Ex-Tesla President reveals EVERYTHING Elon does to win

Get our CEO lessons in one guide: https://clickhubspot.com/rmfk Episode 813: Shaan Puri ( https://x.com/ShaanVP ) talks to Jon McNeill about his time running Tesla and working side-by-side with Elon Musk. — Show Notes: (0:00) Intro (1:18) a job interview with Elon Musk (5:07) Being a sniper for talent (8:20) solve a real problem, right now. (11:23) solving Tesla's sales problem (23:41) One size fits all opportunities (26:50) the power of noticing (31:45) order of magnitude goals (38:34) 3 sentence emails (43:24) identifying $50B industry (49:05) AI — Links: • The Algorithm - https://www.penguinrandomhouse.com/books/799958/the-algorithm-by-jon-mcneill/ — Check Out Sam's Stuff: • Hampton (joinhampton.com): My community for founders. Average member does $25m/year. Many of the guests are members. Get after it...apply: http://joinhampton.com/mfm — Check Out Shaan's Stuff: • Shaan's weekly email - https://www.shaanpuri.com • Visit https://www.somewhere.com/mfm to hire worldwide talent like Shaan and get $500 off for being an MFM listener. Hire developers, assistants, marketing pros, sales teams and more for 80% less than US equivalents. • Mercury - Need a bank for your company? Go check out Mercury (mercury.com). Shaan uses it for all of his companies! Mercury is a financial technology company, not an FDIC-insured bank. Banking services provided by Choice Financial Group, Column, N. A., and Evolve Bank & Trust, Members FDIC • I run all my newsletters on Beehiiv and you should too + we're giving away $10k to our favorite newsletter, check it out: beehiiv.com/mfm-challenge My First Million is a HubSpot Original Podcast // Brought to you by HubSpot Media // Production by Arie Desormeaux // Editing by Ezra Bakker Trupiano /

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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

• 0:32Shaan Puri?

  All right. So I guess to start, I mean, I almost want to rename the podcast, How Lucky Are We? It's like, oh, we get to sit here with the guy who was the president of one of the most important companies of our time, Tesla for years. You got to work with one of the greatest entrepreneurs ever, Elon. You yourself have this crazy entrepreneurial track record. You've built and sold, you know, five, six different startups. You're like the Forrest Gump of the tech industry, just going into different spaces. And you go into, you know, auto repair and cyber insurance and all these different spaces. And so I'm pretty fascinated that we get to talk today. And I got a bunch of questions for you. But I want to start with less of a tactical question and more of a movie scene. So you go into a job interview with Elon Musk. It might not have even

• 1:15Shaan Puri?

  felt like it was a formal job interview, but your first conversation with him, what's that like?

• 1:20Speaker 00

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

• 1:58Speaker 00

  So that's the first, that's the first convo.

• 2:00Shaan Puri?

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

• 2:13Speaker 00

  Oh, yeah. Oh, yeah. That's, no, that's exactly what he was up to. So his hiring method is he wants to determine whether or not you can do world-class work. And his method is to interrogate a particular problem and go super deep on it. And, uh, it's better if he tries to skew it to a problem that he knows.

• 2:34Shaan Puri?

  Right.

• 2:34Speaker 00

  So that he can.

• 2:35Shaan Puri?

  You're bullshitting.

• 2:36Speaker 00

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

• 2:54Shaan Puri?

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

• 3:25Speaker 00

  I'm glad you raised this because this is a hack I don't get to in the book, but it's the thing that a lot of entrepreneurs think about, which is as your company scales, how do you protect the culture?

• 3:33Shaan Puri?

  Right.

• 3:33Speaker 00

  And he and JB Strabill, the co-founder of Tesla, came up with this method to imprint the culture on every hire and a test for culture. And that was they would be the last interviews. That's a hack that I've taken forward now, uh, from, from that Elon experience. Uh, and now I do that too. But the way that translated was that he would say, like, he said to me, hey, look, we now, as fast as this thing is growing, we're going to split this up. And you and I are going to interview everybody that's hired at a manager level and above. So we didn't interview everybody, but growing from four to 40,000 employees, there were a lot of interviews we were doing. In fact, 60% of my calendar was interviews.

• 4:16Shaan Puri?

  Wow, 60%, that's unbelievable.

• 4:18Speaker 00

  Yeah, but it was super important because you totally win and lose on talent. So like, that's another hack for entrepreneurs to think about is how much of your calendar is devoted to the number one driver of your success, which is talent.

• 4:30Shaan Puri?

  Right.

• 4:31Speaker 00

  But he talked to you, the point of your question, he said, hey, we have to determine whether or not these people can demonstrate evidence that they can be world-class. And to do that, we've got to dive deep into these problems. So he basically articulated what he had done with me as we were getting to know each other and going through that interview process. And then we sort of divided and conquered, like we literally were the last interview. And oftentimes I would include in my senior, senior hires, I would include JB and Elon because they were both such great talent selectors. JB especially has this unbelievable knack for talent selection.

• 5:09Shaan Puri?

  And what did you pick up? So what's the, what's the, okay, so I hear the, the overall method, which is you want to be looking for this sort of world-class work, evidence of exceptional ability. You are gonna, how do you do that? You go super deep on a problem that they've worked on or that you understand. I've heard Elon say a couple of things that I liked, which was, he's like, I'm trying to say wow, wow, wow in the first 20 minutes. And if I'm not saying wow, wow, wow, in the first 20 minutes, probably not there.

• 5:34Speaker 00

  Exactly.

• 5:35Shaan Puri?

  And trust, trust the conversation, not the resume, because you could have a great resume. But if the conversation is not giving you wow, wow, wow, it's not there. And if it is, forget the resume, it's, you know, this is legit. So I picked up a couple of extra things in the, over the years and some of his interviews. But I would love, you know, to go from white belt to blue belt here. So what, what are the nuances? What is a little, what's a question? What's a, a little red flag or a trap that you've learned to, to avoid?

• 6:01Speaker 00

  So one trap to like, try to identify is, did this person actually do the work or are they claiming the work of their team? In other words, a lot of us have been on teams of eight or 10 or 20 that have done unbelievable work. I've been on those teams. But it wasn't our work. We weren't leading the team. We weren't leading the curiosity or the discovery or whatever. And so that's the trap that you're trying to like dive into so deeply in the problem that you start to determine, did this person actually do the work or not? And it's tricky because there are companies that are fully matrixed. So take like Nike. Nike is a fully matrixed organization. You pull a marketer out of Nike, that marketer has never had full P and L responsibility, full creative responsibility,

• 6:44Speaker 00

  full distribution responsibility. They have a very niche job. And it's really hard to determine, did this person do the work or not? And so you go way deep on trying to figure that out, knowing that it's a risky hire to hire from a matrix like that because you really can't put your finger on who really does the breakthrough work. That's kind of, that's one. The second is, I would present a, much like Elon did with me, I'd flip the tables and present a current problem of mine. And then I want to see their level of curiosity, their level of analytics, their level of problem solving, their ability to ask really great questions, to get some data from me and get me engaged. Right.

• 7:26Speaker 00

  And so it's basically, it's that basic, like go into a problem of theirs, then flip the table and go into a problem of yours. And that's, that's the knack of Tesla. It was like, let's turn complex into simple. And so, and so if you've been a leader there, you can identify these leaders because they have the ability within a minute or two to take a really complex question and boil it down into a principle.

• 7:48Sam Parr?

  Hey everyone, really quick, if you're enjoying this episode on CEO stuff, so delegating, having hard conversations with your team, hiring, then I've got something for you. So the team at HubSpot, they actually went and put together a bunch of best practices that Sean and I use in our own companies. And they put it together in something that's really easy to read and understand. And so if you want to just save yourself 10 years of headache and heartache, then you should check it out. I wish we had this a long time ago, would have helped me a lot, but there should be a QR code on your screen that you can scan or a link in the description. So check it out. It's totally free and totally awesome.

• 8:23Shaan Puri?

  I've had the two traps you just mentioned. I've had the exact experience in the last week. I interviewed somebody. They're like, oh yeah, I was there from 1 million of revenue to 93 million of revenue. Oh, fantastic. They weren't the one driving that revenue. So it's not even they're claiming the work of their team. It's they're claiming the progress of the overall company. And they lived in this corner over here that had nothing to do with driving the growth. And they really didn't understand, oh, the core engine of this business is A. You worked on B over here and it's like, I need to find people who the guy who built A. Because A was the reason that business won. And that's what we're actually trying to understand and trying to try to do our own version of. So I've definitely felt that. And then the other side is there's people who have come from these great companies. Nike, I'm a marketer at Nike. Well, Nike has great marketing.

• 9:06Shaan Puri?

  And so your brain associates this like level of talent, but they're not maybe the people who were there at the beginning, the ones who made the key decisions. Or one thing that I found is with salespeople, there's a great piece of advice, I think from Ben Horowitz or someone. He's like, hire the salespeople from the ones who had the shitty product. He's like, if you hire a salesperson from the people whose the product was just being pulled by the market, they, you know, the fish were jumping in the boat. And you don't know if that person's a great fisherman, just because they were just being handed inbound, organic, warm leads. And they were closing them. That's, that doesn't mean anything. You want to go to the guy who was selling on the tier three company still beating quota. Even though their company was not the winner, their product was not the hot one, because that person actually knows how to sell.

• 9:48Shaan Puri?

  And that's really helped me with some of my companies. So there's these like small heuristics that can actually like improve talent selection sourcing.

• 9:55Speaker 00

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

• 10:22Shaan Puri?

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

• 10:32Speaker 00

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

• 10:53Shaan Puri?

  You negged him.

• 10:54Speaker 00

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

• 11:31Shaan Puri?

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

• 11:43Speaker 00

  Totally. I'd read the Sam Walton biography and the biggest thing I pulled out of that book was the management hack of secret shopping. Cause you get to sense like frontline employees know exactly what's wrong with the company. They will tell you what the customers are complaining about. They'll tell you what the, the organization sucks at. And so that was my first instinct, like go to the frontline. So I go to eight stores, I test drive, use different email addresses. So they don't know who I am. And the test drive is supposed to be the fulcrum of the sales funnel. Like you hit the accelerator and you can't stop thinking about buying a Tesla.

• 12:15Shaan Puri?

  Right.

• 12:16Speaker 00

  I didn't get a single call back. And Elon had introduced me to the head of sales ops. So I called the guy, I said, can you tell me why I'm not getting called back? And he said, I looked at the system, you're not fly. Like I have no idea. I said, okay. Tell me how many people have gotten a test drive in the last 30 days that haven't been called back. So he cranks through the CRM and he comes back and says 9,000. And I'm like, 9,000, you're going to make your quarter if you just call these people. I said, okay, look, this problem has to get solved now. So I'm kind of in CEO mode. And like this problem has to get solved now. Can you cut off any new leads to salespeople until they call all their previous test drives back?

• 13:00Speaker 00

  He's like, yeah, I can block that in the system. I said, okay, do it. He's like, great. It'll be done in two hours globally.

• 13:06Shaan Puri?

  They weren't calling back, not out of laziness, but because the incentive structure, right? They were getting, they, they sort of commission was tied to the test drive, right? Not on to, not to sales that closed from a follow up. Is that what, there was some incentive problem, correct?

• 13:20Speaker 00

  There was, there was an incentive problem, but there was also a profile problem. We were hiring people that didn't know how to ask for the sale. And that was the root cause. So when you force them to, then, then stuff started moving. So I talked to the guy the next day. He's like, I already have the results out of Asia and Europe and like, sales are flying. And I said, I said, no surprise. Like, all you have to do is call people back. Like, if you want to close the sale. And then it dawned on me, oh crap, I made this decision like I was the CEO. I don't even work for Tesla yet. And so I said to the guy, like, I gotta call Elon and tell him what we did. And I said, I'll take the blame. You're not gonna take the

• 14:02Speaker 00

  blame. I'll take the blame. And so I called Elon. I said, man, I gotta, I gotta beg your forgiveness. I haven't, I haven't not been a CEO for 20 years. I've had six companies. I've, I haven't had a boss. And when I see a problem, I want it gone, like immediately. And so here's the problem I saw on your top line challenge. Here's what's happening in your stores. Here's the change we made yesterday. And by the way, I think with this change, you're gonna make a quarter.

• 14:29Speaker 00

  Long silence, like uncomfortable silence. This is before I knew about the signature Elon long silence. And

• 14:36Shaan Puri?

  What are we talking? 30, 10 seconds, 30?

• 14:38Speaker 00

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

• 14:53Shaan Puri?

  He's literally like AI, right? You can say, go to, go to think mode and it just, it'll take time.

• 14:58Speaker 00

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

• 15:13Shaan Puri?

  That's an awesome story.

• 15:14Speaker 00

  Yeah.

• 15:15Shaan Puri?

  And you know, you've done this kind of over and over again, where you sort of go into problem solving mode. And I want to talk a little bit about that little off book here because

• 15:22Speaker 00

  Yeah.

• 15:23Shaan Puri?

  I was at a dinner somewhere and I got bumped into a dude who had taken over as CEO of Lime Scooters. You know, one of the scooter companies, I knew like hot for a while.

• 15:32Speaker 00

  Yeah, exactly.

• 15:32Shaan Puri?

  Bird or Lime. And then it kind of crashed. But they're a public company and they were struggling now. And so this guy comes in and I was like, so what'd you do? Cause he actually turned the company around, like they got to profitability, they like, it's not like it's the best company in the world, but it was about to die.

• 15:49Speaker 00

  Exactly.

• 15:50Shaan Puri?

  Not died. So, you know, as a ER doctor, he did well. And he goes, the first thing I did is I went and I sat in the warehouse and I just sat, took a chair and I just sat there for eight hours. And, you know, people were like, hey, do you want to do meetings? And he's like, no, I just want to watch. And he just watched. And he's like, okay, he's basically like watching where all the waste is. Cause if he wants to make this thing profitable, he has to find out where all the, all the waste and expenses that's not driving revenue to the company. We're gonna, you know, we're spending money, but we're not getting paid to do these activities. He's like, oh, so that guy, he's doing this, but there's a bottleneck over here. And that's because they only have one person and they're all waiting for this. And he's just, he's like, I sat there for eight hours and it kind of like told me what I needed to do for the first, you know, two weeks. And I remember

• 16:34Shaan Puri?

  thinking, this idea of mystery shopping or going and sitting in the factory, going and sitting in the warehouse and just watching what's going on. There's an immense amount of power to that. And I think for most CEOs, we sort of think that a big impact has to come from a big, high level thing. And not this kind of roll your sleeves up, just go watch. You don't need a 2000 IQ. You just need a simple thing.

• 16:58Speaker 00

  Yeah. Like I think the biggest, your biggest job as an entrepreneur or as a leader is to like, stack rank the problems that are constraining your business, stack rank them, and then pull the biggest problem off the top of the pile every day and work it. And the first principle that I learned from a guy that, who was a mentor of mine, he taught me, he used to haul me down to the, like I had a software business, he would haul me down to the customer support teams. And he'd say, just sit here on a chair and listen to these calls. And his first principle that he kept saying to me was, I'm going to introduce you to the most powerful analytics you have as a leader. Your two eyes and your two ears.

• 17:39Speaker 00

  Use them because you will get insights so much faster than the data can get to you to give you insights. And it was true. And so when I started at TESSO, we were having a super big problem producing Model Xs and getting that Falcon wing doors to fit. And Elon and I had shared this, this favorite book, The Goal, which is all about manufacturing process. And he grabbed me one day, he said, okay, the goal guy, come on, we're going down to the line. And I said, he said, help me solve this problem. I've been sleeping in the factory trying to work on this. And I said, okay, like, we're going to walk up the factory line to where all the inventory is stacked up on these doors, because that's the clue where the problem exists.

• 18:24Speaker 00

  If, if throughput can't get through there, it's all stacking up. That's where the problem exists. So we're just going to stand here. So we walked to that point. Sure enough, a bunch of doors stacked up. And I said, I said, the thing my mentor said, I said, you're going to now use, and I'm going to now use the greatest analytical instrument in the world, our eyes. And we're just going to sit here for an hour. And this is going to drive you crazy, but we're just going to watch these people work. And so we stood there and watched them work. And you could all of a sudden see, oh, these people can't see where the bolt goes, because it's blind. And so they're threading a bolt blind, and they're missing that they're missing the angle. And therefore, the door is going on crooked. What do they need? They need a jig. After 10 minutes, you could see

• 19:06Speaker 00

  this. And so he got antsy, I got antsy, and we're like, okay, just have the maintenance guys build a jig, bring it out here, and let's start to experiment about whether they can get the bolt done correctly. But that was an example of just go out there, don't, don't depend on data, don't depend on anybody else's opinion, just go see it with your own eyes. And that will lead most likely to an insight, that you can then teach people, like, here's what I was looking at, here's what I saw. So if you're the leader of this little team, next time, you look for this. And you can solve this problem. You don't have to wait for me to come down here and sleep on the factory floor as the president or CEO.

• 19:46Shaan Puri?

  What's, it's funny, it's like, is there a double solid experiment problem here where as soon as you start observing it, it behaves differently?

• 19:54Speaker 00

  Sometimes.

• 19:55Shaan Puri?

  When you're sitting there watching with Elon, all of a sudden the doors are going through real fast, is that, is it that or no, like, it's usually a process constraint, no matter how hard they're trying to work?

• 20:02Speaker 00

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

• 20:20Shaan Puri?

  Right, and, and there's also, you know, you talked about being there for an hour, and after 10 minutes, you see it, and you get an answer, you wanna go fix it right away, and there's almost actually a benefit in just feeling the pain a little longer than you're supposed to, to just really like, actually drive home the importance of it.

• 20:35Speaker 00

  Totally.

• 20:35Shaan Puri?

  We did this, I, you know, I'm not in the manufacturing business, but I have an e-commerce business, and in our e-commerce business, we're at this, you know, leadership offsite, and we're all talking about these strategies, and it's like, has anyone tried shopping the site, or watching someone shop the site? Hey, let's get somebody here to shop right now, and they're trying to find something that we know we have, and you can't find it on the site, and it's painful, and we think this is so, yeah, just click that thing, and they won't click it, because it doesn't look obvious, and feeling the pain of watching somebody use your product, it's surprising how many CEOs don't actually use the product, or watch average people struggle to use the product.

• 21:13Speaker 00

  So I was with a group of bank executives a few weeks ago, and I asked them to raise their hand if they used their bank's app in the last week, their consumer app, and no hands go up, and I said to them, I could have guessed that, because I'm a consumer of two of your banks, and your apps are terrible.

• 21:32Shaan Puri?

  Right.

• 21:33Speaker 00

  And if you use them, you couldn't live for another day without terrible this was, so you'd be calling whoever could fix it, to fix it ASAP. And a little bit to your point, like, I learned this technique from Scott Cook, the founder of Intuit, and he's got this process he calls Follow Me Home. And what it means is you look over the shoulder of real customers who are using your product. So sometimes you can't use it and there's a lot of cases of that. But you want to see how an actual user thinks about using your product. And when you look over their shoulder, you see all of the friction you're putting into that product. Like how difficult it is really to find what you're looking for, to make the right clicks, do whatever. And he has his senior executives do this on a really frequent basis.

• 22:16Speaker 00

  So that they're getting the feedback loop through the eyes of the customer. And oftentimes those customers will turn around and say, would you just fix this? Or would you, could you just do this for me? And they get new product ideas too, where they, they would get to like an accountant doing the end of the month payroll close. And they, one of them in this exercise turned to a senior manager and said, be a whole lot easier if the payroll was just done by QuickBooks. And boom, that idea was like right back into the senior management team discussion. Instantly like, hey, I just heard this from a customer. Should we get in the payroll business? Now that's a huge business for Intuit. But it came out of these like, just follow the customer home and watch them click. And, uh, and then have them tell you not only what's wrong with the product, but what, what's missing in the product.

• 23:00Shaan Puri?

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

• 23:15Speaker 00

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

• 23:42Shaan Puri?

  Right. I love that.

• 23:45Shaan Puri?

  Today's episode is brought to you by HubSpot. Did you know that most businesses only use 20% of their data? That's like reading a book, but then tearing out four fifths of the pages. Point is, you miss a lot. And unless you're using HubSpot, the customer platform that gives you access to the data you need to grow your business, the insights that are trapped in emails, call logs, transcripts, all that unstructured data makes all the difference. Because when you know more, you grow more. And so if you want to read the whole book, instead of just reading part of it, visit hubspot.com. You have a couple of other like business principles. And one of the things I liked was, I'm an idea guy. Like my, my entrepreneurial style is a high variety style. I've done businesses and whether it's restaurants and biotech and cyber and a bunch of different industries. And not all have worked, but like, that's, I guess, just the way I'm wired.

• 24:29Shaan Puri?

  Whereas some people, they stay in one domain and they keep solving problems in that domain for 40 years of their career. Yeah. And it seems like you're also in the high variety category. And one of the reasons why is you've learned how to sniff out opportunity because it smells like a problem. It smells like something that doesn't make sense. And it sounds like one of the tells that you have in the book is anytime you see something that's one size fits all.

• 24:54Speaker 00

  Yeah, so a little bit like you, I've been a variety driven entrepreneur. I think it's a little bit because I've got business ADD. Like I couldn't spend an entire career in a single industry without driving myself crazy. So I do look at these one size fits all and, and as a clue of, ooh, there could be an opportunity here. So an example of that is we took a look at the cybersecurity industry. And we started with this question of like, hey, 30% of computers moved to the cloud, 70% hasn't. When does the next 30% move? What opportunities is that going to create, et cetera? This is in my venture firm. And we found something surprising that 30% of compute wasn't moving to the cloud.

• 25:35Speaker 00

  It was small, medium sized businesses like law firms, accountancies, et cetera, have no compelling reason to go to the cloud. And they have a headwind of data risk. They have very sensitive data. They don't want to move that to the cloud. And so then we started to ask ourselves like, is there a one size fits all here scenario? And it turned out there was. We asked, we just happened to ask the question, how many cybersecurity platforms have been created for the cloud in the last five years? And the answer is like 1,300. And then we said, how many have been created for the SMB in the last five years? And the answer was zero. All right. This is a one size fits all market. Cyber is sized to the cloud, which I totally

• 26:18Speaker 00

  get. As a computer scientist, I get that it's easier to write to Amazon, Azure and Google, and it's super difficult to write to an infinity number of tech stacks in SMB. So that one size fits all is creating an opportunity. And then we asked one more question because then we felt like we knew the answer to this question. Where are the ransomware attacks happening? And no doubt, no surprise, it's in the SMB side because they haven't had tech in five years. And so we set out to build a company that is essentially a super modern cyber platform for widely variable tech stacks and introduce that. It's got a ton of market traction and it's like one of the fastest growing companies in cyber

• 26:59Speaker 00

  right now. But it came from that first insight of like, oh, we just tripped across a one size fits all. The market has been 100% cloud and there's this small, medium thing hanging out here that isn't large or extra large. How about we like split the market and go after where the competition isn't?

• 27:18Shaan Puri?

  I like that. In the book, you phrase this, you use a slightly different intro to the story, which I liked, where you basically talked about like you're looking at the expense. I think you were on the board of two companies or something like that. You're looking at the line items on the expense sheet and it was like, it was two different, it was like,

• 27:34Speaker 00

  you're Lyft and Lululemon.

• 27:36Shaan Puri?

  Lululemon, which is a retailer. They don't really have any personal sensitive data about any customers. You know, customer comes in, swipes your credit card, they don't save it. And they were spending something like $7 million on cyber insurance. And then somebody else was spending, you know, somebody else who had a lot of sensitive data, was also spending $7 million. And you sort of had this like, huh? How could these two vastly different companies with vastly different risk profiles and vastly different industries have the same thing? And you were like, that smells a little fishy to me. And whether that became a successful company or not, I just liked the The general idea of noticing is actually a superpower. We talked about noticing for bottlenecks, but then you can sort of notice for things that don't make sense in the world and an entrepreneur

• 28:20Shaan Puri?

  can come in and make it make sense by actually changing the way the world works, right?

• 28:25Speaker 00

  Exactly.

• 28:26Shaan Puri?

  And actually change the system rather than try to just say, I guess it just has to be that way.

• 28:31Speaker 00

  Right, right. And that's a perfect example of that. Like, I think noticing is a trade a lot of entrepreneurs have because we do see like friction and say to ourselves like, why does this friction exist in life? And how do we get rid of it?

• 28:45Shaan Puri?

  Right.

• 28:46Speaker 00

  And I have people ask me like, do you fly private? And I've got a weird answer. I said, no, I don't, but for a weird reason. I don't fly private. I fly commercial because I want to experience friction of everyday life. That's going to give me my next business idea or two or three.

• 29:01Speaker 00

  And I think entrepreneurs are kind of wired to look for friction as a clue that there could be an opportunity. But they definitely, we all have, I think, a heightened spidey sense for where that friction is.

• 29:14Shaan Puri?

  Yeah. As an entrepreneur, if your life gets too comfortable, you lose your ability to spot problems.

• 29:18Speaker 00

  Exactly.

• 29:19Shaan Puri?

  Comedians, when comedians get too rich, they fall off a cliff because they don't have relatable jokes anymore because their life is completely unrelatable at this point.

• 29:25Speaker 00

  Right.

• 29:25Shaan Puri?

  And they don't see the everyday things. Okay, so I want to go through a couple of the like the steps of the algorithm. So your book is called The Algorithm, and the idea is that, let me phrase what I took away from the idea.

• 29:39Speaker 00

  Okay.

• 29:40Shaan Puri?

  So the idea is there's a certain way that you can run a company that will lead to faster growth and more success, obviously. And what I liked about it is there's this feeling that Elon's just the super genius alien. And maybe he is, but let's say like that the success of the companies are because you have this super genius. It's a very nice story, fits well in the sort of Hollywood way of looking at the world. But you said, or is it that he is really smart and ambitious and talented, but he surrounds himself with really smart and ambitious and talented, a legion of smart people who are empowered by a way of working, a culture of working. A method that leads to this level of success because he's got all these different companies.

• 30:23Shaan Puri?

  One man can only be doing so much and can be only be in so many places at once. Is that, is that accurate how I describe the like the premise of what we're talking about?

• 30:32Speaker 00

  Yeah, it's kind of three layers. First off, he's, he's brilliant and he is unique as an entrepreneur in our time. Like I can't name, I can't name any entrepreneur who's created four or five companies, all of worth, all worth tens of billions of dollars, if not hundreds of billions of dollars. Yeah, Zuck has had one, Gates had one, Jobs had two, Beto Oss had one, Ellison's had one. You go down the list of entrepreneurs of our time, there's nobody like him. And so he is a pretty special dude. He does surround himself with world-class talent. And, but the idea of the algorithm was to give that world-class talent a framework so that we could push decisions to the edge.

• 31:13Speaker 00

  And people could drive innovation without us showing up and, and having to drive it ourselves. And, and a framework is super helpful in that. So you combine world-class talent with a framework and a method and you start to get innovation breakouts that are really unique. And a lot of people said, hey, do you have to be Elon to do this? And my answer was no. Like, that's why the book is told through the eyes of people who are actually on the edge, doing this work and telling their stories. So you can see, hey, there was no senior management team hanging around here. This was like frontline people taking on these big problems. Saying, we like, we just want to solve this. And you give them a framework to solve it.

• 31:52Speaker 00

  And they do crazy things like inventing mobile car service from an OEM, from a manufacturer, inventing one-click loans, inventing insurance embedded in car payments, like just stuff that was flowing and moving so fast because people at the edge were empowered, but they were also equipped with this framework.

• 32:14Shaan Puri?

  And one thing that's not in the framework, but it seemed common was that the starting point for a lot of the stories was, we had this problem. You have this one in there about online sales. It's like, you know, Tesla is this, you know, high-tech kind of the most tech-forward company, but actually the e-commerce, the online sales were, were, were pretty weak at the time.

• 32:35Speaker 00

  Right.

• 32:36Shaan Puri?

  And so you have this problem and it, and it's a weakness in the company right now. And instead of just saying, hey, let's improve our weakness a little bit, let's get back up to par. Elon's method, it seems like, starts with a crazy goal that's like, not only is this today, not only are we gonna go from weakness to average, we're gonna go to like world class or best in class in that same category, which I think is not how most people think. It's not how I operate. Like, when I see that, I'm like, hmm, that's not what I would have said in that situation. For example, with the online sales, it's like, online sales are weak. Okay, here's what we're gonna do. We're gonna 20x our online sales or something like that. Like, we are going to lift this and it's gonna be the number one driver, right?

• 33:16Speaker 00

  Yeah.

• 33:16Shaan Puri?

  Of sales. And so there's this crazy ambitious goal to start the thing. And it sounds pretty unreasonable, especially because you're starting not from a position of strength, but from a position of weakness. Can you talk about that side of things? The like, let's just start by laying down the gauntlet of a somewhat impossible goal on something that today is actually a weak area?

• 33:39Speaker 00

  Goal setting can determine like what outcome you're gonna get. And so if you set a goal for five to seven percent improvement, you're probably gonna get three to five. If you set a goal for an order of magnitude improvement, now you've got people that have to think way differently about that problem, because you can't tweak the status quo to get to a hundred percent improvement or a 20x improvement. And so part of the secret to Elon's, part of his secret sauce is he sets these order of magnitude improvement goals. So 10x, 100x, and it forces you to think way differently about how you would solve that problem, or what you would do with the product, or what

• 34:20Speaker 00

  you would do with the process, et cetera. And so like, you're referencing this example of, he came to me and said, hey, look, we have continuous demand challenges. We gotta figure out how to sell cars online, which sounded crazy at this time, because nobody was buying $120,000 things sight unseen online.

• 34:38Shaan Puri?

  Click, click.

• 34:39Speaker 00

  But we both knew, because we'd both been in consumer, that every click you have, you ask the consumer to make, your conversion goes down. And that's, I'm saying, an obvious, every entrepreneur in e-comm knows that, but we looked at our clicks and there were 64 clicks to buy a car. And so he turns to me, he says, improve, let's improve digital sales. This is your goal. Improve digital sales by 20x.

• 35:03Speaker 00

  So now it's like, oh crap, I gotta think way differently about this. I can't figure out like tweaking here and there. And so he said, how many clicks does it take to buy Domino's pizza on their app? I have no idea. He's like, let's pull it out. So we pull it out. It turns out it takes 10, 10 thumb taps to buy a Domino's pizza at that time. He's like, we're 64, Domino's is 10, let's go to 10.

• 35:25Speaker 00

  And the first thing then that that calls into question, it was a core tenet of the business at that time, which was producing custom build to order product.

• 35:37Shaan Puri?

  Right.

• 35:37Speaker 00

  And that was religion there, partly driven by the fact they didn't want to be a typical car company. They wanted to make you the car you wanted versus the car the car company wanted to sell.

• 35:47Shaan Puri?

  Right. And it's something everyone will nod their head to. Fully customizable, of course.

• 35:50Speaker 00

  Totally. But that led to like 360,000 different combinations of a car that you could choose, which is driving a lot of clicks, plus a lot of decision fatigue for people. And so we went and ran the data, my team ran the data and we came back and figured out that people weren't buying 360,000 versions. They were buying two. And it was either what is known today as a standard or a performance. And so I went to the head of manufacturing, Greg Reichow, and the head of engineering, Doug Field. I said, hey, like I'm the new guy here. I've never been in the car business. So I could be completely stupid about this, but let me show what the data says. The data says that out of all these 360,000 combinations of build to order, people are only buying two.

• 36:35Speaker 00

  And what would it mean to you guys' side of the business if there were only two?

• 36:40Shaan Puri?

  And sorry, just to clarify, what you're really saying is it's not that they're buying two configurations. It's like the job to be done. The thing that the customer cared about was they wanted either high performance, you know, like tap the pedal and it flies.

• 36:53Speaker 00

  Yeah.

• 36:53Shaan Puri?

  Or they want the safety plus EV plus whatever, you know, like some other.

• 36:57Speaker 00

  Longest range battery they can afford.

• 36:58Shaan Puri?

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

• 37:12Speaker 00

  Exactly. And that's exactly it. And so Greg, who's running manufacturing says, oh my God. I've been waiting for this day for somebody to like, somebody to really drive this because you know what that would do to our factory? Totally simplifies the factory, simplifies the supply chain. We could increase throughput dramatically. Turn to Doug, what does it mean for engineering? He's like, are you kidding me? Like, I don't have to design all these parts. I don't have to test them. I can port engineering's time on the stuff that really matters to the job to be done for the customer. I'm totally in. So then I walk into the senior management team meeting and and one of the team members was like, hey, you are the new guy. You don't understand. Like, it's religion here. We do build order.

• 37:56Speaker 00

  And I'm like, it might be religion, but that religion might take you to the grave. Here's why. Here's what happens to the business if we do this. We're going to get rid of a lot of clicks, a lot of decision fatigue. If we just get down to two configurations, and you can make it three if you want. I don't care, but you can't make it 360,000.

• 38:13Shaan Puri?

  Right.

• 38:14Speaker 00

  And Elon, he's super rational. He looked at the case and then listened to Greg and listened to Doug. And he was like, yeah, we have to do this. So if you go to buy a Tesla today, you'll see you've got two or three configurations on there. That's it. And the fear was we would look like Honda, but it turns out we didn't because we had a completely different product. We had software on wheels. We were making, we're taking away all that decision fatigue from the customer and all that friction in the sales process. Just by questioning, like, at the end of the day, we questioned the business model at the time. Which happens to me as an entrepreneur, happens to a lot of entrepreneurs. You fall in love with your business model.

• 38:56Speaker 00

  And you don't really accept any challenge when somebody says, should we chuck this business model because it's actually what's in the way?

• 39:03Shaan Puri?

  Right. And I wonder what you learned when you went to work for someone, because you said, like you said, I've been CEO for 20 years. And I had the same experience where we got acquired and I went from a 20-person company and I'd always been my own. I was always the CEO of startups for 10 years. And then suddenly I now had to go and report to, and then what, forget the report to, I just had to. Bring my plans of what I'm trying to do to the table with somebody. I had to learn how to talk to a CEO who was thinking about the business separately. And I had never really been on that side of the table. And I had to learn how to communicate upwards. What does that mean? How do I simplify? How do I speak the language that they're trying to understand in order to do this well? Do you have any tips for somebody who's learning how to communicate

• 39:45Shaan Puri?

  to a CEO? And you were doing it with Elon, right? Maybe there's something specific to Elon. But what was your method for when you go into those meetings of how you present information in a way that is productive versus wasting time?

• 40:00Speaker 00

  We actually had this bit of a game for a while. I think it was just his idea. He's like, let's try to get down to three sentence emails. What is the problem? What's your analysis of the root cause and what's your proposed solution? And he's like, I think we could run the company on three sentence emails. And so we did that. And what that taught me about exec communication was that level of efficiency is so helpful. Like, if you can give me three sentences. So I turned to my people and said the same thing. Like, tell me what the problem is. Tell me what the root cause is. Tell me what your proposed solution is. And in that proposed solution, you got to have like, how much it's going to cost and what's going to do the economics and that sort of stuff. But the thing executives,

• 40:43Speaker 00

  if you're talking to a CEO, the most precious commodity that CEO has is time. And it's information inbound absorption time, information processing time, decision time. And so if you can get super efficient in communicating to a CEO and say, I'm going to minimize your information absorption time, I'm going to minimize your information decision time, you become a very valuable member of that team. Very valuable.

• 41:12Shaan Puri?

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

• 41:54Shaan Puri?

  almost the exact same thing. We just had different labels for the, for the same exact communication structure.

• 41:59Speaker 00

  I love that. In fact, I'm going to steal that because I think the world of Emmett, but, but that's a great, that's a great way to think about communication. And I think the other way I, the other thing you made me think about is as an entrepreneur, if you're successful, the most likely outcome of your business is somebody's going to buy it. And that means you're going to have an owner that you're going to now be subordinate to. And that's a different form of mindset. And I got it wrong, like the first few times that we sold companies to, like every time we sold a company of mine, we sold it to a public company. And so then I would come in and I'd know that company a year or two.

• 42:31Shaan Puri?

  Right.

• 42:31Speaker 00

  And I'd have to work in their structure. And at the time I was young and, and so I was trying to keep this bullheaded entrepreneurial

• 42:42Speaker 00

  mindset. And that doesn't work in large corporations. And what I've now learned, if like I had a redo, and I apologize if anybody's listening who bought one of my companies, he had to put up with this pugnacious like entrepreneur who didn't get it. Now what I get is I should have sat down with him and said, what, what drives success for you? Like, what do you care about? Like you bought this company, what has to happen? In your mind to make it a success. That's often different than the bullheaded entrepreneur's way of thinking about it.

• 43:12Shaan Puri?

  Right.

• 43:12Speaker 00

  And, and I think that's a different set of challenges when you sell yourself to another company. The first thing you got to realize is that you don't own it anymore. They do. They have the keys. And if you owe them a year or two, you might as well make, not make that miserable. You might as well make it like fun. And the way to make it fun is to figure out, okay, like, how do I make this thing work for you and for me?

• 43:32Shaan Puri?

  Right.

• 43:32Speaker 00

  And if you do that, oftentimes you got to nerd out and it's going to work for you too.

• 43:37Shaan Puri?

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

• 43:40Speaker 00

  Me too. Me too. Man, I stumbled so badly.

• 43:43Shaan Puri?

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

• 44:13Speaker 00

  Yeah, it ended up having a lot of software in it, but it starts with a little context. I grew up in the back of my grandfather's auto repair business. And so like I, I was a tech. I had the dirtiest jobs because I was a kid, didn't have any skills. So I was changing oil and changing tires and that sort of stuff, but learned,

• 44:32Speaker 00

  learned how to hang out and talk to auto technicians. And so decades later, my wife's car gets hit by one of our neighbors and now I gotta go get that fixed. And so I go to a large body shop and drop it off, get the estimate, agree to have this place fix it and the guy says it'll be done by Friday. So this is Monday, I come back on Friday, car's not done. He's like, ah, this person didn't come in. This is kind of typical. Next Friday. So I show up next Friday, car's not done. Tech didn't show up. I said, you know what? I've just sold one of my businesses. I got a curiosity about how your business works. Can I just come hang out here?

• 45:16Speaker 00

  He was like, you're the first customer ever to ask that, but I, I don't want you back there because you're going to get hurt. And then I explained to him, no, I know my way around a body shop. I know my way around auto repair. I won't, I'll stay out of the way. I won't get hurt. In fact, I'll just run parts for you if you want. So I went home that weekend and I started to do research and found out the auto collision industry is a $50 billion industry. And then figured it then found out that there were 38,000 of these. And so the average business is around 1, 1.2 million. So pretty small. And I had been exposed to advanced manufacturing and I could got a sense of that was not what was happening in the back of these shops. So

• 45:56Speaker 00

  I went and just observed, I was running parts, just observing. And what I saw was essentially a hair salon. Every technician had two bays and they were on commission and they made money off of those two bays. So they had no interest in how fast that car went through because it was, that car was sitting in front of them as a cash register to make money. And, and so I thought to myself, what if, what if this was $50 billion industry was modernized? What if you put these cars into a, into a production line like Henry Ford did? And what if you paid the entire team a bonus based on cycle time and throughput?

• 46:36Shaan Puri?

  Right. So I didn't understand. So the, why, why doesn't the technician want the cars to go through more cars equals more commission? No.

• 46:41Speaker 00

  They wanted to control their paycheck. And so they would surround themselves with three or four cars and they would just cherry pick hours off of those cars. And they got paid by the hour, but not, so the car didn't have to get finished. They were getting paid by the shop just on the hours they worked on that car. So that car could sit there for a couple of weeks. They didn't care.

• 46:59Shaan Puri?

  And you had these two terms, cycle time and touch time. Can you explain?

• 47:02Speaker 00

  Yeah. So I went to the shop owner and I said, tell me what the average time it takes between a customer dropping it off and a customer getting their car back. And he said, yeah, I can tell you that it's 18 days. I said, how do you know that? He said, that's the average rental car time. I said, okay, that's pretty good proxy. I said, um, how many hours of labor do you bill on each job on average? He said, oh, that's easy. Six to eight.

• 47:32Speaker 00

  And I went 18 days to get six to eight hours of work done. That looks like an opportunity because that's the difference. Cycle time is the 18 days. That's from the beginning to the end of the process. And touch time was the amount of time that those technicians were actually touching the car, six to eight hours. And I went, oh, that looks like an opportunity to maybe turn this industry around for the consumer. What if you could go to market and say, you'll get your car back in a day? Versus the 18 days of the rest of the guys down the street. That's when I like started to diligently say, let's start a business. So I grabbed some guys that I had worked with and we started to work on just doing that. We ended up with

• 48:18Speaker 00

  the largest at the time collision repair chain around the country.

• 48:22Shaan Puri?

  What was it called?

• 48:23Speaker 00

  It was called Sterling. Then it's now called Service King. It's owned by Carlisle. It's got several billion dollars in revenue, but the whole premise was we're going to get your car back way faster because we're just deploying assembly lines versus a hair salon.

• 48:39Shaan Puri?

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

• 49:02Speaker 00

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

• 49:34Shaan Puri?

  Right. Yeah. Today's podcast is brought to you by my friends at Mercury. They make the world's best banking product. I think you know this already. I use Mercury for all of my businesses. I think I have like maybe seven or eight businesses. We use Mercury as our business banking across all of them. And now they actually just launched a personal banking account. So I have my personal account there. I moved off of Wells Fargo and Chase. I'm just all in on Mercury. Why? I like products that are easy to use. I like products that get me and the problems that I have. So like very easy to make a joint account with my wife, very easy to spin up virtual cards. One click and I get savings yield. It just has all the stuff that I need in one place. So if you're looking for the best banking product on the market, it's definitely Mercury. I will fistfight anybody who disagrees with me on that. Go to mercury.com slash personal and learn more. Mercury

• 50:19Shaan Puri?

  is a fintech, not an FDIC insured bank. Banking services are provided through Choice Financial Group and Column NA, members FDIC.

• 50:27Shaan Puri?

  What do you think now with AI? So I feel like you've been doing this for a long time. And just when you're probably like, I'm a veteran of this game. The entire board game changes. Somebody flips the table and now there's a whole new game to be played. Where's your head at with AI? How do you think about this?

• 50:41Speaker 00

  Man, I'm excited. All the way back in college, I worked my way through college, writing trading algorithms at the world's largest options and futures trading platform in Chicago. I went to college in the Chicago area and worked my afternoons coding. And way back then, we were using neural, the very beginning neural nets to try to get an edge in the market and try to, and try to robo trade in a way that people hadn't been able to in terms of the accuracy and the speed. So all these years later, now that this has emerged, I'm like completely psyched because we were using what looked like rudimentary computers to do this stuff. Now you've got real compute power.

• 51:24Shaan Puri?

  Shave Man AI.

• 51:25Speaker 00

  Totally. And now that you see this unleashed, I'm like, oh, this is what we were trying to, trying to do three decades ago. So, um, so I'm super excited by it, largely because every technical revolution and breakthrough like this that has happened in history creates enormous opportunities for entrepreneurs. I cannot name a technical revolution that's happened that's resulted in less GDP and less jobs. Can't like, it just doesn't work that way. And there's a lot of hand wringing though, at the beginning of every technological revolution, because humans are really good at seeing the first order effect, which is the job destruction. But they're not good at seeing the second order effect, which is the job creation that happens by entrepreneurs on the backend.

• 52:10Speaker 00

  And I think we're like right in the middle of this. So I, we're, we're applying AI at the core of each of our companies. But I think more importantly, I think there's going to be just like, we're keeping our eyes peeled for big, big opportunities that are being created by this. So I'll give you an example, and this is, this example would date me. But when I was growing up,

• 52:32Speaker 00

  To make a long-distance phone call, you had to dial zero and talk to a human being, and that was usually a lady in your town, who would literally plug the local phone network on one end of a cord, and then plug that cord into the national phone network, and that would create a connection for you to do a long-distance call. In other words, humans were switches. And sometime in the late 60s, early 70s, Bell Labs invented an electronic switch that would do this. And by the end of the 70s, there was a lot of hand-wringing, that there were 800,000 people, pillars of our communities, that were employed as operators, and 100% of those jobs were going away.

• 53:15Speaker 00

  And sure enough, by the late 70s, early 80s, 100% of those jobs had gone away. Those humans were replaced by electronic switches. But what people couldn't see while they were doing the hand-wringing was what was going to happen on the other side. And what happened on the other side was, now that a long-distance call is free, it doesn't require human labor, it just requires electrons, now you could offer toll-free calls. And so some entrepreneurs said, "I'm going to use these toll-free calls." There was a single area code, 1-800, "And I'm going to create businesses, 1-800 Flowers, 1-800 Junk, 1-800 Insurance. We want to enter this, that." And what those 1-800 numbers required was now centralized answering of phone calls,

• 53:59Speaker 00

  because now people were calling like crazy, because it was free. And so this industry got created, called call centers and support centers. And a few years into the 1980s, there were now millions of people employed in call centers. Hundreds of software firms that were created. And my first startup was a software firm in the 90s, serving call centers, because the technology was still nascent. When people were just deploying electronic switches and people were like lamenting the end of these jobs as operators, nobody could see on the other side that these entrepreneurs were going to create toll-free dialing, they were going to create businesses on top of toll-free dialing, and on top of that, there were going to be this whole layer in our

• 54:43Speaker 00

  economy called call centers that millions of people are going to be employed in. We just had creativity to see the other side. And so now I tell our teams, like, we cannot see through the other side, but we can get a hint of where this stuff is going to go if you think creatively. And, and so that's the thing I'm most excited about. Like, we're going to have entrepreneurial opportunities like crazy over the next few years, based on what this technology is going to unleash.

• 55:09Shaan Puri?

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

• 55:21Speaker 00

  Well, now we've got intelligence that is so rapid and non-latent. So you can solve problems way faster that are really complex. So one of the, one of the businesses that we've got that I'm most excited about is, we pulled a team out of Tesla that built the supply chain automation platform at Tesla, which is super sophisticated and way beyond anything anybody had in the industry. And they built this with ML in, in like 2017-ish. And we said, how would you like to build it today in AI? And what AI allows that team to do is solve a super complex problem really quickly, but also use agentic AI to understand

• 56:01Speaker 00

  the workflows of their clients super rapidly. So they just went into one of the biggest grocery delivery platforms in the country. I don't think I could say which one yet publicly, but it's, it's one of their newer customers. And their agents could go in and understand the work rules of that ginormous platform within hours. And then design a system and a workflow within hours that, that you really have to have two special things to be able to do. You have to be Expert in that particular thing, which is supply chain optimization, to know which rules are good, which rules are bad, what to tell your agents to do, et cetera. And then you have to be able to judge, okay, what these agents are bringing back is correct,

• 56:46Speaker 00

  or it needs to be tweaked, or redirected, or whatever. So you definitely have these humans who have got AI as exoskeleton, like super strength, that are now building a business that's grown like a rapid fire, because it's got this incredible compute to actually fuel the business and deliver value back to the customer way faster than you could otherwise. What they're competing against is standard ERP systems that take nine to 12 months to implement, and they can implement them in a period of days and deliver that value back. And that's the kind of business like I think we're going to see more and more and more of as its capabilities unleashed.

• 57:25Shaan Puri?

  Yeah, that is the weird thing about this, that the software essentially works like labor, right? So what you're describing is like, essentially a consultant. It comes in and it learns your workflows, it documents it, it figures out how things are currently working, and then it starts to improve or automate or whatever.

• 57:42Speaker 00

  That's right.

• 57:43Shaan Puri?

  So the weird thing is like, there is a question of is it different this time in terms of the job?

• 57:48Speaker 00

  Right.

• 57:49Shaan Puri?

  Because it's like, if the software is fundamentally like human labor, like equivalent, then even the business it creates, won't the workers in that business also just be AI labor mostly that's doing that, right? And do we all just become sort of like mechanics for the robots and for AI, right? That's one part I haven't been able to wrap my head around.

• 58:08Speaker 00

  I haven't either, and I haven't heard the case for why we do that is compelling enough to me. Like, the most frequent example I hear is, hey, in the 1950s, there were skyscrapers full of humans who were humanly calculating spreadsheets. And then the real spreadsheet came along and all those jobs are eliminated. And then that's where the story ends for them. And I'm like, timeout. I was just in New York City, those skyscrapers aren't empty. What happened?

• 58:38Speaker 00

  And what happened was a plethora of things. And I would use just one tiny little example of what happened that created trillions and trillions of dollars of market cap. Once a spreadsheet was available that was digital, it could calc things in complexity way faster than those humans in those skyscrapers. And so all of a sudden, you could have sophisticated pricing engines like Black Shoals at your fingertips. And that meant that you could now price options and futures and derivatives that didn't exist before. And so entire markets got created on top of that one technological change that employ hundreds of thousands of people.

• 59:20Speaker 00

  And again, that was unknowable on the other side when the spreadsheet was just being invented, that somebody would deploy Black Shoals and somebody would figure out how to price puts and calls and derivatives and make entire markets like the options exchange, the Merc, et cetera, possible to be able to syndicate loans. Like, none of that stuff was available, and now it's all available. And that's the kind of thing where I think, okay, make me the case that all of a sudden, now the computers do all of that and take all that creativity and all those jobs. I just haven't seen that in history, and I don't know that I can fully buy into that ending point.

• 1:00:02Shaan Puri?

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

• 1:00:34Speaker 00

  I sort of wonder if they're creating an app layer or a tooling layer. And what I mean by that is, I think they're creating the tooling layer. That then a lot of us are now using to create real businesses on top of. So I kind of go back to the internet breakthrough and the internet revolution and think about, okay, like the browsers, everybody was super excited about the browser business and Marc Andreessen made, uh, made a career out of Netscape. But I wonder if like those now browsers are a commodity, but what got him, what got built on top of a browsable web were things like Facebook and Airbnb and,

• 1:01:17Speaker 00

  uh, E-Trade and you named the, the businesses, like tons of GDP got created on top of that tooling. And it sort of feels like to me, we're getting really excited like we did about Netscape and Internet Explorer. We're getting really excited about these hyperscalers, but what you really want to be looking at is what businesses are going to get created on top of this tooling. And so I'm psyched for the work they're doing. I think it's amazing and it's breakthrough level, but I, but I am also much more excited about what's going to get built on top of it.

• 1:01:50Shaan Puri?

  Yeah, me too. I can't wait to see it. I almost want to fast forward. It's like, I don't want to miss it, but at the same time, I'm so curious how the, how this all plays out, how, what the world looks like in 10 years is probably the first time that I feel like, I, I have no idea what the world's going to look like in 10, 15 years. But I do know it's, it's likely to be very like completely different, you know?

• 1:02:12Speaker 00

  For sure.

• 1:02:13Shaan Puri?

  You know, like I, I bought a Tesla this year and it has like self-driving that's perfect. It's amazing. It's, it's so good and I just don't drive anymore. And I like trying to tell my mom and my sister, and I'm just like, guys, you realize like you don't have to drive anymore. Like that's, that's now. And I, I can't believe that that's not, more people aren't freaking out about this one change, let alone whether it's robots or it's AI that, you know, AI assistance in everybody's pocket or,

• 1:02:37Speaker 00

  Totally.

• 1:02:38Shaan Puri?

  There's so many different ways that I feel like the whole world in 10, 15 years is going to like, my kids won't really understand, wow, you used to have to do all that? You used to do that? Like, that's so funny that you used to do that. That's horseback riding, right? Not cars. And it seems like we're on one of those transition points, which is exciting.

• 1:02:57Speaker 00

  Totally agree.

• 1:02:58Shaan Puri?

  Well, John, I appreciate you coming on. Everybody should go get your book, The Algorithm. Uh, I don't say that usually most people come on, but I actually am reading the book and liked it a lot.

• 1:03:05Speaker 00

  Awesome. Thank you.

• 1:03:07Shaan Puri?

  Big fan of it. And, uh, you know, thanks for coming out and doing this because I feel like, We get a lot of biographies. Oh, they grew up this way and daddy issues and blah, blah, blah. But like, you know, what's, which, which isn't, it's entertainment. It's great. But what I really love is tactical, practical. Me too. And how do, how do you actually do things? What can I, how can this be useful for me? Me too. Versus reading about somebody else's life. And so I'm glad you wrote this book. If, I think if this book didn't exist, and it can only be written by somebody who's kind of there doing it side by side with other people and, and has, you know, the experience doing it. So, so congrats to you and thanks for writing the book. Thank you. I'm glad you're joining it. All right. Take care.

• 1:04:00Sam Parr?

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