The Exchanges

Q Now, I would love to start with a little bit of context. We look at the incredible journey you've had, and I'm going to skip a few steps in between, but I'd love to know, how did you make your way into the world of startups first? And then how did you come to be CEO of Peloton most recently?

A Well, I got involved in startups in the, in the 19, not to date myself, in the 19 eighties when I was at First Boston, and they pulled together an investment pool, um, and were investing in startups, and I was invited to participate in that group as a venture capital investor, and I spent seven years doing it, and I made just about every mistake you could possibly make, and along the way I realized that I wanted to be an operating guy, and then it took me quite a while to get my, convince someone to hire me in my first operating role, Uh, eventually that led me to, to read Hastings Doorstep in 1999 when Netflix was quite small. I think I was the 40th employee, and, and then, you know, the rest is sort of history. And then with respect to Peloton, I was comfortably retired, uh, and, uh, Uh, and an avid Peloton fan user, and, uh, and, uh, had, had many, um, years of successful association with TCV, both co-investors in Netflix and co-investors in Spotify, and, um, and read about some of the difficulties in the business and thought it was particularly relevant coincidentally with things I'd done in my career that led me, gave me some insights into Um, maybe some of the challenges they were facing, and possibly some of the fixes, and I was anxious to play another big game with an iconic brand, which Peloton is, and, um, fortunately, I was able to convince them to give me a shot at,…

AI assessment note: “fortunately, I was able to convince them to give me a shot at”

Q pivotal role with Spotify in terms of the direct listing. And I spoke to Jeff Jordan at Andreessen as well. I told you, I'm really stalked you. Um, and I spoke to Jeff and he said, you've got to ask about direct listings. Why do you feel direct listings are better? And what do you think you saw that others didn't see about the direct listing model being so good?

A Well, there are a couple things to unpack, um, as it relates to direct listing. You know, it's a drug. That's very effective for addressing, you know, certain kinds of clinical circumstances, but it's, it's not for every occasion and not for every company. .1. So at Spotify, I was trying to solve a particular problem. I wasn't trying to reinvent the going public thing. I will say very much to Daniel's credit. I walked in the room and I very intentionally said to him, Hey, I have this crazy idea to do something that's never been done before. Now, there are an awful lot of CEOs and boards I know who, if, if you were foolish enough to say that to them, would go, whoa, whoa, whoa, whoa, whoa. And Daniel was like leaning forward in his chair and couldn't, couldn't wait to hear what the idea was. So, one, two, when you take a company public, you need to sell enough shares for there to be a liquid market, and you dilute the existing shareholders. Now, the typical rule of thumb, you're going to raise sort of 12% of the market Cap of the company, 10 to 15, maybe as low as seven, if it's going to trade by appointment in the aftermarket. Okay, so for us, that would have been well north of a billion dollars. We already had a billion plus, several billion on the, I don't even remember anymore, lots of billions on the balance sheet, and we didn't know what to do with the existing cash. We ce…

AI assessment note: “That's what got me thinking about the direct listing as an alternative.”

Q We'll get to it. I heard some weaknesses too. I just, I'm fascinated. I'm sure Ben told you I go off schedule a little bit. What was Reid like back in 1999? We see this incredible leader today. What was Reid like back then in 1999?

A Well, his, his original vision was to be retired and to fund the company and be its chairman. And the performance kind of got sideways and he came in off the sidelines. And replace Mark Randolph as a CEO. And then the very first thing he did was to bring in Patty McCord and rebuild the entire team. And so I came in as part of the rebuilding and it was then an a la carte business. Now he had been very successful building company called pure software, which ended up selling and been taken public by Morgan Stanley. And I think was maybe the second most successful IPO of all time. If I'm recalling correctly, a little bit out of my depth there. Um, and In hindsight, I think he wished that he had had the opportunity to build it in a slightly different way. He had been a first-time CEO at Pure, and this was his, this was his do-over in effect. Um, and so he was, um, he was quite deliberate in the way that he, he built the culture, um, and measured performance. And, um, And then eventually we found product market fit as a subscription model, as it turned out, not as an a la carte business. And once we stumbled into, uh, into the subscription model, the business literally started doubling each year. And for gosh, five or six years, it just kept doubling.

AI assessment note: “this was his do-over in effect. Um, and so he was, um, he was quite deliberate”

Q I've got to ask you, you said about disagree there a couple of times. You know, I think Gustav before said on the show with me, you know, about disagree and commit. And I don't know if I really agree, to be honest. I don't know if people can really commit when they really disagree. How do you feel about the disagree and commit as a management philosophy and action?

A I think we do it pretty well. The decision-making process in a Swedish culture and at Spotify can at times to an American feel a little bit like watching them paint dry. I mean, the amount of time that Daniel invests in allowing the organization to work its way through the decision-making process, when in fact, he's already made the decision. He's just waiting for everybody else to catch up to the decision he's already made. You know, it just seems to an American like a complete waste of freaking time. They certainly don't move in Silicon Valley time. I'll give you an example. There was a point in time very early in before the world had discovered AWS and its progeny. That that's where the world was moving, and so he decided overnight, literally, that we were moving to the cloud, and there was no discussion, there was no debate, and he, and he had no interest in tolerating any discussion or debate on the subject, and so if you were an engineer and you disagreed, you could leave. Those are your choices. You, like, get with the program or leave. Okay. Well, that kind of decision would have taken, oh, maybe three or four months at Spotify, even if Daniel had decided overnight that we were moving to the cloud, but he would afford the organization the time that needed in order to reach its own consensus. Now, the Swedish culture would say the benefit is once the decision is made, pe…

AI assessment note: “I think we do it pretty well. The decision-making process in a Swedish culture”

Q Tell me, Barry, what board member have you been most impressed with over the years, and why?

A Well, the one I've worked with the most consistently is J-Hope. I remember when Netflix was actually going down after After the dot-com bust, we were running out of money, even though we were going, we're doubling every year, but the world is in meltdown. You couldn't get capital from anybody. And he stepped up in a moment of immense bravery to the, to the long-term benefit of his investors. I might add, they made a killing, but it was a moment of, of great courage. And I've have known him, you know, through Spotify, through, through a number of really terrific and Netflix and, and other, you know, really lucrative Investments, and he was responsible for bringing me here to Peloton, and he's been enormously helpful to me in stabilizing the performance of the business and moving it forward, and so, you know, he would be at top of my list probably.

AI assessment note: “he would be at top of my list probably.”

Q to do with my crush on her, I promise you, it's the engagement. Um, but I do have to ask you, um, I, I spoke to, you mentioned team, I spoke to Daniel before, I spoke to Shaq before, and they said, you've got to ask, Why did you move from sunny California to the cold, dark Stockholm? What was it that compelled you to join Spotify at the time?

A Daniel, um, music. I, I knew music from my previous life at a company called Music Choice. And, um, from my experience on the board of Pandora, Spotify owned cool. Daniel was using my pattern recognition skills as exceptional in his own way as Reed was exceptional in his way. Kind of, you know, one in twenty-five million. It was a unique opportunity to work with someone that I had come to admire and trust. I had been on his board before he invited me to join the management team. Stockholm was not on my list of places to live for sure, and I terribly missed California. On average, you know, living in Stockholm was great. In the summer, the sun never goes down, and it's one of the most beautiful places on Earth, and in the winter, it's one of the most.

AI assessment note: “It was a unique opportunity to work with someone that I had come to admire”

Q pivotal role with Spotify in terms of the direct listing. And I spoke to Jeff Jordan at Andreessen as well. I told you, I'm really stalked you. Um, and I spoke to Jeff and he said, you've got to ask about direct listings. Why do you feel direct listings are better? And what do you think you saw that others didn't see about the direct listing model being so good?

A Well, there are a couple things to unpack, um, as it relates to direct listing. You know, it's a drug. That's very effective for addressing, you know, certain kinds of clinical circumstances, but it's, it's not for every occasion and not for every company. .1. So at Spotify, I was trying to solve a particular problem. I wasn't trying to reinvent the going public thing. I will say very much to Daniel's credit. I walked in the room and I very intentionally said to him, Hey, I have this crazy idea to do something that's never been done before. Now, there are an awful lot of CEOs and boards I know who, if, if you were foolish enough to say that to them, would go, whoa, whoa, whoa, whoa, whoa. And Daniel was like leaning forward in his chair and couldn't, couldn't wait to hear what the idea was. So, one, two, when you take a company public, you need to sell enough shares for there to be a liquid market, and you dilute the existing shareholders. Now, the typical rule of thumb, you're going to raise sort of 12% of the market Cap of the company, 10 to 15, maybe as low as seven, if it's going to trade by appointment in the aftermarket. Okay, so for us, that would have been well north of a billion dollars. We already had a billion plus, several billion on the, I don't even remember anymore, lots of billions on the balance sheet, and we didn't know what to do with the existing cash. We ce…

AI assessment note: “We certainly didn't need any more, and, and the existing investors had no economic incentive”

Q Yeah. No, I, I totally get you in terms of the pop. Can I ask a final one before we actually get to, you know, how you work? But it's just on, on kind of the move to Peloton. This was your first time adopting the role as CEO. Without sounding strange, given your incredible career, but were you nervous about being CEO for the first time?

A Yeah, a little bit. Actually, I, it was Daniel who talked me into, it was Daniel and a very successful venture capitalist who'd been on the Netflix board for a long time named Tim Haley. Both of us counsel I had sought and, and my wife together got me thinking about the CEO role because initially I was talking to Peloton about a COO role. I wasn't entirely sure that, that I had the chops to, you know, actually step up. But in the course of understanding the sort of the challenge ahead and the business, I thought, well, the only rational way to actually do that is if, is if I can be assured that at the end of the day, I have the final say about how we manage through the turnaround, because different from Daniel, where I had a relationship of trust, um, and I'm not throwing shade at, at any of the founders, um, we didn't know each other and I didn't know if I could trust their judgment or not. We just simply were Unknown to each other. And that was more risk than I was willing to, to, to take.

AI assessment note: “Yeah, a little bit. Actually, I, it was Daniel who talked me into”

Q How do you think about the trade-off between speed and quality when making decisions? It's always something that I struggle with.

A Um, yeah, you know, I think that Jeff Bezos at Amazon provided us both a really helpful framework for how to think about the answer to that. It begins with this concept of whether it's a one-way or a two-way door. So if you can make a decision and you can undo it, then you can afford to move a lot faster with that decision than you can if it's an irreversible decision that you're going to make, which you described as a one-way door. And if it's a one-way door, then you really want to make sure that, you know, you got all your ducks right, You fully understand the scope of what it is that you're, that you're deciding and what, what trade-offs here are making as an end process of that decision. And if it's a two-way door, you know, you could move faster. You can afford to be wrong. Let's take by way of example, the expansion of our business into, into third parties with the exporting goods and with Amazon. Is it a good thing or a bad thing for the business? The only way to know that is to actually do it. And if it doesn't work out, then you just, you stop partnering with them. We can all agree, reasoning from first principle, that we need to be where, where our customers are buying hardware, and so, um, seems like it, it's kind of a no-brainer, but You could be wrong and you just got to get started.

AI assessment note: “whether it's a one-way or a two-way door”

Q it. Um, and you might, and you might need a banana halfway through for some energy. Um, but I, I want to go to that. You mentioned the emotional resilience there. In terms of your performance, obviously Peloton is, is a company of performance in its sporting endeavors. When you think about the words high performance in leadership, What do they mean to you having seen also many different organizations?

A Um, it was Reed Hastings who taught me the importance of business models. So first and foremost, if you don't have the right model, you, you can't win where you, you know, you, it would be enormously difficult for you to extract competitive advantage and sustain those advantages in a way that enable you to, to be successful in the marketplace. So first and foremost, you, you know, you have to have the strategic chops that enable you to think about Your business model, its inherent weaknesses and strengths, and how you can leverage it, um, for the future success of the business. And secondly, great leaders are all about talent density. It's, it's both the ability to, to recognize talent for what it is, and then it's, it's the ability to, to hire it, to recruit it, get people to want to work with you. And then lastly, it's the ability to extract from that talent every ounce of their talent and getting them to perform at a high level for the benefit of the business.

AI assessment note: “great leaders are all about talent density”

Q Yeah, no, in terms of like decisions and accountability, boards are often at the center of core decisions. You've sat on some of the best boards. What makes an amazing board to you, having seen so many different types?

A Yeah, I, I wrestle with this. I would say managers manage and board members don't, and that's important to bear in mind. The best board members tend to be Operators who are strategically focused, who can help provide context for the management team and sort of see around corners and anticipation of issues that maybe they're not thinking about and encourage them to so cratically to steer them towards anticipating issues that, you know, they might not otherwise have seen. So that's one model of value that I've seen. Another is, well, they've got a lot of functional expertise and, and if you want them to lean in and help you in, Some particular aspect of your business. That's been true here at Peloton, by example, on the supply side, had some really valuable help from one of our board members in that regard. That can also be quite, um, value added, but it's a from time to time sort of thing. Let me say, in my experience in sitting on boards, and I'm sad on many, no matter how hard you tried, you never really know what's going, my experience has been, you never really know what's going on inside of a company, so board members are entirely dependent on On the management team and the CEO to assist in their understanding of the business. So as a CEO, you kind of get out as much as you put in. The more informed they are, the more value added they can be, and the less context they have,…

AI assessment note: “The best board members tend to be Operators who are strategically focused”

Q Final one for you, Barry. What do the next five years hold for you and what's the plan ahead?

A I can't see farther than, than my role here at And Peloton and the immediate challenge is to, is to finish the turnaround. I've said publicly, I think the ship is, is turning and there are lots of green shoots a bit, which I'm super enthusiastic. I think we're on track to get the business to cashflow breakeven, which enables us to, to, to control our own destiny is Andy Ratcliffe would say cash is oxygen, oxygen is life. So, you know, you got a husband that scarce resource and we're doing that really well. And then, then the question is, you know, how, how, How high is high? How quickly can we grow the business? What will the growth rate be? We still have to solve for all those things, and so I'll be here for a period of time where I figured that out, and then eventually, hopefully, I plan successfully for my successor and, and manage through that process well, and then I'll go off and do back to California and, and discover the rest of my life again.

AI assessment note: “the immediate challenge is to, is to finish the turnaround.”

Q Yeah. No, I, I totally get you in terms of the pop. Can I ask a final one before we actually get to, you know, how you work? But it's just on, on kind of the move to Peloton. This was your first time adopting the role as CEO. Without sounding strange, given your incredible career, but were you nervous about being CEO for the first time?

A Yeah, a little bit. Actually, I, it was Daniel who talked me into, it was Daniel and a very successful venture capitalist who'd been on the Netflix board for a long time named Tim Haley. Both of us counsel I had sought and, and my wife together got me thinking about the CEO role because initially I was talking to Peloton about a COO role. I wasn't entirely sure that, that I had the chops to, you know, actually step up. But in the course of understanding the sort of the challenge ahead and the business, I thought, well, the only rational way to actually do that is if, is if I can be assured that at the end of the day, I have the final say about how we manage through the turnaround, because different from Daniel, where I had a relationship of trust, um, and I'm not throwing shade at, at any of the founders, um, we didn't know each other and I didn't know if I could trust their judgment or not. We just simply were Unknown to each other. And that was more risk than I was willing to, to, to take.

AI assessment note: “Yeah, a little bit. Actually, I, it was Daniel who talked me into”

Q Barry, I do have to ask, you know, without being too much of a therapist, I always believe we're, well, we're all functions of our history, and you've never been on a podcast like this before, my friend. So, what are you running from, and what are you running towards?

A Running from boredom, and, uh, and whatever the antidote for boredom is, what I'm running to. I love the game, and, uh, I love being able to play on a team, you know, they're, Let's see, if I was used to musical analogy, I say that the, that the kind of music that you can play as a soloist is quite a bit different than the music that you play when you're in an orchestra, and I find the orchestral music to be particularly engaging. My whole life, I've been involved in organized sports on teams in high school and college, and I miss it terribly when I'm not playing on a team, and for me, business is, is, it provides that opportunity. We happen to be associated with, you know, physical fitness, which has also been a, a, It's an important part of my life, and so the mission and the values of the business happen to resonate with me personally, but it's mostly the opportunity to do it with a group of folks.

AI assessment note: “Running from boredom, and, uh, and whatever the antidote for boredom is”

Q Can I ask, when you, when you have that decision, you have, you know, the pros and the cons, and when you thought about the challenges that you were maybe nervous about, the challenges that you were nervous about, the challenges that you face today, is it what you expected in terms of the hard things or are the hard things different?

A Super good question. So I knew that from experience in situations like that, you don't know what you don't know. And so you're absolutely going to discover things that will be challenging to you, and you're going to have to be good enough in real time in order to figure out how to deal with those black swan events. And we had a couple. And, and maybe a few more than I was anticipating, but you know, we've been able to navigate them successfully. Let me say the biggest surprise to me Is the amount of emotional resilience required of a CEO in a situation like this? But people don't come to you when things are working well. And in a turnaround, almost nothing's working well. And so you're like a constant firefighting mode. And it's just one mess after another is, you know, arriving on your desk that needs to be dealt with. And you need to both have the, uh, the intellectual horsepower and the emotional energy to fix it. And you need to Also be able to lead and motivate the people you're trying to fix the problems with, which then this is where the emotional resilience, you know, comes into play, because it does eventually grind you down. But, you know, that's not a formula for successful leadership. You got to, you know, motivate the troops. Same time you're trying to solve all these problems, the same time you're, you know, trying to manage your own emotional state.

AI assessment note: “the biggest surprise to me Is the amount of emotional resilience required”

Q So I, I have a couple of things I have to unpack there. You, you mentioned competitive advantage. What would you say is Peloton's biggest competitive advantage today?

A This is going to sound overly simplistic, but it's not. And maybe as a user, you'll be able to relate to this. The brand is golden and the user experience is platinum and always has been. So there are many mistakes that have been made along the way, but from the get go, it's had product market fit. And despite all of the, the foot faults, it has never once damaged the product market fit. And so there is an army of consumers who are pulling for the success of the business because they, they absolutely adore the user experience. That's the That's the primary success that that's the asset that, you know, it's the content that we have one. Then two, I would say Mike Moritz put it best when he was talking about the Instagram business, but it absolutely applies to the Peloton business. COVID was the marketing campaign that Peloton never could have afforded. And the growth that happened during COVID propelled the business to scale in a way that no other company in the space to a level that no other company in the space has achieved. And that has, uh, afforded the company access to capital that it wouldn't otherwise have and, um, has made it the dominant player in the connected fitness category.

AI assessment note: “The brand is golden and the user experience is platinum and always has been.”

Q So what, with that in mind, what's your framework for problem solving? You said about emotional resilience earlier. When the problems come, what's your framework for problem solving?

A Well, the first thing I do is I'm not sure the answer about that, that I, it depends on the nature of the problem. It depends on whether I have functional expertise or not. That, you know, makes me competent at diagnosing the problem. Um, my experience is that oftentimes the way that people, uh, articulate the problem and the solution is relatively uninformed because they, they have misinterpreted the underlying data or they haven't done the data analytics rigorously enough to understand the full scope of the problem. And so I just start pulling on strings and trying to get to the, um, to a basic understanding of the root cause. And I try to understand The data that informs us about why we think the nature of the problem is what it is, and then I just follow the data and see where it leads.

AI assessment note: “trying to get to the, um, to a basic understanding of the root cause”

Q It was a large data set. But really, what, what, what do you think led him to say that?

A Well, look, we were a great team, and we had a terrific run together, and a lot of success, and we, we broke new ground. We were quite compatible. You know, um, I wanted to do new and interesting things, and, and he's particularly interested in new and interesting and smart things, and he's, he's a risk-taker in ways that were appealing to me, and two, I had a skill set that was complementary to his own, and so, um, we never stepped on each other's toes. And he absolutely has skills that from a product perspective that, you know, I just, uh, technical, um, skills that for running engineering teams that, that I don't have. And I would say the business model from a financial perspective was sort of a mess when I walked into, well, there was a lot of low hanging fruit. Let me put it that way. When, when I got involved in, in Spotify. And so the partnership worked really well at a personal level and, and professionally. Maybe that's why he said it.

AI assessment note: “the partnership worked really well at a personal level and, and professionally. Maybe that's why he said it.”

Q it. Um, and you might, and you might need a banana halfway through for some energy. Um, but I, I want to go to that. You mentioned the emotional resilience there. In terms of your performance, obviously Peloton is, is a company of performance in its sporting endeavors. When you think about the words high performance in leadership, What do they mean to you having seen also many different organizations?

A Um, it was Reed Hastings who taught me the importance of business models. So first and foremost, if you don't have the right model, you, you can't win where you, you know, you, it would be enormously difficult for you to extract competitive advantage and sustain those advantages in a way that enable you to, to be successful in the marketplace. So first and foremost, you, you know, you have to have the strategic chops that enable you to think about Your business model, its inherent weaknesses and strengths, and how you can leverage it, um, for the future success of the business. And secondly, great leaders are all about talent density. It's, it's both the ability to, to recognize talent for what it is, and then it's, it's the ability to, to hire it, to recruit it, get people to want to work with you. And then lastly, it's the ability to extract from that talent every ounce of their talent and getting them to perform at a high level for the benefit of the business.

AI assessment note: “great leaders are all about talent density. It's, it's both the ability”

Q So what, with that in mind, what's your framework for problem solving? You said about emotional resilience earlier. When the problems come, what's your framework for problem solving?

A Well, the first thing I do is I'm not sure the answer about that, that I, it depends on the nature of the problem. It depends on whether I have functional expertise or not. That, you know, makes me competent at diagnosing the problem. Um, my experience is that oftentimes the way that people, uh, articulate the problem and the solution is relatively uninformed because they, they have misinterpreted the underlying data or they haven't done the data analytics rigorously enough to understand the full scope of the problem. And so I just start pulling on strings and trying to get to the, um, to a basic understanding of the root cause. And I try to understand The data that informs us about why we think the nature of the problem is what it is, and then I just follow the data and see where it leads.

AI assessment note: “I just start pulling on strings and trying to get to... the root cause”

Q Barry, I do have to ask, you know, without being too much of a therapist, I always believe we're, well, we're all functions of our history, and you've never been on a podcast like this before, my friend. So, what are you running from, and what are you running towards?

A Running from boredom, and, uh, and whatever the antidote for boredom is, what I'm running to. I love the game, and, uh, I love being able to play on a team, you know, they're, Let's see, if I was used to musical analogy, I say that the, that the kind of music that you can play as a soloist is quite a bit different than the music that you play when you're in an orchestra, and I find the orchestral music to be particularly engaging. My whole life, I've been involved in organized sports on teams in high school and college, and I miss it terribly when I'm not playing on a team, and for me, business is, is, it provides that opportunity. We happen to be associated with, you know, physical fitness, which has also been a, a, It's an important part of my life, and so the mission and the values of the business happen to resonate with me personally, but it's mostly the opportunity to do it with a group of folks.

AI assessment note: “Running from boredom, and, uh, and whatever the antidote for boredom is”

Q Can I ask, when you, when you have that decision, you have, you know, the pros and the cons, and when you thought about the challenges that you were maybe nervous about, the challenges that you were nervous about, the challenges that you face today, is it what you expected in terms of the hard things or are the hard things different?

A Super good question. So I knew that from experience in situations like that, you don't know what you don't know. And so you're absolutely going to discover things that will be challenging to you, and you're going to have to be good enough in real time in order to figure out how to deal with those black swan events. And we had a couple. And, and maybe a few more than I was anticipating, but you know, we've been able to navigate them successfully. Let me say the biggest surprise to me Is the amount of emotional resilience required of a CEO in a situation like this? But people don't come to you when things are working well. And in a turnaround, almost nothing's working well. And so you're like a constant firefighting mode. And it's just one mess after another is, you know, arriving on your desk that needs to be dealt with. And you need to both have the, uh, the intellectual horsepower and the emotional energy to fix it. And you need to Also be able to lead and motivate the people you're trying to fix the problems with, which then this is where the emotional resilience, you know, comes into play, because it does eventually grind you down. But, you know, that's not a formula for successful leadership. You got to, you know, motivate the troops. Same time you're trying to solve all these problems, the same time you're, you know, trying to manage your own emotional state.

AI assessment note: “the biggest surprise to me Is the amount of emotional resilience required”

Q So I, I have a couple of things I have to unpack there. You, you mentioned competitive advantage. What would you say is Peloton's biggest competitive advantage today?

A This is going to sound overly simplistic, but it's not. And maybe as a user, you'll be able to relate to this. The brand is golden and the user experience is platinum and always has been. So there are many mistakes that have been made along the way, but from the get go, it's had product market fit. And despite all of the, the foot faults, it has never once damaged the product market fit. And so there is an army of consumers who are pulling for the success of the business because they, they absolutely adore the user experience. That's the That's the primary success that that's the asset that, you know, it's the content that we have one. Then two, I would say Mike Moritz put it best when he was talking about the Instagram business, but it absolutely applies to the Peloton business. COVID was the marketing campaign that Peloton never could have afforded. And the growth that happened during COVID propelled the business to scale in a way that no other company in the space to a level that no other company in the space has achieved. And that has, uh, afforded the company access to capital that it wouldn't otherwise have and, um, has made it the dominant player in the connected fitness category.

AI assessment note: “The brand is golden and the user experience is platinum and always has been.”

Q How do you think about the trade-off between speed and quality when making decisions? It's always something that I struggle with.

A Um, yeah, you know, I think that Jeff Bezos at Amazon provided us both a really helpful framework for how to think about the answer to that. It begins with this concept of whether it's a one-way or a two-way door. So if you can make a decision and you can undo it, then you can afford to move a lot faster with that decision than you can if it's an irreversible decision that you're going to make, which you described as a one-way door. And if it's a one-way door, then you really want to make sure that, you know, you got all your ducks right, You fully understand the scope of what it is that you're, that you're deciding and what, what trade-offs here are making as an end process of that decision. And if it's a two-way door, you know, you could move faster. You can afford to be wrong. Let's take by way of example, the expansion of our business into, into third parties with the exporting goods and with Amazon. Is it a good thing or a bad thing for the business? The only way to know that is to actually do it. And if it doesn't work out, then you just, you stop partnering with them. We can all agree, reasoning from first principle, that we need to be where, where our customers are buying hardware, and so, um, seems like it, it's kind of a no-brainer, but You could be wrong and you just got to get started.

AI assessment note: “It begins with this concept of whether it's a one-way or a two-way door.”

Q Yeah, no, in terms of like decisions and accountability, boards are often at the center of core decisions. You've sat on some of the best boards. What makes an amazing board to you, having seen so many different types?

A Yeah, I, I wrestle with this. I would say managers manage and board members don't, and that's important to bear in mind. The best board members tend to be Operators who are strategically focused, who can help provide context for the management team and sort of see around corners and anticipation of issues that maybe they're not thinking about and encourage them to so cratically to steer them towards anticipating issues that, you know, they might not otherwise have seen. So that's one model of value that I've seen. Another is, well, they've got a lot of functional expertise and, and if you want them to lean in and help you in, Some particular aspect of your business. That's been true here at Peloton, by example, on the supply side, had some really valuable help from one of our board members in that regard. That can also be quite, um, value added, but it's a from time to time sort of thing. Let me say, in my experience in sitting on boards, and I'm sad on many, no matter how hard you tried, you never really know what's going, my experience has been, you never really know what's going on inside of a company, so board members are entirely dependent on On the management team and the CEO to assist in their understanding of the business. So as a CEO, you kind of get out as much as you put in. The more informed they are, the more value added they can be, and the less context they have,…

AI assessment note: “The best board members tend to be Operators who are strategically focused”

Q We'll get to it. I heard some weaknesses too. I just, I'm fascinated. I'm sure Ben told you I go off schedule a little bit. What was Reid like back in 1999? We see this incredible leader today. What was Reid like back then in 1999?

A Well, his, his original vision was to be retired and to fund the company and be its chairman. And the performance kind of got sideways and he came in off the sidelines. And replace Mark Randolph as a CEO. And then the very first thing he did was to bring in Patty McCord and rebuild the entire team. And so I came in as part of the rebuilding and it was then an a la carte business. Now he had been very successful building company called pure software, which ended up selling and been taken public by Morgan Stanley. And I think was maybe the second most successful IPO of all time. If I'm recalling correctly, a little bit out of my depth there. Um, and In hindsight, I think he wished that he had had the opportunity to build it in a slightly different way. He had been a first-time CEO at Pure, and this was his, this was his do-over in effect. Um, and so he was, um, he was quite deliberate in the way that he, he built the culture, um, and measured performance. And, um, And then eventually we found product market fit as a subscription model, as it turned out, not as an a la carte business. And once we stumbled into, uh, into the subscription model, the business literally started doubling each year. And for gosh, five or six years, it just kept doubling.

AI assessment note: “he was quite deliberate in the way that he, he built the culture”

Q to do with my crush on her, I promise you, it's the engagement. Um, but I do have to ask you, um, I, I spoke to, you mentioned team, I spoke to Daniel before, I spoke to Shaq before, and they said, you've got to ask, Why did you move from sunny California to the cold, dark Stockholm? What was it that compelled you to join Spotify at the time?

A Daniel, um, music. I, I knew music from my previous life at a company called Music Choice. And, um, from my experience on the board of Pandora, Spotify owned cool. Daniel was using my pattern recognition skills as exceptional in his own way as Reed was exceptional in his way. Kind of, you know, one in twenty-five million. It was a unique opportunity to work with someone that I had come to admire and trust. I had been on his board before he invited me to join the management team. Stockholm was not on my list of places to live for sure, and I terribly missed California. On average, you know, living in Stockholm was great. In the summer, the sun never goes down, and it's one of the most beautiful places on Earth, and in the winter, it's one of the most.

AI assessment note: “It was a unique opportunity to work with someone that I had come to admire”

Q I've got to ask you, you said about disagree there a couple of times. You know, I think Gustav before said on the show with me, you know, about disagree and commit. And I don't know if I really agree, to be honest. I don't know if people can really commit when they really disagree. How do you feel about the disagree and commit as a management philosophy and action?

A I think we do it pretty well. The decision-making process in a Swedish culture and at Spotify can at times to an American feel a little bit like watching them paint dry. I mean, the amount of time that Daniel invests in allowing the organization to work its way through the decision-making process, when in fact, he's already made the decision. He's just waiting for everybody else to catch up to the decision he's already made. You know, it just seems to an American like a complete waste of freaking time. They certainly don't move in Silicon Valley time. I'll give you an example. There was a point in time very early in before the world had discovered AWS and its progeny. That that's where the world was moving, and so he decided overnight, literally, that we were moving to the cloud, and there was no discussion, there was no debate, and he, and he had no interest in tolerating any discussion or debate on the subject, and so if you were an engineer and you disagreed, you could leave. Those are your choices. You, like, get with the program or leave. Okay. Well, that kind of decision would have taken, oh, maybe three or four months at Spotify, even if Daniel had decided overnight that we were moving to the cloud, but he would afford the organization the time that needed in order to reach its own consensus. Now, the Swedish culture would say the benefit is once the decision is made, pe…

AI assessment note: “once the decision is made, people commit, and there's none of the passive-aggressive kind”

Q So how do you, how do you deal with it? Because right now I just get bluntly frustrated and visibly angry. That isn't productive, actually, and people just...

A Yeah, I agree, and I'm susceptible of that in high pressure situations, and particularly when I'm being surprised with negative news that is inconsistent with the mental model that I am bringing to the conversation, or with people who were Advocating for a position that I think is not well reasoned and don't have the data to support the position they're advocating for, I can get frustrated pretty quick. And as you say, it can be really demotivating for the team. And so, um, if that's frequently your MO, people don't want to work for you. And the good people will leave. You know, you try to strike the balance between being inclusive and listening. People want to be heard. It's not important that we all agree, but it's important that people have feel like they've been given the opportunity to voice their point of view. And then I think it's important if you disagree, Danny was particularly good at this at articulating the reasons why you are deciding to do whatever it is you decided the business should be doing at that particular point in time. So people can at least understand what you're disagreeing about. That has caused you to reach a different conclusion perhaps than they've recommended. And if you can do that in a, you know, in a balanced and a matter of fact tone of voice and, and take the emotion out of it, it's pretty successful. And I'm less good at that.

AI assessment note: “take the emotion out of it, it's pretty successful. And I'm less good”

Q So how do you, how do you deal with it? Because right now I just get bluntly frustrated and visibly angry. That isn't productive, actually, and people just...

A Yeah, I agree, and I'm susceptible of that in high pressure situations, and particularly when I'm being surprised with negative news that is inconsistent with the mental model that I am bringing to the conversation, or with people who were Advocating for a position that I think is not well reasoned and don't have the data to support the position they're advocating for, I can get frustrated pretty quick. And as you say, it can be really demotivating for the team. And so, um, if that's frequently your MO, people don't want to work for you. And the good people will leave. You know, you try to strike the balance between being inclusive and listening. People want to be heard. It's not important that we all agree, but it's important that people have feel like they've been given the opportunity to voice their point of view. And then I think it's important if you disagree, Danny was particularly good at this at articulating the reasons why you are deciding to do whatever it is you decided the business should be doing at that particular point in time. So people can at least understand what you're disagreeing about. That has caused you to reach a different conclusion perhaps than they've recommended. And if you can do that in a, you know, in a balanced and a matter of fact tone of voice and, and take the emotion out of it, it's pretty successful. And I'm less good at that.

AI assessment note: “strike the balance between being inclusive and listening”