We recently interviewed Jon McNeill to learn more about his newest project, a startup studio called DeltaV Ventures. But we also wanted to hear about what it’s like to work inside of Tesla and Lyft.
McNeill spent two-and-a-half years as the carmaker’s president, heading up global sales, marketing, delivery and government relations before heading to Lyft in early 2018, where he served as COO for 18 months. (He left four months after the ride-hail company’s IPO last year.)
He shared his take on his experience at both places, and what, from each, he is using and eschewing at DeltaV. Our conversation has been edited lightly for length and clarity.
TechCrunch: What was it like working with Elon Musk?
Jon McNeill: To me, it was fascinating. He’s the best practitioner of my craft as an entrepreneur. It’s hard to name another entrepreneur who has started four companies, all of which are worth more than $10 billion in market cap [and] several of which are worth more than $50 billion.
We were in hyper-growth mode, and there were no playbooks. Like, literally, when I started, the company had about $2 billion in annual run rate revenue, and three years later, it had $20 billion in annual run rate revenue. And there are no playbooks for that, so we were innovating constantly to either try to get ahead of that growth or just to keep up with it.
You’ve said that Tesla is where you first started thinking about the idea of the perfect product.
One of the things I learned from just being around Elon and observing him was how much time and energy he put into pursuit of the perfect product, and that was contagious. It was contagious to all of us who were around him; it was contagious to the engineers who were working on the product; it was contagious to people who were customer-facing in the market who would bring feedback back to us from the marketplace in really fast feedback loops.
The mantra was, if we can produce the perfect product, then it will sell itself, in the sense that we wouldn’t have to use paid marketing and advertising, but virality and organic methods of growth. And now I’ve gotten that religion. I’m a firm believer because I saw what was possible at scale. If you’ve got an organization devoted to continually making the product better, and not releasing the product until it’s just awesome, and keep improving on it in the pursuit of perfection, it is super-inspiring to be in an organization like that.
Tesla was the subject of huge short-seller interest for a very long time. What was it that the financial short sellers didn’t get about Tesla?
What some of the short sellers didn’t understand was how passionate consumers were for the product, how much they wanted an electric and clean product — so much so that our most common trade-in was a Toyota Prius, which retails for around $30,000. And this was before Model 3. So we had owners of cars buying a car that was double the value of the car they were trading in because they had this aspiration to own a car that was the safest car, the fastest car, et cetera.
So I don’t think the market understood the demand. They certainly didn’t understand how our unit economics were different, because we didn’t have to spend $2,000 or $3,000 per vehicle on advertising. They didn’t understand that the product didn’t depreciate like other cars because we were literally making it better with every over-the-air update. And I don’t think they understood the value of having a vertically integrated manufacturing and supply chain. All those things were hard to see from the outside, but incredibly powerful when combined into one business model.
You were at Tesla for two-and-a-half years. What were some of the decisions that you had to convince Musk to get behind?
I was a part of an incredible executive leadership team and Elon was right in the thick of this with us as we were changing our digital go-to-market, which started with dozens of clicks to buy a car.
Eventually, we ran into the root cause of that, which was the financing part of the transaction, where people had to fill out and sign pages of loan or lease documents and title transfers and things like that. So Elon gave us the challenge one day to figure out how to do a one-click lease, which, when I went to the financing community — banks and other sources of capital — they said, ‘that’s crazy.’ But we pushed the envelope and found a couple of great banking partners who helped us essentially invent a one-click lease that took enormous friction out of the purchase process, which then caused more and more transactions to happen online versus in-store.
We also invented mobile service, when we discovered that we could do 80% of the repairs we were doing [at a service center] in somebody’s driveway or in their office parking lot. We did a massive shift to mobile service that allowed us to scale without nearly the amount of capital we would need to scale in time to build service centers.
And we were experimenting with and improving on our manufacturing and delivery techniques. We realized you could create recurring revenue on a car if you actually sold the insurance. There were just dozens of things that were happening so that we could not only survive, but then also start to thrive.
Given Tesla had such a compelling product, why did you head to Lyft, which was spending a lot of money on paid marketing?
One of the things I hadn’t done in my career is take a company public, and that was a really attractive part of my decision to go to Lyft. I also shared the vision that Lyft’s founders had, which is a city without cars, or with far fewer cars . . . and if you could get car-sharing happening at a broad scale, you could reduce the number of cars that were on the road, which then reduces the amount of pollution that is in cities, which reduces the number-one cause of lung cancer in cities, which is auto emissions.
Do you think Lyft and Uber have created less congestion or caused more of it? What of the argument that people who might have taken the bus will now — before the coronavirus — use one of these services instead?
Given the pricing, it’s actually not people hopping off of urban public transit and into a rideshare but [it’s designed for] people who would normally take a car solo and are commuting more and more in shared rides, and that’s what reduces congestion.
But it’s a long journey to get to that end point. There is a point in that adoption curve where, because you’re adding more and more single-car rideshares, you increase traffic. But over time, you convert them to be a shared rider, and as you convert them to share, it’s then that you start to pull cars off the street. And if you can get them into shared electric vehicles, that’s a super-compelling version of the future.
You’ve said you don’t think Lyft necessarily had go-to-market fit because its customer acquisition costs were so high. Do you think these companies — Lyft and Uber — will ever be able to completely rationalize their businesses? At what point do they make real money?
The early chapters of the Uber and Lyft competitive battle were based on price, and so they were pricing irrationally. Over the past year, I think they’ve both gotten religion [regarding] how destructive that is to the economics of the business and destructive to the [total addressable market]. And not sustainable. So as they have now started to price rationally, their growth rates come down, but they now have a path to profitability, and that does lead to sustainable economics in the business.
What if people, who are growing accustomed to working from home because of this pandemic, don’t fully return to the office?
I think there’s the pre-therapeutic coronavirus world and the post-coronavirus world [that features a vaccine] and maybe looks different from the mid-step that we’ll be in for the next few months. Yes, I think volumes will be down until there’s a therapeutic or a vaccine. I think as we get closer to people being less worried about and concerned about coronavirus that folks — even though we’ve discovered that work from home is definitely viable — [will decide that tele-commuting] isn’t optimal.
Human beings are pack animals and we have a need to be with our pack and, in my case, in the office. Working alongside of teams is a really important part of my work life.
So I think we will see probably different commute patterns for the next few months. But then I think as people start to come back into office environments, we will see largely a return to normal community. But I do think that’s going to be constrained by a vaccine and/or a therapeutic.
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