← Second in Command: The Chief Behind the Chief with Cameron Herold
Second in Command: The Chief Behind the Chief with Cameron Herold
Ep. 556 - Former Tesla President and Lyft COO Jon McNeill - Why Most “Big Ideas” Fail (And What Actually Works)
00:46:34
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- [00:01]
John McNeil
Vision and team. So the CEO is the person that's, that's gotta be setting the vision and they've gotta be attracting and building a team of the senior leaders. And so if it's a senior management team, they're attracting that talent and they're running that team and they've gotta be inspiring to that team, et cetera. Because you're you, you want to get world class talent, world class talent wants to be inspired and challenged. And then the COO's job is to make it happen and also to attract the talent and set up the operating system to make that happen. But at the end of day, your job is to make it so. Welcome to the Second In Command podcast, produced by the COO alliance and brought to you by its founder, Cameron Herold. In the Second in Command podcast, we Talk to top COOs who share the insights, strategies and tactics that made them the chief behind the chief. And now here's your host, Cameron Herald.
- [01:04]
Cameron Herold
All right, our guest today is one I'm really, really excited about. He's the former President of Tesla, he's the former CEO of Lyft. John McNeil is the CEO and co founder of DBX Ventures and he has a track record of founding and scaling companies. John has led teams that have generated tens of thousands of jobs and delivered multi billion dollar returns for investors. And at DVX, John and his team have launched 12 companies that are attacking broad opportunities in large markets. He has prior served as the President of Tesla, reporting directly to Elon Musk, where he grew revenue from 2 billion to $20 billion in 30 months. Later served as the COO of Lyft, helping double revenue and taking the company public. He currently sits on the boards of General motors, Lululemon, Asurion, CrossFit, Stash. He's a frequent speaker and guest lecturer at the MIT Sloan School of Business in Stanford. He's also known for delivering practical insights on innovation, leadership and scaling operations. And in his upcoming book the Algorithm, which is the hypergrowth formula that transformed Tesla, SpaceX, Lululemon and General Motors, he shares a behind the scenes look at how iconic companies scale and outline a playbook leaders can use to drive sustained growth and impact. This is going to be an episode that is a must. Share on social. Share it with your email list Share with your employees Hope you love it. You can watch this on our Second in Command podcast YouTube channel, which you should subscribe to, but hope you enjoy this episode. We've got a lot more coming in the future as well. So John, welcome to The Second in Command podcast.
- [02:38]
John McNeil
Hey, nice to be with you, Cameron.
- [02:40]
Cameron Herold
Yeah, really looking forward to this. Meredith, who's my second in command and has been with me for 10 years, has been raving about you over the course of the last couple of months. Oh, no, yeah, all good. Just saying that she's really excited for me and she's excited for me to get to know you and to hear all of your stories. So instead of me even kind of rhyming off some of where you've come from and what you've done, I want you to give us a little bit of the backstory. So walk us through your career, how you got to where we are. Take a few minutes, and then we'll kind of dovetail it and go backwards.
- [03:11]
John McNeil
Gosh. I think my career probably starts in college. I was trading. I was working on the trade desk at the Chicago Board of Trade all through college. And I realized that's not what I wanted to do with the rest of my life. But I had a great mentor there, and he said, hey, you grew up in a family without any business experience around the table. My parents were educators and academics, and my dad was a minister. And he said, you need to go to a place where you're going to learn a lot in a short period of time about business because you sort of have to catch up with the rest of the world. And the best place I think you could do that is strategic consulting. So I went and was lucky enough to get hired by Bain Co. As a consultant, spent two awesome years there, and then got sucked over into the early stages of Bain Capital when they were building that. And then they saw something in me and said, hey, we think you're an entrepreneur. Why don't we back you? And so they did just that. I found a business plan I really liked, jumped out, they funded it, and that was the first of six companies in a row where I had great backing, started a company from our kitchen table, scaled it, grew it, and sold it to a public company, and did that six times in a row as co founder or CEO, and then went to start my own firm where we could systematically start companies. And that whole idea was interrupted because of a crazy series of events. I got introduced to Elon Musk, and he was looking for a number two. And I decided to go to work with the best practitioner of my craft on the planet, the best entrepreneur that I. That I could identify. And I'm glad I did. Like, I joined Tesla when we were 1.8 billion in sales, and 30 months later we were 20 billion in sales. So we 10X'd it in 30 months.
- [05:07]
Cameron Herold
What year was that?
- [05:08]
John McNeil
That was 2015 through 2018. 19.
- [05:13]
Cameron Herold
Okay. I thought it was a couple years before because, yeah, he. At least by that point, people did know who he was. Totally.
- [05:18]
John McNeil
People knew who he. Yeah, yeah. And I knew who he was. And then after I left Tesla, I helped. I joined Lyft as coo, helped to double revenues, took them public, and then finally got back to my own firm. But that's my. That's the quick story of my career.
- [05:33]
Cameron Herold
Okay, that's crazy. And like, it's like the Audrey Shucks, president at Tesla, CEO at Lyft. I mean, didn't you work for any good brands?
- [05:39]
John McNeil
Yeah, it's fun to work for. It's fun to work for strong brands.
- [05:42]
Cameron Herold
Yeah.
- [05:43]
John McNeil
Yeah.
- [05:43]
Cameron Herold
What were your businesses, the six that you had built, roughly what were the kinds of industries or businesses?
- [05:47]
John McNeil
Were they in Fintech Automotive, which was kind of the tie to Tesla manufacturing. Those would define the six businesses that I was in. So I had some good experience getting me ready for the manufacturing side of automotive and getting me ready for the financing side of automotive, both of which were super helpful. By the time I got to Tesla,
- [06:07]
Cameron Herold
I got so many directions to go, and we're definitely going longer than 40 minutes. So just hold on. It's not often that you find people that work in the kind of consulting, you know, the Bain McKinsey kind of space, and then become entrepreneurs. It's interesting that they identified you and saw you as an entrepreneur. What do you think they saw in you that. That were those entrepreneurial traits.
- [06:29]
John McNeil
The clue was, like, I enjoyed. I enjoyed meeting with founders much more than I enjoyed being a spreadsheet sheet jockey. And I think they could see that. The second is, is that I. I started a business while I was at Bain and sold it. And I think that the legend of that kind of got around too. But I think it was mostly behavioral. Like, they knew that I'd started businesses in college, in high school, and then at Bain, and so they could see this pattern, and the pattern probably wasn't hard to recognize. And there are a few presentations where we're meeting with management teams, founders, and I just wanted to stay at the office because I was so excited about what they were working on.
- [07:04]
Cameron Herold
And what you're touching on right now is kind of the DNA of the entrepreneur versus the skills of the entrepreneur. And I think, sadly, that Starting in around 1995, with the rise of the first.com, wave, entrepreneurship started to become cool. But really, when the Internet hit with social media, even probably 2007 with Facebook, social media started to become like this trendy. Entrepreneurship became this trendy thing. I think it's dangerous that people are thinking they should be an entrepreneur right now when they don't have that DNA makeup. And the skill set is very different from that.
- [07:35]
John McNeil
It is. And you know, so I started my first company before this wave. So it was 1993 that I started my first venture backed company. And I went and looked around like I was thinking about going to business school and I went and looked at curriculums and there was nothing. Zoom.
- [07:52]
Cameron Herold
No, there wasn't.
- [07:54]
John McNeil
And so it wasn't a popular thing. When I said, I'm going to leave to start a company, a lot of people looked at me sideways, like, what are you doing? You're going to ruin your career. It's much, much different now. And as you said, it cast a much wider net. And I think a lot of times people are getting caught up in that net and they probably shouldn't. Because when I speak to business school students now, a bunch of them will walk up and say, I want to be an entrepreneur. I'll tell you.
- [08:15]
Cameron Herold
Sure, yeah.
- [08:16]
John McNeil
You have so hard. This is so hard.
- [08:19]
Cameron Herold
And they're often getting into it for the wrong reasons. So it's interesting. 1993, you starting your first business. That was the year that I hired Kimbal Musk out of Queen's University in Canada to work with me at College Pro Painters and be a franchisee. I hired his cousin, Pete Reeve, who went on to build Solar City with his brother Lyndon as well. But yeah, that year, entrepreneurship wasn't cool. It was so cool that Kimball, when he was in commerce at Queens, I remember this so clearly. His business professor said, we're grooming you to be a middle manager at a corporation.
- [08:50]
John McNeil
How exciting.
- [08:51]
Cameron Herold
Kimball said he almost. He said he almost threw up in his mouth. He's like, this is horrible. I just don't want to do this. This is not who I want to be. I'm going to move to a different view because I've got a. I'm in an Airbnb right now in Austin, Texas, before heading off. Got some sun there. That's better. Yeah. Kimball was like, I almost threw up on my mouth. I don't want to be a middle manager at a corporation, so. But you then made the move from an entrepreneur to being a second in command. What was that shift like for you?
- [09:18]
John McNeil
It was kind of funny. Like as Elon and I were getting to know each other. I was selling at one of my companies, and I said, hey, let me give you some time just to make sure that we're going to be compatible. And I'll do that while I'm selling a company. So no harm, no foul, if we both decide that we're. We're not meant for each other. And I wanted to get to know his company and especially like the sales funnel. As I was visiting clients in my own business, I went to visit eight different Tesla stores around North America. And I would come to the store, get greeted, educated on the car, and then ask for a test drive. And I'd take the test drive, which is amazing. You hit the accelerator on electric car.
- [09:59]
Cameron Herold
It's like. That was the first year I bought. My first model S was 2016 P93. Blew my mind.
- [10:05]
John McNeil
Blows your mind.
- [10:06]
Cameron Herold
Incredible.
- [10:06]
John McNeil
So I had my mind blown eight times. And then a funny thing happened. I never heard from any of these stores. And so I was getting another company, and I called the head of sales ops who Elon had kind of assigned to me, and I said, hey, can I ask you a question? Like, if I've been tagged in your system or something? Because I've taken eight test drives at eight different cities. I've used eight different emails. People don't know who I am.
- [10:31]
Cameron Herold
Wow.
- [10:31]
John McNeil
And I'm getting no callback.
- [10:33]
Cameron Herold
Wow.
- [10:34]
John McNeil
The guy said, that's super weird. And so I said, hey, could you do me a favor? Tell me how many cars you have to sell this quarter. And he said, $12,000 to meet the street's expectations. I said, okay, how many you sold so far? Because it was like a month and a half into the quarter. And I can see him sort of his face drains. He's like, $3,000. I'm like, oh, my God, you're not going to make your quarter. I said, can you tell me how many test drives you've given without callbacks?
- [11:01]
Cameron Herold
All of them. Yeah.
- [11:03]
John McNeil
Pretty much back in two hours. Now he's white as a sheet, and he's like, you won't believe this. We've given. We've given 10,000 test drives, and we've only called a thousand of them back.
- [11:13]
Cameron Herold
Wow, there's.
- [11:14]
John McNeil
I said, well, the good news for you is you're going to make your quarter if we call people back.
- [11:19]
Cameron Herold
Yeah.
- [11:20]
John McNeil
So I said, quick idea. Can you. What's your MD is. He said, Salesforce? I said, good. Can you shut off any new lead generation and put a message on the screen to the sales reps? They cannot do Another test drive until they've called all of their previous back.
- [11:34]
Cameron Herold
Yep.
- [11:35]
John McNeil
He's like, yeah, I can do that. I said, do it. And so he calls me back the next day. He's like, you won't believe what's happening. Like orders are coming in left and right. I said, yeah, you're just calling like people are down at the bottom of the funnel. You're calling them back. So then I had to call Elon because it dawned on me. Number one, I haven't worked there yet. Two, I hadn't run this by him because I was just acting like I'm CEO mental of coming into this situation. So I called him up and I said, hey man, I gotta apologize to you. He's like, why? I said, well, I told him a little story. I said, I don't even work for you yet. And I made this decision. I locked down your salesforce until they, until they called all their prospects back and we've sold a bunch of cars in the last 24 hours. But it dawned on me that I hadn't run it by you. You're the CEO. I'm not. And I get this long silence these now famous for. But I, I was not ready for the silence at this point. At this point, no one is long silence. And I'm going, oh man, have I, have I really screwed up? Or he breaks the silence and says, I think you're going to fit in here just fine. But it was the first clue to me that, oh my God, like I've been a CEO for six companies, now I have to subordinate myself to another leader and I better figure that out fast.
- [12:54]
Cameron Herold
I want to talk about that in a second. What you touched on was something I heard Elon say something about six months ago. And he said that if you don't know what the one big problem is in your company this week, you're the problem.
- [13:03]
John McNeil
Exactly right.
- [13:04]
Cameron Herold
And that's kind of something that you identified right away was like, wait, and, and they're often so simple too. Like they often really aren't. I had a very similar situation. I did a ghost call with our team and then I wasn't getting the follow up emails, so I checked in and all of a sudden realized that all of our email funnels and our forms were broken. We'd migrated over from one software to another. I'm like, why am I the one finding this? But then I wasn't pissed off at everybody. I'm like, what system do we have in place to ensure that these things are being checked and are Being followed. But yeah, we didn't need any more leads. We actually needed to do more with the leads that we had.
- [13:35]
John McNeil
Totally.
- [13:36]
Cameron Herold
You're now having to. Then you said subordinate yourself. I don't think it's subordinating ourselves to it. To a CEO. When I was the CEO for 1-800-got- junk, I definitely didn't feel subordinate to Brian. I felt like I was his partner, that I was his counterpart, that I was executing on his vision. I never felt subordinate to. But how did you get on the same page with Elon? How did you understand where he wanted you to go? How did you understand what areas of the business to kind of divide and conquer with him?
- [14:05]
John McNeil
It's a great question. So we sat down early on because I'd found this in teams, like, it's really important. If a team's going to work optimally together, each team member has to understand their role. And so we spent a lot of time talking about sandboxes, like, what's in your sandbox, what's in mine. And regardless of what's in each other's sandboxes, we're not going to cross over into those without permission because then we're just duplicating effort and confusing people. So we sat down, had a lot of conversations about that. And he was like, hey, the things I want, this is at the beginning, were manufacturing in engineering. And I said, great, I can take the rest.
- [14:45]
Cameron Herold
Yeah, the hard ones, too.
- [14:47]
John McNeil
And that, well, you always want the founder to be in charge of product.
- [14:51]
Cameron Herold
I want the founder to be in charge of what they love and what they're.
- [14:54]
John McNeil
Yeah, yeah, but. But especially, like, they've had this product vision.
- [14:58]
Cameron Herold
Product for sure.
- [14:59]
John McNeil
And. And so he loved product engineering, manufacturing. We needed that. We need to differentiate ourselves. There's nobody better in the world, maybe at that in cars than him. So that was kind of easy. So we, we said, okay, like, here's what's in your stack, here's what's in mine. And then we had to, like, really talk about, okay. Like I said, you know, you're the boss. You're going to set the vision and the targets, which he's famous for setting these super ambitious targets. And I'm going to figure out a way to get us to deliver those targets. And we asked, at the time, we asked Sheryl Sandberg and Mark Zuckerberg, like, how they manage their relationship. And one of the things that they.
- [15:36]
Cameron Herold
That they said this was when Cheryl was the COO for Marcus CEO.
- [15:40]
John McNeil
Exactly. And what they said was they got together every Week like religion. And they asked each other. The first question they asked each other is, hey, I've got frustrated you this week.
- [15:53]
Cameron Herold
Yeah. Date night.
- [15:54]
John McNeil
So you clear accounts. And the second is like, what is the most important thing to the company? What are we working on? And here's where I'm spending time. Do you agree this is the right thing? Is here's where I'm spending time. Do you agree this is the right things? Where can we help each other out, whatever. And a lot of that was just brainstorming on product. And the big thing, we called it the big thing. The thing that was the number one thing that we had to get right in the business. And that's how we kind of managed the relationship and how we kind of divided and conquer. And we were on a team. The team, the senior management team was six people super strong. And everybody understood their role. And we were kind of off to the races.
- [16:30]
Cameron Herold
You said something earlier when you were just kind of, you wanted to get to know Elon, you wanted to kind of get to know this. How did you try to get. And it's less about getting to know him. How did you get to know the CEO? What were the things that you did to get to know him?
- [16:45]
John McNeil
So this might be unique to him. But he said at the very beginning, I said, what does success look like? He said, success looks like you make the same decision that I would on the same set of inputs. I'm like, okay, we're gonna have to mind melt to make that happen.
- [16:58]
Cameron Herold
Wow, that's. That's challenge.
- [17:00]
John McNeil
Yeah, totally. Because his IQ is maybe 100 points higher than mine. So he devised this. He's like, let's do the Vulcan mind meld. And the way we'll do a Vulcan mind meld is we'll travel together. We'll just be together a lot.
- [17:11]
Cameron Herold
Okay.
- [17:12]
John McNeil
And we'll talk about like what we're seeing and what the inputs are and what decision you would make.
- [17:16]
Cameron Herold
Yep.
- [17:17]
John McNeil
And that's how I got to know him. Like we would like. It's hard not to get to know somebody when you're sitting in the back of a car being picked up from the airport after a 15 hour flight.
- [17:27]
Cameron Herold
Right. Hotel rooms for four years. In the first seven years I was building one, 800 got junk. We shared hotel rooms for four years so that we would partially was to save money because we had no money back in the day. But it was like we had two beds in a hotel. What do we need? And we could sit and chat and talk, but you wake up in the morning with somebody in their underwear, you get to know them a little bit.
- [17:43]
John McNeil
Yeah. Like, we didn't share rooms, but we shared a lot.
- [17:46]
Cameron Herold
Yeah.
- [17:46]
John McNeil
Yeah.
- [17:47]
Cameron Herold
How did you. When you came in as the President of Tesla, 1.8 billion dollar company already, there was an existing team, there were existing people. You're like a big boulder being dropped into a pond and there's a lot of ripples that happen from that boulder. How did you come into the organization and not piss people off? Not ruffle too many feathers? How did you get to know them and how did you get them to know you? And then how quickly did you start? I can't imagine how you can slow it down when he. With the pace he goes. But how did you come in and not go in too quickly and making big decisions? Or did you come in and just make big decisions? Day one, it's a, it's gonna be
- [18:24]
John McNeil
a bit of a mix. Like, I, I was coming into a leadership team, all of whom had interviewed me as part of the process. And so I, I kind of knew who they were. And, and that was super helpful.
- [18:34]
Cameron Herold
And by the way, if anybody just missed that point, if you are bringing a senior executive in, get them to interview the person they're going to get to, to work for. Right. Like, that's.
- [18:43]
John McNeil
Yeah, exactly.
- [18:44]
Cameron Herold
Yeah. You don't just say, here's your new boss, like, they picked you. Okay, so that's interesting.
- [18:50]
John McNeil
Yeah. And one guy had just been hired literally, as head of his head of revenue. And so I was kind of a surprise to him. And so we really did need to get to know each other. And I had a sense, because Elon and I talked about it, like, what the two or three things that really, really mattered to get right were. And I went right to work on those. And I wish I could tell you I was more strategic than I was about my entry, but my. One of the hacks I learned as an entrepreneur, as a CEO, was go to the frontline workers because they will tell you exactly what's wrong, where it's wrong, and what to fix. It's a total hack in leadership. And so I just went to the factory floor and, and started to identify, okay, where is our problem at this point? It was. I was joined right as the Model X was launching and we couldn't get the doors right. So go right down to the factory and try to figure out, okay, where in the factory is the problem getting created and how could we fix this, like asap, because we're going to run out of money. If we don't. So I just. I dove into a problem.
- [19:49]
Cameron Herold
Did you try to not make big decisions in those early days, Weeks, months?
- [19:54]
John McNeil
I wasn't afraid of. I wasn't afraid of, like, big decisions. I was going to seek a lot of input before I made a big decision, but in this case, it was kind of. We went through this several chapters of a save the company moment, but it was. We had 1,200 Model XS times $100,000 each parked in the parking lot. We couldn't ship them because the doors wouldn't align. So this was a save the company moment. And so I just dove into the problem. And luckily, as we solved that problem, then that became the currency that I could use to come into the organization and be trusted to handle bigger and bigger decisions.
- [20:34]
Cameron Herold
Interesting. When you were there and you were working alongside him and working with the team, one of the big questions I get from. From COOs all the time is they have these very ADD bipolar CEOs, which is their superpower. Like, ADD is they're seeing everything. Bipolar is the mania and stress and depression. Those are their natural strengths. But it's also hard to say no to them or not now to them. How did you say no to Elon or not now to Elon or do you.
- [21:08]
John McNeil
He's super rational. So if he came up with an idea that he was pretty convinced on, then I would sit down with him and say, hey, look, let's steel man this thing together.
- [21:20]
Cameron Herold
Yeah.
- [21:20]
John McNeil
Like, here's the other side of the argument.
- [21:22]
Cameron Herold
Okay.
- [21:24]
John McNeil
And why don't we framework? Yeah, exactly. Like, here's the other side of the argument, and here's why that may not be a good idea.
- [21:31]
Cameron Herold
Okay.
- [21:32]
John McNeil
And so one of those examples was actually cybertruck, where a colleague of mine, Doug Field, who was leading engineering and I, we talked Elon out of that probably five times. He was in love with the idea of bending raw stainless steel and creating this video game caricature of a car. And he had to sit down with him and say, look, if we do that, like, first of all, it's not a big market. Nobody buys trucks outside of North America because the streets are too small. So you got a very small niche market for this thing, and we're going to pour X amount of dollars into the project and come out with something less than X at the end. Like, this is not what we need to do right now. And he mentioned in several earnings calls, like, thanking the team for calling them off of that project. Eventually they did it, but. And it turned out that that perspective was right. Like, you just can't sell that many of these things. But that was an example. Like, if you were rational with him, then he would and could sit down and explain the other side. Then he was rational enough to say, maybe I'd rethink that.
- [22:40]
Cameron Herold
Would you be rational with him in front of others, or would you pull him aside and try to be rational with him one on one? Or did that depend a little bit?
- [22:47]
John McNeil
A little bit of both. Like sometimes we're doing this in or weekly senior management team meeting. Sometimes it was one on one. But maybe to your point, never very public.
- [22:55]
Cameron Herold
Yeah, right. You're not going to do it on an earnings call or something like that?
- [22:58]
John McNeil
Nope.
- [22:59]
Cameron Herold
Okay, I want to flip a little bit. So you leave Tesla. Why did you leave Tesla and you went over to Lyft as coo?
- [23:04]
John McNeil
I was leaving Tesla. Really? To start my venture firm that I put off during the years I was at Tesla. And just as I was leaving Tesla, I got a call from Ben Horowitz's team at Andreessen Horowitz. And he said, hey, we don't know each other, but I've watched you make 12 quarters in a row at Tesla. Tesla never made a quarter before you got there. Can you come meet with me? Because I have a couple companies in my portfolio that I want to get public. And he said, I'd like your help. And I was like, ben, you know, you're actually pressing a button you probably didn't know you were pressing. But all six of my companies I sold to public companies, but I never took a company through the IPO process. And it's this little thing that. Not such a little thing, actually. It's something I'd really like to experience.
- [23:53]
Cameron Herold
Sure.
- [23:54]
John McNeil
So I went and met with Ben and he said, hey. He gave me the name, he showed me his portfolio, and there are five or six companies in the portfolio they wanted to get public. But the one that caught my eye was Lyft.
- [24:05]
Cameron Herold
You had left Tesla or were preparing.
- [24:06]
John McNeil
I left Tesla.
- [24:07]
Cameron Herold
I'd love to Ms. Ben is one of the like, God. Quirky as, but smart and intriguing. One of the best books I've ever read. Hard thing about hard things. I've been following Ben since 94. Wicked, wicked smart entrepreneur.
- [24:20]
John McNeil
Yeah.
- [24:20]
Cameron Herold
And I've always said that the best players, the best employees are never out looking for a job. They're already working somewhere and you got to poach them or, you know, you got to know where they are and go and get them.
- [24:30]
John McNeil
Right.
- [24:30]
Cameron Herold
That's kind of what he did. Like he'd been watching you, he identified you, he went and grabbed you. What did he see other than you hit all the numbers? What else do you think he saw?
- [24:41]
John McNeil
I think as we sat down and got to know each other, he wanted me to break down how we did it. And so I gave him the framework of how we built this muscle at Tesla to connect people that were generating demand with people who were generating supply. And we developed this process where we could dial in kind of with a lot of certainty what the quarter was going to look like. And I'd followed this. I had this old mentor who was in manufacturing, and he had been on one of my boards of my companies. He had this great old saying that a lot of CEOs understand, which is, do you want to make your quarter? You have to make your month. And if you want to make your month, you have to make your week. If you want to make your week, you have to make your day. And if you want to make your day, you have to make your hour. So you could literally tell by an hour how a business, if a business was going to make its quarter. And so we systematized that at Tesla and connected the supply side, which is supply chain and manufacturing and delivery, with the demand side, which is sales and marketing. And we had the meeting weekly. And there's always stuff that was going on, tariffs come on in China. Now you can't ship cars to China to make our quarter. Now we got to figure out how to sell more cars in North America and Europe, in the Middle East. And so we're constantly moving stuff around. That team met weekly. And I remember sometime in my third or fourth quarter there, Elon walked by in the first month of the quarter, and he said, hey, how are we looking for the quarter? And I said, oh, we're going to make it. He's like, how do you know that? And I said, here's how. Like, we just made our hour, and we've made the last X days in a row, and we're exceeding. So I know we're going to make the quarter unless, like, a bomb falls on us. But that's. So Ben got into the process of how we'd done that and. And started to understand that there was a framework that I could bring into a company like Lyft.
- [26:31]
Cameron Herold
I love that. My very first operating company, I was 20 years old. I had 12 employees, painting houses, a group called College Pro Painters. And all I knew was that I had to make $3.52, a gross margin per labor hour. And why I remember that from 40 years ago is because it mattered.
- [26:48]
John McNeil
It matters. That's how the business works.
- [26:50]
Cameron Herold
And that's all it was, was every job, every labor hour. If I made that, and lo and behold, I made my profit at the end of the year, I'm like, well, that's really simple. It' you know, build your plan and plan your work. Do you find that business is simpler than we tend to overcomplicate it, or does business get complicated when it's bigger?
- [27:04]
John McNeil
No, it should be simplified. It really should be simplified. So we. One of the things you do in the auto, in the automotive business is, is you look at what's called taktime. And that is basically you're every 60 seconds a car comes off the line. That's the tak time. And there's a lot of complexity that goes into that. But if you do what you just said, which is, hey, every time a car comes off the line, that's worth $10,000 of gross margin for us, let's say. So if there's a car coming off the line every 60 seconds, we know what our gross margin is per day and we know what our overhead is per day. So I can tell you whether or not we're making money on a daily basis if we hit that tech time of 60 seconds. And I think if you connect that for people and a lot of businesses that's not connected, everybody's like, oh, we got to produce car every 60 seconds. But they don't know why. And if you just simplify it and say, here's why. Because we make five bucks per widget and we pay two bucks in overhead, and so we're making three bucks of profit every time we do that, then people kind of understand, oh, this is a pretty simple business. Yeah, it is. There's a lot of ways you can complicate it, but you need to keep it simple.
- [28:10]
Cameron Herold
When you're running companies of this scale, you're at enterprise level, global brands. You know, when Elon acquired Twitter, he fired 80% of the staff. I think he mismanaged the communication, but I think he did the right thing. How do you not get that kind of waste and bloat in a company? Because it happens to small companies too. When you're in the 30 to 100 employee range, I call it the death zone. That all of your early managers, their solution to every problem tends to be hire more people and you end up with all this bloat. How do you avoid that stuff? And how do you avoid it when you're big and you just have all these people around doing the busy work versus the important work.
- [28:45]
John McNeil
We did two things, at least two things to that end. We personally interviewed every manager higher and above. And this was a period when we were growing from 4,000 people to 40,000 people. And we wanted those managers to understand the reason we were doing the final interview was maybe to scream, but that screening should have been done way before us. The reason we were doing the final interview was to imprint the culture on that person.
- [29:09]
Cameron Herold
Yeah.
- [29:10]
John McNeil
And so we were able to explain, like, here's the currency here. The currency here is you are working on the one or two things that is existential with this company. And to do that, you're going to be measured by a TOC due ratio that has to be inverted. So in other words, the currency here isn't talking in meetings, it's actually getting shit done against those two things. And that is how you're going to be promoted, and that's how you're going to be rewarded. And so we did that imprinting as people were coming in, and then we enforced that in terms of how people were compensated, promoted, et cetera. The best people were working on those existential things. And if you were a top performer, you wanted to be assigned to those existential things because you're getting exposure to the CEO or the president every week. And we kept teams small. We would systematically prune the organization and take the bottom 15% out by using one performance review question. And that was, list the people you've worked with this year on teams and list and put a check mark next to the ones you want on your next team.
- [30:17]
Cameron Herold
Whoa. You actually had them self top grade their teams.
- [30:21]
John McNeil
Yeah. And so then you could see a bunch of names where people, nobody checked them, nobody wants them on their team. You knew exactly who the bottom performers were.
- [30:28]
Cameron Herold
And that's how you could call the bottom part of the group.
- [30:31]
John McNeil
Exactly. Super simple. That again, is an example of simplicity over complexity. You can do really complex performance review systems or you can just ask who are the best people that you want to work with?
- [30:43]
Cameron Herold
Well, that's the signal that you really need to pay attention to. What I love about that too is those people that you've now cut, those bottom performers or the toxic people, the ones that nobody really wants to work with. I would guess that nine times out of 10, you don't even have to replace them to somebody else. They weren't doing much anyway.
- [30:59]
John McNeil
Exactly. And so therefore we had less engineering headcount than any of our competitors. We had less sales headcount than any of the competitors. Less manufacturer, more cars per throughput, per manufacturing person. Like, it just was a much smaller, more efficient organization as a result.
- [31:14]
Cameron Herold
I love it. Okay, so then you get to Lyft. What year did you go Into Lyft as CEO?
- [31:18]
John McNeil
Was it 2018?
- [31:20]
Cameron Herold
2018. Okay, that was right. Really? When Lyft was starting to kind of get a lot of buzz around that point too.
- [31:26]
John McNeil
Yeah, it was Delete Uber. So I came in right on the right as Delete Uber was happening. So for those who don't remember, the CEO of Uber had downplayed sexual assault on the platform in a really kind of crude way. And so a lot of people's reaction to that was deleting the Uber app and downloading the Lyft app. So that's the. That was my entry point into Lyft. And. And we said, do we take advantage of this or not? And the answer was, we take advantage of this. And so we doubled market share over the course of the next six months, which then gave us a platform from which to go public. Otherwise it would have been hard to go public with as low as market shares we had.
- [32:05]
Cameron Herold
What was it like going public? What did you learn from that? And it's extraordinary that it was eight years ago that that whole thing happened with Travis. It feels like it was only a few years, but it really was years ago.
- [32:14]
John McNeil
Exactly. Yeah. We're living in compressed times. Eight years ago the delete happens, and six years ago the DeepMind paper comes out. Yeah, it's just. It's an amazing time to be alive. But what I learned in the IPO process was a couple things. How important it is to have a CFO and a management team that can tell the story of the business in less than 60 seconds. And what I mean by that is, how does the money machine work? If you take a dollar in, what does that turn into? And how. How does that turn into a buck 50? And that's super important because you're talking in the IPO process. You're having 30 meetings a day with potential investors and you have to succinctly say, here's why you want to own this stock. Because we have a money making machine that is unique from anybody else. And nobody tells you that. The bankers don't tell you how to do this stuff. The advisors don't tell you how to do this stuff. But it dawned on me how straightforward this was. You just had to make your story so attractive and so digestible that in those 30 meetings, people were writing orders for your IPO stock.
- [33:23]
Cameron Herold
I laughed when you said that because I think it's not only important to have had that skill of being able to tell the story in less than 60 seconds. You know, when you're doing the IPO process and raising money, doing the road show. But daytoday in a company, senior executives need to explain stuff in 60 seconds as well. Nobody has the time for these long emails, these long WhatsApp messages, these dissertations. They're random, like we don't have time, we're filtering. We're so totally. Is that how you avoid some of the politics in companies as well?
- [33:55]
John McNeil
I think simplicity does blow out politics and it gets people super focused because you want people that are walking around to understand, oh, here's how our money machine works. It costs us five bucks to get a driver or it really cost us a thousand bucks to get a driver and it costs us a buck to get a customer. So the emphasis in this business is on getting drivers and keeping drivers. How do you keep drivers? Well, drivers want to be well paid and they want to be coached aboard to be and when so they can maximize their earnings and they want to be treated respectfully, which means you got to have customer service that responds to them. And our competitor had been cutting customer service to drivers and it was easy to scoop up drivers and keep them and keep them happy. And that's the product. At the end of the day, if you get in a Lyft and you feel like that driver cares about what they're doing and you had a good experience, you're going to come back to Lyft versus Uber where Uber was sort of abusing their drivers at that time and the drivers were all pissed off. And so like you got a completely different feel. And that's the product. And we could explain to people, here's why this matters, because we pay a thousand bucks to get one of these folks and they have to give so many rides before we get profitable in that relationship. So you dang well better take care of them. That's how the business works.
- [35:08]
Cameron Herold
I like this. So a couple parts I want to kind of wrap through is the first is the real difference between the CEO and the coo. Gino Wickman wrote a book years ago called Traction which talks about the very early stage companies, the visionary and the integrator. But when you're into the more the mid sized company, enterprise level company. What's the real difference between the CEO and the COO in terms of the day to day, week to week, month to month, you know, year, vision and team.
- [35:38]
John McNeil
So the CEO is the person that's, that's gotta be setting the vision and they've got to be attracting and building a team of the senior leaders. And so if it's a senior management team, they're attracting that talent and they're running that team.
- [35:52]
Cameron Herold
The team that knows how to do it and has done it before and is aligned with the vision. That's. Yeah, for the most part.
- [35:58]
John McNeil
Exactly, for the most part. And they've got to be inspiring to that team, et cetera, because you're. You, you want to get world class talent. World class talent wants to be inspired and challenged and, and then the COO's job is to make it happen and also to attract the talent and set up the operating system to make that happen. But at the end of day, your job is to make it so.
- [36:17]
Cameron Herold
So when I was The COO for 1-800-got- junk, my best friend Brian was the CEO. I used to say that one of my jobs was to make Brian iconic. I had to make the spotlight on him, the brand about him. But then internally, he made sure that he shone the spotlight on me so that the team knew that I had to make the tough decisions. I had to be the bad guy, I had to roll out the tough, you know, the, the problems. I had to be the one to show what was going wrong, to hold everybody accountable or hire people. And he was the one who got to say all the good stuff. How did you, how do you balance that when you know the, the Elon is the figurehead or the CEO of your brands or the figurehead. How did you work through that?
- [36:56]
John McNeil
I took the same approach you took with Brian, which was the, the limelight needs to be on him, not me. Like I am in the background and I am cool with that. I don't need to establish a brand and I don't need to take anything away from his iconic status. And quite the contrary, I want to build that iconic status because it's free marketing, right?
- [37:15]
Cameron Herold
Great marketing.
- [37:16]
John McNeil
But he did me a favor, Cameron. Internally, people would come to him, they'd be questioning my decision or they'd be questioning who was going to make the call. And he would say, that's John's, that's in John's area. That's John's call. So go talk to John about it. I always say
- [37:35]
Cameron Herold
it's almost like mom and dad staying on the same page, that mom and dad can fight, but never in front of the kids. But like, if, if mom said no to cookies. Dad says no to cookies too, right?
- [37:43]
John McNeil
Exactly. That was a lot on him. Like, I was really grateful that he took that approach.
- [37:50]
Cameron Herold
When Sheryl Sandberg was the COO for Mark, I think she joined Mark when He was about 22 or 23 and was the COO for about 15 years. She was really the adult in the room in the early days. There was a. There's an article by Harvard around, gosh, 17 years ago called the misunderstood role of the CEO. Have you ever read that article?
- [38:07]
John McNeil
No, I didn't.
- [38:08]
Cameron Herold
It was a great, great HBR article. So it talked about the seven distinct types of chief operating officers, and they had the executor and the mentor, the better half, the partner, the heir apparent, the mvp. Was there kind of a role that you were playing or was it. Was it just kind of divide and conquer, get shit done?
- [38:26]
John McNeil
It was just get stuff done. Like, I. In this case, I didn't have interest in being the CEO. That's him.
- [38:31]
Cameron Herold
Right.
- [38:31]
John McNeil
I just wanted to get stuff done, and I felt like I was doing the best work of my life, and the people around me were doing the best work in their lives, and we just wanted to do more of it. And we knew we were changing the world for the better. Which is a great place to start from in terms of winding up your motivational mainspring. But, yeah, I just. I wanted to get stuff done, and so I felt like CEO setting the vision. My job is to make it so. So, like, how do I make it so well?
- [38:55]
Cameron Herold
I have a feeling like some of your best work is in your book, the Algorithm.
- [38:59]
John McNeil
Yeah, like there's the story of some of that work, and it's told through the eyes of the teams and the people that were actually doing the work. Because what I wanted to show was that. So the algorithm is about the operating system behind Tesla, like, how it really works and how it runs, and the framework that's used to run that place on a daily and weekly basis. And I wanted to make this approachable so that people would walk away from reading the book and say, you know, I could do this. And the answer is, you can. Because this wasn't dependent on Elon's genius. This was really dependent on a framework that really, really capable people applied. And so the book is told through their eyes and their stories. And it makes it much more attainable, I think, for people to say, geez, I could do that.
- [39:45]
Cameron Herold
What do you think are one or two. One of my favorite books, I think my three favorite books of all time. In business still are. Good to Great. A Hard Thing About Hard Things by Ben Horowitz and then Insanely simple by Seagal about Apple and the simplicity systems they use to scale Apple. What are the two or three or one or two core tactical specific things that are in the algorithm? What are a couple of the systems that you used at Tesla that almost any company can operate within?
- [40:12]
John McNeil
The first was just question all the requirements that people are throwing at you because oftentimes people mean well and they'll say, this is a requirement. And what we learned to do was question the requirements because we were burned so many times when we would find out that it wasn't a requirement at all. Like, some intern had come up with it.
- [40:29]
Cameron Herold
Wasn't there one about, like, a windshield wiper blade or something?
- [40:32]
John McNeil
There's a gazillion of these examples, but I'll tell one that Elon tells. We worked forever to solve a manufacturing problem on a battery separator between the battery and then the cabin, okay? And we could not figure out how to manufacture this thing. And we slept in the factory. I did for a while. Elon did for a while, trying to figure out, like, how the hell we make this thing right? Because it wasn't fitting and it wasn't conforming and it was delaminating all this stuff so we couldn't get it right. And finally we asked the question, like, who required this? We want to talk to the engineers about why they designed it this way. And the first guys we talked to were the battery guys. And they said, oh, this isn't our requirement. This is the cabin guys. They're. This was a noise dampening strategy for them. And we went to the cabin engineers and we're like, guys, explain to us why this was designed this way. They're like, oh, this wasn't designed for noise dampening. The battery guys wanted this for safety, for heat safety. And we're like. We just talked to those guys and they said it was you. And they're like, it's not us. And then we discovered as we dug into where this requirement for this part had come from, it was literally an intern that that was no longer with the company. And we're like, we just spent months of our lives living in the factory trying to fix manufacturing of this dumb thing, and it's not even necessary, okay? And so that became thing one was, when you're attacking a problem. Sorry about the zoom. When you're attacking a problem, you better make dang sure you understand that whether it's a requirement or not or what's required.
- [42:07]
Cameron Herold
Question everything. Have you heard the story of the woman? She's at Thanksgiving dinner with her mom and the whole family. Her mom like is getting ready to put the roast or something into the oven and she cuts off the end of the ham, I think it's ham. She cuts off the ends of both end of the ham and puts it into the pan and puts it in the oven. She goes, hey mom, why? Why did you cut off the ends of the ham to put it in the oven? She was actually, I don't know, my mom taught me that. I've always done it that way. So they go into the living room, they hey, grandma, why? Why do you cut off the ends of the ham to put it in the oven that way? And she goes, well, I only did that really out of habit because when I was quite young, my mom used to do it. And she goes, well, do you know why your mom used to do it? And she goes, oh, yeah, it's because we had these very, very small ovens and the pans were really small, so we always cut off the ham. She goes, well, why are we doing it now? And she goes, I guess we've just always done it that way, right?
- [43:02]
John McNeil
Yeah, exactly. So that's why the principle starts there. And then a couple other principles that are in the book are simplicity, like you really gotta simplify the process. And then this one is totally counterintuitive, coming especially from Silicon Valley. Automate last. Oh, so you make it work manually and you rip every unnecessary movement out of the process that you can before you automate it. Because the idea is once you automate it, it gets set in cement and then you gotta go blast concrete to get change made. So I used to say to people, when we're working on the factory floor and we're simplifying a process, I would say don't bolt the machines down to the floor until we're absolutely dialed on this process and we've run it at speed so we know it actually works. Then you can bolt the machines to the floor. And automation is like that. It's like bolting the machines to the floor. Once you do it, it's going to get really hard to change it.
- [43:55]
Cameron Herold
I love that I used to say, stop optimize Automate. Outsource. Like before we even optimize it, do we even need to do it? Like, can we just. Right, yeah, okay, I love that. All right, I want you to go back to the 2122 year old John McNeil and give yourself Some advice. If you were talking to the younger you, what advice would you give the younger you that you know to be true today, but you wish you'd known earlier on in your career?
- [44:15]
John McNeil
Well, that's a great question. I think the first thing that comes to mind is just the importance of, is the importance of personal relationships as you lead. Like, I had this vision of leaders as the deciders, I think as 21 or 22, and it's largely because I was working in this trading organization and the leaders were the deciders.
- [44:33]
Cameron Herold
Sure.
- [44:34]
John McNeil
And. But I didn't realize, like, how, how powerful it could be if the front line could be the deciders based on what they were seeing. And I started to look at the. Like we would. This firm I was working at was the largest trading firm in the world at the time. And they would hire these former football players who were ginormous to stand in the trading pits because size mattered. And you would get your orders filled if people could see you. And so these guys were like six, eight and huge. They could take up a big space in a trading pit and people could see them and. But all the trading decisions were being made upstairs and I started to think about, like, the nanoseconds that made a difference in picking up nickels in a trading pit and what it would be like if those guys could make their own decision. And I wish I would have known that, the power of that earlier. I could see it in action, but I didn't know how to make it so. And. And now I think about that a lot.
- [45:25]
Cameron Herold
I love it. John, where can people find you?
- [45:27]
John McNeil
You can find me most easily at either DVX Ventures or on LinkedIn.
- [45:33]
Cameron Herold
All right, John McNeil, thank you so much for sharing with us. Really, really appreciate the time. I could sit and ask you questions forever. Great leader, incredibly great background. Thanks for your generosity and your wisdom today.
- [45:44]
John McNeil
Yeah, thanks for. Thanks for taking the time.
- [45:47]
Cameron Herold
Appreciate it. I. I double checked about seven times to make sure we were recording. Appreciate it.
- [45:54]
John McNeil
You bet. You've been listening to Second in Command, brought to you by COO alliance founder, Cameron Herald. If you enjoyed this episode, please be sure to like, share and subscribe to us on Apple Podcasts, Spotify and our other podcast streaming platforms. For more best practices from industry leading COOs, visit COOAlliance.com.