Ex-Tesla President reveals EVERYTHING Elon does to win

part of this secret elon secret sauce is he sets these order of magnitude improvement goals so ten x a hundred x he came to me and said hey look we gotta figure out how to sell cars online nobody was buying a hundred and twenty thousand dollar thing sight unseen online and so he turns to me says this is your goal proved digital sales by twenty x so now it's like oh crap i gotta think way differently about this i feel like i could rude where to know i could be what i want to from at all in in like a days off on a road let's try so i guess to start i mean i almost wanna rename the podcast how lucky are we it's like oh we had to sitting 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 five six different start ups like the force gum 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 wanna start with less of a tactical question and more of a a movie scene so you go into a job interview with elon musk it might not have even felt like it was a a formal job interview but your first conversation with them what's that like alright so the setup up to the scene is we're introduced by a mutual friend and he is intense and the nice cities were about two 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 two hours flew by because i had had that experience in manufacturer 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 two hours he was like oh man like i hey i got a lot out of this i gotta go alright i'm gonna go down to the factory floor and do it we just talked about so that's the first that's the first combo he's so you're problem solving together he skips a 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 lower i'm oh yeah that's it no that's exactly what he was up to so his hiring method is he wants to determine whether or not you can do world class work and his method is to inter a particular problem and go super deep on it and it's better if a he tries to skew it to a problem that he knows right so that he can you're bullshit exactly and he can take you do super deep because he's in it and he he just likes to know like almost like a video game like how many layers can this player get through before they stomped alright and so that's exactly what was going on we were getting to know each other but ninety percent of it was he was evaluating later when you worked under near the president did he try to teach you kind of the 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 that tesla on the key hires i think i've i've read something before that he interviewed the first thousand people at spacex i don't know if that's kind of like full floor or real but you know the idea that he's he's basically figured out how he likes to hire did he try to implement that with you and the others so that it's the whole team is or is hiring that way or he just does it in his own idiosyncratic way you do whatever you wanna do i'm glad you raised this because this is a hack i don't get to in the book but it's the thing that a lot of entrepreneurs think about which is as your company scales how do you protect the culture right and he and jb str the founder of tesla came up with this method to imprint the culture on every hire and a test for culture and that was they would be the last interviews that's a hack that i've taken forward now from from that elon experience and now i do that too but the way that translated was that he would say like he said to me hey look we know as fast as this thing is grown we're gonna split this up and you and i are gonna interview everybody that's hired at a manager level and above so we didn't interview everybody but grown from four to forty thousand employees there were a lot of interviews we're were doing in fact sixty percent of my calendar was interviews wow sixty percent that's unbelievable but it was super important because you totally went and lose on talent so like that's another hack for entrepreneurs to think about is how much of your calendars devoted to the number one driver of your success which is talent right but he talked to you your 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 got to 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 divide concord 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 selector jb especially has this unbelievable knack for talent selection and what did you pick up so what's the what's the okay so i hear the the overall method which is you wanna be looking for this sort of world class work evidence of exceptional ability you are gonna how do you do that you go super deep on a problem that they've worked on or that you understand i've heard elon say a couple of things that i liked which was like he's like i'm trying to say wow wow wow in the first twenty minutes and if i'm not saying wow wow in the first twenty minutes probably not there exactly and trust trust the conversation not the resume because you could have a great resume but if the conversation is not giving you a while while it's not there and if it is forget the resume it's you know this is legit so i picked up a couple of extra things in the over the years and some of his interviews but i would love you know folks you go from white belt to blue belt here so what what are the nuances what is a little what's a question what's say a little red flag or a trap that you've learned to to avoid 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 know other words a lot of us have been on teams of eight or ten or twenty that have done unbelievable work right 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 that 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 matrix so take like nike nike is a fully matrix organization you pull a marketer out of nike that marketer has never had full p and l responsibility for creative responsibility for distribution responsibility they have a very niche job and it's really hard to determine did this person do the work or not right and so you go way deep i'm 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 the breakthrough work that's kinda 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 wanna see their level of curiosity their level of analytics their level of problem solving their their ability to ask really great questions to get some data for me and get me engaged right and so it's basically it's it's that basic like go into a problem theirs then flip the table and go into a problem of yours and that's that's the na at tesla it was like let's turn complex into simple and so right 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 a principle hey everyone really quick if you're enjoying this episode on ceo stuff so del heavy hard conversations with your team hiring then i've got something for you so the team at hubspot they actually went and put together a bunch of best practices that sean and i use in our own companies and they put it together in something that's really easy to read and understand and so if you wanna just save yourself ten years of headache and heartache then you should check it out i wish we had this long time ago or to help me a lock but there should be a qr code on your screen that you can scan or a link of the description so check it out it's totally free and totally awesome i've had this the two traps you just mentioned i've had the exact experience you had in the last week i interview somebody either they're like oh yeah i was there from one million dollars of revenue to ninety three million dollars of revenue oh fantastic they weren't the one driving that revenue so even they're claiming the work of their team it's they're claiming the progress of the overall company and they lived in this corner over here that had nothing to do with driving the growth and they really didn't understand oh the core engine of this business is is a you worked on b over here and side i need to find people who the guy who built a because a was the reason that business one and that's what we're actually trying to understand and and trying to try to do our own version of so i've i've definitely felt that and then the other side is there's people who have come from these great companies nike i'm a marketer at nike nike has great marketing and so your bringing associates this like level of talent but they're not maybe the people who are there at the beginning the ones who made the key decisions or one thing that i found is with salespeople there's a great piece of it sitting from ben h or someone he's like hire salespeople people from the ones who had the the shitty product he's like if you hire a salesperson from the the people whose the product was just being pulled by the market the you know the fish were jumping in the boat and you don't know if that person's a great fisherman just because they were just being handed inbound organic warm leads and they were closing them that's that doesn't mean anything you wanna go to the guy who was selling on the the tier three company still beating quota even though their company was not the winner their product was not the hot one because that person actually knows how to sell and that's really helped me with those some companies so there's these like small heuristic that can actually like improve talent selection sourcing i i a hundred percent agree with that like our head of retail came to me and he said hey am i hiring a lot of apple people from apple stores and i said time out you can work in an apple store and you're 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 pick the fact that they're they're not starving is unbelievable so go hire them well one of the stories i loved in the books that i have i have the book here so i have like highlighting all my favorite stories as we but you have a sale a tesla sales story can you explain tell that story thought was a great one so the context is i elon and i are having these discussions we're getting to know each other and eventually pops the question said why don't you join my first i'm not sure i'm your guy like your company's twice as big as my biggest company already don't you need a big company guy and he says no no i i i that's the opposite of what i need i need a fellow entrepreneur who knows what like you need him yeah totally he's like i need i need a fellow entrepreneur who knows what it's like the chew glass and look into the abyss his famous quote yeah and you know how to allocate capital and no big company person's gonna know that so i said finally why don't you let me go poke around the business what is your biggest challenge right now hey he said oh biggest challenge is top line like we've promised the this street we're gonna sell twelve thousand cars this quarter and it's a month and a half in and we've sold three i'm like oh crap it's a big problem i said to tell you what i'm traveling to on 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 of cars you so your first move was to mystery shop which exactly it's because you get this idea that it's all intellectual it's all strategy and no you're like no let me go let me go see ground floor truth of what's going on totally i'd read the sam walton biography and the biggest thing i pulled out of that book was the management hack of secret shopping because you get this sense like frontline employees knew exactly what's wrong with the company they will tell you what the customers are complaining about they'll tell you what the the organization sucks at and so that was my first in instinct like go to the front line so i go to the eight stores i test drive use different email addresses so they don't know who i am and the test drive is supposed to be the fu room and the sales funnel like you hit the accelerator and you can't stop thinking about buying a tesla right i can get a single callback and elon introduced me to the head of sales ops so i called the guy said can you tell me why i'm not getting callback and he said i looked at the system you're not fly like i have no idea i said okay tell me how many people have gotten a test drive in the last thirty days that haven't been called back so it cranks to the crm and he comes back it says nine thousand and i'm like nine thousand you're gonna make your corner if you just call these people i said okay look this problem has to get solved now so i'm kind of in ceo mode and like this problem has gets solved now can you cut off any new leads to salespeople until they call all their previous test drives back he's like yeah i block that in the system i said okay do it he's like great it'll be done in two 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 is that what there was some incentive problem correct there was there was an incentive problem but there was also a profile problem we are hiring people that didn't know how to ask for the sale and that was the root cause so when you force them to then 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 wanna close the sale right 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 a 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 and i'll take the point and so i called elon i said man i got a i got a bigger forgiveness i haven't i haven't not been a ceo for twenty years i've had six companies i've 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 changing you're gonna make a quarter mh long silence like uncomfortable silence this is before i knew about the signature elon long silent and don't we talk thirty ten seconds thirty it had to be at least sixty and to the point where i just about it rate asking him where were you still there and what i have now come to learn is like that's his processing mode he shuts down all other century sensory inputs and he just lets the compute run oh right literally like ai right you can say go to go to think mode and exactly it'll take time that is the think harder button so he comes back on he says you know what i think you're gonna fit in here just fine you've proven to yourself into me you can be useful so why don't you just join that's an awesome story yeah and you you know you've done this kind of over and over again where you sort of go to the problem solving mode and i wanna talk a little bit about that little off book here because yeah i was at a dinner somewhere and i got bumped into a due to a taken over a ceo of lime scooters you one of the scooter companies i knew like hot for a while yeah bird or lime and then it kinda crashed but they're a public company and they were struggling now mh and so this guy comes in and i was like so what you do because they he actually turned the company around like they got to profitability they you like it it's not like it's the best company in the world but it was about to die and it exactly not died so you know as an e doctor he did well and he goes the first thing i did is i went and i sat in the warehouse and i just sat took a chair and i just sat there for eight hours and they you know people were like hey do you wanna do meetings and he's like no i just wanna 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 is to find out where all the all the waste in an expenses that's not driving revenue to the company we're gonna 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 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 eight hours and it kind of like told me what i needed to do for the first you know two 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 two thousand iq you just need a simple thing yeah like i think the biggest your biggest job is an entrepreneur or as a leader is to like stack ranked the problems that are constrain your business stack rank him and then pull the biggest problem off top the pile every day and work it mh and the first principle that i learned from a guy that who is a mentor mighty he taught me he used to haul me down to the like i software business he would haul me down to the customer support teams and he'd say just sit here on a chair and listen to these calls and his first principle that he kept saying to me was i'm gonna introduce you to the most powerful analytics you have as a leader your two eyes and your two ears not use them because you will get insights so much faster than the data can get to you to give you insights and it was true and so when i started at tessa we were having a super big problem producing model and getting the falcon doors to fit and in elon and i had shared this this favorite book the goal which is all about manufacturing process and he grabbed me when he said okay the gold guy come on we're going down to the line and i said he said help me solve this problem i've been sleeping in the factory trying to work on this and i said okay like we're gonna walk up the factory line to where all the inventory is stacked up on these doors because that's the clue where the problem exists if if throughput can't get through there it's all stacking up that's where the problem exists so we're just gonna stand here so we walked to that point sure enough a bunch of doors stacked up and i said i said they think my mentor said i said you're gonna now use and i'm gonna now use the greatest name analytical instrument in the world par eyes and we're just gonna sit here for an hour and this gonna drive you crazy but we're just gonna watch these people work and so we stood there in washed work and you could all the sudden see these people can't see where the bolt goes because it's blind and so they're threading a bolt blind and they're missing that they're missing the angle and therefore the door is going on crooked what do they need they need a jig after ten minutes you could see this and so he got antsy i got antsy and we're like okay just have the maintenance guys build a jig bringing it out here and let's start to experiment but whether they can get the bolt done correctly but that was an example of just go out there don't don't depend on data don't depend on anybody's else else's opinion just go see it with your own eyes and that will lead most likely to an insight the do you can then teach people like here's what i was looking at here's what i saw so if you're the leader of this little team next time you look for this and you can solve this problem i you don't have to wait for me to come down here and sleep on the factory floor as the president and or ceo what's it's it's funny it's like is there a double solid experiment problem here where as soon as you start observing it it it behaves differently you know we aren't sitting there watching with elon and all of a sudden the doors are going through real fast is that is it that or no like it's we're 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 process constraint but that does happen and so the problem you 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 gonna forget you're there right and and there's also you you know you talked about being there for an hour and after ten minutes you see it and then you get answer you wanna 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 so we did this i 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 off site and we're all talking about these strategies and it's like because 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 so i was with a group of bank executives a few weeks ago and i asked them to raise their hand if they use their bank's app in the last week their consumer app and no hands go up and i said to them i could guessed that because i'm a consumer of two of your banks and your apps are terrible right and if you used them you couldn't live for another day without terrible this was so you'd be calling whoever could fix it to fix it asap and a little bit to your point like i learned this technique from scott cook the founder of intuit it and he has got this process he calls follow me home and what it means is you look over the shoulder of real customers who are using your product so sometimes you can't use it and there's a lot of cases of that but you wanna see how an actual user thinks about using your product and when you look over their shoulder you see all of the friction you're putting into that product like how difficult it is really to find what you're looking forward to make the right clicks do whatever and he has his senior executives do this on a really frequent basis so that they're getting the feedback loop through the eyes of the customer and oftentimes those customers will turn around and say would you just this or would could you just do this for me and they get new product ideas too where they they would get to like an accountant doing the end of the month payroll close and they one of them in this exercise turned to a senior manager and said be a whole lot easier if the payroll was just done by quickbooks and boom that idea was like right back into the senior management team discussion instantly like hey i just heard this from a customer should we get in the payroll business now that's a huge business for intuit it but it came out of these like just follow the customer home and watch them click and and then have them tell you not only what's wrong with the product but what what's missing in the product does does pro 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 a 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 this career at p and g he ended up being the ceo of levi levi's but he was famous at he at p and g for washing moms and kitchens like you said and he invented he and his team and invented the sw because they're like the the mob sucks like you gotta eat get water all over the place so you gotta dump it in the sink it's totally jan and so they invented the sw based on what how they watch moms suffer with regular mop right i love that today's episode is brought to you by hubspot did you know that most businesses only use twenty percent of their data that's like reading a book but then tearing out four fifth 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 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 dot 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 has a high variety style life 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 some people they stay in one domain and they keep solving problems in that domain for forty years of their career yeah and 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 so a little bit like you i've i've been a variety driven entrepreneur i think it's a little bit because i've got business ad like i i could spend an entire career in a single industry without driving myself crazy so i do look at these one size fits all and and as a clue of oh there could be an opportunity here so an example of that is we took a look at the cybersecurity industry and we started with this question of like hey thirty percent of computers moved to the cloud seventy percent hasn't when does the next thirty percent move what opportunities is that gonna create etcetera this is in my venture firm and we found something surprising that thirty percent of compute wasn't moving to cloud it was small medium sized businesses like law firms account etcetera have no compelling reason to go the cloud and they have a headwind of data risk they they have very sensitive data they don't wanna move that to the cloud and so then we started to ask ourselves like is there a one size fits all here scenario and it turned out there was we asked that we just happened ask the question how many security platforms have been created for the cloud in the last five years and the answer is like thirteen hundred and then we said how many have been created for the smb in the last five years and the answer was zero alright this is a one size fits all market cyber is sized to the cloud which i totally get as a computer scientist i i get that it's easier to write to amazon azure and google and it's super difficult to write to an infinity number of tech stacks in so that one size fits all is creating an opportunity and then we ask one more question because then then we felt like we knew the answer to this question where are the ransom were attacks happening and no doubt no surprises it's in the s and smb side because they haven't had tech in five years and so we set out to build a company that is essentially a super modern cyber platform for widely variable tech stacks and introduce that it's got a ton market traction and it's like one of the fastest growing companies in cyber right now but it came from that first inside of like oh we just tripped across a one size fits all the market has been a hundred percent cloud and there's this small medium thing hanging out here that isn't larger or extra large how about we like split the market and go after where the competition isn't i like that in the book you phrase it slightly you you you you use a slightly different intro to the story which i liked where you basically talked to about like you're looking at the expense i think you're on the board of two companies or just like that yeah you're looking at the line items on the expense sheet and it was like it was two different you know it it's like here's was lyft in lulu lulu which is a re retailer they don't really have any personal sensitive data about any customers you know customer comes in swipe credit card they don't save it and they were spending something like seven million dollars on cyber insurance and then somebody else was spending you know somebody else who had a lot of sense of it was also spending seven million dollars and you sort of had this like how could these two vastly different companies of the vastly different risk profiles in vastly different industries have the same thing and they were like that that smells a little fishy to be and whether the can a successful company or not i just like the the general idea of noticing is actually a super 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 and i 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 trade a lot of entrepreneurs have because we do see like friction and say to ourselves like why is this friction exist in life and how do we get rid of it right and i've people ask me like do you fly private and i've got a weird answer i said no i don't but it it for weird reason i don't fly private i fly commercial because i wanna experience friction of everyday life u that's gonna give me my next business idea or two right or three and i think entrepreneurs are kinda wired to look for friction as a clue that there could be an opportunity but they definitely we all have i think in a a heightened spidey sense for that where that friction is yeah as an entrepreneur of your life gets too comfortable you lose your ability to spot problems exact comedian when comedian get too rich they fall off a cliff because they don't have relatable jokes anymore because their life is completely unbelievable at this point right and they don't see the the everyday things okay so i wanna go through a couple of the like the steps of the algorithm so you called the algorithm and the idea is that let me let me rephrase 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 i what i liked about it is there's this feeling that elon is just the super genius alien and maybe he is but let's say like that the success of the companies are because you have the 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 be 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 kinda three layers first off he's he's brilliant and he is alright unique as an entrepreneur or a time like i can't name i can't name any entrepreneur who's created four or five companies is all of worth all worth tens of billions of dollars if not hundreds of billions of dollars yeah z had one gates had one jobs had two beating off had one ellis had one you go down the list of entrepreneurs of our time there's nobody like him alright right 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 shown 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 in a method and you start to get innovation breakouts that are really unique and a lot of people said hey you have to be aligned to do this my answer was no like that's why the book is told through the eyes of people who were actually on the edge doing this work and telling their story 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 we're like we just wanna solve this and you give them a framework to solve it and they they do crazy things like in inventing mobile car service from an oem from a manufacturer inventing one click loans you inventing insurance and embedded 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's is this you know high tech kind of the most tech forward company but actually the e commerce to online sales were were were pretty weak at the time right and so you have this problem and it 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 method it seems like starts with a crazy goal that's like not only is this today not only we're gonna go from weakness to average we're gonna go to like world class are best in class in that same category which i think is not how most people think it's not how i i operate like i when i see that i'm like boom 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 gonna do we're gonna twenty x our all online sales so something like that like we are going to lift this and because it's gonna be the the number one driver right yeah of sales and so there's this crazy ambitious goal to start the thing and it's 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 setting can determine like what outcome you're gonna get and so if you set a goal for five to seven percent improvement you're probably gonna get three to five if you set a goal for an order of magnitude improvement now you got people that have to think way differently about that problem because you can't tweak the status quo to get to a hundred percent improvement or a twenty improvement and so part of the secret elon part of his secret sauce is he sets these order of magnitude improvement goals so ten x a hundred x and it forces you to think way differently about how you would solve that problem or what what you would do with the product or what you would do with the process etcetera and so like you're referencing this example of he came to me and said hey look we have continuous demand challenges we gotta figure out how to sell cars online which sounded crazy at this time because nobody was buying a hundred and twenty thousand dollar thing sight unseen online click click but we both knew because we both been in consumer that every click you have you asked the consumer to make your conversion goes down and that's that's i'm saying an obvious every entrepreneur in e com knows that but we looked at our clicks and they were sixty four clicks to buy a car and so he turns to me and he says improved let's improve digital sales this is your goal improve digital sales by twenty x so now it's was like oh crap i gotta think way you differently about this i can't think about like tweaking here and there and so he said how many chris take to buy domino's pizza on their app i have no idea like let's pull it so we pull it out take it turns out it takes ten ten taps to buy domino's pizza at that time he's like we are sixty four domino's is ten let's go to ten and the first thing then that that calls into question it was a core tenant of the business at that time which was producing custom build to order product right and that was religion there partly driven by the fact they didn't wanna be a typical car company they wanted to make you the car you wanted versus the car of the car company wanted to sell right and it's something everyone will nod their head to fully customizable of course fully but that led to like three hundred and sixty thousand different combinations of car that you could choose which is driving a lot of clicks plus a lot of decision fatigue for people and so we went around the data my team were the data and we came back and figured out that people weren't buying three hundred and sixty thousand versions they were buying two and it was either what is known today as a standard or a performance and so i went to the head of manufacturing greg r and the head of engineering doug field i said hey look i'm the new guy here i've never been in the car business so i could be completely stupid about this but let me show what the data says the data says that out of all these three hundred sixty thousand combinations of build to order people are really buying to and what would it mean to you guys side of the business if there were only two 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 yeah tap the pedal and it flies yeah or they want the safety plus e plus whatever you know like range battery they could afford longest range battery good i'm gonna have that and actually like we can pre customize we could pre reconfigure cars to like solve those needs without letting them choose what color the the strip is on the the side of the you know the side of the door exactly and that's exactly it and so greg he's running a manufacturing says oh my god i i've been waiting for this day for somebody who like somebody to really drive this because you don't what that have to do to our factory totally simplifies the factory it simplifies the supply chain we could increase throughput dramatically turn to doug was it mean for engineering he's was like are you kidding me like i don't have to design all these parts i don't have to test them i can port engineering 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 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 and like it might be religion 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 gonna get rid of a lot of clicks a lot of decision fatigue if we just get down to two configurations and you can make it three if you want i don't care but you can't make it through hundred sixty thousand right and elon he's super rational he looked at the case 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 two or three 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 with had software on wheels we were making we're 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 question 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 a work for someone because she said like i said i've been ceo for twenty years and i had the same experience where we got acquired and i went from a twenty person company and i'd always been my own i was always the ceo of startups for ten years and then suddenly i had now had to go and report to and what i forget the report to i just had to bring my plans of what i'm trying to do to the table with somebody i to learn how to talk to a ceo who was thinking about the business you know separately i never really been on that side of the table and i had to learn how to like communicate 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 you were doing it with elon right maybe there's something specific to elon but what what 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 we actually had this a bit of a game for a while i think it was this his idea he's like let's try to let's try to get down to three sentence emails what is the problem what's what's your analysis of the root cause and what's your proposed solution and and he's like i think we could run the company on three sentence emails it's and so we did that and what that taught me about exec communication was that level of efficiency is so helpful like if you can give me three sentences so i turned to my people said the same thing like i tell me what the problem is tell me what the root causes tell me what your proposed solution is and in that proposed solution you gotta have like know i'm just gonna cost and what's gonna do the economic side sort stuff but the thing executives is if you're talking to a ceo the most precious commodity that ceo has its time and and it's information inbound absorption time information processing time decision time and so if you can get proficient in communicating to ceo and say i'm gonna minimize your information absorption time i wanna gonna minimize your information decision time you become a very valuable member of that team very valuable and it sharpen your own thinking you think you're doing it for them and then you realize actually i didn't fully have clarity on that until i was forced myself told to be clear to them now i'm cleared myself actually it's so funny you said that that those use act three when i went into my first meeting with emmett the founder of twitch and i said how do i talk to you how do i use these i don't wanna come here and just you know chi chat you know like we could do that but i'm guessing that's not what you want for me to do and he goes yeah three ways three sentences 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 gonna about and he's like that's the way i like communicate what why so what and then i i've now taught that to my team of the same so funny the same basically almost these exact same thing we just had different labels for the for the same exact communication structure i love that in fact i'm gonna steal that because i think the world of ami 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 gonna buy it and that means you're gonna have an owner that you're gonna now be subordinate to and that's a different form of mindset and i got a 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 puddle company then i would come in and i'd i 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 and so i was trying to keep this bull headed entrepreneurial 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 he had to put up with this pug like entrepreneur who didn't get it now what i get is i should sat down with him 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 bull headed entrepreneurs way of thinking about it right and and i think that's a different set of challenges when you sell yourself to another company you the first thing you gotta realize is that you don't own it anymore they do they have the keys and if you go oh ear to you might as well make not make that miserable you might as well make it like fun in the way to make it fun is to figure out okay like how do i make this thing work for you and for me right and if you do that oftentimes you got a earn out and it's gonna work for you too yeah that's that's great advice wish i had that device earlier me too me too i stumbled so you know you sort 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 wanna 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 tax business no software but you built that and and i it sounded like a pretty pretty interesting success story you can you tell that one yeah and it having a lot of software it but it starts with a little context i grew up in the back of my grandfather's auto to 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 the oil and changing tires and that sort of stuff but learned learned how to hang out and talk to auto technicians i and so decades later my wife's car gets hit by one of our neighbors and now i gotta go get that fixed and so i go to a large body shop and drop it off get the estimate agreed to have this place fix it and the and the guy says it'll be done by friday so this is monday i come back on friday car not done he's like us preston come in this kinda typical next friday so show up next friday cars not done tech didn't show up that i that i 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 because you can get her and then i explained to no i know my way around a body shop i know my way around auto repair i won't i'll stay the way i will get fact i i'll just run parts for you if you want mh so went on that weekend and i started do research and found out the auto collision industries a fifty billion dollar industry and then figured it then found out that there were thirty eight thousand of these and so the average business is around one one point two million so pretty small and i had been exposed to advanced manufacturing and i could got a sense of that was not what was happening at the back of the shops so i went and just observed i was running parts just observing and what i saw was essentially a hair salon every technician had two days and they were on commission and they made money off of those two days 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 and so i thought to myself what if what if this was fifty billion dollar industry was modernized what if you put these cars into a 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 wanna control their paycheck and so they would surround themselves with three or four cars and they would just cherry pick hours off of those cars and they got paid by the hour but not so the card didn't have to get finished they were getting paid by the shop just on the hours they worked on their car so that car gets sit there for a couple weeks they didn't care three and you you had these two terms cycle time and touch time can you explain me so i went to the shop owner and i said tell me what the average time it takes between a customer dropping it off and a customer getting their car back and he said yeah i can tell you that it's eighteen days i said how do you know that he said that's the average rental car time i said okay that's a pretty good proxy i said how many hours of labor do you bill on each job on average he said oh that's easy six to eight and i went eighteen days to get six to eight hours of work done that looks like an opportunity because that's the different cycle time is the eighteen days that's from the beginning to the end of the process in touch time was the amount of time that those technicians were actually touching the car six to eight hours and i went oh that looks like an opportunity to maybe turn this industry around for the consumer what if you could go to market and say you'll get your car back in a day versus the eighteen days of the the rest of the guys down the street that's when i like started to diligently say let's start a business so i i grabbed some guys that i worked with and we started to work on just doing that we ended up with the largest at the time collision repair chain around the country what was it called it was called sterling then it's now called service king it's owned by carl it's got several billion dollars in revenue but the whole premise was we're gonna get your car back way faster because we're just deploying assembly lines versus right a hair salon that's amazing what do you have a what do 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 what's the name of when you do that when you say we're all the way over here they're kind the same thing with they on twenty x online sales right it's like the industry the an 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 i just and so my teams that i've worked with now they they they hear this phrase a lot because i'll it in that moment like i'll sit down i'll i'll write out a a slack or an email and say like and the subject will be i just had an epiphany and it's kind of a realization moment where you're like oh there's a big opportunity here to move the market in that word for me is an epiphany it's just like oh it's just like sudden discovery where you've been like you've been killed and now you can see the other side right yeah thanks podcast is bought to you by my friends at mercury they make the world's best banking product i think you know this already i used mercury for all of my businesses i think i have like maybe seven or eight 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 i like products that are easy to use i like products that get me and the problems that have so like it 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 definitely mercury i will fist fight any way to who me on that go to mercury dot com slash personal and learn more mercury is a fintech not an fdic insured bank banking services are provided through choice financial group and call them an a members fdic what do you think that with ai so i feel like you've been doing this for a long time and 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 where ai how do you think about this man i'm excited i all the way back in college i works my way through college writing trading and algorithms at at the world's largest options in futures trading platform in chicago and with going with college chicago area and and worked my afternoons coding and way back then we are using neural the very beginning neural nets to try to get an edge in the market and try to and try to robo trade in a way that people hadn't been able to in terms of the accuracy and the speed so all these years later now that this has emerged i'm like completely psyche because we were using what looked like like rudimentary computers to do this stuff now you've got real compute power caveman ai totally and now that you see this unleashed i'm like oh this is what we were trying to trying to do three decades ago so so i'm super excited by it largely because every technical revolution and breakthrough like this that has happened in history creates enormous opportunities for entrepreneurs i cannot name a technical revolution that's happened this resulted in less gdp and less jobs can't like it just doesn't work that way and there's a lot of hand though at the beginning of every technological revolution because humans are really good at seeing the first order effect which is the job destruction but they're not good at seeing the second order effect which is the job creation that happens by entrepreneurs on the back end and i think we're like right in the middle of this so i we're we're applying ai at the core of each of our companies but i think more importantly i think there's gonna be just like we're keeping our eyes peeled for big big opportunities that are being created by this so i give an example and this isn't this an example would date me but when i was growing up to make a long distance phone call you had to dial zero and talk to a human being and that was usually lady in your town who would literally plug the local phone network on one end of a cord and then plug that cord into the national phone network and that would create a connection for you to do a long distance call in other words humans were switches and sometime in the late sixties early seventies bell labs invented an electronic switch that would do this and by the end of the seventies there was a lot of handling that there were eight hundred thousand people pillars of our communities there were employed as operators and a hundred percent of those shops were going away and sure enough by the eight seventies early eighties a hundred percent of those jobs had gone away they were those humans were replaced by electronic switches but what people couldn't see while you're were doing the hand ringing was what was gonna happen on the other side and what happened on the other side was now that a long distance call is free doesn't require human labor just requires electrons now you could offer toll free calls and so some entrepreneurs said i'm gonna i'm gonna use these toll free calls there was a single area code one eight hundred and i'm a create businesses one eight hundred flowers one eight hundred junk one eight hundred insurance we wanna enter this that and what those one eight hundred numbers required was now centralized answering of phone calls because now people were calling like crazy because it was free and so this industry got created called call centers and support centers and a few years into the nineteen eighties there were now millions of people employed in call center hundreds of software firms that were created and my first startup was a software firm in the nineties serving call centers because the technology was still nascent when people were just deploying electronic switches and people were like lament the end of these jobs as operators nobody could see on the other side that these entrepreneurs were gonna create toll free dialing they were gonna create businesses on top of toll free dialing and on top of that they were gonna be this whole layer in our in our economy called call centers that millions of people are gonna be employed in we just had creativity to see the other side and so now i tell our our teams like we cannot see through the other side but we can get a hint of where this stuff is gonna go if you think creatively by and and so that's the thing i'm most excited about like we're gonna have entrepreneurial opportunities like crazy over the next few years based on what this technology is gonna unleash i love that story so keep going so let's say you know if we could 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 well i can now we've got intelligence that is so rapid and non latent so you can solve problems way faster that are really complex so one of the one of the businesses that we've got that are most excited about is we pulled a team out a tesla that build the supply chain automation platform at tesla which is super sophisticated and way beyond anything anybody had in the industry and they built this with ml in in like twenty seventeen ish and we said how would you like to build it today at ai and what ai allows that team to do is solve a super complex problem really quickly but also use ai to understand the workflows of their clients super rapidly so they just went into one of the biggest grocery delivery platforms in the country i don't think i could say which one yet publicly but it's it's one of their newer customers and their agents could go in and understand the work rules of that ginormous platform within hours and then design a system in a workflow within hours that that you really have to have two special things to be able to do you have to be expert in that particular thing which is supply chain optimization to know which rules are good which rules are bad what to tell your agents to do etcetera and then you have to be able to judge okay what these agents are bringing back is correct or it needs to be tweaked or redirected or whatever so that you'd definitely have these humans who have got ai as exoskeleton like super strength that are now building a business that's grown like a rapid fire because it's got this incredible commute the compute to actually fuel the business and deliver value back to the customer way faster than you could otherwise like the what their competing against is standard erp systems that take nine to twelve months to implement and they can implement a period of days and deliver that value back and that's the kind of business like i think we're gonna see more and more and more of as its capabilities unleashed yeah that that is the weird thing about this that the software essentially works like labor right so what you're describing is like exactly essentially a consultant it comes in and it learns your workflows a documents and it figures out how things are currently working and then it starts to improve or automate or what's that's right and so so the weird thing is like there there is a question of is it different this time in terms of the job 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 for the robots and for for ai reg i that's one part i haven't been able to wrap my head around i haven't either i haven't heard the case for why we do that is compelling enough to me yeah i see the most frequent example i hear is hey in the nineteen fifties 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 i time out i was just the new york city the 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 a spreadsheet was available that was digital it could cal 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 sc at your fingertips and that meant that you could now price options in 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 mh and again that was un unable on the on the other side when this spreadsheet was just being invented that somebody would deploy black sc and somebody would figure out how to price puts and calls and derivatives and make entire markets like the options exchange the merck etcetera possible 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 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 is called it the highest el game in in the world right so 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 got sam alt you've got ant philanthropic you have all these players how do you how do you see this playing you've seen a couple of tech waves you know you know at least some of the players i maybe even all of them personally how do you see this playing out i sort of wonder if if they're creating a app layer or a tooling layer and what i mean by that is i think they're creating the tooling layer that then a lot of us are now using to create real businesses on top of so i kinda go back to the internet freight through an internet revolution and think about okay like the browsers everybody was super excited about the browser business and mark andre jason made and made a career out of nets scape but i wonder if like those now browsers are commodity but what got him what got built on top of a browse web were things like facebook and airbnb and e trade and you named the the businesses like tons of gdp got created on top of that tooling and it sort of feels like to me we're getting really excited like we did about nets scape and internet explorer we getting really excited about these hyper killers but what you really wanna be looking at is what businesses are gonna get created on top of this tooling and so i'm psyche for the work they're doing i think it's amazing and it's breakthrough level but i but i am also much more excited about what's gonna get built on top of it yeah me too i can't wait to see it i almost wanna fast it's like i don't wanna miss but at the same time i'm so curious how to how this all plays out how that what what the world looks like in ten years it's probably the first time that i feel like i i have no idea what the world's gonna look like in ten fifteen years but i do know it's it's likely to be very like completely different you know for sure you know like i 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 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 i can't believe that that's not more people aren't freaking out about this one change to let alone told whether it's robots or it's ai that you know ai assistance in everybody's pocket or totally there's so many different ways that i feel like the whole world in ten fifteen years is gonna like my kids won't really understand while 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 course and it seems like we're on one of those transition points totally riding totally well john i appreciate you coming on everybody you go get your book algorithm i don't say that but usually most people come up 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 but like you know what's which which isn't it's entertainment it's great but what i really love is the tactical practical and how do how do you actually do things what can i how can this be useful for me me 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 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 join it alright take care i feel like i could rule where to know i could be what i want to put at all in it like a days off on a goal travel never looking back if you made it this far then you're gonna love what i'm about to tell you so there's this amazing entrepreneur name neil patel he's been on fm he's one of our favorite guests and he has a podcast is called marketing school and it's brought you by the hubspot podcast network marketing school brings you daily actionable digital marketing lessons learned from years and years of being in trenches they have over a hundred million downloads in over twenty five hundred episodes marketing school gives you bite sized marketing wisdom that you can implement immediately whether you have a new website or you already have this huge established business you're gonna learn about the latest seo content marketing social media email marketing conversion optimization and general online marketing strategies that work today you can get marketing school wherever you get your podcast