打造历史上增长最快的消费品公司之一｜David Protein 与 RXBAR 的 Peter Rahal

Okay, I want to start with the fact that you sold your previous company for $600 million. You and your co-founder owned 90% of it. You found yourself as a very young man with close to a quarter of a billion dollars in cash. What happens next?

It’s natural to get involved in investments. From the outside, investing seems very attractive. On the one hand, you think it’s an intellectual exercise. The second thing is that it gives you a great lifestyle because you’re not operating, so you don’t have organizational responsibility.

I want to talk about how to study investments and get into it. How did you study investments? Discovering asset classes, how to create a portfolio, growth capital, evaluating deals, having conversations? Are you reading books like this?

Reading, conversations, the best books on the subject. Then, where I spent my time was where I had the greatest advantage, which is investing in consumer goods or simply in private companies—in other words, early-stage startups. Ignoring the stage, from seed to growth, didn’t matter.

I started doing it and quickly realized that the most important skill set is charisma, like whaling. It’s like finding the deal that’s pretty obvious and then trying to get an assignment. That’s really the game, and that’s pretty boring.

Chasing people for assignments is something I didn’t want to do. My previous experience was that I would sit and wait. I would dedicate my time to building a product, and my product would speak for itself. My product would do the job.

As an investor, you’re taking capital and trying to allocate it to what’s going to grow, behind the leader you’re betting on. That’s too far away for me. I’m used to fighting, to being in knife fights, and this is too passive.

Investing is very tempting because you can make a decision and not have to do anything, and it works. It seems to keep growing. The big problem I had with that is that the feedback loop is extremely long.

In building and operating a business, you make a decision—whether it’s a hiring decision, a product decision, or a marketing decision—and you get the answer immediately. The feedback is immediate. With an investment, you can develop a thesis and the judgment that a founder is truly great, and then you make your decision. Five years go by, and you find out whether it worked or not.

So, where were you living when you sold RXBAR?

Chicago.

Good. You have this great acquisition and a lot of cash. Was that when you moved to Miami? Had you moved to Miami before?

No, later.

Okay, later. So now you have the money and you think, “Okay, I have a lot of money.” You start to have this ridiculous idea. Those are your own words, because when we were together a few weeks ago, you said, “I had the ridiculous idea of starting a family office.”

Yes.

So, you moved to Miami and thought, “I’m going to set up a family office.”

Yes.

Very well, explain that part.

I was in Chicago and I needed a change. I needed a change of scenery. RXBAR was my identity, and I had just gotten divorced. So I looked at the United States and thought, “What’s the best place to go?”

Wait, wait—about the divorce. Did the divorce occur after the acquisition? Did it have anything to do with that? Were you under a lot of stress?

No. Just arrogance.

Tell me more about that.

I had a success bias because of everything I had done. Everything had been successful, so there were blurred lines between the personal and the professional, and I moved too fast. I thought it would be easy.

Yes, because my goal was to start a family, so professional success achieved—the next step is family. And you try to do it in a hurry.

Yes, I went too fast, thinking I was very good.

So, if I remember correctly, meeting, getting married, and getting divorced—all in about 9 months.

Yes. I surpassed Kim Kardashian.

Okay, so you moved to Miami. You’re going to invest. What I really want to address is the fact that you weren’t fit to invest. In other words, all the founders I know whom I ask about you say that this guy is simply a tireless operator.

The idea that you might think you could just sit back and be the guy behind the guy—why do you think you made that mistake?

This is very interesting to me because you did what you did to start, scale, and sell, which is much celebrated. But I’ve spoken to a lot of founders who did that and then became miserable. You are one of them. So I really want to focus on what you were feeling and why you were so miserable in that situation.

My plan was to get out of Chicago and change my environment. I looked at a map and said, “What’s the best place to reboot a bit, invest, build my family office, and get things right?” My ultimate goal was to move to wherever was best to start my next project. So I chose Miami as a place to restart and invest.

This was before COVID. I arrived there and began to formalize a family office. What I underestimated when investing in different entrepreneurs, particularly in food and beverages, is that I assumed they all had the same tenacity as me. I thought that was what one did, and I really didn’t know anyone else who was a founder at that time.

I quickly realized that I’m probably a terrible investor because I’m handcuffed in the back seat while someone else drives and doesn’t know where they’re going. That’s a torturous position for someone who knows where they’re going.

So, you didn’t know how weird you were.

Yes. As humble as it may sound, yes. I was sitting upstairs just before this with my friend Patrick, who does the podcast Invest Like the Best. He’s one of my closest friends, and we happened to meet Adam Frucci from Apple Oven.

There’s a lot of overlap between Adam and me, and we were essentially talking about how Adam runs this money-printing machine with very few employees. In fact, he hates entrepreneurs who focus on vanity metrics. He says you should only concentrate on generating cash. He’s very direct about it. It’s obvious to him.

We talked about the different hires he made and other founders he knows. Through a story he was telling, Patrick said something great. He said, “Man, it’s crazy. In any field, there are only 2 or 3 people who are really good.”

Pick any category, and there’s a sea of garbage and 2 or 3—maybe 4—people who are really excellent. I simply assumed that anyone who gets into entrepreneurship is willing to die before their company fails. They’re willing to sacrifice their comfort to win. They want to win, and I realized that’s not what many people do or prioritize.

When you come across other entrepreneurs like these, in whom you made the mistake of investing because they weren’t like you, when you talk to them, what is their reaction to your extreme approach?

If I’m the one who has to criticize the company, that’s already a problem. The CEO should be the most critical. I shouldn’t be saying, “Hey, the car is on fire.” If I’m the one pointing out the problems or telling them to go faster, it’s usually not a good sign.

I kept falling into that pattern, and I don’t want to be in a position where I have to say, “It’s your company, after all.” I don’t want to be an advisor. I’m just here to try to make things easier.

But what I really want to know is, what’s going on inside you? What’s your inner monologue? Are you saying, “Oh, I messed up”? What’s really happening?

This is frustrating. I need to get back into the game. This sucks.

How long did it take you to realize this?

Probably a year—from 2020 to 2021.

1. Going all in and burning the boats

Okay, so what’s the next step after that? You say, “Okay, this sucks. I don’t want to be an investor. I need to be an operator. I want to run my own company.” By the way, you’re too young to retire.

Yes, definitely. So I began. One of the good things about investing is that you talk and go through the negotiation process. You generate ideas. You talk to other leaders and influencers. That’s a useful process for saying, “Okay, is this interesting? Is this a problem I want to solve?”

But basically, I had several failed attempts. I analyzed garbage recycling. I analyzed synthetic biology. I analyzed other packaged consumer products. I would start them and then basically quit.

The reason is that if I enter, I go all in. That’s something really scary because my friends drift away, my health deteriorates, and all those things happen to me. We can’t go all in under those conditions.

Then you have to describe what “going all in” means to you—what you just said. It’s scary. Your friends are leaving. Your health is deteriorating. Is this the only way you can operate? Explain it to me.

Yes, my leadership style is basically to go all in—burning bridges. I can never get involved in something halfway. What I’m committing to is something very serious.

All my false starts were like, “I’m not moving toward starting it.” Then I would simply back away. I moved in that direction—starting and then retreating.

The other thing was that I needed to start a family. During my break from investing, I said, “I need to find a wife to start a family.” I don’t know if Miami is the place. Miami Beach is a ridiculous place to look for a wife.

I agree.

I bought a property in New York and moved there. But, in general, if I find something I’m passionate about, there’s a good chance I’ll dedicate myself to it completely, stop seeing my friends, neglect my health, and end up single at 50. That’s a version of my future that I really didn’t want.

So I finally found my wife, and all roads led me back to protein bars. It took some humility to accept that this is my personal trademark. If I die, my tombstone could say, “The Protein Bar Guy.” And I’m comfortable with that.

Because at first, I was somewhat influenced by Elon: “I’m not the food guy. I’m going to go another way. I am not this. I need to prove something.” But then I realized that I’ve been in the food business since I was 12 years old. I have a deep and intrinsic knowledge about it. Basically, when there was 1 year left before my non-compete clause expired, it just happened naturally: I started connecting the dots and thought, “This is what I need to do.”

Wait, in the food business since you were 12? How old were you when you said, “I’m going to start another protein bar company?”

34.

Okay. So, 24?

Yes. My non-compete clause expired on October 6, 2022.

How long did it take you to get past that dialogue, that internal monologue of, “I need to do something with more impact, or I need to get into biology, or create hardware or something,” and just say, “No, I’m going to stick to what I really know and what I’m perhaps the best in the world at”?

It was 3 years.

Did you have to convince yourself of that?

Yes.

Mhm. Wow.

Yes. To some extent, I always think this, both as an investor when I analyze companies and in my own philosophy: If the company leader has to pick up the phone to fix the product, it’s screwed. I mean, the leader has to be able to understand the product thoroughly and be able to fix it.

All those false starts were because, somehow, I depended on something else. Either I didn’t have the time to learn or gain a deep enough understanding of the product to make that change. With food, I really know exactly what to do, so it just became very obvious. I talked to my wife, and then I started what is today, David.

When we talked the other day, why did you laugh? Why did you laugh?

Because it was my first—It was a very clear process: “Okay, review your personal life first so you don’t ruin your personal life again,” because you’re going to bet everything on something, and then, once that’s over, you—

It just never happens. You have your family, the non-compete clause expires, and now you’re back in this.

But perhaps your ambition when you were younger—because you started RXBAR at what age? In your early 20s, something like that? 24?

24.

2. Building the most important food company of the 21st century

But now the scope of your ambition is, like, David, this is not a bar company. That’s just the first of the products. How would you describe what you’re working on now?

We don’t want to tell you what not to eat. I think that’s a big part of the food business: “Don’t eat this.” It’s demonization, and it’s pseudoscience. We want to make your favorite meals smarter.

That’s why it’s a very discreet approach. They’re there, and they’re smarter, more intelligent, more effective—objectively better. We’re going to do that in multiple categories. The protein bar is our wedge.

I know. It’s what we use for climbing.

Well, once you reach scale, you can build the platform from there. You have the organization, you have the route to market, and you have the R&D capabilities. The protein bar gave us our platform, and now we’re expanding into categories that simply make sense for us and our technology.

When you started David, you knew you weren’t going to stay there, that you wanted to build a food company and not a protein bar company. I’m going to answer my question the way you told me before, which I thought was excellent, where you say, “I have to be the best in the world at what I do in my category.” And I said, “What’s your category?” And you answered, “CPG, consumer packaged goods.” I said, “What does that mean?” You replied, “Anything you can buy in a store.”

Yes.

That’s the size and scope of your ambition.

Yes. It’s like we’re competing with Nestlé. In other words, I want to build the most important food company of the 21st century.

Nestlé has over $100 billion in revenue. They are truly global, too. Pepsi is probably around here somewhere. Actual scale.

So, companies worth a couple of hundred billion dollars. How many different products do they have?

Well, they have this huge portfolio of brands.

Yes.

Hundreds of brands. Those brands are different depending on the culture or geography.

Do they grow through acquisitions or not?

Yes, mostly.

Good. Are you going to do that, too?

Probably. It’s on the table, but our core competency is the ability to build brands. I know how to create an identity and build a brand. For the next 4 or 5 years, we’ll probably just be creating brands, but I wouldn’t rule it out later on.

3. How a brand is like a human being

Okay, so tell me what you know about building brands and identities. This could be interesting.

The analogy I think of for a brand is simply that of a human being. A brand has a name. She has a mom and a dad. They are the founders; they are the parents. Those parents have DNA.

This brand, this individual, has values. It has a vision of where it’s going. It has other features, a tone of voice. It has friends. Who do you partner with?

Wait. Explain that part to me. Who do you partner with?

Who are you going to partner with? For example, David Protein has an association with Human. In other words, that’s an alignment. We wouldn’t form a partnership with—I don’t know—Ms. Rachel. It doesn’t make sense. I know she’s great, but just like a person, your social circle matters.

When creating a brand, that identity—in terms of tone of voice, visuals, what clothes it wears, who its friends are, its values, and its vision—you define it clearly, and there is a kind of guiding star for it.

The most important factor in building brands is that it simply takes time. If you maintain this identity, it can be dynamic in nature as it grows, but you do it consistently over time and with a very high-quality product and service. The time factor is critical; you have to be doing that over time.

David’s values revolve around intelligence, beauty, and discipline. That is rooted in the history of Michelangelo’s masterpiece, the sculpture of David. Those values are rooted in the symbolism of that masterpiece and in the tool, the chisel, which is like a rudimentary nail. The meaning of a chisel is intelligence and discipline, and if you apply those things, you get a masterpiece, something beautiful.

That’s the logic behind David’s brand and brand identity. If you have a very clear identity for a brand, its product offering, and its positioning, the marketing response becomes very simple. You simply keep repeating those points over and over and over again.

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How much time did you spend planning this brand identity for David?

6 months, maybe.

Okay, so once you have this clearly defined set of qualities for the brand, you say, “Okay, then we just extend this for decades.” Is that the plan?

You just hammer on it.

How do you move forward? How did you learn the importance of maintaining the same brand identity over a long period of time?

Just studying brands. If you look at the top brands, they’re all old. Time is a factor that is really, really important, as is consistency.

There’s an asymmetry where those brands are super fragile. If you mess with quality or anything else, it ends very quickly.

The reason I asked that is because I was obsessed with a guy named David Ogilvy, and I’ve read every single one of his books. He built one of the best advertising agencies of all time and hammered away at exactly what you did. You sounded exactly like him.

If you read his autobiography or Ogilvy on Advertising, his main point was that people change too much. You choose a brand identity and do it over and over and over again for decades.

Yes, you came to the exact conclusion. The best brands are the best because they've been doing this for decades and decades. It’s fundamentally about the brand’s values. With David, it’s about intelligence, beauty, and discipline. Why did you choose those 3 traits, though?

They’re close to me. I love beauty, I love intelligence, and I love suffering and discipline to an almost negative degree.

Protein bars are where we started. So why are people looking for protein bars?

They come to them because of their body composition. Nobody actually eats protein bars like, “Oh, I’m just going to enjoy this treat.” It’s very, very functional. It’s, “I need to transform my body, either by building muscle or losing fat.”

The protein category in general is very much geared toward those values as well. With David, one of the things he wanted was a weight-loss or body-composition company without actually being one.

4. From zero to $300 million in two years

If you look at the big—well, not so big—1990s weight-loss brands like Atkins, Weight Watchers, and Jenny Craig, they’re in really bad taste. But people came to them for body-composition issues. So the question was, “Okay, how do I make that more refined? Really more European, as if it were of a higher and better taste?” And so I did that.

The other idea—I don’t know, when I turned 35 and looked at my friends, I just realized that everyone I knew had some kind of weight problem. It seemed like everyone had struggled with weight loss. As you get older, everyone wants more muscle. Everyone I’ve spoken to either has a problem they’re honest about or something they’re keeping secret. It’s an omnipresent problem.

So what I do is figure out how to create a brand that truly embodies that in a refined way.

5. Why Peter always chooses the hard path

Okay, I’ll get back to the masterpiece in a minute, so don’t let me forget that part. But you said that you’re almost attracted to suffering in an almost extreme and ridiculous way. What on earth does that mean?

I always choose the difficult path. Even when I exercise, I choose the most painful exercises. When I take my son for a walk, I refuse to use a stroller. I just charge it all the time. I like being strong and doing difficult things.

I think there’s something spiritual about suffering that I find very rewarding once you overcome it. Physical suffering is easy because you just experience extreme heat or extreme cold. But the good thing about building a company is that it’s emotional suffering. There are many conversations.

What I learned from the beginning is that if you face those things, there is growth in the end. I found this relationship: the more you suffer, the stronger you become and the more growth you experience. So when I see it and feel it, I lean toward it.

Travis Kalanick, the founder of Uber, was on this podcast and said something that resonated with many people. He says, “The very life of an entrepreneur is, ‘I can endure more pain than this guy, and I’m going to prove it to you.’”

Do you agree with this?

Yes. It’s fun. I love it. Pain tolerance.

I want everything you have in your mind regarding pain and suffering tolerance. Let’s put it on the table because I think this is very interesting.

Look me in the eyes. I don’t know if we can capture this on camera or not. It just feels good, and I don’t necessarily know where it comes from. I think it’s rooted in a competitive nature, but I believe it makes you a better man.

I think there’s a nuance: suffering without any benefit is not good, but I think this is different. I have a lot of resentment and anger in my life. If I don’t take advantage of it in a certain way, I start to be a bad person or I start to be unhappy.

Physical effort, exercise, and building a company are ways to channel all this resentment and anger in a very productive way.

What is the source of resentment and anger in your life that you feel you need to channel?

Trauma is relative, but for me, I grew up with wonderful parents. I don’t want to sound like I suffered that much, but when I was a child, I was simply labeled as disabled because of my dyslexia. I remember overhearing teachers talking and saying things like, “Is Peter stupid?” as if he couldn’t read properly.

I remember overhearing those conversations with my parents, and that marked me in a way that became my deepest intrinsic motivation to prove them wrong. That’s actually why I’ve been so difficult with any kind of authority, and so contrary by nature, because my childhood survival strategy for having self-esteem was basically to say, “All of you teachers are wrong. This whole system is broken. Go to hell.”

I think that at the core of my personality is this desire to prove that everything was wrong. Also, to survive in school, it took me about 10 times more effort to get a C or a D. That’s why I think a lot of my pain tolerance comes from there, but my resentment and anger certainly have their roots in that.

Do you still feel this when you wake up today?

Yes. I think it’s like a tattoo. I’ve tried psychedelic therapies, but this is already tattooed on me at this point.

You’ve tried to get rid of it and you can’t?

Yes.

So you feel that your way out is to crush your competitors, something like that?

Yes. It’s winning. It’s not that I’m really proud of it; it’s just the way it is. I didn’t really choose it, but it’s kind of to show that I’m not like that. Fundamentally.

When I was pretending to work as an investor, I was deeply unhappy because I wasn’t able to channel it. I felt like I was on the sidelines. I’m not a damn cheerleader. I’m on the sidelines, and I need to channel all this anger into a result. Reporting on a portfolio isn’t that.

I have a younger friend with whom I feel I can share some of the experiences I’ve had with this person. I told him that, as a general rule, the further you get from the person who actually has the talent, the more cautious you should be.

In other words, the founder is obviously talented. You obviously have talent. You created something from nothing, and you’ve done it time and time again. Now you’re building this, but you have to be careful with these agents. You have to be careful with these bankers. You need to be careful with these investors.

The further you distance yourself from the talented person, the more incentivized they are to try to persuade or cajole you to act, in many cases, against your interests.

Yes.

I was saying, just stay close to the people who are truly talented. You don’t need many friends in life. You can have 5.

Yes.

That’s the kind of group of friends you should have, while you have all these other phonies out there playing at politics. You can get ahead that way, which is completely different from how the entrepreneur thinks.

Yes, I agree with that.

There’s something else you were saying, because I’m not going to let this go. I want to hear more about your resentment and this sort of attraction you have to pain.

The founder of Four Seasons, a guy named Izzy Sharp, has this great quote. It all began with an almost shameful ambition—and I mean that in a good way—when he said, “I’m going to build the best luxury hotel chain in the world.”

He knew nothing about it. He had never built a single hotel before setting that goal. His autobiography is excellent, and in it he says one of my favorite maxims in the history of entrepreneurship: excellence is the ability to endure pain.

Yes. It’s the same thing.

He had a very complex relationship with his father. He had many people who doubted him. This idea you just told me makes a lot of sense, because it appears in these biographies time and time again and in many people who have come on the show.

I just mentioned Adam Fruge. Something that drove him was simply, “I tried to raise money. I was willing to sell 25% of my company for $1 million. This is a company that will eventually be worth $100 billion or $200 billion. I got rejected. These venture capitalists rejected me and then funded some of my competitors. So we made it a principle of the company to bankrupt those competitors.”

When I listen to you, I hear what Josh Wolfe says with his great line: “Having a thorn in your side helps fill your pockets.”

Yeah. It’s like using that pain you had when you were younger as a drive and channeling it into momentum and achievement.

I think the key is, if you have that and you don’t channel it or focus it, it’s destructive. For me, it all gets channeled through the process of building our company, and then it’s productive. It can be destructive if you don’t channel it.

Okay, so how are you channeling it into what you’re building now? The output of the company is really impressive.

Just a lot of hours sitting in the office and dedication.

What do you find impressive about the output you’re doing right now?

What does that mean? We’re only 2 years old, and it feels like 5. Our relationship with time is really weird.

In 2 years, I mean, we’ll be over 400 million this year. We’ll be doing 300 million this year. We’re in the frozen-food category. We’re obviously in protein bars. We have a ready-to-drink beverage. We’ve launched a candy in 3 different formats.

We’ll be launching another brand in November. You just don’t see that kind of output in my field, and it just keeps getting better. All our products keep getting better.

But we're the fastest-growing food company—I think. No, I don't know, in history. So it's really hard to scale it, and the rate at which we're doing it... I think this would normally take 10 years, and we've done it in 2.

Explain to me why it's so difficult to scale.

It's difficult to scale because of inventory. You need to go and buy the raw materials, turn them into finished product, and some raw materials take a long time. For example, the dairy market was super tight. Growing 300% or 400% a year—or even closer to every 6 months—is very demanding on the supply chain. For Travis, this is all about atoms. We're not a digital business at all, so the inventory part is really challenging. Matching supply and demand has been very difficult.

And you've had times in the company where you ran out of supplies, right?

Constantly, yeah.

6. Why Peter started selling frozen cod

Is this when you started? I was telling you, Rob and everyone have been telling me about David Barr. Then I saw an ad and you were selling cod or something. Is that a result of supply issues? Did you run out of supplies? What happened there?

The cod story was that we were creating our website and doing a comparison chart. The one metric we considered really important was how many of your calories came from protein. On that chart, we were number 1. We were number 1 on everything, and for me, because of my influence as an investor, any chart where I see that everything is number 1, I think is nonsense.

So we said, “Well, we need to find something that is number 1. What has a better protein-to-calorie ratio than our flagship product?” The only thing we found was boiled cod. On our comparison chart, we put boiled cod in the number 1 spot and David in the number 2 spot. We just left it there as a sort of obscure comparison.

Why it worked is that the juxtaposition between our bar and the cod signals convenience and value, and cod is pretty unappetizing. Then, halfway through our first year, I thought, “You know, it's like déjà vu for me.” I thought, “This is super boring. Another flavor, another...” I said, “We need to do something bold.”

So we said, “Let's sell real cod.” Not as a gimmick, but to sell real fish. We did this boiled cod campaign, and everyone was like—

It was funny because it was like, “Let me sell.”

Yeah, I said, “I got into the frozen business and went back to our brand values.”

It was a really smart thing because it set up the conversation about the protein-to-calorie ratio, but it did it in a way that wasn't exactly straightforward. It was like a little riddle. It's $55 for frozen cod online, and nobody's really interested in that. So we didn't have product-market fit, but it worked as a great communication tool.

So, create a product for marketing benefits?

Yeah, we call it product-as-marketing. I'm not going to give up on that. We're going to keep at it and continue. We're going to keep at cod until we achieve product-market fit.

I don't think you know that. I don't think you'll get it, man.

I know it's funny, because if you look at our website, there are protein bars, bronze and gold, Heinz, frozen ice cream, ready-to-drink beverages, and even fish. It's weird, but to be honest, the whole food industry is fucking boring. Everyone says the same stupid things and does the same things, so being my second time, I thought we had to have some fun with this.

Okay, so that wasn't a response to supply issues, because up until now there wasn't any demand for this frozen cod.

7. The organization is the product

Yeah, I know. It just so happened to coincide with us running out of stock of some things, but no, it was a separate thing.

Okay, back to when I interrupted you because you started talking about pain. You said we should talk about building a masterpiece. What were you going to say about that?

It takes a lot of discipline and intelligence, and it takes time. That's what Brand A is really about. It's like finishing your masterpiece. And every event, every inner excellence.

But how do you apply that to building your company?

I think I start by thinking, “What the heck is a company?” Our strategy is based on 2 fundamental things in a company: people. It's all about people, as cliché as that sounds. I think of the organization as a product, so my focus is totally on that.

The second part is the product and product mastery. When I think of product, I think of brand and product as the same thing. The product is just the raw material, and the brand is what you see—the outer part. But if you try to see the organization as a product, the company is just a group of people aligned with the mission.

If that's the most important thing, what actions does the company take to make sure it's achieved?

For us, we have 4 processes in the company that ensure our organization functions well and that the culture is lived. If people are everything, the most important thing is who you choose, who you select for the organization. How do you train and onboard them? Third, how do you select those who will be promoted and rewarded? And then, how do you end the relationship with those who shouldn't be there?

Those 4 processes are fundamental to building the organization and scaling it. That's why we dedicate a lot of time to refining our hiring process. Training and onboarding are fundamental, as are promotions, rewarding the right behaviors, and terminations. All of that is organized around our value system, which is the best way to align a group of people and ensure that the right behaviors align with what we want.

What are the behaviors you want?

You want truth-seekers: people who have the courage to seek the truth. That's fundamental to our mission. You don't want bias to be present. Something fundamental would be humility, which I define as freedom from pride and arrogance.

Humility is truly fundamental. It manifests itself, for example, in a conversation when you say, “I don't know what I'm doing. I need help.” I don't want a culture of covering each other's backs, where people say, “I have this data. Therefore, my decision is good.” That's not really productive.

Talk more about that. You see people from big American corporations coming in and generating a ton of data, surveys, or whatever to prove their experiment or cover their backs if the experiment goes wrong. It's like fake work. It's performative, like, “I'm only doing this to cover my back,” instead of focusing on the experiment and not worrying about covering your back.

Entrepreneurship is also a very important value for the company, and that's so contrary to any performative activity. The fear of failure is the opposite of entrepreneurship. You just can't allow that as a company grows.

So, you get a lot of people coming in from different corporate backgrounds who are just looking to protect their position. Can you recruit from other food companies, since you guys are so different? Most of these companies haven't been led by their founders in, I don't know, half a century or more.

Yes, we can and we do. They have a lot of good experience. You just have to baptize them when they arrive. That's why the onboarding process is really critical.

Do you baptize them?

Yes. You just have to teach them new beliefs and new values. If you just throw them in there, they're going to take what they know and apply it. You really want them to assimilate into the culture in some way.

A very thoughtful onboarding process is critical. You learn the company's values, you learn entrepreneurship, you pack boxes, you learn humility, and you learn all these things. It's really critical.

8. Why he recruits former founders

Are the most talented people in your company the ones without experience?

The most talented people in our company are former founders.

Talk more about this.

Convincing a founder to leave their own thing behind to join a bigger company is a very strong signal of the opportunity we have ahead of us. Basically, I would frame it as this being a platform for you to do your thing. You can do your thing with amazing technology and resources, and you don't have to deal with the nonsense of raising money or all the bureaucracy that comes with dealing with different stakeholders.

I think you see this in AI, where all the founders' talent goes to those platforms. Convincing them to join a founder-led company without the bureaucracy, so they can fulfill their vision, is a very powerful proposition.

Did you specifically target founders?

Yes, definitely, because they have initiative, courage, and humility. They're not broken down by American companies or by school. School breaks you down, too. You have to follow procedures. You don't think outside the box; you're following a manual. There is no manual in entrepreneurship. You have to think from first principles, understand the fundamentals, and, fuck it, just move forward.

We just had Luca Ferrari on, and he started this crazy company called Bending Spoons. He does it from Milan, not exactly a startup hub, and he talks about how being isolated was super valuable for him because he couldn't even copy the startup mantras. He didn't know them, so he was immune to them.

Yes.

His point was simply that he prefers young people, or even people who didn't graduate, over experience. He simply says, “I don't want your bad experience. I know what we're doing. Let's take young, intelligent, highly motivated people who are really eager.”

I think he said he received around 800,000 applications last year for about 350 positions. He's in markets where there are a lot of smart people. There are smart people everywhere, but there aren't many great jobs for them. Their economy is terrible.

Yes. He just says, “I’m just streamlining this.” Then they’ll come in, and I’ll indoctrinate them on how we run a business, which is completely different from school or a mediocre company.

Yes. Experience is a really valuable thing, but it has a consequence: you naturally reason by analogy or through your experience, which can be accurate, but you’re not going to ask the dumb question or think from first principles because you’ve already done that. You’ll just move faster by leaning on your experience. In my personal case, I started a company with no real experience. Ultimately, I don’t think it’s that important if you have good reasoning skills and the right ability to learn.

The best thing is someone with no experience and some damage—someone with a thorn in their side. There are people in our company you can’t compete with. They don’t give up; they have something to prove. Those are the most powerful people you want to organize around.

Tell me more about them.

It’s all about childhood—something went wrong in their childhoods. There’s a guy on our team I can’t compete with. He’s just going to die before he fails. He didn’t have an easy life, so for him, this is something really different.

You want a lot of those people, but probably too many will break things. Generally, you want a balance between those crazy, driven individuals and some people who balance the team—people who are very rational, pragmatic, and more conservative. You want a good team design, but the ones who drive the company are usually those driven, high-initiative, entrepreneurial individuals.

Did this person turn out to be a former founder?

Yes.

How long did it take you to recruit him?

When we bought EBG, he was a casualty of that acquisition.

A casualty?

9. Buying his supplier and victimizing his competitors

Yes, because we bought the whole company. He was a customer of EBG's business, so we recruited him to join us and do it here.

“Casualty.” I love that you said that.

Okay, let’s get into this, because this is one of the stories I’ve been hearing about you for a long time. It’s the story that other founders repeat so much. That’s very Rockefeller-esque. Explain what that is. What is it?

Epogee.

Okay. So, in March of 2020—don’t jump into the acquisition yet. Talk about what this does and why it was important to your business. Great. Then we’ll get to the fact that you acquired it.

Apogee makes EPG, esterified propoxylated cholesterol. It’s basically a modified triglyceride. Olive oil is a triglyceride, and a triglyceride has 3 fatty acids attached to a cholesterol base. Your body can’t digest it unless lipase cuts these fatty acids.

What the company discovered was that if they block these fatty acids, lipase can’t break them down. What that means is that you can have the taste and texture of fat without the caloric or metabolic impact. It’s a huge innovation because most of the calories in food come from fats. They have twice the protein and carbohydrate content.

This technology was misunderstood, like most food technology. It was there, and it’s a really amazing thing. You can eat your cake and not suffer the caloric consequences. Think of it as high-intensity sweeteners like stevia or monk fruit. That’s the level of innovation.

Anyway, we were using it for David, and we were responsible for about 90% of the company’s sales. All roads led to litigation.

So, this is a patented technology. You had only one source where you could buy it.

Yes.

You said you were 90% of this company’s total sales.

Yes.

But there were a handful of other companies that saw the same opportunity in using this in their products.

Right. Yes. So there we were. We started, and the company was struggling, with a bunch of cats and dogs trying to make it work. It’s hard to work with; it’s not easy. It requires good product-development skills. But we were 90% of their available supply.

You’d be in a bad position if, for some reason, that company went bankrupt or decided to cut off your supply.

Dead.

Okay.

Eventually, we became 150% of their supply, meaning they couldn’t keep up with our needs. As soon as I started the company and we used the ingredient, my impression was that it was a dangerous dependency. It was also run by older gentlemen, mostly lawyers. You know how it is: lawyers running companies is not a good thing.

I was thinking, “Either they kill us, or this ends in litigation or extortion, or we buy them out.” All my focus was on making sure we bought them out or did something. Then, in February—basically 6 months into the company—they said to us, “Hey, you guys are doing amazing. What if you take charge?”

Of course, I said, “Let me think about it for a second.” But we negotiated, and it was a no-brainer.

These food companies need to be vertically integrated. If you make a food ingredient and try to sell it to a big company, it’s hell. The food company says, “You don’t have enough supply to meet our demand,” and you reply, “I don’t have enough demand to generate the supply.” On top of that, it’s too expensive. To top it all off, they tell you, “I need redundancy. I need 2 suppliers.”

“Well, I have the intellectual property. I can’t do that.” So vertical integration makes perfect sense. They couldn’t vertically integrate because they didn’t have a way into the market. They essentially bought this patent as a way to make money.

Yes. They developed the process.

Yes, they developed the process, and they invested in it. The founder’s spirit is incredible; it just required so much cash that it ended up being diluted, so the lawyers could take control. It made sense for both parties to merge and acquire.

We did a hybrid deal where we bought half the company—actually, we bought the whole company, but half in stock and half in cash. Then we got to a situation where David was way over our forecasts, so we were covering 150% of his supply.

At the end of the day, there were a lot of customers who didn’t have a supply contract. Honestly, their businesses weren’t going anywhere. If you didn’t have a supply contract, you simply weren’t going to receive product.

With David, the first thing I did when we started was negotiate a supply contract with them. Before the acquisition, we had a contract that protected against changes of control, with most-favored-nation clauses on price and inventory. All the available inventory was ours.

How did you know how to do that?

When you have a dependency like that, you have to make sure you’re covered. Even if the deal didn’t go through, we’d have the entire supply anyway. We were the elephant in the room for the company. If you didn’t have a supply agreement, you were out of luck.

The way it was reported, or talked about, was that there was a very important patented ingredient that you needed. You were using most of it. There were other companies also using it, with whom you were technically competing. You bought the company and cut off their supply.

Yes. But I didn’t hear the second part of the story, which was that I then also hired people I had just won over.

Yes. You had a lawsuit or something over this, right?

We had a lawsuit and an antitrust claim, yes.

Is that still in court?

It was dismissed 3 times. For that lawsuit to work or have any merit, it would have had to be a landmark intellectual-property case.

The big lesson—and I think you already had Lulu—is that if I had had Lulu on hand, I would have handled the communication differently. We didn’t; we let Epogee handle the communication a bit, and we did a terrible job communicating.

Did they even communicate?

There was a notice about the acquisition and that, if you didn’t have a supply agreement, there wouldn’t be any supply. But I could have done that communication better. I could have done it with more compassion and called the entrepreneurs, or handled it differently.

In what way exactly? Compassion doesn’t seem to be one of your personal traits.

I think it is. I think compassion is important.

Do you have it?

Yes. You have to have it to be a good leader.

Show me. No, no—where do you hide it?

I just don’t feel sympathy for stupidity. I have no sympathy for incompetence, really. It was so obvious that if you were going to use an ingredient that had only one source, you’d better make sure you had a supply agreement. It’s critical.

This goes back to something that was second nature to you, something you don’t even feel is special. Remember at the beginning of the conversation when you were saying, “Well, yeah, I have all this money. I’m going to relax. I’m going to find a wife, have kids, and then I’ll invest on my own”?

Obviously, you’re an entrepreneur, so it’s a matter of life or death for you. You’ll take it very seriously. You start writing checks, and companies are like, “What’s this guy doing?”

Yeah. You didn’t know how uncommon you were.

Yeah, I know. Totally. It’s the same situation here.

How many other companies were involved where you bought the same ingredient?

3.

Okay.

Their response is, “Well, I didn’t know I couldn’t. I didn’t know that was an option.” It’s like, what the heck? What do you do all day? Honestly.

I came across one of my all-time favorite quotes when I was reading the book Zero to One. The quote says, “The most powerful pattern I've ever noticed is that successful people find value in unexpected places, and they do it by thinking about business from first principles rather than formulas.” That's exactly what AppLovin has done with its advertising platform. AppLovin connects you with over a billion new potential customers in mobile games. AppLovin lets you capture total attention. AppLovin ads are full-screen videos that are watched for an average of 35 seconds. That's retention that surpasses other advertising platforms, and you can launch on AppLovin in minutes. You set the goal, and AppLovin achieves it. No complex setup, no experience required. And AppLovin scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scaled to hundreds of thousands of dollars in daily spend, and increased their revenue by millions. So you'll want to get started fast before all your competitors are on AppLovin. And you can do that by going to applovin.com. That's applovin.com.

Is this why you had to raise money?

Yes.

So your first company, RXBAR, was kind of a loan from friends and family? What was it?

My dad and my partner's mom guaranteed a line of credit.

A line of credit. But no typical venture capital?

No.

Okay. What did you start with, Peter? Did you raise money right away? Did you put in your own money? What did you do?

I put in $2 million of my own. It was like any seed capital, and that was enough to launch. Then, at launch, we raised $8 million for working capital just to survive.

Why not put up the $8 million yourself, since you already had it in the bank?

Because I wanted to include some people who had been really good to me. Valor Equity Partners—Antonio and John—had been very supportive, and I liked how they operated. As their name suggests, Valor. They're quite intense.

Outside of Valor, weren't they typical investors?

No, no. Friends and things like that. Small friends.

Yes.

Then I said, “We're done, okay? We don't need any more.”

Why was that your initial reaction?

Because I don't want to spend time talking to investors or raising funds. I think in consumer goods, the P&L should work out pretty quickly. You don't need the economics to make sense. So, you should be really efficient with capital. You shouldn't be raising a lot of money unless you're going to acquire a company or do what we're doing.

That wasn't on the table at the beginning, so I just focused on the business without thinking about raising more money. I thought that was it. That's the only capital that came in. Then we had an incredible product-market fit, it grew, and then—

Here I am, needing to raise money to figure out how to sell fish online.

Yeah, exactly. It was funny. We eventually raised a round to fund the acquisition, and it turned out we didn't need any more money on the balance sheet.

Okay, wait. Before we get there, how much money did you raise to make the acquisition?

We raised $85 million.

And who did you raise it from?

Greenoaks and Valor.

10. How Neil Mehta and Greenoaks earned a spot on the cap table

Okay. We need to talk about Neil Mehta. I'm friends with Neil. I talk to him on the phone all the time. I spoke to him about you, I don't know, 2 weeks ago, and he has some hilarious stories about you that I'll also mention on the podcast. But you have to explain: Why did you choose him?

You said you wouldn't put in any more money. You're a second-time founder. You made a ton of money before. You have all these other investors chasing you, and you don't even like talking to them. You were kind of—and this is my own characterization—not rude, but just like, “Leave me the fuck alone. I'm building my company. Get lost.”

Greenoaks was looking for you, right? So explain how you ended up choosing Neil and Greenoaks.

The investor class thinks it has very, very high status, and they always approach me with the right to want to take my time. So I've always seen it as, “I'm not giving them my time.” It's not that I'm disrespectful, but I don't take calls from investors. I just don't. I think it's a waste of time.

Besides, I have my own capital, so I said, “I'll fund it myself. Screw it.” That's a great position to be in, by the way. I love it. I don't need anything.

Anyway, my friend Chad Byers said to me, “Hey, my friend Neil wants to contact you.”

I said, “What about?”

He said, “Oh, he's an investor.”

I replied, “Cool, but I'm not taking calls from investors right now, with all due respect.”

So I declined. Then, 2 weeks later, Chad said, “Hey, I think you should put some time into them.”

I said, “Okay, for you, Chad, I will.”

I got on the phone and said, “I'm really focused. Look, listen, this isn't a tech company. The math should work out really fast. We should have profitable sales. That's how we're going to grow: profitable sales and then a line of credit.”

They said, “Cool. If any opportunities come up, let us know.”

I said, “Cool, I will.”

Time went on, and we were working flat-out. Then I started getting messages from former RXBAR employees. A firm was contacting them to pay them to evaluate me. It wasn't just 1 person; it was about 20 people I hadn't spoken to in 5 years saying, “Hey, Peter, should I take the call?”

I told them, “Yes, take the call.”

They were basically saying, “We'll pay you $1,000 if you call us and tell us about your experience with Peter. What kind of leader was he?”

I said, “Yeah, take your money.”

I had no idea. I thought I was going through a lawsuit, so I said, “Oh, they're just trying to find dirt.” I had no idea he was an investor.

Then the Apigee deal happened. The president of Apigee came to me, and we said, “Hey, let's work out a deal.”

So I contacted Neil again. I said to him, “Hey, this is happening. Do you want to take a look?”

Of course, I contacted Valor and said, “Hey, this is happening. We'll probably need some money for this.”

That's why I respect Greenoaks so much. Even though I'm a bit rude to them, they put resources into doing the best due diligence they could on me. They were saying, “Dylan, just do my lead.”

I believe that's the most fundamental thing for this investment to work. You have to make sure he's the right kind of leader.

They had already done it when there was no agreement on the table. Not only was there no agreement, I had already told them there would be no agreement. When I found out, I thought, “Oh, wow. These guys are good.”

I didn't hold an auction. I want the right people on the capitalization table. Greenoaks won only because of my respect for their approach. I kept it to just friends I know.

11. How Peter fundraises

Valor had a conflict of interest because they were involved in the deal, so they couldn't do mergers and acquisitions. The deal was to finance the other company. Greenoaks led, and they're amazing. I'm very lucky that Chad connected us.

Before I tell you the story he told me about you, you just said, “I didn't hold an auction.” Why is it so important not to hold an auction when you're fundraising?

The reason I didn't want to do it is, first, we didn't need a lot of money. If we needed a lot of money, I think it would be different. But we only needed 1 or 2 players.

We were growing like crazy, and I didn't want to consume the company's resources in a way that would harm our operation or our business. I'm very sensitive to the resources that an auction would take.

What resources would an auction require?

You have to hold a lot of management meetings. You have to constantly answer due diligence questions. In other words, it's a very long time.

Your whole argument keeps coming back to the fact that you're intolerant of wasting time. You've said this in half a dozen ways, in subtle ways, since we started this conversation.

Yes. I'm obsessed with time.

If we think of it as an analogy, it's like aerodynamics. I want to be super-aerodynamic through things.

My goal, being on the other side as an investor, is also to want to maximize value—but not really. If I wanted to maximize value, I would organize an auction and not care about anything else. But I don't want to do that. I want to make sure my investors make money and are happy with the investment.

So you want to walk the line where it's lucrative, but not too much, right? If I'm on the other side, I can subscribe to that quite easily.

I want to make sure that all stakeholders make money. That's my focus.

The result of that is that maybe we could have gained an additional $100 million in valuation. I don't know, but I don't really care. I want to make sure everyone feels good.

I agree with this. I just want to explain your way of thinking. What is an additional 2%? It doesn't matter. It simply doesn't matter.

I care about money, but I don't care about that kind of money. I care about how the people on the team feel—that they're excited and aligned.

I've seen founders on the other side of the table who prioritize business value so early on, and it's just disgusting.

Why is it disgusting?

Because that's not what it's about. At this stage, it's about having the right people and focusing on the mission. This is not about maximizing business value at this stage.

If you're good, you'll end up getting the money anyway. It's simply going to take care of itself.

Yes, and we got a good, fair valuation, but I don't want an investor saying, “Okay, we'll do it, but I don't agree.”

So you said that if you were on the other side, you could back it up. Basically, you want to make a deal where, if you were Neil, you'd accept it because it's a good deal. You should make that investment.

Yes, and that's exactly how I back it up. I operate as a CEO and also as an investor because I'm participating in all of this. That's a conflict, but I generally try to bifurcate it, like: “Okay, Peter is the CEO, but he's also an investor.”

Are you saying you're putting more of your own personal money into the company? Why would that be a conflict of interest?

Because I could lower the valuation for myself—

I understand.

Yes, it would be for my own benefit.

You would try to do what's best for the company, not just what's best for you.

Yes. I first read Michael Bloomberg’s autobiography about years ago. I learned that he owns one of the most profitable private companies in the world. I’ve heard crazy rumors that we don’t even need to mention—that he’s much richer than everyone knows—but I’ve heard he’s orders of magnitude richer than reported.

He raised, I think from Merrill Lynch, if I remember correctly, $30 million for 30% of the company. Then he ended up buying back that first 10% about 10 years later, and I don’t know, he paid something like $200 million for it, right? Then he bought the other 20%, I think in 2008, for $4.5 billion. So, if you analyze it, one of the best investments he made was buying back his shares, right? Essentially, he now owns his entire company. I think he owns everything, or 90% or something like that.

Could you give us a future example? I do think you’re obsessed with control. Anyone who’s obsessed with quality, control, and all that stuff might see you wanting to buy back the shares at some point.

If the opportunity arises, definitely. The governance is structured in such a way that I have that control.

So, as long as that’s there, you’re in control.

Yes. I know how to handle power, so I don’t abuse it.

Are you going to continue fundraising? In other words, you do need it, but not right now. In each round, you invest more money from your own pocket. Is that how you do it?

Yes, I spend a little.

You have to do it.

What the hell else am I going to do?

12. Running a business is like a river

Very good. I get on the phone with Neil, and he says to me, “Peter is one of my favorite founders.” He means the founders he likes to invest in, which, as I hinted at before, is that nothing is ever good enough. You wake up and don’t focus on what’s right. You only see the flaws in your business, and you tackle those weaknesses by trying to make your business stronger over time. Again, that’s something very common in the history of entrepreneurship.

I suppose he came to visit you with someone else, and you were with a group of people who work with you, doing taste tests of new or existing products. You asked, “What do you think?” They said, “It’s amazing,” and you said, “It’s bad. This is crap.” He said that you told him everything was wrong, that it was all crap, and then you listed all the shortcomings and the things you wanted to fix.

Running a business is like a river. As long as it flows, great. But if something is blocking that flow, you have to fix it, damn it. If something gets in the way, I overthink it so much that I can’t sleep until I fix it so I can sleep. I overthink problems, so they torment me. This is actually a problem I have.

One flaw in my leadership style is that I don’t recognize wins or success. I’m only worried about what’s wrong, so I’m working on that. In fact, I’ve delegated that internally and told people, “Make sure you say, ‘Tomorrow is our birthday.’”

I hate birthdays, but our birthday is tomorrow, so I said, “Please do something so we can celebrate our birthday.” They told me, “I don’t do those things.” I delegated it internally a bit, but, yeah, it’s because you just fix things. I don’t know if the approach makes sense.

It’s almost like what Elon does. We had Zach on the podcast, and Antonio Gracias is on his board of directors. He says that, for the first 2 years—and I think it’s still the case to this day—every conversation Zack Dell had with Antonio was, “Hi, Zach. How’s everything going?”

“Good.”

“What’s your bottleneck?”

He didn’t want to talk about anything else. He refused to talk about anything else. It was always, “What’s the bottleneck? What’s holding things up? What’s the critical path?” Then, as a result, it was, “Okay, what’s the next bottleneck?” It happens again and again and again. It’s a relentless focus on the bottleneck.

Yes. I think it’s like saying, “My job is to analyze the big picture of the business, react to problems, fix them, and then get out of the way once and for all.” It’s like constantly facing problems.

I believe that almost all elite entrepreneurs have exactly the same mindset. Even Buffett and Munger talked about this when they mentioned who operated Berkshire’s subsidiaries. They said, essentially, “Tell us the bad news, because the good news takes care of itself.”

That’s exactly what I’m saying. It’s like a flowing river. I don’t care if it’s good or bad. Tell me the bad news.

Exactly. It’s Tony Xu from DoorDash, whom I want to invite back to the show as soon as possible. I can’t explain it, but you talk to him—I think he’s 41 or 42 years old—and you sit there and observe him. You see that it’s not just a delivery business. That’s not what this guy is doing. He gives off the vibes of a young Jeff Bezos and is chasing something much bigger, something he sees that you can’t see at that moment.

He has this same problem where they reach a milestone, achieve a certain income level, or whatever, and he says, “Maybe I’ll go out to dinner.”

Yes, but in many cases, I don’t even do that.

It’s like, “Okay, I’ll come back the next day.”

The very next day.

Yes, exactly.

Just like with our restaurant, I didn’t do anything. That deal happened, and I just followed up the next day.

Even though you bought a house in Miami, you looked for a wife. That was a year and a half later.

Yes, I did do that at some point.

13. Why the company is named Medici

What are you trying to unlock right now that you see is blocking you?

We’ve reorganized the group to be a hybrid organization. We have David as a business unit with its own sales, marketing, supply, and finance, and then we have Hall Pass as another business unit. We have 2 business units, and we’re about to have a third, all operating semi-autonomously. Then we have shared services at the Medici level.

Why call the company Medici?

I love the story, and it reflects how we operate organizationally. The Medici created the conditions for the Renaissance to occur. They were not necessarily the perpetrators; they created the conditions that identified Michelangelo, Donatello, Galileo. It’s an analogy for what we do: the people who work at Medici, in the company, create the conditions for the business units to thrive and flourish, and they are the artists and scientists.

At Medici, money, law, and things that are agnostic reside there. Then the artists and scientists—the people who actually do the work—are at the business-unit level. The name fit how we operate. Medici creates the conditions for business-unit leaders and all operators to execute what they need.

Talk more about the structure. You have all these businesses. Did you just say they operate semi-autonomously?

Yes. Semi-autonomous means that there are some centralized services, but more or less, they are their own business units. They have agency and autonomy, they manage their own profit-and-loss statements, and they execute.

Unlike a large consumer-goods company, which is typically centralized, it’s a decentralized approach because speed and agility are the main objectives. If you look at it, you might say, “Your salary is too high.” It’s quite inefficient in terms of the profit-and-loss statement because there’s duplication of effort, such as duplicating sales staff. But for me, that’s the main goal of design: speed. If you’re designing for speed, you’re going to pay people extra to achieve it.

Rob and I had this exact same conversation yesterday.

14. Bureaucracy is not inevitable

Yes, speed is important. It has always been important and is truly crucial, especially in our market, where we deal with people on a gigantic scale. Our ability to launch products to market quickly is something I don’t want to lose. Honestly, if we lose that, I’ll end up quitting.

What do you mean by saying you would end up resigning?

If we lose our entrepreneurial spirit—if we lose our values, the way we operate, and our culture—I’m out of here.

Why don’t you just clench your teeth and bear it?

Clench my teeth? Yes, squeeze them, because it makes me angry. I hate big, fat, stupid things. I’m leaving here. I hate big, fat, stupid things, and I don’t want to be a big, fat, stupid company.

The problem is that, in reality, it’s inevitable as you grow. My job is to fight against bureaucracy and nonsense. It doesn’t have to be that way. You’ve even stumbled across this yourself, or maybe you’ve been very intentional in the way you’ve handled it.

I just finished an episode of my other podcast, Founders, about Henry Singleton, who led one of the most successful conglomerates of all time. In many cases, many of the ideas we attribute to Buffett and Munger were actually things they learned from him.

His philosophy was simple. In the 1970s, he owned about 130 companies, and 129 of them were profitable. They were profitable and, essentially, operated the same way: they simply managed their own operations. The only things he centralized were compensation and capital allocation. So, you manage, you make money, and I’ll leave you alone.

Performance equals freedom.

Yes, exactly. Then you just send your money, and I make the capital-allocation decisions for everyone. I don’t think it has to be that way. He didn’t have a big, fat, stupid, or ugly company, so it doesn’t have to be that kind of company.

No, no, I know. But that’s the nature of these organizations. If there are more people, nature itself draws them toward it.

The more people there are, the more it seems that’s what they want to become: a group of people. Luca Ferrari just said exactly the same thing, because he buys and acquires these companies and, in some cases, owns hundreds of them. They’re software companies.

Then he says, “How old are they? One month old?” He says, “How come they’re not profitable?” And he says, “What are these 400 people doing?” In one case, he bought a company that had 400 people and reduced it to 20. Now, from losing money, it has become a cash-printing machine. It almost recoups its original acquisition cost in profits each year.

But there was this whole thing he says: “It’s human nature to add layers and complexity.” I think he said that one of his company’s values is that anyone can raise their hand and say, “I don’t want to add this complexity.” He says he’s not the person who wants to add complexity. You don’t have to say anything else; just raise your hand. But the person who wants to add it has to be the one to justify it to the company.

Yes. So you have to fight it. At that level, you have all these semiautonomous business units. How much power does the person who manages the individual business unit have?

Quite a lot. They’re usually former founders. They must be either former founders or product leaders. That’s a credential, meaning they have to pick up the phone and fix the product; otherwise, they’re the wrong person. Therefore, they need to be product-oriented—ideally a founder or someone with that experience, but not necessarily. They can be product leaders.

Okay, tell me more about the organization now.

In Medici, the product, the cash, the people, the legal, and the regulatory stay there. I’m there, and we serve the business units. There’s a lot of collaboration in general; we’re all in the same office.

There’s a multidisciplinary team in each business unit, so it’s supply and demand. Demand is sales and marketing, and then there’s finance and supply. In CPG, it’s very multidisciplinary.

Typical business units are organized around sales, which is retail, marketing, and demand. They generate demand. Marketing can be primarily e-commerce, but also everything social and digital. Then there’s the supply side, which is the end-to-end supply chain, from raw materials to fulfillment and warehousing, and then finance, which is forecasting and pricing.

Finance is the referee. That’s what makes the interdisciplinary team run the business.

Wait, what do you mean by finance being the referee?

They define the framework for prices and define the budget. They’re the ones who establish that because there’s a healthy tension between supply and demand. There’s always a healthy tension there.

Finance is the referee in the sense that they define the rules of the game and, in my opinion, ultimately direct the P&L. That explains the tension between supply and demand. Supply-chain people are truly driven by accuracy and efficiency. Sales and marketing people are more charismatic and want to generate demand, and that may require less precision.

Sometimes they have a conflict of interest because some people just want to grow as fast as possible. Others want to ensure that the supply is there in an adequate and accurate manner.

I still don’t understand that. Talk more about accuracy. You’re using the term precision. Why would anyone be interested in the supply chain?

Generally speaking, it’s about knowing what you need, where it is, when you need it, and how much you have.

You’re talking about personality types.

Personality types, yes. Its function is to make sure we know what we have, where it is, when we need it, and how much we have. Sales is, “I want to win.” Often they overdo it, or there will be problems, and in the end, supply has to go and solve those problems.

Great. How many business units do you currently have in the group?

1, 2, 3, 4.

15. Why Peter has 25 direct reports

You said something earlier that I like, and I’d like you to elaborate on that as well. You said, “It’s very important for me to be streamlined as I move forward with things.”

I simply like efficiency and simplicity. I believe the best design is the simplest design. It’s in my nature.

How does your nature manifest itself in the way you build this business? Because it seems very complicated.

It’s complicated, but first, it’s a very flat organization, so there isn’t much depth. I have about 25 direct reports.

The interesting thing is that I read this book about Jensen, and Jensen famously has about 60 direct reports. A lot of people, when that came out in the book—and I think he talked about this in some interviews, too—said, “That’s too much. How could he do it?” And it’s like, well, this guy runs the most valuable company in the world, so it’s working for him.

How many direct reports are too many?

I used to think that 7 or 8 was the maximum you could have to really develop and give the necessary attention to train the best possible leaders. Now I believe that the value of having so many direct reports is that it allows you to see a lot and keeps the organization organized. It keeps me closer to the issues.

What I tell people who report to me is that I’m not going to manage them or tell them what to do. We’ll work together to set priorities, but I hope they’ll bring me the topics. I tell them they need to bring me their problems, and we’ll solve them together. But I’m not going to manage their to-do list.

That requires a certain type of leader who reports to me. I’m not going to manage them, but I will lead them.

Yes, so it requires these leaders to have greater agency and autonomy if they work with me, as opposed to a conventional organization that says, “I only have 8 direct reports.” Then you get something very, very stacked, where the hierarchy becomes too rigid and information doesn’t flow as well.

Do you have a co-founder?

Yes.

Are you still working together?

No. He’s no longer with the company.

What happened?

It was a great help at the beginning, but most founding teams never manage to scale to the promised land. The hardest thing about leadership is that the team that gets you started in the different life cycles is usually not the same group of people.

That’s one observation I’ve had. The observation you made is about the founding team. Let’s say there are 2, 3, or 4 co-founders.

Usually, it’s actually 1.

Yes, it just takes time to reveal who that one is. I’ve noticed exactly the same thing. I talked about Adam Foroughi previously on AppLovin, and I think he even said this on the podcast. He wants to run a very strict and ruthless meritocracy.

Yes, in the same way.

Their whole approach was that the co-founder who maybe had the skills to be the CTO at the beginning couldn’t keep up, so they literally had to make a change. In many cases, they had a conversation. Adam was the one who initiated it, but he was saying to them, “You see what’s happening. Do you want to do what’s best for the company, or do you want to have this fight?”

In many cases, if you simply frame it as this being obviously the best thing for the company, you see what happens, and it’s a friendly thing.

Mhm. Yes, and I don’t like the titles of founder or co-founder because they imply a certain privilege. It’s inherently antimeritocratic.

What do you mean by not liking the title of founder or co-founder?

I don’t like it. Being a founder isn’t a role. It’s not a job. You never hire anyone for that, so it doesn’t have a role in the company. That’s why I think people abuse that power, and I don’t think they should receive special treatment.

So I don’t use it. I believe it’s an abuse of power. Everyone has a role, everyone has duties, and you either do them well or you don’t do them at all.

This is what becomes more and more interesting to me as I have more of these conversations: starting to see the same similarities between people. I mentioned Luca Ferrari before, and you mentioned Adam Foroughi a couple of times. They both said the same thing.

Luca Ferrari says that they don’t even like the term “founder” in the company. He said that the 4 founders of Ben & Jerry’s all have the same job, and that job is to do what’s best for the company.

They don’t use the title at all.

Yes. Not me. It’s not in me, and it’s not in my signature.

16. Peter's principle of reactionary leadership support

How do you define your role?

Chief executive officer.

How do you think about that in terms of how you wake up every day?

My permanent job description is the management team, making sure they’re performing; making sure we get to product-market fit and continually achieve it; and organizational health. In other words, what is the state of the culture? Are people afraid? Do people feel free and creative? Are we living by the values? Can people articulate the values?

Then there’s culture, and the fourth would be strategy alignment. Are we organizationally aligned? Not in terms of decisions, but does everyone understand where we’re going, why we’re going there, and is everyone incentivized to go there? Is the group of people moving in the right direction?

The fifth would be cash or fundraising. Those are my permanent duties.

Then I have another one that I like to call—this is like founder mode—but what I’ve always done is call my main job reactive leadership support. Reactive in the sense that I literally react to it. I get information about fires or problems. It’s very reactionary, which is generally seen as a negative thing, but my job is to react to problems.

So, reactive leadership support means I have to drop what I’m doing, prioritize or reorganize, and then come in and assess, resolve, and fix it—whether directly or indirectly, whatever it takes—provide resources, shed light on it, and then get out of the way.

And I expect that from all leaders in the company. They called us reactionary leadership support.

17. On divine discontent and loving the fight

I want to come back to this. I think one of the most fascinating things about you is this—like, a divine discontent. You wake up with this fierce competitive drive, but also—I won't call it unhappiness, because I don't think that's the right word—but rather this discontent with where you are and this constant desire to improve things every day. When Travis from Uber came, he had a warning. How old are you?

40.

Okay, so he's about 10 years older, right? And he says that what you have to worry about is what you become. That is, he says that the act of starting a business is just dealing with problems.

Yes. Constantly.

And he says something like, when a warrior fights for too long, he might become too Zen. So he's kind of Zen on the outside. He's so used to adversity and says it doesn't bother him anymore, right? And he's worried that, yes, he's numb.

Exactly.

Numb is a good way to put it. The point he makes is that you want to wake up feeling annoyed and unaccustomed to adversity. It's not that it prevents you from acting; essentially, you want to react to it. This is what you call reactionary leadership. What you just said made me think of this.

So, how do you think about what's really going on inside you emotionally?

Yes. I am sensitive, and I get angry, but I use that to my advantage at work, which is good. I love it—it's not a fair analogy, but I love the fight, so I look for it. I don't think I'm good at connecting with my emotions in the moment.

However, I believe that developing pain tolerance is very good in order to be able to manage it for long periods of time. Because if you're too sensitive and react to it, and it affects your sleep, then you'll fall apart. So I think it's important to have that Zen, to be able to take a punch in the gut and stay calm. But yes, you definitely can't lose the emotional response. Things don't bother me like they used to. I'm improving, but I still have that reaction if things aren't right.

But I imagine that with Uber, it's become really tough to crack. I don't know your experience, but I can see how it happened. So what keeps you there? Do you like to fight?

Yes. I love conflict. I accept the conflict.

But thank you for your time. This is incredible, man. I appreciate it. I hope you enjoyed this episode. Please remember to subscribe wherever you listen, leave a review, and be sure to check out my other podcast, Founders. For almost a decade, I have obsessively read over 400 biographies of the greatest entrepreneurs in history in search of ideas that you can apply to your work. Most of the guests you hear on this show first met me through Founders.