How Toto Wolff built the most valuable team in F1

Toto Wolff, Team Principal and Co-Owner of the Mercedes-AMG PETRONAS F1 Team, joins John Collison for a pint to discuss the engineering, management, and economics behind modern Formula 1. Toto breaks down how Mercedes spots generational driver talent as early as age eight, why they enforce a strict "No Dickheads" hiring policy across 2,500 employees, and how the F1 cost cap transformed racing teams into $1B+ assets. He also shares his early career as a dot-com investor, the team’s "Navy SEALs" approach to car development, and why he believes live sports are immune to AI disruption. Timestamps (00:00:22) Spotting driver talent (00:06:24) Engineering and team selection (00:09:11) The F1 cost cap (00:25:21) Toto’s early investing career (00:38:15) Running Mercedes as an owner (00:46:47) Why F1 team values exploded (01:08:24) Succession planning

• 0:00Speaker 00

  You know, as a continental European, I kind of never got the tradition of standing at the bar and having a pint, a two or three, and then having a conversation. What are you talking about? Cheers. Cheers.

• 0:17Speaker 01

  Many people across many jobs are in the talent spotting business, but you're especially in the talent spotting business. How do you actually spot a Kimi?

• 0:28Speaker 00

  How do I spot a Kimi? I think in the, you know, when it comes about spotting racing drivers, you can judge pretty early on in a kid's karting performance whether that kid has the potential to be a professional racing driver. Even with the tiny ones, you can identify the ones that are doing better than their peers. Either because they are younger, you know, if someone that's eight years old beats the ones that are 10 in that group, you can have those very early signs of whether that kid has the potential. You can see when someone is comfortable in the car, you know, going at 100 kilometers an hour in the rain and that kid does his first lap and comes across the corner sideways,

• 1:13Speaker 00

  you know, okay, there are the ingredients for being good at it.

• 1:17Speaker 01

  How quantitative is it? Like, you know, in certain sports, in cycling, you know, there's a metric called threshold power and Tadej Pogacar, the best in the world, is very clearly just the best in the world on this single metric of, you know, how much power for your weight can you produce? Is there some number that, you know, Kimi and George Russell would stand out on compared to other racers?

• 1:39Speaker 00

  This is what makes our sports unique. There isn't any. With Tadej Pogacar, you know, you can see that the threshold watt per kilogram or CO2 max, these are things that are measurable.

• 1:55Speaker 00

  But I don't know what Tadej's metrics was when he was 12. So maybe that was not best in class. Maybe that came later. And ingredients of success that you can't measure, personality. How resilient are you to pressure? How much can you play the team game? When it comes to racing drivers,

• 2:21Speaker 00

  there are obviously similar KPIs. The stopwatch, you know, the stopwatch never lies. But put them in the same car, the stopwatch is going to decide whether you're being judged good or not. But underneath the stopwatch, there needs to be technical ability to set your car up in the right way, interact with the engineers, have some kind of social competence of making sure you have sponsors, treat them well. You know, there have been extremely talented kids that never went anywhere because they were just simply bad people or not intelligent enough. And then there is the kind of overwhelming part, and that is what we call speed.

• 3:07Speaker 00

  What is speed? And all of your cognitive abilities and neurosensors, the sheer billions of sensors that a human has, that give you an ability that not many have. It's actually to feel what the car does underneath of you. And you can see with the extraordinary drivers, they feel much more, they feel more connected to the car and the road than anybody else. One example is, you know, old friend and driver of mine, Lewis Hamilton. You have two axles, a front axle and a rear axle, and you have the chassis in between. And when you call a car understeer, it means when you turn the wheel and it goes straight.

• 3:51Speaker 00

  And that happens over the tyres and the front axle. It's pretty normal. But Lewis once said something when talking about the car. The car understeers from the front axle to where I sit. Well, that's the middle of the car. How can that understeer? And the engineers couldn't really identify what he meant. But that is what his body told him or his brain told him the car is doing. And if a driver is able to have that underlying layer of ability, then that becomes unbeatable. But that is, you know, genetics.

• 4:26Speaker 01

  The great drivers strap the car onto themselves. You know, they don't sit in the car and there's a connectedness.

• 4:31Speaker 00

  Absolutely. Connectedness is the right word. It's actually being one with the car and with the road.

• 4:40Speaker 01

  How did you decide that you weren't good enough to be a professional driver on this topic of talent identification? I mean, that's one decision.

• 4:50Speaker 00

  Talking about humiliation and trauma as ingredients for later success. When I was a child or a teenager, there wasn't really anything differentiating me or outstanding, be it academically or in sports or socially. And when I was 18, by sheer coincidence, I ended up with friends on a racetrack watching an F3 race, which is a junior formula. And when I stepped into this paddock, it's like I've gotten my identity. This is what I wanted to be. I wanted to be a racing driver, someone that is able to tame this machine.

• 5:33Speaker 00

  And this is when I started, you know, basically my career as a driver. But I came too late to the part. You know, I didn't have all of this karting background that teaches you the fundamentals of the physics of how to position your car in the race. But I became a pro. I went through the various stages of junior formula racing into what we call GT cars, touring cars or sports cars with a certain amount of success. And it is, you know, like you do about your business, I guess. And what I'm doing today is, I woke up with that desire and I went to bed with that desire. And that lasted for quite a few years.

• 6:19Speaker 01

  The other, maybe less talked about part, you know, obviously there's a huge amount of fixation on driver selection and who will get the next seat and everything like that. Presumably a lot of what you spend time on is recruiting the right engineers and aerodynamicists and things like that. How does spotting that kind of talent work? Are you trying to pull people from other Formula One teams or from other industries and outside? And how are you? Just what have you learned about talent outside of drivers?

• 6:44Speaker 00

  So when you look at the Formula One team from outside as a fan, you see two drivers. You see then a guy like me who is sitting in front of a screen. And then you see the mechanics. And sometimes the engineers on the pit hole. This is what you expect to be the racing team. But this is just the tip of the iceberg. It's about 150 people that go to the tracks, including marketing. It's 90 technical operational people. But we're 2,500. You know, here in the UK, we have two hubs. One that is does the engine, the other one, what we call the chassis. That is the works team. And we are 2,500 people in an organization that is quite vast

• 7:29Speaker 00

  if you look at the two cars.

• 7:32Speaker 00

  And for me, the selection process of the people that I want to work with is the same or is similar in terms of the pattern than for racing drivers. And I always say, there is not two superstars in the team. There's 2,500. And I treat all of them equally. And we've learned from the old blacks 10 or more years earlier. And they have a saying, which is on their training ground, that says, "No [bleep]!"

• 7:58Speaker 00

  And we have continued to run that motto. The extraordinary scientist or engineer that hasn't got the right values of humility, integrity, honesty,

• 8:21Speaker 00

  enthusiasm, will have no future in the organization. We're trying to filter that out pretty early. Sometimes you find out later, but no place for the... A genius household.

• 8:35Speaker 01

  You're describing a lot the need for people to collaborate within the organization and the teamwork. But what's interesting is you have these different domains where you have aerodynamics and you have the battery systems and you have the internal combustion powertrain and traction, everything. So the R and D almost entirely goes towards cars where you know the rules. There isn't much room for general R and D because you just don't know. Like you're not going to work on batteries before you know what exactly will be permitted when it comes to batteries and things like that. You have to know the target that you're designing.

• 9:06Speaker 00

  We did it a long time ago, but Formula One introduced the cost cap a few years ago.

• 9:11Speaker 01

  Yeah.

• 9:11Speaker 00

  So every resource that you deploy into engineering is being counted for in the cost cap, which is $200 billion a year. And therefore, long-term R and D work, lab work

• 9:24Speaker 01

  Yes.

• 9:24Speaker 00

  is actually unfortunately very limited because you need to decide between deploying compute power

• 9:32Speaker 01

  Yeah.

• 9:33Speaker 00

  in a front wing that you might have in three months against some long-term.

• 9:37Speaker 01

  Ah, so for all F1 teams, one of the things that the cost cap changed is speculative R and D just had to go because ultimately you have fixed dollars and you have to put absolutely everything you can towards this season and next season.

• 9:48Speaker 00

  I wouldn't say all of it had to go.

• 9:51Speaker 01

  Yeah.

• 9:51Speaker 00

  You still need to make the, you know, find the right balance between what you think future cars are going to benefit from.

• 10:00Speaker 01

  Yes.

• 10:01Speaker 00

  Value the lap time effect it can have versus the current cars. And unfortunately, that percentage of R and D, development of science and lab work, which I love, has a more limited scope.

• 10:17Speaker 01

  You have not only the overall cost cap, but you have things like limits on the number of wind tunnel runs and CFD simulations. Isn't that a bit weird that you can't spend your R and D budgets exactly as you want to?

• 10:30Speaker 00

  So there's two sides of that coin. The first one is to say Formula One was always unlimited budget and therefore ultra sophisticated machinery, which led to a situation that the big teams, Mercedes, Ferrari, Red Bull, were lead frogging all of the other teams. Because for us, we had those big motherships behind us that benefited from either shareholder that was extremely keen, like Red Bull, or Mercedes that said, this is a huge branding exercise for us and the spending is relatively low in comparison to all of our marketing. So what happened is only these three teams actually won races.

• 11:15Speaker 00

  So Formula One said, we want everybody to compete on the same budgets. And that was the reason why it was introduced. Now you can see that limited very much, you know, the kind of science aspect of Formula One, but it brought also more competition and that's one of the positive effects. The other one is that Formula One back in the day, Chase Carey, who was the CEO, said, we need to protect you from yourselves. Because obviously I was against the cost cap because I knew that Mercedes, we had might and that probably the worst case scenario was to lose against Ferrari or against the Red Bull, but not against McLaren or Williams or anybody else. So he said that to me. Eventually, it was a take it or leave it.

• 11:58Speaker 01

  You are investing, trying to eke out tiny advantages in the car. And one of the things that's interesting is that there are the rules. There are things that are clearly against the rules. There are things that are permitted. And then there's a spectrum between those of the gray areas. And when the challenge is, is like you defend something that you think is great and clearly allowed, but then it's banned mid-season or it's, you know, banned in the next season. And so was it really worth all that effort, you know, to get like a, you know, trivial advantage? Maybe, maybe not.

• 12:29Speaker 00

  And I think the lesson we've learned is that it needs the dialogue with the governing body. If you feel you have an innovation that passed the first red face test within the organization.

• 12:42Speaker 01

  Yes.

• 12:43Speaker 00

  That means the leading engineer, sometimes myself on the table, we are having a mock trial. The people that have invented

• 12:51Speaker 01

  Yeah.

• 12:51Speaker 00

  the loophole or the opportunity, play the prosecutor. And so they need to fight their own argument. And then on the other side, there is the ones, engineers that defend the innovation. And then is our general counsel, Carey, and myself, who are the judges.

• 13:09Speaker 01

  And you try to see how convincing the defense is?

• 13:11Speaker 00

  Yeah, exactly. How convincing is the defense? And how can you destroy the argument that is actually legal?

• 13:16Speaker 01

  Yes.

• 13:17Speaker 00

  So that would be an extreme case where there is something that we, we, we struggle within the engineering community to define. But obviously, the dialogue with the FIA is important and bring them on very early.

• 13:30Speaker 01

  But so will you, if you have a very secret proprietary improvement that you don't want to unveil, it would be totally top secret within Mercedes, but you will also bring the FIA into it?

• 13:40Speaker 00

  If we think it's 100% defendable.

• 13:42Speaker 01

  Okay.

• 13:43Speaker 00

  Well, crystal clear defendable.

• 13:45Speaker 01

  Yes.

• 13:45Speaker 00

  Then we will deploy it on the car and then we will make the argument why it's right. And normally the FIA will say, we don't like it.

• 13:51Speaker 01

  Yes.

• 13:52Speaker 00

  They could say, we like it, but it circumvents the principle of the regulations, so we're going to ban it. Because the principle of regulation is most equal competition.

• 14:00Speaker 01

  Yes.

• 14:01Speaker 00

  So if they're fair, they're going to say ban it next year. If they believe it's really very powerful and it's not what they wanted to see or intended

• 14:10Speaker 01

  Yes.

• 14:10Speaker 00

  to define, then it could be banned much earlier. This is where the politics come into play.

• 14:15Speaker 01

  Ah, so basically if they think it's a fair loophole, they'll give you one season of advantage.

• 14:20Speaker 00

  I would say this is, call it the kind of experience that we have.

• 14:24Speaker 01

  Yes.

• 14:24Speaker 00

  Because they are, you know, innovators and engineers too, and they will respect if something comes up like this. You know, one example, what was the system that we called DAS? Which was, you know, you have the various dimension of the steering wheel, what you do. I don't know if you've heard about it. You can steer to the left and you can steer to the right.

• 14:43Speaker 01

  That probably no, I'm with you so far.

• 14:44Speaker 00

  Yeah, so far, yeah. That's like in an airplane. No, in an airplane, you can also go forward and backward.

• 14:48Speaker 01

  Exactly. It's actually nothing like that.

• 14:49Speaker 00

  And here it becomes interesting. So what we did, we created another dimension with the steering wheel, actually to push and to pull the steering wheel in a Formula One car. And what it did, it changed.

• 15:01Speaker 01

  Yes, I do remember this.

• 15:02Speaker 00

  Yeah.

• 15:03Speaker 01

  Yeah.

• 15:04Speaker 00

  It changed the way the front wheels were operating in terms of its tow effect. What it did is we were able to turn, we created a tow effect which helped us to heat up the surfaces of the tires by basically dragging them.

• 15:19Speaker 01

  You're running them inefficiently, yeah?

• 15:21Speaker 00

  Yeah. And they respected the innovation. I remember the first test, Sky had it on board, they say, what's happening here? They're pushing and pulling the steering wheel. And when, it was shown to me four or five months before we actually produced it, they called me to a rig in, in test and development. And there was the steering wheel and they said, now turn to the left and turn to the right. You know, I was a driver, so, and then I said, now push it and pull it. And I said, but that doesn't go. It's like, you know, I'm used to it in order to fix the steering wheel to where I wanted to have it. But it feels deeply uncomfortable actually to have this additional motion in the steering wheel. And then the Formula One drivers got in and said, no, we'd like to try it. And, and it really worked.

• 16:03Speaker 00

  So come back, I think if you want to be, you want to have the, the exchange with the FIA to make sure that you're not on the wrong side of the argument.

• 16:12Speaker 01

  But so with that, did they end up banning it or they ended up permitting it?

• 16:15Speaker 00

  They banned it after a year.

• 16:17Speaker 01

  So why did they ban it after a year? Why didn't they say, okay, this is one of the things that F1 cars can do now?

• 16:23Speaker 00

  I don't know, maybe we lost the political argument that it was good. Other teams said it would cost so much to replicate it and they could, but is that really the intention of the, of the regulations?

• 16:34Speaker 01

  Why did you do it as a push-pull rather than a button on the steering wheel or, you know, whatever's the push-pull, the control mechanism?

• 16:39Speaker 00

  I think there was a regulations that allowed to have it like a mechanical system that was, you know, the, the rule is the driver must drive the car.

• 16:48Speaker 01

  Yes.

• 16:49Speaker 00

  So it needed to be deployed for the driver through a mechanical system. I believe that was the reason.

• 16:53Speaker 01

  I see. So that was the best way to have it defendable?

• 16:55Speaker 00

  Yeah.

• 16:56Speaker 01

  That's so interesting. What about the, where would you categorize the compression ratio, kerfuffle, you know, ambient temperature versus, you know, measuring a temperature? Where does that fit on this spectrum?

• 17:08Speaker 00

  This was just.

• 17:12Speaker 00

  Other teams feeling sore about not having read the regulations in the right way. You know, today, on any vehicle in the world with a combustion engine, you measure compression ratio in a cold state. Because how else would you measure it? What does hot state even mean? At a certain temperature with other ambient factors that that that matter. And it's a, it could be a manipulative value that you have. So the other team said, quite unfair, you know, the rules say it needs to be measured in the cold environment.

• 17:44Speaker 01

  Yes.

• 17:44Speaker 00

  Or a cold engine. And what Mercedes has done is, once it's running hot, it basically grew in size and therefore extracted more power. And we didn't confirm that.

• 17:56Speaker 01

  You had more thermal expansion than other engines did?

• 17:59Speaker 00

  Exactly.

• 18:00Speaker 01

  Because you engineered in more thermal expansion.

• 18:02Speaker 00

  Okay, okay, but that's what people say. That's what people say. Because the measurement was clearly identified to be in the cold, in the cold phase of the engine.

• 18:09Speaker 01

  Yes.

• 18:10Speaker 00

  Um, and so was it a loophole? Was it a shortfall of the other teams? I think it was a shortfall of the other teams. So it became quite a political argument and then some compromise was found in how the measurement worked. And actually, you know, the funny bit is, it didn't make any difference for us. So it was a month-long argument going back and forwards. And we fought it for the sheer principle of innovation.

• 18:34Speaker 01

  Is it hard to keep these top-secret improvements a secret?

• 18:38Speaker 00

  Ah, yeah, it is, because there is a natural fluctuations of personnel between the teams.

• 18:43Speaker 01

  Do you compartmentalize? It's like the Manhattan Project, you know, you need to.

• 18:47Speaker 00

  Yeah, you know.

• 18:48Speaker 01

  Fireball things.

• 18:49Speaker 00

  You, we fireball certain things and we don't, you know, I'm pretty, I'm maybe more on the extreme side within the organization. Not everyone needs to know everything. But eventually, you will always have a, a group of, what I call it, twenty, twenty-five people.

• 19:02Speaker 01

  Who need to be in there now.

• 19:03Speaker 00

  Who need to be in, in there and, and they may change team and then that obviously leaks.

• 19:09Speaker 01

  Can you prevent people from changing team within a season?

• 19:12Speaker 00

  So there is the, you know, regulatory environment of every country. How long can you actually prohibit someone to work for?

• 19:19Speaker 01

  Yeah.

• 19:19Speaker 00

  For another team? With our contract, contractual frameworks and in the UK, you can do it up to twelve months.

• 19:25Speaker 01

  Okay.

• 19:25Speaker 00

  But there are countries like Switzerland, for example, where it's three months.

• 19:29Speaker 01

  Okay, so you gotta be careful who you hire in Switzerland.

• 19:32Speaker 00

  Yeah, we haven't got Audis in Switzerland, for example. You've got to be careful who you hire, hire elsewhere.

• 19:37Speaker 01

  Yes.

• 19:37Speaker 00

  But you always need to account for the fact that, that people may change teams because of personal reasons. Absolutely, you know, fair arguments.

• 19:44Speaker 01

  Yes.

• 19:45Speaker 00

  And that's why, how can you make sure that things are not leaking too easily? But they will eventually always come out.

• 19:51Speaker 01

  Yes. If you could write the rules, how would you change them?

• 19:54Speaker 00

  Well, I'm in two minds, you know, the innovation part in me and listening to my engineers is free rein.

• 19:59Speaker 01

  Mm-hmm.

• 20:00Speaker 00

  We have a budget cap.

• 20:01Speaker 01

  Yes.

• 20:01Speaker 00

  That is two hundred million and then make it as open as you want.

• 20:05Speaker 01

  Yes.

• 20:06Speaker 00

  Um, because that would be magnificent, magnificent from a scientific standpoint, an engineering standpoint. But it would, what, what would happen is the, the best engineers in the, with the most, you know, capability or in terms of infrastructure will come out with a car that is much superior than some of the other teams. And it would create a, a field where the leading car could be five seconds quicker than the next one. And that is not what Formula One wants.

• 20:34Speaker 01

  Mm-hmm.

• 20:34Speaker 00

  So it's becoming more and more restrictive.

• 20:37Speaker 01

  Yes.

• 20:37Speaker 00

  Is that good or bad? Um, you know, I think it needs to be, it needs to be sensible. Because this is still the fastest laboratory in the world. That is in our DNA. And I think it's, that is still happening.

• 20:51Speaker 01

  Yeah.

• 20:51Speaker 00

  Obviously, engineers would always say, well, it's not as much fun as it was in the, in the past. But it's still a lot of fun.

• 20:56Speaker 01

  Yeah, yeah. You, you were describing one set of risks in developing new technical changes, which is the, the regulatory risk. You know, the risk, will you be allowed to have it even for one season or certainly multiple? But the other risks is just technical risks, you know, will it work? And I think in any R and D organization, you know, we have this at Stripe where we only have so much time. We only have so much money. We have only so much engineers. And we need to put them on the very, you know, towards the projects that are most likely to work. And you don't know upfront what's going to work. And so part of the special sauce is that ability to predict this product direction is a good one versus this one is just, I mean, it's not awful, it's just not the, not the best. And you're fundamentally playing this game of where you spread the poker chips.

• 21:41Speaker 01

  How do you manage technical risk? How do you think about allocating those very precious chips? And again, they're even more precious now in the new cost cap era.

• 21:51Speaker 00

  So the unfortunate part of it is that your business is far more complex, in my opinion. Why? Because you deal with the end customer. Or whoever the new customer is, an organization, an entity or, or a, or a person. Because are you, you know, you can define technical specifications that you believe make the process better or more efficient or successful. But there is someone at the end that actually needs to buy your product. And that person or that organization is going to measure whether the humans that are actually his customers or her customers are going to like it.

• 22:22Speaker 01

  Yep.

• 22:23Speaker 00

  How, how can you predict that part? With us, it's all data and the simulation.

• 22:30Speaker 01

  It's much more measurable.

• 22:30Speaker 00

  It's much more measurable. That at a very early stage, we will define what is the lap time contribution that we, that we imagine of that part.

• 22:39Speaker 01

  Yes.

• 22:40Speaker 00

  And that all starts in the virtual world. It's all simulation, whether it is CFD.

• 22:45Speaker 01

  Yes.

• 22:45Speaker 00

  Or whether it's the wind tunnel in the way we, we measure it, or we attribute downforce and drag, or whether it is mathematical models that we have. And all along the process, you continue to correlate with your expectations. And there are rare occasions where you believe that something eventually, when it ends up in the car, it's going to be a tenth of a second in average overlap quicker. And you realize it's not. Or you realize that the driver doesn't feel comfortable with it and isn't feeling, you know, isn't feeling, uh, safe enough to, to drive it.

• 23:23Speaker 00

  So we need to consider also if the end customer, which we know exactly, you maybe not, will be able to extract from that virtual, let's say, theoretical lap time benefit. But it's much more measurable.

• 23:41Speaker 01

  Engineers like to fall in love with their ideas and I just need one more simulation run or I just need one more, you know.

• 23:46Speaker 00

  We don't have that.

• 23:47Speaker 01

  So, but you have to kill people's ideas because they're, they're in love with them, but they're just not going to work or you just don't have the resources to staff it.

• 23:55Speaker 00

  I think we have, we have people like this who, if they are also forceful, they might put the organization under pressure to actually continue with the experiment beyond the, you know, reasonable point. But they are not part of the organization anymore. This is, this is one of the personality traits that, that we hold dear.

• 24:13Speaker 01

  Hmm.

• 24:14Speaker 00

  Um, that you need, it needs to fundamentally contribute to the overall target of lap time.

• 24:20Speaker 01

  Yes.

• 24:21Speaker 00

  Rather than what we discussed before, to the department's target. So there will be a decision within the group and then in the wider technical management to say, we're stopping this now.

• 24:32Speaker 01

  So, so if I was to talk to an engineer at Mercedes, I would find them surprisingly dispassionist and analytical, where they're not falling in love with a particular technical approach or they're not falling in love with their idea.

• 24:44Speaker 00

  Yeah.

• 24:44Speaker 01

  It's either it works or it doesn't.

• 24:46Speaker 00

  Exactly. You fall in love with the result.

• 24:48Speaker 01

  Yeah.

• 24:48Speaker 00

  It's that this extreme emotions and gratifications that you feel when you win a race or a championship. And therefore, the kind of rational part of the engineers, I would hope, is superior against like, let's say, an emotional falling in love with your development part.

• 25:12Speaker 01

  I want to ask a bit about your investing background, because obviously that is how you ended up in the position that you're in, in racing. Um, first off, were you a private equity or venture capital investor? I've heard it described as both in accounts.

• 25:27Speaker 00

  Um, none of that, I would say. Because how it all started is that when I decided to stop my racing, I had a short period of time where I was an employee in a, in a steel manufacturing company, didn't like that. And then ended up, uh, reading about internet companies in the US. And I know you had Marc Andreessen here. So one of the first companies that I got interested in was Netscape.

• 25:58Speaker 01

  Mm-hmm.

• 25:58Speaker 00

  And then you had Yahoo, AOL.

• 26:01Speaker 01

  And these were the star companies of the time.

• 26:03Speaker 00

  Companies of the time, exactly. And I thought, I, you know, lived in Vienna and I thought, okay, I understand now what they were doing.

• 26:12Speaker 01

  Yeah.

• 26:12Speaker 00

  And I looked at the, let's say, the German-speaking countries to see who is doing that in Austria and in Germany and in Switzerland.

• 26:20Speaker 01

  Yes.

• 26:20Speaker 00

  And I found out that these, that that existed. But sometimes it was just little startups that weren't even in a, in a legal entity.

• 26:30Speaker 01

  Yes.

• 26:31Speaker 00

  Young people working out of their children's room, our kids' room. And what I did is, then, you know, obviously, the effect of the NASDAQ started to, to kick in.

• 26:41Speaker 01

  Yes.

• 26:42Speaker 00

  With absurd valuations for no-revenue companies. Then in, in Germany, it was a Neuer Markt, which was the equivalent, but even crazier uh, in terms of process of being able to list.

• 26:54Speaker 01

  Yes.

• 26:55Speaker 00

  Um, there was no boundaries, you can call it like this. Um, and so I found out about all of these companies, got myself into my car, went there and said, I like your business. Um, I'll, I want to help you to raise some equity or list your company on the stock exchange. And if it was successful with the first or the latter, I would like to have ten, fifty percent of your company. And that led to some, to, to, to some, you know, shareholding. Because some of, some of the people said, well, my business is worth ten million euros. And I knew it was not worth it. But I said, okay, if it is ten million and I'll raise five million for you or we IPO for twenty, can I have half the company? And they said, of course, you know, that was a.

• 27:38Speaker 01

  So you're almost like an investment banker to some of these dot com companies. You probably wouldn't have described it that way, but you were helping them with financing.

• 27:44Speaker 00

  I was wearing cufflinks and a mace tie and a pinstriped, double-breasted suit. Um, but eventually, uh, put it in, in a cave and never wore it again. But that was another experience. But no, it wasn't. Um, it was, it, it was actually a hybrid between sweat equity.

• 28:09Speaker 00

  Early-stage micro-investments.

• 28:12Speaker 01

  Yes.

• 28:14Speaker 00

  And equity kicker or options related to success. And that's how it worked at the beginning and then eventually we raised capital, not fund-like structure, it was still my company, but we got two private equity, two venture capital companies in that each owned 10%, so we got real money and then deployed some of them.

• 28:34Speaker 01

  And you also importantly had good market timing, right? Because I mean, for people who weren't around, the 99-2000 period was crazy, where as you say, the valuations just became fairly disconnected from reality and then they crashed hard shortly afterwards. And so a lot of the people who did well in that 99-2000 era were people who were optimistic enough to get into these companies, but then skeptical enough to sell some of the proceeds rather than just watching the account balance go up and then down.

• 29:01Speaker 00

  And lucky. So in our case, within two years, we went from actually me pitching an idea to an entrepreneur that didn't have a company around him to an IPO. Which was crazy, you know, we found ourselves in the after-IPO party, which we used to do back in the day and we thought that had zero value three months ago and now 100 million euros. You know, one of those companies that I pitched is, I found out that there was a web portal, free SMS web portal, it was called SMS.at. And what you did, basically, you wrote your SMS on the interface and at no cost.

• 29:44Speaker 00

  And Austria back then had around nine million people and two million were using this because SMS were expensive.

• 29:49Speaker 01

  SMS cost money back then.

• 29:50Speaker 00

  Yeah, it cost money back then.

• 29:50Speaker 01

  Nine cents a message.

• 29:51Speaker 00

  Yeah, it was a lot.

• 29:52Speaker 01

  Yeah.

• 29:53Speaker 00

  And so I found out that this was run by a teenage boy in Austria in Graz, visited him and basically with the model, "I'm gonna raise money for your company," which then was very successful, you wrapped it into a legal entity. When I said to him, "How do you do that?" I mean, he said, "I'm hacking, I'm hacking into the SMS service of the big telcos." I said, "Okay." And then, and I said, "Well, eventually they find out that the data volume was bigger than, let's say, on normal days," and they shut me down. And I said, "Okay, and if that happens, what do you do?" "Well, I have a plan. So for example, today I'm running on Nigeria Telecom and next week it's gonna be Norway." So, okay, we put it in an entity and I started to visit Telecom Austria, the biggest Austrian

• 30:38Speaker 00

  and T-Mobile then, the two biggest Austrian telcos. And they said, "We hate SMSAT, we absolutely hate it, but we can't shut it down. So what is it we can do together?" And eventually, you know, within two years, that non-existent company was sold for 250 million to T-Mobile.

• 31:01Speaker 01

  For 250 million?

• 31:02Speaker 00

  Yeah.

• 31:03Speaker 01

  Wow.

• 31:03Speaker 00

  So.

• 31:04Speaker 01

  This is, people forget, 2000, this is the year 2000?

• 31:06Speaker 00

  That is obviously the, yeah.

• 31:08Speaker 01

  Yeah, it was just a, it's a different era.

• 31:09Speaker 00

  Different era.

• 31:10Speaker 01

  Yeah.

• 31:11Speaker 00

  You know, maybe the kind of 250 million today, when you look at the I situation, that's gonna be 25 billion.

• 31:17Speaker 01

  But on a relative basis, yeah.

• 31:18Speaker 00

  Relative, it was unbelievable, enormous money and valuation. So and this was the lucky moment, actually.

• 31:25Speaker 01

  And they bought it to shut it down?

• 31:26Speaker 00

  No, they bought a large part of it and integrated it in, took over the customers and integrated it in their systems. So what happened is, we signed the deal in Bonn, which was Deutsche Telekom back in the day, T-Mobile was a subsidiary of Deutsche Telekom.

• 31:45Speaker 00

  And I flew back with my CFO, Austrian Airlines, and he was 15 years my senior and was running the M&A department of the Austrian National Steel Company. And we were sitting in Austrian Airlines and got a class of cheap bubbly and said that was a good transaction. And he said, "Something's going wrong here." And I said, "Why?" He said, "That business with literally tiny revenue but with a large customer base, that means with lots of potential but no way of actually knowing how to monetize it or how to repay the CapEx investment." There's quite some correlation to the current markets, no? Was valued at this absurd, with this absurd amount.

• 32:30Speaker 00

  Compared to my specialized Alu business that he had, that was generating 30 million in EBIT. So something's going wrong. And I said to him, "Nothing's going wrong, the internet is gonna dominate and can't you see the amount of customers?"

• 32:46Speaker 01

  The new paradigm, you're old fashioned.

• 32:48Speaker 00

  Exactly, exactly. And he said, "No, no, I'm sure this is gonna collapse, the valuation's absurd." And we had, we listed another company on the stock exchange, which was between pitching into the bankers that scratched the eyes out of each other to do this to the day of listing in three months. And, and he said, "I promise you, we need to look at that. I don't think this is sustainable." And that impulse that he gave me from this one-hour flight from Bonn to Vienna was enough to look at our whole portfolio of nine investments. And we decided to exit all of them. And that was started end of 99 and went all through 2000.

• 33:32Speaker 00

  Obviously, when the market collapsed in spring 2000, people were still hoping for a rebound, it was just a glitch.

• 33:38Speaker 01

  Yes.

• 33:38Speaker 00

  And then the market never came back and we exited all of those investments. B1, an Israeli startup that we couldn't exit. And, and we were out.

• 33:52Speaker 00

  And what remained was a skeleton of a venture capital company, very much downsized.

• 33:57Speaker 01

  Yes.

• 33:58Speaker 00

  To continue to look for opportunities whilst having the philosophical idea of this is not gonna come back for a long time.

• 34:05Speaker 01

  I think this is an underrated aspect of good investors, is knowing when to sell. And I think there's an incentive in the investor ecosystem where they all like talking about, "Oh, we found this founder very early and we, you know, bought the stock and, you know, it's grew and grew and grew and, you know, we, we want to be on the journey forever." I think all of the myth-making tends to be about getting in early and being a very long-term partner. I notice a thing that doesn't get talked about, but is a very common trait amongst the most successful investors, is they have this spidey sense for, you know, it's like the movie Heat, you gotta, you gotta know when to get out. And a lot of the very good investors have this very commercial sense for, again, you're

• 34:50Speaker 01

  in this period like 99-2000 and it's an important moment to sell. And it doesn't get talked about because it sounds cowardly or it sounds like you, you know, you don't believe in this company that you made a lot of money from because, you know, you're now a seller, but it's, it's an interesting aspect.

• 35:06Speaker 00

  I came from a very financially or generally poor family background, no money. And financial safety and opportunity was always a very strong driver for me.

• 35:21Speaker 00

  And I owned 90% of that company. It wasn't a fund, I wasn't managing anybody else's money.

• 35:26Speaker 01

  It was a corporate entity, you had your own venture investors, but it itself was all holdings.

• 35:32Speaker 00

  Yeah, so it was a private limited company from which I owned 100%, sold 20% to someone, to some venture capital companies. And all of the 80%, the most of it, we had some, some of my dear friends and colleagues had a few shares, all of it, I owned. So when the opportunity came of actually exiting and generating a vast amount of money, which was life-changing.

• 36:06Speaker 01

  Yes.

• 36:06Speaker 00

  Generational wealth opportunity, it became easier for me to do that because I thought, "Okay, I never had any, any money and now suddenly I was able to generate so much that I couldn't even spend it at the time I made the call." I think I would have been probably more aggressive if it would have been other people's money, generating management fees, potential carry upside.

• 36:33Speaker 01

  Yeah, yeah, but the fact that it was your money allowed you to be pragmatic.

• 36:36Speaker 00

  Exactly.

• 36:36Speaker 01

  Yeah.

• 36:37Speaker 00

  And have a certain sense of safety also, or a desire for being on the safe side.

• 36:45Speaker 01

  What was your best performing investment before the racing era?

• 36:48Speaker 00

  Mercedes, F1 team. But before the Mercedes era, I was invested in Williams, which was pretty successful before that, a company that I loved forever called HWA, which was a...

• 37:00Speaker 01

  But these were all racing companies?

• 37:01Speaker 00

  That was all racing companies. So before that, I would say probably...

• 37:07Speaker 00

  That, the SMS company was called UCP.

• 37:12Speaker 01

  Yes. SMS entrepreneur turned racing entrepreneur.

• 37:17Speaker 00

  I was a race driver before, actually.

• 37:19Speaker 01

  Racer turned SMS entrepreneur turned racing entrepreneur.

• 37:21Speaker 00

  So the exact sequences. Racer turned

• 37:26Speaker 01

  Steelworker.

• 37:27Speaker 00

  Banking intern in Warsaw turned steel sales manager in Eastern Europe, turned venture capitalist, although it was more venture than capitalist. And then turned young driver manager. Once I sold all of these investments and then I started to invest in motor racing companies.

• 37:49Speaker 01

  This is Toto's new Twitter bio, just for you guys.

• 37:54Speaker 01

  And so obviously that.

• 37:55Speaker 00

  I have no social media.

• 37:57Speaker 01

  Well, I mean, you're kind of, you have enough exposure. I think people know what you think without tweeting. Do you get to manage the team in a different way? Because I don't know, you're less worried about job security. You can take bigger swings or just, how is Toto managing the team different from all the other F1 team principals managing the team?

• 38:14Speaker 00

  I have had this opportunity, immense opportunity given to me by the board of management of Daimler back in the day, led by Di Trecce, the CEO. But actually, all of the board members were very supportive of the idea. So what happened is they bought a small team, Brown, that won the championship in 2009, expecting it to be a dominant force in Formula One. And it was the first Mercedes Grand Prix own team with its own engines and its own chassis. And it underperformed. Year after year, the results were really not satisfactory. And until 2013, they won a single race only.

• 38:52Speaker 00

  And I was at the time running Williams with the founder and we also won a race. So one of the board members approached me and invited me to Stuttgart. And he said, how can it be that your private little team can win a race? And we Mercedes, we can't do any better than that.

• 39:12Speaker 00

  So I said, I don't know. So they gave me the opportunity to look at their setup, their numbers and everything. And I came back and said, what is your aspiration? And they said, well, winning world championships because we bought the team that did that. And I said, okay, then one of us is wrong because I'm working on the same budgets and I'm thinking about finishing in the top six. And they said, no, no, no, no, no, it's not the same budget. Look at, we spent 100 million more. And I said, yeah, those 100 millions you spent on Michen Schumacher, a Nicosberg driver, a P driver from Venezuela, who won the race, by the way, Pasta. That's the main difference. So they didn't like that situation at all. So I'm just the messenger, you know, and I'm gonna go back to Williams. So eventually they came back and said, we think our model,

• 39:58Speaker 00

  corporate running a Formula One team doesn't function. Because this needs to be much more entrepreneur related. You need to be empowered to take decisions on the spot and we want you to run this. And I said, I need to pinch myself because, you know, being the head of Mercedes Motor Sport is probably one of the best jobs in the industry other than being Ferrari, the Ferrari guy. And I had to say no because I was a shareholder in Williams and I have been always an entrepreneur. And they said, funny that you say that because we've just bought 40% of the Abu Dhabi Sovereign Fund. We bought it back, you can buy that. And I said, I did well in my life, but I won't be able to afford it.

• 40:38Speaker 01

  But they helped you finance it, right?

• 40:40Speaker 00

  Exactly. They said, how much can you afford? And I said, I'm always, you know, on the, let's say, conservative side. I've gone through financial hardship and I don't want to end up there. How much are you prepared to put into this? And I said, well, that's the amount. They said, okay, we're gonna finance, help you finance the rest. And here I was. And until today, with the change of management now led by Ola Kalenius and his colleagues, the CEO of Mercedes, they, you know, they give me a framework that I can act in the best interest of the racing team outside of the corporate structure. And I couldn't wish for a better co-shareholder, partner and brand, mighty brand that I'm associated with.

• 41:25Speaker 00

  So the decisions that we make are quick. They are in the best interest of the team whilst thinking about the consequences for the brand. And I run it like a 20-person organization.

• 41:38Speaker 01

  And how is, how you run it different from just hires, team principals, how they run teams?

• 41:45Speaker 00

  Every team is different. But for example, when you look at Ferrari, the team principal is one of 10 direct reports to the CEO. So the marketing person in the racing team is probably on the same level that the team principal. Then you have others, you know, very much shareholder-led organizations like Red Bull, where you would have employed a team principal that's reporting to a group of shareholders. Then you have a strictly corporate structure like Audi, where you have people from the group and from Formula One are being hired to run the team. They have a salary, they might have a bonus. So that kind of long leash that I was given, today there is no leash because we are partners.

• 42:26Speaker 00

  But the ability of taking, making, of taking decisions was given to me was extraordinary because all of these people, they need to fundamentally report to someone. And there's always the risk that by, if you take a decision without having actually escalated it through the hierarchy, you might be exposed and lose your job. So where I am until I really badly screw up, I'm responsible for my decisions and I'm very clear about that, but I can't be fired.

• 42:53Speaker 01

  Yeah. And that's what's interesting, right? I mean, you see this in Silicon Valley where companies run by founders often have different strategic degrees of freedom available to them than other companies. And so you look at, say, with Meta, you know, it's not a company that's just run by the shareholders. It's run by Mark and he has a strong view that being on the forefront of AI is very important. And there's been kind of previous waves where he's had strong views. And now they're doing very well in the AI space where maybe a professional management team would not have had the, you know, license by shareholders or the board to spend so much money on that. And it took a long time to prove out and things like that. And you see that effect oftentimes. And again, this is the, Mercedes is kind of the only founder run.

• 43:38Speaker 00

  It's a little bit like you and your brother, Ron Striped. You know, you are able to take decisions that in a dynamic environment may prove to be false or misjudged after a few years. You know, when you look at the ability, you know, the way Mark Zuckerberg leads the companies is quite amazing because you can decide to put quite some investment in a certain field and then say, okay, well, that hasn't developed in the way I thought. And Dietrich Mathias, the founder of Red Bull, said something quite interesting to me one day. He said, as an entrepreneur, you need to be like a downhill ski racer, but you need to be able to stop and walk back up the hill. And I think as an entrepreneur, you can do that.

• 44:22Speaker 00

  And you have the long-term horizon also. A manager will probably be short-term incentivized. You know, you have a three or you have a five-year contract. You have stock options, you want to maximize the value of these.

• 44:36Speaker 01

  And there's a fear of failure. There's a fear of doing something that looks bad to the people who are grading you because you're always being graded.

• 44:42Speaker 00

  Exactly, exactly. So that's what I meant at the beginning, you know, my time perspective has changed. It's 10 years and it's not, it's not one year.

• 44:50Speaker 01

  Yes. People know that you're a, you know, a large owner of the team. I don't think quite as many people know that Jim Radcliffe of Ineos is also, you know, a major shareholder of the team. What's he like?

• 45:03Speaker 00

  So that was a real opportunity back in the day for Mercedes and for Jim. And he's built an empire of an organization. You know, this is a chemicals conglomerate.

• 45:18Speaker 00

  And the three shareholders, they run it in the way they think it's intelligent. And back in the day, Niki Lauda, unfortunately passed away, was my best friend. And those shares went back into the pool. And Jim Radcliffe and Ineos started to sponsor us with quite extensively, actually. And we ended up sitting on the table with the CEO of Mercedes, Jim Radcliffe and myself, talking about the sponsorship. And it was, it was when, just before Covid hit. Teams had no valuations, we were all loss-making. The sport wasn't anywhere near where it was today. And Jim said, I'm prepared to commit X hundred million as a sponsorship if I can have a stake in the team. And we said, well, that makes sense.

• 46:02Speaker 00

  I increased my stake a little bit and then we were all one-third. And today, Jim is a great resource that I use if I need to have a contrarian view. If someone that is highly experienced, but also shrewd in the way he looks at his businesses. And a very enjoyable co-shareholder that isn't really interfering. But because I guess we do well, enjoys the ride and is a resource that we can, that we can utilize.

• 46:34Speaker 01

  F1 teams have become radically more valuable. Like this transaction valued Mercedes as F1 as 4.6 billion pounds. And that's many, many, seven times increase from even just a few years ago. That phenomenon has also happened in other sports like NFL and teams like that. There's two explanations you could have for the increase in value. One is sort of a monetary theory that you have more rich people who want to buy into teams. And so the businesses are the same, but you just have more demand to become a sports team owner and more dollars chasing fewer assets. The other is that you can say, and obviously this is somehow true for F1, they've become better businesses. I mean, the audience has grown so much and you have Drive to Survive and things like that.

• 47:16Speaker 01

  Just as you think about the increase in value in Mercedes and F1 teams, how much of it is? F1 teams have become a more desirable asset. And how much is it that they're actually just very good businesses now?

• 47:27Speaker 00

  Yeah. You know, when you buy a car today, you justify it with sometimes rational decisions. Like lots of horsepower or good design or it's EV. Because I want to, you know, I want to have an efficient car. The truth is, it's an emotional decision why you buy a car. And the emotional decision is how you want to be, how you want to be perceived. Do I want to be perceived progressive? Do I want to be perceived affluent?

• 47:56Speaker 01

  Yes.

• 47:58Speaker 00

  All of this. So that is going to be a longish answer. Sports teams are scarce asset today. You know, in F1, there's just 11 of us. And you could potentially have another 12 one that's within the regs, but nobody's really keen. And it's the biggest global sport in the world today. The Olympics and the Football World Championship are bigger, but they're only for every four years.

• 48:19Speaker 01

  Yes.

• 48:19Speaker 00

  So this is the biggest global sport in the world. Then you look at the NFL, very scarce asset too. And for US American, it doesn't go any bigger than the NFL. And I think how much 32 teams or something around that. So the scarcity of the asset can be a rational decision to own it. And hope for a value increase because of that factor. Okay. Then there is the trophy asset angle. There's many very wealthy people that love the sport and say, well, you really, I always dreamt owning an NBA or NFL team or Formula One team.

• 48:57Speaker 01

  Yes.

• 48:57Speaker 00

  And I enjoy going to the races, giving my input and, and I can afford it now. Very well, very valuable. It's a win-win. But then there is the people that have so much money and feel in a way maybe not recognized enough.

• 49:15Speaker 00

  Because you could have earned 10 billion with a business that is, doesn't have as much as, you know, visibility. And you're saying, you know, actually, I'd spend a large chunk of money just for the courtside seat.

• 49:31Speaker 01

  Yes, yes, yes.

• 49:31Speaker 00

  And, and be more prominent. Also a decision that you can understand maybe. So that is that aspect of investing. The other part is fundamentals. You look at the landscape and you can say, do I believe that this sport is going to continue to grow? What's the demographics of the sport? How much income potential has the league? How much does the team earn? And, and that today have, have these fundamentals have become reality. Formula One before we were all loss making, it was a marketing exercise. But today, few of us are generating very healthy profits. You know, in our business, more than 30% EBIT margin.

• 50:16Speaker 00

  We are distributing dividends. So it's not like the US American teams that, or the tax structure where you basically live in a dead, dead environment. And we don't have a lot of capex because we don't own the stadium. Obviously also miss some of the revenues. But so when you invest in a Formula One team today, you can attribute multiples to the investment decisions. And you know, when I sold part of the team last year, those multiples justified the valuation you just stated. Today I'll probably be able to generate 30% more, but I got the right partner. So that's okay. And, and those multiples are also valid for most of the, valid for most of the US American teams.

• 50:54Speaker 01

  What are the last publicly released financial figures from Mercedes?

• 50:57Speaker 00

  Well, we're generating around a billion dollar in revenue and 30% profit margin.

• 51:02Speaker 01

  Okay.

• 51:02Speaker 00

  So it's a very healthy margin.

• 51:05Speaker 01

  It's, sorry, 300 million of EBIT.

• 51:08Speaker 00

  Yeah.

• 51:08Speaker 01

  And so the 4.6 billion dollar valuation is a 15 times EBIT multiple. So, I mean, yeah, it's very, Warren Buffett could, could underwrite this business.

• 51:16Speaker 00

  Exactly. It was back in the day, it wasn't a billion and it wasn't 300 million. It was considerably less because we're growing very strong and the, the sport is still growing strong. But you know, we are Europeans, we don't talk so much about valuations and money. But as a matter of fact, like you say, these multiples are actually on the conservative side.

• 51:36Speaker 01

  And actually, that's very different from say an NBA or an NFL team where I think every time one transacts, it's wackadoodle valuations. That can only be justified by tax structuring or courtside seats.

• 51:48Speaker 00

  Yeah. But also, you know, when, when you look at the valuations of the, of the US teams. You have fundamentals for some of the teams, but then there are some which are kind of being dragged along that are having valuations that are not real anymore. And if you look at Mercedes, we are probably generating, other than the Dallas Cowboys, the most profit of any sports team in the world. So we have kind of a USP in this, in this world. When we compare our multiples to the NFL or the NBA in its latest crazy, you know, uplift of valuation. In, I don't know what the multiples, the revenue multiple, which is crazy.

• 52:33Speaker 00

  You know, I'm a fundamental guy, fundamental figure. So I would never value a business on revenues. I would value it on return on investment, fundamental cash flow and profits. So that would value us at 10, 12 billion. If you look at the Lakers sale, for, for example, whatever else happened in this frenzy. But that's not the point, you know, my horizon is so long term that I'm a long-term bullish investor. With all the ebb and flow that can happen in this sport, that it becomes irrelevant to actually, you know, starve for high evaluation because it's just on paper. But we could value the business today much more than it was a year ago.

• 53:15Speaker 01

  Yeah, it's, it's interesting, you know, there can be an effect in tech where say, if you look at the AI space, some of the most, most enduring businesses in, in AI, like a TSMC or an Nvidia. That have these very long-term advantages, actually trade at quite reasonable multiples, despite the fact that they're growing very, very quickly. And similarly, the, the best team in the biggest sport trades actually as one of the most sensible multiples.

• 53:40Speaker 00

  Yeah, and that's okay. You know, I wanna, we wanna be perceived as the serious people in there because we are not particularly interested in the, in the trophy investor where we could maximize our valuation. And, and then the most important point, none of us is actually interested in selling any shares here because we believe in the long-term development of the company and the sport. You know, particularly in this environment of AI, humans watch humans and the driver in the car is irreplaceable. Not because a robot couldn't go any quicker, by the way, that's a different discussion, I don't believe in that.

• 54:15Speaker 00

  But because we wanna go through the drama and the glory of the individual.

• 54:19Speaker 01

  Yes.

• 54:19Speaker 00

  So I believe that the sports, live sports generally are very resilient to whatever technological developments we see at the moment in the market.

• 54:30Speaker 01

  Will we see any of the F1 teams as public companies? Isn't that the next logical step? Because there are lots of people who would like to be a part of them.

• 54:37Speaker 00

  I don't think I, I, we went public with Williams and that was not a success. Because in a way, you know, you're reporting 20 times a year with each of the races. And in this sport, it goes from mania to depression within a week.

• 54:51Speaker 01

  But that was a very different era. F1 was much smaller, it would have been a different shareholder base. Could it work now?

• 54:56Speaker 00

  I don't know if somebody wanted to monetize or raise capital by just being public, maybe. But I don't think being public as a sports team is the right long-term structure. You wanna be in control.

• 55:11Speaker 01

  You'll just get whipsawed so much.

• 55:12Speaker 00

  Yeah, yeah, exactly. And you want, I would also want to be in control of that business, not because I think in, you know, legacy terms, that has no interest for me. But it's about creating the best sports team in the world in the time I run it.

• 55:29Speaker 01

  Drive to Survive has been a smashing success for Netflix and a big success for F1 where it's brought lots of new people into the sport. And then you know, people talk about women especially, you, you don't associate F1 with women, but the show is very popular with them. And then Netflix has tried a very close copy of Drive to Survive with cycling and tennis and all these sports. And it hasn't really worked and you don't hear anyone talking about those shows. Why does the format work particularly well for F1?

• 55:58Speaker 00

  There's some shows that I personally found quite okay, the cycling was okay. But why? I didn't believe it would work. Back in the day when Formula One pitched it to us, Netflix didn't really pay any money, very little. And I, you know, we were fighting a world championship against Ferrari. So I sat down with my colleague of Ferrari and said, are we doing this? And he said, we are here to win a Formula One championship and not play here in the soleil. So Ferrari and Mercedes decided not to participate, participate in series one.

• 56:30Speaker 01

  Yeah, famously.

• 56:31Speaker 00

  Famously. And that was maybe important for the success of the series because it allowed Drive to Survive to look at smaller teams.

• 56:39Speaker 01

  Yeah.

• 56:40Speaker 00

  And less.

• 56:41Speaker 01

  Kind of underdog.

• 56:43Speaker 00

  Underdog, exactly. And then, you know, COVID came, people stayed at home.

• 56:50Speaker 00

  Generations watched Drive to Survive from the, you know, granddaughter to the grandparent, grandchild to the grandparent. And then we started to race as the only sport because we were able to contain our traveling circus very closely. So we were live also. And I think this is where we made a big step forward in terms of growing our audiences and demographic. But why the sport is so strong today? I think it's not only because of the Netflix factor, it's also because we entertain. We have great characters that are very active on social media, younger drivers. We provide.

• 57:31Speaker 00

  Great narrative, controversial situations, the politics outside of the sport, you know, that is basically a 12 months live reality show. But.

• 57:42Speaker 01

  So F1 already is a soap opera and that's why it works well in TV format?

• 57:46Speaker 00

  It is, but with a fundamental difference to other soap operas. We are credible sports. We have rules. We race based on those rules and if you win, best car, best machine wins. So this is the fundamental base of the sport. And this is why the reality show around fits well. This without that wouldn't work.

• 58:09Speaker 01

  Yes.

• 58:10Speaker 00

  Entertainment follows sport, not the other way around for Formula One.

• 58:15Speaker 01

  Yes.

• 58:15Speaker 00

  And we've stayed true to this DNA and that's why we've attracted audiences that in sheer size that we didn't expect before. Our strongest growing demographic is young women, 15 to, I don't know what the bracket is, but 15 to 25 years. And we have 42% female fans, which is, which is an awesome.

• 58:35Speaker 01

  Unthinkable for a motor racing.

• 58:36Speaker 00

  Unthinkable. And then obviously my wife, Susie, runs the female series from an academy, which is going very strong with young women driving those cars. And what she sees is that her demographic very much obviously buys into Formula One's demographic. And it became an aspirational series for young women, not only that want to be racing drivers, but also engineers or marketing people in a racing environment. Or sheer an inspiration to that a woman can actually succeed in a male dominated environment. So all of this kind of universe kind of buys into the credibility of Formula One.

• 59:16Speaker 01

  I've always wanted, I personally find Drive to Survive a little too soap opera. I always want more of the technical details and more of the race craft. And so I think maybe there will be the opportunity over time for, you know, different sub shows or something like that. Because I, I, I understand why they make the choices they do. I think what they have is probably has the most mainstream appeal, but they'll probably find that there are sub emphases that would be successful too.

• 59:41Speaker 00

  It's a good, it's a good point. We actually haven't thought about because we tried to develop, and Stefano Di Meccali who runs Formula One is excellent at that, to grow it in the right demographic.

• 59:51Speaker 01

  Yeah.

• 59:52Speaker 00

  We are still niche in some parts of the world. We have large group of fans in every continent, but when you look at the United States, it's very much big cities and affluence.

• 1:00:02Speaker 01

  Yes.

• 1:00:02Speaker 00

  I can see that when you go to New York, Miami, San Francisco, LA, Austin, the sport is very present. People recognize you. I was invited to the Super Bowl in Arizona a few years ago. No recognition, you know, so we're kind of not developed in the middle of the United States, which is NASCAR.

• 1:00:21Speaker 01

  Right.

• 1:00:21Speaker 00

  And so this is very much the, the demographic, the current demographic that Stefano is, is aiming at. Because, because it's niche, it's, it's high tech.

• 1:00:34Speaker 00

  It's, it's, how can I say, it's very European.

• 1:00:38Speaker 01

  Yes.

• 1:00:38Speaker 00

  And glamorous to a certain degree. And we've, we have this hardcore fans. Interestingly, many of the young ones follow free practice on, on Friday. They will know everything about the updates on the car. There are updates. They also know about the wags, the wives and girlfriends of the drivers. And all of these influences and blogs that, that are existing.

• 1:00:57Speaker 01

  Yes. We're kind of getting into what does it mean to be an F1 fan these days? Because it's interesting, you have this pyramidal structure where you can be extremely engaged and follow the team around, or you can go to one race when it comes to your town, or you can watch Drive to Survive. Or maybe you just come across YouTube clips in your feed occasionally. And so now there are all these different layers. And so how has that changed from a Mercedes strategy point of view? The fact that you have so many different types of fans now versus the old paradigm of you turn up to a race or you don't?

• 1:01:29Speaker 00

  You know, as a team today, we, we have so many different fan groups or not only fans, but stakeholders. You have obviously Mercedes. What is it we do for the car's brand? To enhance.

• 1:01:45Speaker 01

  Yes.

• 1:01:46Speaker 00

  Reputation and fundamentally selling cars. So what is that? What can we do for, so I have this customer theory.

• 1:01:57Speaker 00

  A customer is someone that makes your life better. So my number one customer is Susie, my wife. So whatever I will do and say is always focused on, is she gonna like that or not? Because that has an effect on my life quality. My family, very important. My, the people that work for Mercedes, my employees. If I have them in a good space, then the car is gonna go faster. And the relationships matter. Then it's sponsors and co shareholders. What is it I need to do for them to, to say that this is a good investment or a good platform?

• 1:02:38Speaker 00

  And you can trickle it down and then it's the, the fans and then there might be the social media followers. You can trickle it down and what I'm trying to do is in my priority list of customers, to identify the objective to achieve the best outcome. So.

• 1:02:57Speaker 00

  That is what I've always done in any of my, you know, my, the way of looking at a life. Sounds a bit rational and brutal and maybe the reality is it's not like this.

• 1:03:10Speaker 01

  No, you're ranking.

• 1:03:10Speaker 00

  But I'm ranking the priorities. Exactly.

• 1:03:12Speaker 01

  F1 is interesting because you have the teams. You have F1, the organization, the company itself. And then you have the FIA, which people might not realize is different. What are the tensions between all of those groups?

• 1:03:28Speaker 00

  I think tensions have been very limited in, in recently, in recent times. Because there was this pressure always between Formula One as being, you know, the, the commercial sides of it and the commercial rights holder, the FIA being the governing body, making the rules, policing, policing the rules. And then the teams.

• 1:03:56Speaker 00

  And there was an, let's say, an umbrella contract between all three stakeholders, which was called, which is the famous Concord Agreement. Because it was signed on the Plaza de la Concord in Paris, many, many 10 years, 10 years, tens of years before. And the commercial, so the teams, we don't own the league, contrary to the NFL, for example. But we, we are, we are getting quite a large percentage of the profits that Formula One, Formula One do. So Liberty and the public shareholders, retail or institutional, institutional investors own Formula One and we get the profits. The FIA is being paid by Formula One for their services. But the FIA is also the one that granted the rights to Formula One in a 100 year agreement.

• 1:04:42Speaker 00

  So they need to be respected as a, as a stakeholder and not only as the policeman. And I think that was where cracks, cracks appeared a few years ago, or even before, you must say, but today. It's quite, it's more aligned. We're gelling more the three entities for the benefit of the sport.

• 1:05:03Speaker 01

  But if there is a disagreement, what will it likely be about?

• 1:05:07Speaker 00

  What could the disagreement look like, you know, in, in, you know, how are the profits split? For example, these contracts are being renewed every five years.

• 1:05:19Speaker 01

  The age old debate.

• 1:05:20Speaker 00

  Yeah, exactly. Or, you know, where are we, which countries are hosting races?

• 1:05:26Speaker 01

  Yeah. Was that new Spanish circuit that nobody likes a mistake?

• 1:05:30Speaker 00

  So I'm a traditionalist. I love going to the old circuits because they represent history for me. But also the racing is based on this. For whatever reason, the layout of the old tracks, which had vast areas that they were available, because places were not as developed as today, provide great racing, overtaking, cars being able to go side by side.

• 1:05:51Speaker 01

  That was a criticism of the new Spanish track.

• 1:05:53Speaker 00

  Exactly. That there wasn't a lot of overtaking, but Madrid did have, and I'm not saying this to make anybody look good. Madrid as a city is spectacular.

• 1:06:05Speaker 00

  The track that has built in this area is spectacular. I must say, the job that they did over the few years since they got the contract is nothing but outstanding. But I think where it didn't work is that the track is so spectacular in terms of for the drivers and the kind of camera positions with this long banked corner. But it didn't account too much for the new generation of cars, for the difficulty to overtake. And for next year already, I think they're going to change the layout of the track because it's not a permanent track, to provide more straights.

• 1:06:41Speaker 01

  Oh, so it's not a permanent area, they can they can just rejigger it?

• 1:06:44Speaker 00

  Exactly.

• 1:06:45Speaker 01

  How configurable is it?

• 1:06:46Speaker 00

  Well, I spoke with the CEO of the track on the weekend and he just mentioned a few corners that he thinks can be adapted or should be adapted. So they are open minded about it.

• 1:06:55Speaker 01

  Oh, that's cool. Yeah, so there's fundamentally this tension between you're creating a destination and you're designing a racing track and there are some slight tensions between them. Maybe you don't have as much room as you want to work with, but you you can break that trade off a little bit where you can you can improve the track even.

• 1:07:12Speaker 00

  I don't think there's even, I don't, I don't think there's tensions. I think fundamentally all stakeholders, including the host, wants to have a great Grand Prix. And that means having attractive racing whilst having good, you know, spots for the public.

• 1:07:26Speaker 01

  Well, there's sometimes intention, like Monaco famously, you know, you would not design it that way as a racing track, but Monaco is not going anywhere and it's, you know, the.

• 1:07:33Speaker 00

  I think Monaco needs Formula One, Formula One needs Monaco. But Monaco is such a traditional track that nobody actually wanted to change the layout because it's like breaking with the rules or kind of breaking the legacy. But fundamentally, I lived there, lived there many years. I wouldn't know how to make it very different. I mean, I have some ideas.

• 1:07:50Speaker 01

  For longer straights. Also Monaco, you know, they keep building new land and so, you know, you could extend the track out into the the Mediterranean.

• 1:07:57Speaker 00

  Yes, and that has been a great commercial success. I doubt that extending a racetrack into the sea is connected.

• 1:08:04Speaker 01

  I read some of it down. Last question. How do you set Mercedes up for succession? How how will this work? Post Toto and how can you prepare for that?

• 1:08:15Speaker 00

  You know, I've seen examples of entrepreneurs that were either so selfish or believed in their own eternity and forever life. They didn't look at what, they didn't look after, you know, not only the families, but also the company. For me, it is not important, you know, to leave a legacy and

• 1:08:44Speaker 00

  call the building the whatever, total building also.

• 1:08:48Speaker 00

  Which I hear some people are doing nowadays.

• 1:08:50Speaker 01

  You already have the toilets named after you, so.

• 1:08:52Speaker 00

  Yeah, exactly. I wish I would own the go on this business. That's massive.

• 1:08:55Speaker 01

  Especially now with AI.

• 1:08:57Speaker 00

  Exactly. We should ask them to sponsor for sponsorship.

• 1:09:01Speaker 00

  So for me, it's important to do to do what's best for the family and to do what's best for the team. And that means looking at the structure going forward where this team can live without me. And probably it's not going to be the same because I have the credibility as an entrepreneur that that's leading my own businesses, but there will be a solid management structures. And I believe that my job is going to be divided between two or three people. That I'm vetting at the moment, that I that I believe can, already doing a great job with with all of their strengths in various various areas. And then it's going to be different, but it will be a successful team.

• 1:09:39Speaker 01

  Do you think you will

• 1:09:42Speaker 01

  set things up where maybe you move to sort of executive chairman type of role where you don't have to be there every race weekend, you let the new person set their direction, but you can help with personnel and be there for advice? Or do you think it's important to have a clean break and you get out and it's their show now and?

• 1:09:57Speaker 00

  I think clean break is is probably not possible if it continues, if I continue to own it with with my family. So that kind of executive or non-executive chairmanship is something that that may happen. But it needs to happen in a very, very precise way.

• 1:10:18Speaker 00

  Because you can't be on the sidelines and interfere into the daily business. I also don't want to end up in a situation that that I believe the family can run it, run it, it's the best way and then be just mediocre. You have to earn your spot in running it and you have to contribute and my children also don't have any interest. So

• 1:10:41Speaker 00

  I believe that if you are chairman, non-executive or executive, you need to exactly know your role. And that doesn't mean shooting from the outside and being the one that sits on the on the grandstand and says, you've screwed up and you've screwed up and this is how.

• 1:10:55Speaker 01

  You're calling the drivers directly and.

• 1:10:57Speaker 00

  You can't call the drivers directly if it's about, you know, keeping the contact, but it's not about interfering into the daily business. And that's how I would aim to be in the future. But it's, I'm still enjoying it too much running it actually.

• 1:11:11Speaker 01

  Yeah, well, that makes sense. Theoretical for now. Toto, thank you.

• 1:11:14Speaker 00

  John, thank you for having me and congratulations what to what you have achieved. We haven't talked about it enough, but I can only take my hat off.