Transcript of The Man Who Took Tesla From $2B To $20B Shares The Exact Formula | Jon McNeill

I'm very, very excited about this podcast. This is going to be one of the best ones yet, and I've done over 700 podcasts. John was the president of Tesla when it grew from $2 billion to $20 billion in revenue in 30 months. He founded and sold 6 companies and sat on the boards of General Motors, Lululemon, and CrossFit. His new national bestselling book, The Algorithm, reveals the 5-step framework Elon Musk used to build Tesla and SpaceX. and how any company in any industry can use it to cut complexity and grow faster than they ever thought possible. Today he runs DVX Ventures, a venture studio that's launched 12+ companies using the algorithm as its operating system. And you know, after this podcast, we might switch to this system as well. John, it's great to have you, my friend.

It's good to be with you, Tommy.

You know, you, you, you've already founded and sold 6 companies when Sheryl Sandberg decided to call you and said Elon needs help. And I've really researched the hell out of Elon Musk and his childhood. I read his biography. And it's just interesting because he's the richest, most successful man in the world, but it's people around him that make it possible. There's no way he could do everything he's doing without a guy like you.

Yeah, the team. He's got an incredible ability to attract people of talent to him. And so The team that's around him is fantastic, uh, and the team below that team is fantastic.

They get—

I forget how many thousands of applications per job, uh, at a place like SpaceX or Tesla, because the best people in the world want to work with somebody that gives big challenges and then gives a lot of agency to go attack those challenges. So yeah, he can't do it alone, and he would be the first to say that. But he's got a pretty unique ability to attract talent too.

In your companies, as you created this algorithm framework, how much do you guys promote failure? I mean, it seems like failure is like race towards failure and fix it versus NASA trying to get it perfect.

Yeah, exactly. The whole mantra is start. Don't try to avoid failure, just start knowing that we're going to screw it up. We're not going to get it right. It'll probably take us 20 or 30 or 40 tries to get it right, but you won't get to the end goal unless you actually start. So, to your point, we don't wait until we've figured it out and then we move. We move first and figure it out. And, that's key to this because what we're striving for is big, big breakthroughs. And, you get those breakthroughs little chips at a time. You don't get them in big ahas typically. And so we're working really towards making these little gains, little gains that pile up into big gains over time.

I'm sure you came from lean manufacturing. I've read The Toyota Way and the principles of Kaizen incremental improvement. You said that Elon taught was complete opposite of everything you knew. What was that like? What was different about that?

Yeah, like I came in and we had immediate problems producing the Model X. And so I hopped into that problem with everybody else on the leadership team and started to use the skills that I had, the toolbox I had, which was Lean and Kaizen and the Toyota Production System. And what I found was that stuff was great to drive incremental change, but it wasn't sufficient to drive quantum change. And when I met Elon and asked him, Like, what does success look like if I come, if I come and join Tesla? He said, what success looks like is you double the company every, every 8 months. I was like, man, you're already $2 billion in sales. That's a big, a big ask. And I learned that the lean and Toyota, uh, the Toyota Production System weren't sufficient to drive that kind of growth, which is why over time we ended up inventing the algorithm because we wanted a formula that would drive quantum growth. And that's what the algorithm does. It really drives big, big innovation breakthroughs.

I don't know if this is a question I should even ask, but what made you kind of go out on your own and bring a team and decide to dive into a few different board seats and start developing your own businesses versus continuing to— SpaceX just had a great IPO. I know a bunch of guys that were buying it at $12 and they 13x their investment. You know what, you just felt like you're ready to spread your wings and—

Well, I felt like I was ready to get back to my roots. My roots was as an entrepreneur and I wanted to, I had had this vision to do this before I left for Tesla. So essentially this was like unfinished business for me. I wanted to, wanted to prove that we could put a firm together that could grow companies from scratch and grow them into pretty significant, important businesses from scratch with the best people that I'd worked with at Tesla and Lyft. So this, in essence, was me returning to my roots. How do you—

so with all these companies you're making, we keep talking about the talent acquisition, and sometimes it's you build the right moat. People come to you. But when you're starting new businesses, there's no brand. You're not a $2 billion company. You've got who you guys are today. But I think talent acquisition, I'd really like to focus in on that and just understand, how do you guys really go out there and build a world-class team? I think a lot about Steve Jobs and just what he did, and I've been studying him like crazy as well. What is it that you guys do to build so many companies so fast? And you use the framework, but how do you get the talent so quickly?

We go with intentionality and look for specific kinds of people. In our world, we look for people with kind of 3 characteristics. One is they're insanely curious. And people that are insanely curious tend to be dissatisfied with the status quo, which is a great starting place for the kind of work we do. The second characteristic these people have is they've got a bias to action. So not only are they dissatisfied with the status quo, they're super curious. They won't just sit on those thoughts or those insights. They go do something about it. And then the last thing we look for is if they've had world-class impact. And so you can literally say to somebody, hey, give me an example Something that drove you nuts, what you did about it, and what impact you had. And pretty quickly, you can figure out this is a pretty special person across the table, or maybe not. And those are the people that we— the people that kind of check those 3 boxes are the people that we want around us. We've got a network we reach out into to find those people. We've got a search team that's incredible that we reach out to find those people.

But it's pretty easy to spot them when we do.

Do you guys use personality profiles or the resume doesn't tell you anything about a person?

We don't use personality profiles. The resume, as you said, is an interesting starting point. What we use is diving into these examples with the candidate, and then we use a ton of references, both Backdoor references, and then references that are provided by the candidate. The most useful are the backdoor references we find. But we don't—

What company do you use to do that? Because right now where I'm in a process— We do it ourselves. We do it ourselves.

Like I insist on, like if I'm hiring somebody, I want to do the references. Like I want to hear, I want to ask the questions. I want to hear the answers. I don't want any filter between me and that because there's no important, more important decision I make than talent. And so I want to be directly involved in that.

When you're reaching out to references, is it a past coworker? Is it somebody you kind of a LinkedIn acquaintance? Like, what's the best way to get those backdoor references?

Best way, like you just said, is a warm intro to somebody if we can get it. If we can't, then it'll be a cold outreach. But typically what I'll say is, hey, look, CEO to CEO, cone of silence to cone of silence, I'm about ready to make a hiring decision. You know how important these are. Can we have an honest discussion about this person? And, uh, and I promise I will not share anything, uh, but I've just got a handful of questions I'd like to walk through. And 9 times out of 10, people are really open to that because they're doing the same thing I'm doing pretty constantly, and that is they're trying to acquire talent, trying to get underneath the hood of, is this person really this good? Uh, is there any watchouts? Are there any, um— development issues that I could actually help this person with? You want to know all that, and they totally understand that too. And so it tends to be highly effective.

It's so interesting. I'm in the garage door industry, blue-collar space, and it's never been better for us. I mean, AI is definitely going to change the way we do business, but we're still going to be going out there until the robots are here in maybe 7 years. But, but, you know, I'm just, I'm constantly like, this is fascinating for me just thinking about these changes. I want to dive into the algorithm, the 5-step framework: question every requirement, delete every possible step, simplify and optimize, accelerate cycle time, and automate last. Can you walk us through each one of those and start with question every requirement? And what does it actually look like in practice?

Yeah, I think to find a breakthrough or an innovation, you want to question every assumption that people that are in the business follow, uh, like religion. And the reason you want to do that is because if you can determine that several things that everybody else believes to be true are not true, you might be on your way to a breakthrough. So super obvious, Uh, example of that from the Elon world is he had a hunch that it shouldn't cost $100 million to launch a rocket. And so the first thing he did was he built a spreadsheet of every part that went into a rocket and added them up. And turned out that that total cost was around $36 million, if I, if I remember the numbers right, not $100 million. And he sort of went, huh, I wonder what the big gap is. The big gap was a lot of labor, engineering approvals, all kinds of stuff. But then he started to say, geez, if it costs $100 million to put one of these up in the sky and you let all the parts fall back down and go to the bottom of the ocean, that seems like a waste.

I wonder if you could recycle these parts. And so he started to question the first assumption in the industry, which is you couldn't reuse rocket parts. And he said, why? And people said, well, because it's really hard to catch a rocket. And he said, okay, maybe I could figure out how to catch a rocket. Maybe I could put a barge that's really big and try to get the thing to land on it and use a little bit of reverse thrust and from those very expensive rocket engines. And people said, you're crazy. And he just kept questioning that assumption until— it took 15 years. Guy's super stubborn, but it took 15 years and they caught a rocket. And now their launch costs are 90% less than everybody else's. Nobody else has caught a rocket yet. And they did, they did their first catch in 2018. So they've had an 8-year head start. Their costs are 10% of everybody else's, and now they control 90% of the launch business because he questioned the requirement that everybody else, or the assumption everybody else thought wasn't true, and that is you can't reuse rocket parts. And you can add— you can question this in your business on a daily basis.

You can start to look for things that you've followed in your process kind of almost robotically and start to say, do we really need to do this? Why are we doing this? Is it a requirement of law? Is it a requirement of safety? Is it a requirement of physics? And if it's not a requirement of law, safety, or physics, then it might be a candidate to get deleted.

We there?

Yeah, are you there?

Oh, okay. Yeah, no, I, I thought I might have lost you for a sec. No, that's absolutely phenomenal. You know, we kind of fall into this pattern. Look what happened with COVID There was 30% of people that dove in, 40% that followed, and 30% that said, no, not me. And I'm not making this political or about anything else, but a lot of us just follow the status quo and we're not willing to question anything. And I love that, that principle of those 3 things to look at. So we question everything and then we delete every possible step that's unneeded. Tell me a little bit about how that works.

So I have teams literally go to a wall and they take a pile of sticky notes and they put a sticky on the wall for every step in a process. And then underneath those process steps, there are subprocess steps with sticky notes. So we got a wall where you can see the whole process, maybe the whole customer journey of buying a garage door and everything that needs to happen. You got to go out to the house, you got to measure, you got to determine specs, you choose styles, whatever. You order, you set up the appointment, you load the truck, team goes out, does the install. Invoice, like all that stuff, just put it on a wall. And then once you have it on the wall, ask a question. Circle the steps that the customer pays you for. They don't pay you for an invoice. They don't pay you for a site visit. They pay you for a garage door. They don't pay you for a purchase order. They don't pay for your accounting. They don't pay for your training. Like all this stuff. that we do inside of businesses, the customer doesn't pay for. And when you look at the process through that lens, almost everything is a candidate for deletion.

And this sounds crazy, but we were asking this question even in a huge manufacturing space, and that is, do we really need purchase orders? Do we really need invoices? Like, we'd ask crazy questions like that because every once in a while, you'd find something you could delete. And it was painless. And so what you want to do is, what you're after here is simplifying the process radically. And when you simplify the process, now you've got something that will look very, very different from your competition and hopefully looks really good from your customer standpoint. So an example of that is we took all the paperwork That you sign when you buy a car. And we put all those process steps on a wall. And you've probably been through this process yourself, Tom. You go to a— you go, you buy a new car, you buy a new pickup, you sit at the dealership for 3 hours filling out paperwork and going through the whole finance and insurance process. And we said, let's get that down to less than 10 minutes. Let's map it out. Let's figure out what the customer pays us for. And what they don't, and what the customer pays you for is getting in a car and getting the heck out of there.

And they don't want to sit through all these, uh, all these mounds of paper that they have to sign and, and, uh, and people are trying to upsell them, et cetera. And when you do that, you look quite different and people come pounding, uh, a path to your doorstep because you're a pleasure to deal with, not a hassle to deal with. And so deleting these steps can actually lead to a much better customer experience too.

Yeah, I want to unpack that. You just reminded me, a buddy of mine just sent me this. A pattern I've noticed in successful people: they're all a little bit delusional about their abilities. Not arrogant, just unreasonably optimistic about what they can figure out or achieve. While everyone else is listing reasons why something won't work, they're already trying it. Half of the time they're wrong, but the other half they're changing their life. Reasonable people don't build unreasonable lives. I love that. And I think that's something you've lived.

I love that. Yeah, I think that's right. You have this— to your point, you have this unreasonable or unrealistic optimism that you can figure out a new way. And, uh, you've got this gut belief that you and your team are going to figure this out. And, uh, and again, if you just start, start hacking away at it, more often than not, you're going to find a— you're going to find a breakthrough.

Simplify and optimize. Um, that's pretty self-explanatory, but can you just talk to an analogy like you've been for each example? Hey guys, just a quick heads up before we jump back into it. We launched Labor Day group packages for Freedom 2026 that end tonight. We've got a bunch of great options that'll make it easier for you to bring more people from your crew for absolutely free. Your ops manager, your lead technician, your general manager, whoever runs the point for you. They come along at no extra cost when you purchase Freedom tickets in one of these packages. That's more of your people in the room hearing what you hear, learning the same systems at the same time. Tonight's your last shot to lock that in before the event. Freedom 2026 is October 26th through the 28th at Mandalay Bay. Go to freedomevent.com and grab your group package before it's gone. Or call us or text us at 602-581-7563. Now let's get back to the episode. Simplify and optimize. That's pretty self-explanatory, but can you just talk to an analogy like you've been for each example?

Yeah. So, on this step, first of all, now you've removed a bunch of requirements that are dumb because you've challenged those and a bunch of assumptions have come out. You've deleted a bunch of steps the customer doesn't pay you for. Now, you got a really simple process, but you got to now try that process for the first time. And simplify and optimize is basically running that process over and over to try to work out the kinks. Like in a sports example, this is like learning a new golf swing. Almost every time you go— I don't play golf, but my friends who do tell me every time they go to take a lesson, the instructor says to them, hey, look, I'm just going to simplify your swing. You're doing a lot of stuff here. And I'm going to try to get you back to the basics. The instructor gifts them back to the basics, and then they got to go to the driving range and hit ball after ball after ball after ball until that new process sinks in and becomes muscle memory. And that's basically the simplify and optimize stage, is you're really practicing to try to get all the kinks worked out and set a new kind of muscle memory for the organization.

Yeah.

By the way, I think Elon recently stated that the chance of SpaceX being successful was 2%. It was like something ridiculous.

Generously 2%. Yeah.

I love that. It's just interesting because all the PayPal guys were like, there's no way. This guy's insane. Even though they've already worked with him, they said, totally, he's delusional. There's no way you could be successful at this. Go do this with Twitter. Go do this. And I love the fact that he's like, let's just unplug everything and see if it still works.

Right, exactly.

So now that you've simplified and optimized, you accelerate cycle time. How's that done?

So speed is the great hack in making things better. You cannot get speed if you've got a bunch of quality issues or if you've got a bunch of warts in your process. So what introducing speed does Is it reveals all these flaws in the process that you want to get rid of before you automate it. So this is a critical step. So, uh, you start by, say you've got, you want, you want to do 25 jobs a week. So you start by doing 25 jobs a week and then you see if you can get to 50 and then you see if you can get to 100 and then you see if you can get to 500. And, uh, what you're doing is increasing the speed of cash through your business. Which is a super healthy thing to do, but you cannot get speed if you got quality issues or dumb steps in the process, et cetera. So what speed does is it reveals all this stuff, you fix it, and now the process can start to deliver good, fast, and cheap. It's moving fast because it's high quality, and when you move fast, you have higher output.

When you have higher output, it's lower cost. So people that say good, fast, or cheap, pick 2, are dead wrong. You can have 3. If you've optimized a process and then applied speed, and if the thing runs at speed, you're getting good, fast, and cheap.

So, John, so this is what's so hard for me to understand, because I am one of the guys that always said you can't be all 3. Because if you're going to have— and I'll take this back to home service— if you're going to have quality warranties, put drug tests and background checks, somebody you want with your family, and you want it done within an hour, At least in my industry, leads right now on pay-per-click are costing $350. Now, we're innovating the way we even get leads, but we run 30,000 new appointments that we're out in their home, 30,000 a month. And that sounds remarkable to me, but it's like, dude, we could probably do that in a weekend for you guys. But I'm like, how do we get to 500,000? Like, I don't have these little goals. What's that?

That's the right question. How do you get to $500,000? Because now you're talking about more than 10x-ing something. So, I usually start to— if you challenge a team to 10x something and you're actually asking—

You got to start thinking outside of the box.

You cannot think about the current process. It won't work. And so, it forces teams to get into a completely different headspace. And it usually starts with a bit of panic, like, how the heck would we do this? It's impossible. But you start breaking down the assumptions. And so like, I would just start, if I was working with your team, I'd say, okay, you're telling me you have 30,000 in-home appointments. Can I make, can I ask a question about an assumption there? Why do you have to be in the home? And that would then flip into, well, you don't know our industry. We gotta be in the— and I'd say, no, no, no, no, no. Tell me how you'd do this if you didn't have to be— if you couldn't be in the home. And it starts—

I'd ask you a question. No. Yeah, you're right. So my question is, this is the best source of truth we have is data trends or Google Trends. The 96% of people that are calling have a broken garage door that need it fixed, meaning that they need a spring, roller, cable, bottom rubber, new opener.

Yeah.

And I'm just curious the way you think about this because I'm generally interested of how do we fix the door without having a human being there without a robot today?

Well, I think you definitely have to fix the door, but do you have to do a site visit before you fix the door?

Oh, yeah. Yeah. No, exactly. So for new installs, 100%. Why do you go out there to measure and do— yes, it's a new installation for sure.

Totally. And so that's just about eliminating, first of all, you're questioning assumptions and then you eliminate a step, which is like, I don't have to go out and measure. Maybe I could drop something into my client's iPhone and they point it around their garage and it's taking metrics that are highly accurate. We actually have a company—

That's 100% what we're building.

Yeah. Like I had—

And I'm obsessed with these things. And, you know, we just built this Claude. Because I'm the visionary, and right now it goes directly into Asana and it prioritizes everything. And there's at least 100 ideas a week of simple things that are just do it. Some of them I feel like I could do faster than I could even assign it. But then again, I am the visionary. And so I don't want to distract my team. And I've really became a bottleneck years ago, and I've gotten out of their way because I think sometimes I think Elon Musk pops in gives a bunch of challenges and then lets the team figure it out. It comes back and then I'm trying to understand, I'm thinking too small. Even at $500,000, I kind of just want to take over the whole damn home service industry and just innovate. And that's through technology, literally. I just think the next year is going to be insane. And I want to talk to you. I got a million questions. I'm getting off topic because that's what I do. But let's walk through And then automate is the last step. So you've gone through, you've deleted, you've simplified and optimized.

You've— well, you questioned everything first, you deleted everything that you could, you simplified it, you go fast, and now it's time to automate. Yeah.

And that sounds weird coming from a technologist, but you don't want to automate first because you have to do everything you just said. If you just automate your current process, Especially in the world of AI, you're just getting to the bad answer faster and more expensively because now you're spending tokens to do it, which is just dumb. So what you got to do is redo that process first, then automate. And the reason you automate last is because automation is like pouring concrete on a process. Once you do it, it sets and you got to get a jackhammer out to redo that process. So we actually, we teach people this as we're starting companies, like go run the process manually. Do what the guys at Amazon did. When they started Amazon, they had no means to deliver a book. They literally started an order site. You would place an order. They would run down the street to a bookstore, buy the book, stick it in a box, ship it to you so that they got to know the flow of the work. They did not do any automation until they knew it. The guys, the 5 guys that started DoorDash started in a dorm room at Stanford.

They're computer science majors. So their first thing, first instinct was to code. And what they did instead was they took every menu in Palo Alto, made a PDF, and put a phone number at the bottom of a page. And that phone number would ring in their dorm room. They would run to the restaurant, pay for the food, deliver it to the customer, receive payment, because they wanted to optimize the process first. Once they optimized, they automated. And once you automate something that you really understand and that you've optimized, now you have an advantage. They optimized that way by running manually first. Grubhub didn't. 10 years later, Grubhub essentially doesn't exist, and DoorDash owns that space. Amazon not only owns books, they own just about anything that can physically be sent to our homes. And they, they have this rule, automate last. And we'd learned this through making a lot of mistakes where we automated first. So in this world of AI, you want to like be super duper careful that you've optimized the process first before you apply automation, because once you apply automation, it's going to be really hard to undo it.

How do you— anybody nowadays could recreate a version of Facebook. TikTok did it. But to really create a marketplace, Uber had to defy all the governance. They broke the laws. They geofenced the hell out of the people. Uber's never showed up for these guys to tow their trucks in certain markets. How do you create the network effect in marketplace? Is it just slow and steady and just like Warren Buffett would say, It takes time. How do you speed up that effect?

I think if you want to create a network effect, a network effect by definition is every time you add a customer, it gets better for everybody else in the network. That's what a network effect is. And not every business has a network effect, but if you have one, it's a super powerful way of growing a business. And so like the cable industry is an example of that. One house in a neighborhood attached to cable doesn't really work, but if 2 houses get attached and 3 houses get attached and 8 houses get attached, it lowers the cost for everybody to lay that fiber. And so what you're looking for first is like, how would that work in my business? Like if I add a customer, how does it get better for everybody else? Or how could I make it better for everybody else? And that can be a pretty powerful flywheel. And then you can figure out how to speed that thing up, but you got to know what that is.

And so like in having a smaller flywheel sped up.

Yeah.

Yeah.

Like when we started in rideshare, there wasn't much going on. And what both Lyft and Uber knew was the thing that mattered to customers is wait time. You weren't going to wait 15 minutes for a car to show up. It was much better if it was 3 minutes or less. So that meant that every driver you added to the network, it got better for customers. And the more customers that came on, it got better for drivers. That's a network effect. It's getting better for both sides of the marketplace when each side of the market adds more people. That's kind of what you're looking for in your business. You get that, then you speed that thing up. And so in the rideshare industry, it was speeding up the recruitment of drivers. That's what made the thing work.

When I think about 500,000 clients, I think about cost per lead. I got to start thinking about different ways because there's so many other ways. Like in Salt Lake City, because of the Mormons, they created canvassing. They'd knock on your door. And there's box stores, there's event marketing, there's Google, there's LLMs. There's a million ways to get leads. But I kind of, I love marketing. I'm just trying to think of a different way to reach customers. Yeah. You know, we're adding on, there's technology now that counts cycle life and knows when it needs to be replaced, just like your 90,000 miles on your car. You know, and I believe the future of the world is through the garage. That's where all your food's going to be. It's going to automate. The food's just going to get delivered. We're the entryway into the garage. I don't want anybody going into my house, but I'm okay if my doors lock into the house.

Yeah.

And then there's an Amazon refrigerator or a Walmart refrigerator. And then here it'll solve world hunger because literally, if they package it the right way and something is about to expire and call it 2 days and I'm out of town, they just go pick up all that stuff. I am dreaming really big on this stuff. It's hard for me because a lot of people are like, dude, you're psycho. That's not possible. How would you solve— it could be used for dog food. I mean, it could be used for anything. All the stuff that's perishable. How much stuff do you throw out in your fridge? And imagine if, like, go ahead.

I was thinking about your business a little bit as you're talking about that. So you have an episodic purchase, call it every, I don't know, 5, 10, 15 years, somebody needs a garage door. So it's, it's long spaces in between. So that means you got to be really careful with your marketing dollar because you can't, you can't market continuously for 5 years to hope to get to that person. That's a really expensive acquisition cost. So, to your point, like, I would start to ask my team, like, how do we get in front of this person so that we're locked in their mind when they do need a garage door or we can recognize that? And I was thinking about the garage door that I go through every day, several times a day. The first thing that drives me crazy about that is as that door goes up and down every day, you know what goes first? It's the seals. And I hate looking at the seals in my garage door. And I kind of wish there was a simple way that somebody could service those on a pretty consistent basis. And if you're servicing those on a consistent basis, then you're going to know when I'm ready for maintenance and when I'm ready for replacement.

And if you make that a super cool experience where, hey, you're just replacing seals, it's a reasonable amount, you're not hard selling me on anything. And then when the time comes and you say, hey, look, you now need spring spools, cable, whatever, I'm trusting you because I've got a relationship with you. And when you say, hey, this thing needs to be replaced and here's 5 options, your CAC is basically zero at that point. You've been involved. Yeah.

Service agreements.

And the service agreement, as long as it's reasonable, is a hell of a thing for a lot of customers. And so that's just rethinking the way that the business gets done. And you're already on top of that, but that would be way different than any service that's offered in the markets that I live in because I'm not aware of it.

Yeah. And that's getting the audience or the clients to know about it. You know, Amazon and Walmart will deliver right into your garage and it's pretty seamless. Exactly.

They'll deliver right into the trunk of your Tesla.

Yeah, it's pretty insane. The world's about to change pretty dramatically.

Yeah.

And I'm cautiously optimistic. I mean, I'm a little bit worried now that there could be too much control. I mean, the world is so much propaganda. I mean, the fact is the United States is still the best country in the world, and we've got the most freedom, and capitalism works. capitalistic societies. But, but, you know, they start putting these control— and it comes in the form of safety. It comes in the form of, we need— we're protecting you. Like right now on social media, they watch my eyes move. They know what I'm looking at. And that's a little scary. How do you feel about this? And is it a good thing or a bad thing?

Well, I think let's go back to the— to your thesis that A lot of stuff is going to come through the garage door, which is a pretty cool place to start. And you start to say, like, how could— the way my mind goes is to the customer journey. How do I make that a super awesome experience? To your point, customers are concerned about safety and security in their home. And, uh, and they're also concerned that their packages actually show up. So you got that balance, like, I want safety and security, but I kind of would like my stuff delivered inside the garage because it's more safe and secure there. And, uh, for hot and cold stuff, uh, it needs a place to land, uh, that's not sitting outside on a porch too. And so I just start to pull that apart and say, how could we create a super awesome experience that people actually felt great about, that they trusted? And let's go try to figure that out. And, um, I don't know, like in 2017, I got a call from Jeff Wilkie. He was running Amazon and he said, hey, I got to talk to you.

I got the same job you do, uh, over at Amazon. Can we work out how we could deliver packages into the trunk of a Tesla? And my first instinct was, that's a pretty cool idea, but think people— like, we're all going to be considered about— concerned about security. Like, I don't want people stealing Teslas and, uh, and I don't want people doing bad actor stuff. Uh, and so I said, Jeff, how would we do that? And we brainstormed and brainstormed and brainstormed. And what we came up with, along with Doug Field, who was our head of engineering who'd worked with Jeff, was let's just add this as a button on the Tesla app. And when the Amazon driver shows up and says, I'm here, you just press a button and you open up your car. and you turn on the cameras on the car. So now you're watching that person. That person closes the trunk, loads up stuff, closes the trunk, and you hit click again and, uh, and your stuff's inside, it's secure, and you have a full video review of that visit. We're like, that kind of solves the problem. It took a bunch of brainstorming to figure out how to do it, but to the point we were talking about earlier, we could have said, man, no, this is like a safety issue.

I don't know how, uh, let's I don't think this is a good idea. Instead, like, we worked it, worked it, worked it to figure out how to make it work. And similarly with garage codes, everything else, like, you're probably on your way to figuring out how to make that work with Amazon and Walmart in a way that would be super cool and super secure for customers.

You know, I happen to know that Walmart loses money every time they make a delivery, but they know the future. And what would change? Just like you said, when the cable comes to your house, if there's 10 houses, it's drive time. So what if everybody in the neighborhood all got it? And so the real deal for me is, and I've contacted everybody I possibly can. Listen, I know Blackstone and KKR and Goldman Sachs, and I've used every resource I have. But how can I make this compelling to say, look, I could train 200 technicians a month. If you give me 3 months, I'll get to 1,000. I could service, I could create these systems. I'll be the boots on the ground. I'll enable the systems. But why wouldn't you give a $1,000 credit to after you order $5,000 worth of food? That way I could install the system for free. Right. And that way you get massive amounts of neighbors, right? It's all about distances. And it's so hard because when you're talking to these companies, there's so much politics and so much— it's so hard to get to a decision maker. I mean, I went and met with Home Depot and I love those guys.

And I go, why couldn't we add install now on every receipt where it comes out with a QR code? They're like, that would take a year. You don't understand our systems. And I'm like, this would make so much money for you guys. And they're like, you don't understand, just to get something done, to get the development team to make this happen. And I'm going, man, I mean, we're only 1,400 people, so we can still pivot pretty quickly. But I'm like, man, that minutia of decision making going from this person to this person to this person takes months. When I just make a decision and I don't know the solution to it, but I'm like, look, someone's going to figure out how DoorDash could deliver into the garage and you could have hot coffee in the morning from Starbucks and you could have everything just delivered into your garage ready to go. And it works every single time. And Chamberlain just came out with a product that locks the door if it doesn't recognize your face. And there's all these, and they're innovating and they know they need a boots on the ground person. And that's who I want to be.

Yeah.

And I don't want to be— I want to be a monopoly is what I want to be.

Definitely keep pursuing that. Like, keep chipping away at that. The secret hack that I've learned, Tommy, is you put a team of 5 on that. They don't have anything else but that challenge, and they report directly to you. They're not in anybody's budget but you. And basically, you give them that challenge of make the garage the center of the home. Show me how to do this. And if you put 5 to 7 talented people on that, they're going to figure it out. And you meet with them every week.

Okay, so you bring me back. So when you're hiring, let's say you're bringing on a CEO of a Fortune 500 company, how do you— do you use profit units? Do you use shared equity? Is it phantom equity? Do you use a massive salary plus a massive base? Do you kind of reverse engineer what's important to them, give them as much PTO, get to work from home? How do you understand what's going to motivate those people when you are recruiting these curious, biased, and world-class impact people?

What I lean on is the way wealth gets created in our system in the US and really in the Western world. is through equity. Equity gets taxed at half the rate of cash. It compounds. And, and you can just draw a straight line to the wealthiest people in society. They all got there through equity. Nobody got there through cash. Like 99% of Elon's wealth is equity.

Yeah.

99% of Buffett's wealth is equity. Gates, Bezos, Altman, like just Zuckerberg. So what I, what I'm looking for are people that are motivated by equity, uh, because that's, that's a great filter for the kinds of people that are going to want to build big things and then be rewarded for it. And, uh, and so we use some form of equity in one shape or another. depending on whether it's public, private. And what I like to do is put that equity in the hands of every employee, down to the person who's answering the phones or sweeping the broom. Because when people develop an ownership mentality, which equity does, they act like it's their own company and their own money. And that's exactly what you want as the leader. And I remember asking people to change the way they were working on the factory floor. And the reason they would do that in our factories is because they owned a chunk of the company. They got a piece of equity. And after 5 or 6 years, I could walk around those plant floors and I knew which people the millionaires were. They had been there 5 or 6 years and they become millionaires through that equity.

And it was pretty satisfying as a leader. to hear their stories because they— there's a whole lot of gratitude that comes along with that wealth that gets created. And I'd hear stories of, I just paid for a wedding, I just paid for a house, I just paid for a college education. Yeah. Like, I am so glad I work here. And that's unique, and it's by design. There's a reason that the Tesla factories aren't unionized, and that's because people are getting Big, big upside in equity. And that equity dwarfs anything you could make on an hourly basis, literally. And it creates this ownership mentality that helps the business move much faster than its competition.

Yeah, there's a thing called the ownershipworks.org model, and Pete Stavros talks about it with KKR. And it's a very good thing if people buy in, and there's a lot of education that goes around it. The hard part is Equity could get tough when you got to pay taxes. We're in 24 states and you need a full-time CPA and understanding how it works. But I do love the fact I care a lot about my people. I mean, internal net promoter score is one of my favorite KPIs. And I think it's important to understand that apparently not everybody could be on this program because I want them to get paid capital gains versus ordinary income, like you said. And structuring that is something that's very important to me. I've done equity EIP programs and stuff like that. And of course, we're private equity backed, so we got profit units. But everybody's like, why would you take on an investor? And I'm like, do you know how much Elon Musk owns of his companies? Do you know how much Jeff Bezos owns of his company? Whether you're doing it through an IPO, Or not. I mean, at some point you need the cash to grow.

What do you feel about that? Because a lot of people that are listening are like, I never want to sell. And I'm like, well, you're going to die. And there's a great book called Die with Nothing and actually see your money go to work. What are your thoughts about bringing on money?

I think if your intent is to grow, Then to your point, it takes capital to grow. And, and so then the question is, how do I find a great capital partner who's going to help me not only with capital but help me grow the business? Maybe I can learn new, uh, new skills from them, etc. Uh, and so in each of our businesses, we reach a point where we can't grow it with our— with just our cash flow. We're going to need additional cash flow to grow. And so we think really long and hard about who the right capital partner is for this business. Do they have experience? Are these the kind of people that we want to do business with, that we want to have a dinner with, a beer with? And are they going to be additive beyond writing a check? Because money's green and it's a commodity. You can kind of get it anywhere. And so what you're What you're bringing on is a partner in the business in the full sense of the word. And so you want to make sure that these are the people that are really going to help bring success.

Yeah. Strategic investors.

Strategically minded investors. Yeah.

So you delete every possible step in the process and Most business owners are adding checklists, approvals, layer of management. How do you change that mindset? Because like you said, you learned Kaizen. I mean, you were bred into a way of thinking. How do you change the norm?

Bureaucracy in companies comes from process, rules, and managers. And so if you keep an eye out for process, rules, and managers, And eliminate as much of that as you can, you've got a fighting chance against bureaucracy. And so your example of like you bring an idea to Home Depot and they basically say, here's all the reasons why this can't work. And when you break down the reasons that they gave you, it's all bureaucracy. Like there's no value add there. It's not saving Home Depot anything. In fact, it's costing them. But the reason you can't get stuff done is because you got a bunch of rules and you got a bunch of layers, etc. So what you as a leader want to do is constantly weed the garden, pull out the layers, pull out the bureaucracy, pull out the rules and the process steps that don't make any sense. Constantly do that. It's one of the things I learned from Elon because It wasn't something that I did regularly. And we started to talk about this and we used this weed the garden analogy. Like most leaders don't ever weed their garden. And so, 5 years later, you end up with weeds all over the place.

You're like, how the hell did this happen? Well, it's because we weren't doing it along the way. We weren't questioning, do we really need 7 layers of management between us and the frontline? Do we really need these rules? Do we really need these policies? So, I'll give you an example of that. This is kind of the crazy way we think. As your business gets bigger, human resources people say, you know what? People need performance reviews. And here's how we're going to do it. We're going to have every manager fill out a form twice a year scoring their people. And it's going to be like 8 to 10 or 12 questions on this. It'll take a half hour to an hour per employee. This is going to be great. We ended up with a situation where everybody was miserable. We came into a management team meeting one day. All of us were dragging our heels. Elon's like, what's up with you guys? And we said, well, going through this performance review process is terrible. I spent like the last 3 days writing performance reviews. And the crazy thing is, not only do I hate it, the employees hate it because I have this recency bias.

I'm only writing about stuff that I remember them doing over the past like month or 2. They're not getting full credit for like the whole year. This takes a ton of time and we don't think it's very effective. So his like Spidey sense goes up. He's like, why do we do this? What's the purpose? Well, the purpose is to identify the talent we want to promote, to identify talent we want to develop, and to identify people that aren't fitting in that we need to get rid of. That's the 3 3 goals of the performance review process. He's like, well, let me look at the form. These 8 questions, do they get at that really? And does this process get at that? No, it doesn't. So, we started to brainstorm about how we could do performance reviews differently. And we started with those 3 goals. Like, we want to identify who to promote, who to develop, and who to get rid of. And we came up with a 2-question performance review. That could be done in less than a minute. And the performance review kind of went like this. It went out to everybody in the company and it asked the first question, which was, write a list of the people you've worked with in the past quarter.

Then put a checkmark next to the people you'd like to work with again because of their impact. And then there was a little text box you could fill in. Why did you check that person, or why did you not check that person? And that's where the rich data was. People would say, I love working with Tommy. He's a visionary. He's a getter-dunner. I would work with Tommy again and again and again. They would say, I did not put a check next to John's name. The guy has every reason why we shouldn't do something, slows everything down. He's bureaucratic, et cetera. So, we redid a performance review process so that we could identify that obviously, the people that are getting the checkmarks are the people you want to promote and develop. So, super easy. People not getting the checkmarks, you could look and do a bunch of text analysis about why people were saying that and you could identify the bottom 10% of performers that you needed to get rid of. That's an example of like a leader weeding the garden, saying there's this process that exists to get promoted or developed or fired that's super janky, nobody likes, and it's ineffective.

So let's go revisit this and figure out a better way. And we did that over and over again. And you could say that's a small part of the business. It is performance reviews, small part of the business. It's detail. Guess what it does? It identifies the most important part of the business, talent. So it's a really important thing for us to weed and polish. And that's kind of how we thought and how we, how we approach this kind of stuff.

You know, there's 168 hours in a week, and I'm really big into family and friends, faith, fitness. Future self, fun, and finance. Those are my 6 Fs.

I like the alliteration there.

And if you go through this, you know, I think we're off balance on purpose. Dan Thurman wrote a great book about it. But what I found is all these lessons I've learned, I find it hard to apply. I'm working on building manuals for my houses and really putting in the same systems. And I really want to give my mom and dad the time, not the leftover time, the quality time. I don't have kids, but I'm finally getting married next year and I want to have babies. And I guess my question for you is, it seems like a lot of us, we get all this self-worth out of work, and that's great and it's important, but how do you balance all this for yourself? I mean, how do you start all these companies? You're on boards. I know you didn't take time off at SpaceX. They don't— you work. And you're dealt with impossible tasks that take time, energy, and focus. How do you deal with that?

So, a little bit like you, I read this book that really had a big impact on me. It was The 7 Habits of Highly Effective People, Stephen Covey.

Stephen Covey, yeah.

As you know, he starts with a question, what do you want written on your gravestone?

Yeah.

And then work back from there and then make priorities for the next decade, make priorities for the next year, make priorities for the next month, for the week, et cetera. But first you gotta like write your personal kind of mission or your value statement. And like you, I came up with 4 Fs. I don't have 6, I have 4. And they were faith, family, fitness, and financial. Financial being, I need to take care of my and provide for my family. And, uh, so that architected my day. I would wake up early in the morning, sacrifice sleep— especially true when you're gonna have kids and babies— and I would get the faith and fitness part out of the way, work out before everybody was up. I'd practiced my faith before everybody was up. And then I made sure that I was— my wife and I had read a book that actually Cheryl and her husband Dave had given us called Silver Spoon that basically said over a 40-year study of mental health from kids growing to adults, the one variable that mattered in that equation was meals as a family together. That's the only thing that was a predictor out of this huge study.

So we made it a point to be at breakfast and at dinner with our kids. In between those hours, it was work. It was the financial part of my life, which was providing for my family. And even when I was at Tesla, I would say to the team, like, look, I'm bugging out to go have dinner with my family. I'm going to be back online later. But this is super important to me. Uh, and there were times where that wasn't possible to do, but most of the time it was possible to do. Um, and so I think the principle is you take these pillars that are super important and you build your day off of those. If you build your day off of those, it turns out your week is going to reflect those. Your month is going to reflect those. Your years are going to reflect those. And Then you hopefully end up with the life you've wanted to live because you've been living it on a daily basis. And that's— that taught me is how I've approached this whole topic of like, how do you— how do you achieve a life that was— that's, that's really worth living?

Uh, and, um, and it— for me, it just happens with daily structure.

How old do you think I'm 43. How old do you think we're going to live?

I don't know.

I think probably— With the modern—

We're seeing all kinds of changes. I was listening to a podcast the other day, 2 doctors talking about how their practices have changed because they've got 94-year-olds who will have skin cancer. And those 94-year-olds used to say, hey, thank God I had the surgery to get rid of the skin cancer, but now I got a scar on my face. What's changed is the 94-year-old says, I'm living for 10 more years, so could I get plastic surgery to get rid of this scar? And these docs are talking about this is a whole new world because people are living longer and they have different expectations. As a result, they want different things. They want their quality of life to extend, and they're even worried about their looks when they're 94 and they want plastic surgery. So I don't know how long we're going to live, but I know that statistically we are living longer and we're having healthier lives. And we're just introducing these amazing breakthrough drugs like GLP-1s that are going to extend our period of healthiness in our lives and get rid of a lot of chronic disease. So I think big thinkers are thinking about what that means.

Like, if you add 5 years of lifespan to people, what does that mean? That's a big chunk. What will that look like? What will their homes look like? What will their transportation look like? What do their lives look like? What are they going to want to spend money on, et cetera? So I'm optimistic about the future that we're going to live into. I don't know what it means in terms of number of years, but it's going to be more.

I talk to a lot of people. I'm really close with the founders of ServiceTitan, who's one of the bigger CRMs in our space. And they think everything's going to be democratized and basically everything's going to get commoditized. Basically, Houses won't be worth anything because the houses could get built by a robot for very little. So property values go down, transportation, automation, and they see this world in the next 10 years. And what's interesting is the CEO, the founder told me, he goes, I'm really worried about my kids because I came from nothing and I've got self-worth because I built something. And you wonder where gratification is going to come from. And it's kind of a pretty doomy way to look at things. And then you talk to these other people that are like, these other guys, John, where they're like, human beings always find a way. Look at the Industrial Revolution. I'm like, but that's not the same. Computers are going to be smarter than every human combined. Peter Diamandis, I'm seeing him soon, and he's pretty fascinating as well, his way he looks at things. But what is your thoughts?

I would say to the ServiceTitan guys, like, that's an interesting way to think about it, but why don't we, why don't we look at some data to see if this is really true? If what you're saying, like everything gets commoditized with technology, is that really true? Why don't we just take cars? The Model A cost $250. The average car today is $50,000. Did that get commoditized? Did it cost less? Because robots built it. Because that's what's building cars today is robots. And we're not paying a dollar for them. We're paying $50,000 for them. Look at home costs. Look at computer costs. And then—

You can also look at TV. TV costs come down.

Yeah. Like, but look at the performance per dollar you spend on things like a TV. And, uh, and yeah, some, some good prices come down, some good prices go up. I don't think the world gets commoditized. That's not how history has worked. So I'd say to the ServiceTitan guys, like, let me just challenge you with a little economic history. Let's make sure that we're, we're dealing in fact here and not just theory and ideas, because the fact might lead you to a different conclusion. And the additional thing I would say is no technology In history has led to less jobs and less GDP. It's never happened. So because of that, if you're taking the opposite side of the argument, you better have an airtight argument about why this time is different. Like, airtight. Show me the data, show me the facts of why this is different than the Industrial Revolution, why it's different than the printing press, why it's different than the computer, why it's different than the internet, why it's different than mobile, why it's different than space. Show me why. Because the truth of the matter is every technological advance in human history has led to more jobs and more GDP.

And so that's how I think about it. And we're really, really good at doom and gloom. And sometimes that doom and gloom leads to whole societies getting put— pushed aside. As you might know in history, when the printing press was in introduced, the Ottoman Empire, which had a very powerful union of scribes, did not allow the printing press to come into their society because the scribes were so strong in convincing government that that was going to be the end of the world. And when you look what happened over the next 400 years, the Ottoman Empire disappeared. largely because they lost all their economic power because their people were uneducated, illiterate, and couldn't modernize. And so I'm like really careful about not, not becoming a Luddite or a member of the Ottoman Empire because I am cynical about technology and its impact. Uh, the fact is technology tends to have a really positive impact, and kind of that's, that's what my mentality has been.

John, can I ask you one more question, then a couple close out? It'll take 5 minutes.

Yeah.

This is really— I'm having a blast. I could talk to you for days. Um, in the book The Algorithm, uh, it only works if you have the right culture underneath it. You talk about urgency, accountability, and deep customer focus. What does culture of urgency actually feel like inside of a company and still keeping optimistic people that enjoy coming back the next day. Yeah.

So like, I think when people study Elon, uh, 20 or 30 years from now and say, how was this guy such an effective industrialist? I think what they're going to come back to is something that he did on a weekly basis. And that was, A, he set a big goal. So he said, like, let's figure out how to double the company, uh, or let's figure out how to drive a car, uh, autonomously, or let's figure out how to land a rocket. Uh, And catch it over the ocean. Those aren't just goals that are set up and then revisited a month later or 2 months later. Those are revisited every week. He sits down with the teams as the CEO and expects forward progress on a weekly basis. That creates urgency within the organization. Because you can imagine if you're those teams and you know you're meeting with the CEO on week from now, you're not going to bring your B game to that meeting. You're going to bring your A game and you're going to bring some form of an advancement. And so the way that urgency gets created in Elon's orgs are these weekly meetings where you've got to like sit in front of the CEO and say, like, here's what— here's the failure we had.

We thought this was going to work. It's not working. We're going to try this. Show up the next week. We've tried this. It actually worked. Now we're going to build on that. Now here's the next thing we're going to do. And on a weekly basis, he is personally involved. And because of that, that injects urgency into the org. It's a super easy thing for senior leaders to do as long as they prioritize that. And for him, that's the number one priority in his schedule.

Oh, and how long is that meeting? Because I'm sure there's no fluff. It's like, get straight to the point.

You get straight to— some of those meetings can be 15 minutes. Some of those meetings can be 15 hours, literally. If you're like working through a super hard technical problem, literally you could be in there wrestling with that problem for, for a long time. So, but the idea of meeting efficiency is, is right there. Like get to the point, get to the problem, uh, and, uh, no fluff is definitely true.

And anybody's allowed to leave a meeting if it doesn't. Yeah. So I'm allowed to get up if it doesn't pertain to me.

If you do not have an input or a decision You can leave. That's how every meeting starts at Tesla. If you don't have an input here or a decision to make, you can leave.

Oh my gosh, I love it. And is there— I guess you're probably not very easy to get ahold of, but if someone wanted to reach out to you, John, what's the best way to do that?

The place I'm most active is LinkedIn. So So just reach out to me on LinkedIn.

And is there obviously the algorithm? I think we're going to just— I'm buying this for about 20 people and some of them outside of my network, outside of just my internal people, my coworkers. But we're going to study the hell out of it. But is there any other books? You've mentioned a few, but that have changed your life, that are must-reads? other than like E-Myth or Dale Carnegie or—

Yeah, I would say the books that have changed my life are The Goal by Eliyahu Goldratt, which is really how the Toyota Production System works. It gave me a whole new set of tools to attack work with. Stephen Covey's The 7 Habits of Highly Effective People, that's one that's on my list. Most recently, this is one where you get maybe a head scratcher. You're like, why would this be on the list? It's a great book called Unreasonable Hospitality by Will Guidara.

Yeah. Yeah.

That's the book I'm recommending to everybody because what he unleashes, he's a restaurateur and he helped create a 3-star, 3 Michelin star restaurant in New York. You'd say, how does this apply to my business? When you read the book, you'll understand like every, every customer interaction you have, every employee interaction you have, people are looking for hospitality and connection. If you deliver that, you are going to have a big leg up versus your competition. And so that's a book that I'm recommending to everybody right now. Uh, read that book, even though it's for people in the restaurant industry, it's going to apply to you if you're in the service industry. If you're in a software industry, it's going to apply to you. So, those are the books that would be on my shortlist.

There's another book that I've read recently that's just like that. It's called— I think it's called Make the Table. Okay. Anyway, if you look that up, it's very common on reasonable hospitality. And finally, Jon, we talked about a lot of things. I'm blown away and it challenges the way we think. I asked you a million questions, but maybe there's something you want to leave the audience with to close us out. So I'll just leave it, give you the floor.

I think a lot of people don't simplify because smart people complicate. And so being a simplifier is unique, it's rare, and it's super valuable, but it takes work. So I'd say be super intentional about being a simplifier in every aspect of your life. And then, uh, and then secondly, I would say just get started. There are a bunch of reasons why you'll have an idea and you'll sit on it. Uh, don't sit on ideas. Start. Because when you do, you're going to make forward progress and you get locked into some forward momentum around that. But if you never start, the idea goes away. Somebody else is going to grab it. And so you might as well grab it for yourself.

Brilliant. Jon, you're a busy man. If anybody's listening, go buy the book, The Algorithm. Hopefully there's a couple hundred thousand people listening, but this was fantastic, Jon. Thank you for doing this.

Tommy, thank you. It's been super fun to talk with you.