the problem can like can, can fool you because people do start to have the white coat problem where you're the boss is standing there and they're like, now they're hustling, now they're trying to impress the boss. But most of the time you can see it like if you stand there long enough, they're going to forget you're there.

Right. And there's also, you know, you talked about being there for an hour and after 10 minutes you see it and you get antsy, you want to go fix it right away. And there's almost actually a benefit in just feeling the pain a little longer than you're supposed to, to just really like actually drive home the importance of it. Totally. We did this, you know, I'm not in the manufacturing business, but I have an e-commerce business. And in our e-commerce business, we're at this, you know, leadership offsite and we're all talking about these strategies. And it's like, has anyone tried shopping the site or watching someone shop the site? Hey, let's get somebody here to shop right now. And they're trying to find something that we know we have and you can't find it on the site and it's painful. And we think this is so— yeah, just click that thing and they won't click it because it doesn't look obvious. And feeling the pain of watching somebody use your product. It's surprising how many CEOs don't actually use the product or watch average people struggle to use the product.

doesn't Procter Gamble do something like this where you— I think they have like research teams that will literally go home. They'll go to the home of an average mom and they'll watch, you know, how they clean their kitchen, how they're— oh, they use the soap this way. Totally.

I'm on board with a guy named Chip Berg. Chip started his career at P&G. He ended up being the CEO of Levi's, but he was famous at P&G for watching moms in kitchens, like you said. And he invented— he and his team invented the Swiffer because they were like, the mop sucks. Like, you gotta get water all over the place, you gotta dump it in the sink, it's totally janky. And so they invented the Swiffer based on how they watch moms suffer with regular mops, right?

I love that. Today's episode is brought to you by HubSpot. Did you know that most businesses only use 20% of their data? That's like reading a book but then tearing out 4/5 of the pages. Point is, you miss a lot. And unless you're using HubSpot, the customer platform that gives you access to the data you need to grow your business, the insights that are trapped in emails, call logs, transcripts, all that unstructured data makes all the difference. Because when you know more, you grow more. And so if you wanna read the whole book instead of just reading part of it, visit hubspot.com. You have a couple of other, like, business principles. And one of the things I liked was, I'm an idea guy. Like, my, my entrepreneurial style is a high-variety style. I've done businesses and, you know, whether it's restaurants and biotech and cyber and, you know, a bunch of different industries and, you know, not all have worked, but like, that's, I guess, just the way I'm wired. Yeah. Some people, they stay in one domain and they keep solving problems in that domain for 40 years of their career. Yeah. And it seems like you're also in the high variety category. And one of the reasons why is you've learned how to sniff out opportunity because it smells like a problem. It smells like something that doesn't make sense. And it sounds like one of the tells that you have in the book is anytime you see something that's one size fits all. Yeah.

In the book, you phrase it slightly, you, you, you use a slightly different intro to the story, which I liked, where you basically talked about like you're looking at the expense. I think you were on the board of 2 companies or something like that. Yeah. You're looking at the line items on the expense sheet and it was like, uh, it was 2 different, you know, it was like, um, it was Lyft and Lulu, Lululemon, which is a retailer. They don't really have any personal sensitive data about any customers. You know, customer comes in, swipes your credit card, they don't save it. And they were spending something like $7 million on cyber insurance. Yeah. And then somebody else was spending, um, you know, somebody else who had a lot of sensitive data, it was also spending $7 million. And you sort of had this like huh, how could these two vastly different companies with vastly different risk profiles in vastly different industries have the same thing? And you were like, that smells a little fishy to me. And whether that became a successful company or not, I just like the, the general idea of noticing is actually a superpower. We talked about noticing for bottlenecks, but then you can sort of notice for things that don't make sense in the world. And an entrepreneur, entrepreneur can come in and make it make sense by actually changing the way the world works. Right. And actually change the system rather than try to just say, I guess it just has to be that way. Right, right.

And, and that's a perfect example of that. Like, I think noticing is a trait a lot of entrepreneurs have because we do see like friction and say to ourselves, like, why does this friction exist in life and how do we get rid of it? Right. And I have people ask me like, do you fly private? And I've got a weird answer. I said, no, I don't. But it for a weird reason. I don't fly private, I fly commercial 'cause I want to experience friction of everyday life. That's gonna give me my next business idea or two or three. And I think entrepreneurs are kind of wired to look for friction as a clue that there could be an opportunity. But they definitely, we all have, I think, a heightened spidey sense for where that friction is.

Yeah, as an entrepreneur, if your life gets too comfortable, you lose your ability to spot problems. Exactly. Comedians, when comedians get too rich, they fall off a cliff because they don't have relatable jokes anymore because their life is completely unrelatable at this point. Right. And they don't see the everyday things. Okay. So I want to go through a couple of the, like, the steps of the algorithm. So your book is called The Algorithm, and the idea is that— let me, let me phrase what I took away from the idea. Okay. So the idea is there's a certain way that you can run a company that will lead to faster growth and more success, obviously. And what I liked about it is there's this feeling that Elon's just the super genius alien, and maybe he is, but let's say like that the success of the companies are because you have this super genius. It's a very nice story, fits well in the sort of Hollywood way of looking at the world. But you said, or is it that he is really smart and ambitious and talented, but he surrounds himself with really smart and ambitious and talented a legion of smart people who are empowered by a way of working, a culture of working, a method that leads to this level of success because he's got all these different companies. One man can only be doing so much and can only be in so many places at once. Is that, is that accurate how I describe the, like, the premise of what we're talking about?

Yeah, it's kind of 3 layers. First off, he's, he's brilliant and he is unique as an entrepreneur in our time. Like, I can't name— I can't name any entrepreneur who's created 4 or 5 companies, all worth— all worth tens of billions of dollars, if not hundreds of billions of dollars. You know, Zuckerberg has had one, Gates had one, Jobs had two, Bezos had one, Ellison's had one. You go down the list of entrepreneurs of our time, there's nobody like him. And so he is pretty special, dude. He does surround himself with world-class talent. And, but the idea of the algorithm was to give that world-class talent a framework so that we could push decisions to the edge and people could drive innovation without us showing up and, and having to drive it ourselves. And, and a framework is super helpful in that. So you combine world-class talent with a framework and a method, and you start to get innovation breakouts that are really unique and A lot of people said, hey, do you have to be Elon to do this? And my answer was no. Like, that's why the book is told through the eyes of people who are actually on the edge doing this work and telling their stories. So you can see, hey, there was no senior management team hanging around here. This was like frontline people taking on these big problems, saying, we like— we just want to solve this. And you give them a framework to solve it, and they do crazy things like inventing mobile car service from an OEM, from a manufacturer. Inventing one-click loans, inventing insurance embedded in car payments, like just stuff that was flowing and moving so fast because people at the edge were empowered, but they were also equipped with this framework.

And one thing that's not in the framework, but it seemed common, was that the starting point for a lot of the stories was we had this problem. You have this one in there about online sales. It's like, you know, Tesla is this, you know, high-tech, kind of the most tech-forward company. But actually the e-commerce, the online sales were, were, were pretty weak at the time. Right. And so you have this problem and it's a weakness in the company right now. And instead of just saying, hey, let's improve our weakness a little bit, let's get back up to par. Elon's method, it seems like, starts with a crazy goal that's like, not only is this today, not only are we going to go from weakness to average, we're going to go to like world class or best in class in that same category, which I think is not how most people think. It's not how I operate. Like when I see that, I'm like, hmm, that's not what I would have said in that situation. For example, with the online sales, it's like online sales are weak. Okay, here's what we're going to do. We're going to 20x our online sales or something like that. Like we are going to lift this and it's going to be the number one driver, right, of sales. And so there's this crazy ambitious goal to start the thing. And it sounds pretty unreasonable, especially because you're starting not from a position of strength, but from a position of weakness. Can you talk about that side of things? The like, let's just start by laying down the gauntlet of a somewhat impossible goal on something that today is actually a weak area.

And it's something everyone will nod their head to— fully customizable, of course, totally.

And sorry, just to clarify, what you're really saying is it's not that they're buying two configurations. It's like the job to be done, the thing that the customer cared about was they wanted either high performance, you know, like tap the pedal and it flies. Yeah. Or they want the safety plus EV plus whatever, you know, like the longest range battery they can afford.

Longest range battery.

Yeah. Good. I'm going to have that. And actually, like, We can pre-customize, we can pre-configure cars to like solve those needs without letting them choose what color the strip is on the side of the, you know, the side of the door.

Exactly. And that's exactly it. And so Greg, who's running manufacturing, says, oh my God, I've been waiting for this day for somebody to like, somebody to really drive this because you know what that would do to our factory? Totally simplifies the factory, simplifies the supply chain. We could increase throughput dramatically. Turn to Doug, what does it mean for engineering? He's like, are you kidding me? Like, I don't have to design all these parts. I don't have to test them. I can put engineering's time on the stuff that really matters to the job to be done for the customer. I'm totally in. So then I walk into the senior management team meeting and, and one of the team members was like, hey, you are the new guy. You don't understand. Like, it's religion here. We do build order. I'm like, it might be religion, uh, but that religion might take you to the grave. Here's why. Here's what happens to the business if we do this. We're going to get rid of a lot of clicks, a lot of decision fatigue if we just get down to 2 configurations. And you can make it 3 if you want, I don't care, but you can't make it 360,000, right? And Elon, he's super rational. He looked at the case, uh, and then listen to Greg and listen to Doug, and he was like, yeah, we have to do this. So If you go to buy a Tesla today, you'll see you've got 2 or 3 configurations on there. That's it. And the fear was we would look like Honda, but the, but it turns out we didn't because we had a completely different product. We had software on wheels. We were making, we were taking away all that decision fatigue from the customer and all that friction in the sales process just by questioning, like at the end of the day, we questioned the business model at the time. Which happens to me as an entrepreneur, happens to a lot of entrepreneurs. You fall in love with your business model and you don't really accept any challenge when somebody says, should we chuck this business model? Because it's actually what's in the way.

Right. And I wonder what you learned when you went to work for someone, because you said, like you said, I've been CEO for 20 years and I had the same experience where we got acquired and I went from a 20-person company and I'd always been my own I was always the CEO of startups for 10 years, and then suddenly I now had to go and report to— and forget the report to— I just had to bring my plans of what I'm trying to do to the table with somebody. I had to learn how to talk to a CEO who was thinking about the business, you know, separately. And I had never really been on that side of the table. And I had to learn how to, like, communicate upwards. What does that mean? How do I simplify? How do I speak the language that they're trying to understand? In order to do this well. Do you have any tips for somebody who's learning how to communicate to a CEO? And you were doing it with Elon, right? Maybe there's something specific to Elon, but what was your method for when you go into those meetings of how you present information in a way that is productive versus wasting time?

And it sharpens your own thinking. You think you're doing it for them, and then you realize, actually, I didn't fully have clarity on this until I forced myself to be clear to them. Now I'm clear to myself. Actually, it's so funny you said that, that those exact three. When I went into my first meeting with Emmett, the founder of Twitch, and I said, how do I talk to you? I don't want to come here and just chit-chat. We could do that, but I'm guessing that's not what you want me to do. And he goes, yeah, 3 ways, 3 sentences. He goes, what, why, so what? What is happening or what happened? Why is it happening or why did it happen? And so what are we going to do about it? And he's like, that's the way I like to communicate. What, why, so what? And then I've now taught that to my team of the same. It's so funny, the same, basically. Almost the exact same thing. We just had different labels for the, for the same exact communication structure.

I love that. In fact, I'm going to steal that because I think the world of Emmett. But, but that's a great, that's a great way to think about communication. And I think the other way I— the other thing you made me think about is as an entrepreneur, if you're successful, the most likely outcome of your business is somebody's going to buy it. And that means you're going to have an owner that you're going to now be subordinate to. And that's a different form of mindset. And I got it wrong like the first few times that we sold companies to— like, every time we sold a company of mine, we sold it to a public company. And so then I would come in and I'd know that company a year or two, right? And I'd have to work in their structure. And at the time I was young, and, uh, and so I was trying to keep this bullheaded entrepreneurial, um, uh, mindset. And that doesn't work in large corporations. And what I've now learned, if like I had a redo, and I apologize if anybody's listening who bought one of my companies, you had to put up with this pugnacious, like, entrepreneur who didn't get it. Now what I get is I should have sat down with them and said, what, what drives success for you? Like, what do you care about? Like, you bought this company. What has to happen in your mind to make it a success? That's often different than the bullheaded entrepreneur's way of thinking about it. Right. And, um, and I think that's a different set of challenges when you sell yourself to another company. The first thing you got to realize is that you don't own it anymore. They do. They have the keys. And if you owe them a year or two, you might as well make— not make that miserable. You might as well make it like fun. And the way to make it fun is to figure out, okay, like, how do I make this thing work for you and for me? Um, right. And if you do that, oftentimes you got an earnout and it's going to work for you too.

Yeah, that's great advice. I wish I had that advice earlier. Me too. Me too, man.

I stumbled so badly. You sort of discovered the hard way.

I wanted to ask you about the collision repair business because this was fantastic. Can you just tell the story of— because I only know part of the story. I want to know the whole story. So what's the story of how you got into that business, like how you discovered the problem and what actually happened with that company? And because I think it's pretty fascinating because it's not a venture tech. It doesn't sound to me at least like a venture tech business, no software, but you built that and it sounded like a pretty, pretty interesting success story.

Can you tell that one? Yeah, I ended up having a lot of software in it, but it starts with a little context. I grew up in the back of my grandfather's auto repair business. And so like, I, I was a tech. I had the dirtiest jobs because I was a kid, didn't have any skills. So I was changing oil and changing tires and that sort of stuff, but learned, learned how to hang out and talk to auto technicians. Uh, and, um, so decades later, my wife's car gets hit by one of our neighbors, and now I got to go get that fixed. And so I go to a large body shop and, um, drop it off, get the estimate, uh, agree to have this place fix it, and they— and the guy says it'll be done by Friday. So this is Monday. I come back on Friday, car's not done. He's like, ah, parts didn't come in. This is kind of typical. Next Friday. So I show up next Friday, car's not done. Tech didn't show up. Da da da da da. I said, you know what? I've just sold one of my businesses. I got a curiosity about how your business works. Can I just come hang out here? He was like, you're the first customer ever to ask that. But I I don't want you back there because you're going to get hurt. And then I explained to him, no, I know my way around a body shop. I know my way around auto repair. I won't— I'll stay out of the way. I won't get hurt. In fact, I'll just run parts for you if you want. So I went home that weekend and I started to do research and found out the auto collision industry is a $50 billion industry. And then figured it— then found out that there were 38,000 of these. And so the average business is around $1, $1.2 million. So pretty small. And, uh, I had been exposed to advanced manufacturing and I could get a sense of that was not what was happening in the back of these shops. So I went and just observed. I was running parts, uh, just observing. And what I saw was essentially a hair salon. Every technician had 2 bays and they were on commission and they made money off of those 2 bays. So they had no interest in how fast that car went through because it was, that car was sitting in front of them as a cash register to make money. And, uh, and so I thought to myself, what if, what if this was $50 billion industry was modernized? What if you put these cars into a, uh, into a production line like Henry Ford did? And what if you paid the entire team a bonus based on cycle time and throughput? Right.

So I didn't understand. So the— why, why doesn't the technician want the cars to go through? More cars equals more commission.

No, they want to control their paycheck. And so they would surround themselves with 3 or 4 cars and they would just cherry-pick hours off of those cars, and they paid by the hour, but not— so the car didn't have to get finished. They were getting paid by the shop just on the hours they worked on that car. So that car could sit there for a couple of weeks.

They didn't care. And you had these two terms, cycle time and touch time. Can you explain?

What do you have a— would you have a name for that moment where you're like What if you could get it back in the same day? Like, you know, what's the name of when you do that? When you say we're all the way over here, that's kind of the same thing with the Elon 20x online sales, right? It's like the industry, the expectation of the customer, the current workflow is all the way here. What if it was all the way on this side?

I do have a name for it. I have a name for it. I call it an epiphany. Like, I just— and so my teams that I've worked with now, they they hear this phrase a lot because in that moment, like, I'll sit down, I'll write out a Slack or an email and say, like, and the subject would be, I just had an epiphany. And it's kind of a realization moment where you're like, ooh, there's a big opportunity here to move the market. And that word for me is an epiphany. It's just like, boom, it's this like sudden discovery where you've been like, you've been pilled and now you can see the other side, right?

Yeah. Today's podcast is brought to you by my friends at Mercury. Uh, they make the world's best banking product. I think you know this already. I use Mercury for all of my businesses. I think I have like maybe 7 or 8 businesses. We use Mercury as our business banking across all of them. And now they actually just launched a personal banking account. So I have my personal account there. I moved off of Wells Fargo and Chase. I'm just all in on Mercury. Why? Uh, I like products that are easy to use. I like products that get me and the problems that I have. So like, very easy to make a joint account with my wife, very easy to spin up virtual cards., one click and I get savings yield. It just has all the stuff that I need in one place. So if you're looking for the best banking product on the market, it's definitely Mercury. I will fist fight anybody who disagrees with me on that. Go to mercury.com/personal and learn more. Mercury is a fintech, not an FDIC-insured bank. Banking services are provided through Choice Financial Group and Columb NA, members FDIC. What, what do you think now with AI? So, uh, I feel like you've been doing this for a long time and it's just when you're probably like, I'm a veteran of this game. The entire board game changes. Somebody flips the table and now there's a whole new game to be played. Where's your head at with AI? How do you think about this, man?

I love that story. So keep going. So let's say, you know, if we can think creatively, we could start to get a glimpse of what maybe is possible. What do you see as the kind of first-generation businesses that you're excited about and what the second-order effect might be?

Yeah, that is the weird thing about this, that the software essentially works like labor, right? So what you're describing is like— Yeah, exactly. Essentially a consultant. It comes in and it learns your workflows, it documents it, it figures out how things are currently working, and then it starts to improve or automate or whatever. That's right. So the weird thing is like, there is a question of, is it different this time in terms of the jobs? Right. Because it's like, if the software is fundamentally like human labor, like equivalent, then even the business it creates, won't the workers in that business also just be AI labor mostly that's doing that, right? And do we all just become sort of like mechanics for the robots and for AI, right? That's one part I haven't been able to wrap my head around. I haven't either.

And I haven't heard the case for why we do that is compelling enough to me. Yeah. Like the most frequent example I hear is, hey, in the 1950s, there were skyscrapers full of humans who were humanly calculating spreadsheets. And then this— then the real spreadsheet came along and all those jobs are eliminated. And then that's where the story ends for them. And I'm like, hey, time out. I was just in New York City. Those skyscrapers aren't empty. What happened? And what happened was a plethora of things. And I would use just one tiny little example of what happened that created trillions and trillions of dollars of market cap. Once in a— once a spreadsheet was available that was digital It could calc things in complexity way faster than those humans in those skyscrapers. And so all of a sudden you could have sophisticated pricing engines like Black-Scholes at your fingertips. And that meant that you could now price options and futures and derivatives that didn't exist before. And so entire markets got created on top of that one technological change that employ hundreds of thousands of people. Um, and again, that was unknowable on the, on the other side when the spreadsheet was just being invented, that somebody would deploy Black-Scholes and somebody would figure out how to price puts and calls and derivatives and make entire markets like the Options Exchange, the Merc, etc., possible, uh, to be able to syndicate loans. Like, none of that stuff was available, and now it's all available And that's the kind of thing where I think, okay, make me the case that all of a sudden now the computers do all of that and take all that creativity and all those jobs. I just haven't seen that in history. And I don't know that I can, I can fully buy into that ending point.

What do you think happens with the different AI players? You've got like, you think Elon has called it the highest ELO game in the world, right? So it's the highest level chess game being played between the smartest people with the most capital behind them. Going all out for the biggest prize. You've got Zuckerberg and then you've got Google and you've got Elon, you've got Sam Altman, you've got Anthropic. You have all these players. How do you, how do you see this playing out? You've seen a couple of tech waves, you know, you know, at least some of the players and maybe even all of them personally. How do you see this playing out?

I can't wait to see it. I almost want to fast forward. It's like I don't want to miss it, but at the same time, I'm so curious how the, how this all plays out, how the, what the world looks like in 10 years. It's probably the first time that I feel like I, I have no idea what the world's going to look like in 10, 15 years. But I do know it's, it's likely to be very, like, completely different, you know, for sure. You know, like, I bought a Tesla this year and it has, like, self-driving that's perfect. Yeah, it's amazing. It's, it's so good. And I just don't drive anymore. And I'm, like, trying to tell my mom and my sister, and I'm just like, guys, you realize, like, you don't have to drive anymore? Like, that's, that's now. And I, I can't believe that that's not— more people aren't freaking out about this one change, let alone Totally. Whether it's robots or it's AI that, you know, AI assistants in everybody's pocket or— Totally. There's so many different ways that I feel like the whole world in 10, 15 years is going to like— my kids won't really understand. Wow, you used to have to do all that? You used to do that? Like, that's so funny that you used to do that. Horseback riding, right? Not cars. And it seems like we're on one of those transition points. Totally agree. Totally agree. Well, Jon, I appreciate you coming on. Everybody should go get your book, The Algorithm. I don't say that, but usually most people come on, but I actually am reading the book and liked it. A lot. Awesome. Thank you. Big fan of it. And, you know, thanks for coming out and doing this because I feel like we get a lot of biographies. Oh, they grew up this way and daddy issues and blah, blah, blah. But like, you know, what's— which, which isn't— it's entertainment. It's great. But what I really love is tactical, practical. Me too. And how do you, how do you actually do things? What can I— how can this be useful for me? Me too, versus reading about somebody else's life. And so I'm glad you wrote this book. If I think if this book didn't exist, and it can only be written by somebody who's kind of there doing it side by side with other people and has, you know, the experience doing it. So, so congrats to you and thanks for writing the book.

Thank you. I'm glad you're enjoying it.

All right, take care. I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel, never looking back.

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