Al and Chris recap what Rivian was doing during the public offering, which had a market cap of $60 billion at the time. This was already a very impressive number, considering that it was still an IPO.
What people didn’t anticipate is that after Rivian’s launch, they blew well past that and it now sits at over $100 billion in valuation. As a result, they are now the third largest automotive company behind Tesla and Toyota.
All in all, it is an incredible IPO, and one to observe in the future as it develops.
Betting on Potential vs Performance
Despite all that, there are those who are still skeptic of what had happen, and consider it as a fluke or a big risk. But it all boils down to betting on the potential of an idea, rather than just prior performance. Right now, some investors are seeing things in a new light.
“I think it’s hard for investors to understand because that’s been just been the way they are. They look at multiples of revenue or multiples of trucks shipped, or all of those other vital metrics within an organization. But the new investors I think, are starting to look past that.” – Al Ramadan
Paving the Way into a New Category
What Al finds interesting is that currently, 70% or more of the market cap for the electronic car category is cornered by Tesla. Yet Rivian might have to potential to great its own category within it, and be the category king for it.
Because Rivian is not just planning on the electronic cars and trucks. They are also including everything else that comes along with it. We’re talking charging networks and stations, dealerships, and the like. It’s taking into consideration the whole ecosystem, as supposed to just that one product.
“So if you go into this with the mindset of like, I’m going to value this as an automotive industry as it was over the last 125 years, you’re gonna miss big time.” – Al Ramadan
Read the full transcript below:
Christopher L.: Thanks for pressing play. On episode 127, we had on Al Ramadan, co-founder of Play Bigger advisors and co-author with me of Play Bigger the book. And on that episode, we unpacked the upcoming at the time, Rivian IPO. Well, it turns out that was one of our most popular episodes. We thought it'd be cool to get together now that Rivian has gone public and unpack what happened through a Category Design lens, and specifically how Rivian was able to use their IPO as not just a financing event, but a category defining event, how they specifically wrote their S1 and why that matters for every company, regardless of how early stage you are, the power of a blueprint, the power of an ecosystem, the power of including those things in an S1.
And we also look at all the lessons that marketers and in specific entrepreneurial category designers can take from the way that Rivian performed their IPO. We also do some speculation on where the broader electronic vehicle, or what Rivian calls mobility category could head over time. We do some fun spit balling about that at the end. Now, I'll tell you just a little bit about Al. Al and I have known each other for over 20 years. He's been a tech entrepreneur, CEO, and investor and advisor for well over 30 years. And today, he is best known for being one of the co-founders of Play Bigger and one of the godfathers of category design.
Christopher: Al Ramadan.
Al Ramadan: Mr. Lochhead, hello.
Christopher: How do you get more handsome? How does that happen?
Al Ramadan: Shave my head, just like you.
Christopher: You actually have good hair. I mean pretty good hair for a man your age.
Al Ramadan: As Julie Morcaldi once famously said to us which was pretty funny. How was Thanksgiving, brother?
Christopher: Great, great. We got to see pretty much everybody and get connected, and everybody has been vaxxed and vaxxed and revaxed and over vaxxed. We felt relatively safe. It was before omicron took hold, so f*ck. How about you?
Al Ramadan: Yeah, yeah, we had everybody up. I'm actually speaking to you from Tahoe, and we had everybody up for Thanksgiving. It was a real nice time up here. Actually, the weather's insanely beautiful. We've been doing a whole bunch of outdoor stuff as well.
Christopher: The weather in Northern California is incredible right now.
Al Ramadan: There's a part of me that says this is the new future, and the climate and all that is actually well and truly happening. And this is what it's like now. This is what November's like now. There's no snow and it's f*cking... Excuse me, it's 70 degrees.
Christopher: You can say f*ck as many times as you want around me. Rivian 2.0, so they IPO’d, the thing crashed and exposed itself for the pure joke that it is. That's what happened, right?
Al Ramadan: Not so much. Let's be honest. You couldn't get in on the offering price.
Christopher: Couldn't get near it.
Al Ramadan: It was very difficult to buy any shares at the offer. The demand was I believe in excess of 50 to one. For every share I had, they had demand for 50 which is a big number. When you and I, in our first episode on Rivian, of course you remember that was before the public offering. And at the time, they had thrown out a market cap of $60 billion. You'll remember that and we looked at that, we were like, "Wow, that's a giant number." Well, they blew past that at the offering price of $78. They ended the first day in excess of $110. And then soon after that, they went to a high of 170 and today about 120 bucks. Well and truly over $100 billion valuation.
Christopher: Yeah, I'm looking at it right now, 102.
Al Ramadan: So, that 60 number that we were looking at last time is small, and they're now the third largest automotive company behind Tesla and Toyota in the world, having shipped 150 trucks in the latest quarter. So, just an incredible IPO Christopher and the biggest since Facebook, so pretty amazing.
Christopher.: Yeah, incredible on all fronts, no question. And there's still so many people going, "How can your company worth that and it just continued. And yes, it could blow up. It could be a bubble, but the difference is betting on potential as opposed to betting on performance, prior performance. Why is this so f*cking hard for people to understand?
Al Ramadan: Yeah, I think it's hard for investors to understand, because that's just been the way they are. They look at multiples of revenue, or multiples of trucks shipped, or all those other vital metrics within an organization, but the new investors I think are starting to look past that. And I thought Rivian did a phenomenal job in there S1, Christopher. As you will imagine, I crawled over that. And one of the things they did brilliantly which is they outlined that the TAM for the category they were putting forward, Adventure Vehicles, was about $9 trillion. And I was talking to some savvy investors just leading up to the IPO, and I said, "Have you ever seen a trillion in a TAM," and none of them could remember seeing that.
I looked up trillions and the gross domestic product of Japan, the third largest country in the world is five trillion. The United States and China are the two that have more than that. So, nine trillion is a giant number. I think they did a phenomenal job of making the case that the total addressable market or TAM, or the category potential is we start to think about it, one component is nine trillion. And of course, TAM, it always relates to market cap at some point. It’s just how it goes and the work you and I did back in the day found that 75% of the market cap or 76% goes to the category king. If you start doing this, all this math, it starts getting interesting.
And what else is interesting is Tesla is already 70% or more of the market cap of the entire electronic vehicle category worldwide. Christopher, this might be one of those industries that escapes gravity like the software and cloud industry, where like a technology company valuation, as opposed to a product, physical product company. There's early, early indicators that that's the case, just fascinating. And then you start peeling back from that, and it's like 80% of the profitability in the automotive market is in the United States, at least it's light trucks and SUV. Rivian could actually be the category king of 80% of the profitability, while Tesla's the queen of 20%. That's an interesting thought.
And then on top of that, it's not just about the vehicles, Christopher. You've got to add all the other ecosystem TAM, charging network and stations. Think gas stations, Starbucks, the third place, all of that, that's what that's going to become, right? Dealerships, there are no dealerships. So, all those NFL owners who own dealerships, those guys make some money somehow, so some part of that valuation has got to play here. All the financial services, insurance, leasing, and all that stuff, and then accessories. It's a different category to the automotive industry. If you go into this with the mindset of, ‘I'm going to value this as an automotive industry as it was for the last 125 years,’ you're going to miss big time, and that's what's happening.
Christopher: I think you nailed it there Al, the actual work.
Al Ramadan: There was a fantastic article in The Guardian just recently, and this guy David Trainer, who's a founder of the investment research firm New Constructs, it's in the automotive industry. His comment was at a price of $70,000 per truck, the company evaluation at its peak implied within the next 10 years would be selling three million vehicles at about 12% of the automotive market, and that relates to a value of $13 billion. That right there is what we're talking about. David who's an automotive guy thinks it's a $13 billion company. Some of the smartest investors in the world think it's $100 billion, that's the problem.
Christopher: Yep, and I never thought I'd say this about any company, but as you know, Apple's I think 2.8 trillion or somewhere around there, pushing up on three. And I know this sounds like I've been smoking the wacky tobaccy, which I do enjoy from time to time, but Apple being a $3 trillion company seems light to me today, now.
Al Ramadan: Yep, yeah.
Christopher: Given the category potential, right?
Al Ramadan: Yeah, and they just keep expanding...
Christopher: I mean that's the other part of the Rivian stuff people understand, they're a software company.
Al Ramadan: Yeah.
Christopher: They're a hybrid digital/analog company because the information technology, and forget the automotive technology for a sec, around this thing that connects this thing and all that, there's an ecosystem to be built with that sh*t.
Al Ramadan: No, it's the data side of the equation. It's like Google Maps and it's like Amazon, they just have uncanny knowledge of what is happening in that whole experience chain, from driving a car to stopping and charging for 20 minutes and jumping into whatever the store is that Rivian sets up. They're looking at it as a completely new category. It's this experience of transportation. Maybe it's even a mobility category, it's a broader category game. And they're somewhere in there, but it's absolutely not just an automotive category, and that's where people get tripped up. They don't think about all these additional ecosystem TAM elements that are now rolled into a vertically integrated company that's a technology-based company to your point with a stack that is incredibly powerful.
When Amazon, for example, one of their big partners in this whole thing owns 20% of the company, they pre-ordered 100,000 trucks, EV trucks, EDVs they're called. And of course, how do they do that? Well, they do that on the Rivian ordering system. And it asks for things like well, what color would you like? Where do you want the placement of the logos? What software do you want to be running on your car? Blah, blah, yadda, yadda. They're configuring the whole thing for the Amazon driver, the whole thing, right? So, that's just a different... it's not just selling the nuts and bolts, that's important, right? But it's a whole different thing, and the charging network and all the service programs and alerts when cars aren't right, all that stuff, total back end vertically integrated system. It's really powerful.
Christopher: Well, another compare with Apple is when the new super ding dong M2568 IUDF ERT chip just came out, of course you know that they time the laptops and the iPhone to time out when the sh*t is launching, right? Because six months before the new iPhone and six months before the new laptops come out, my technology starts developing features I don't like. Anyway, long story longer, that's exactly how I bought the new super ding dong Apple, right? And today, that seems common. Well, of course, you go on the internet, and you pick the size you want, and you pick this net, and how much memory and blah, blah, blah, blah, and there's whatever your choices are, the colors and sh*t. And you put in your credit card and Bob's your uncle.
We think nothing of it, but I mean there was a point in time where the idea of ordering a computer on the internet was like a Star Trek kind of idea. We're now at that point with automobiles, or vehicles I should say.
Al Ramadan: You're absolutely right and look, I had the whole Rivian experience. And I've had one on pre-order for more than two years, and luckily got invited to go drive one just before Thanksgiving actually, just before the public offering. And it was such a different experience, Christopher, than going to a "dealer situation," right? It was the antithesis of that. First of all, the folks you're talking to actually have a degree of some kind. I was talking on the charging stuff. I was talking to the gal who was actually in charge of rolling out the entire network of charging stations across the United States.
I asked her a question like, "You're going to having one on the way to Truckee," she's like boom, straight back at me like, "Yes, and then this and then this." And I said, "Where'd you come from?" She said, "I set the whole thing up for Tesla." It's like, "Oh, okay." You are like a goddess inside of that company and here you are at the actual, what they call the event where you drive the car, and you can answer questions. I was asking another guy, I met an industrial designer, knew everything about textures and colors and all that stuff that your wife would love. And then you get in the car and the guy's like, "Okay, you're driving and I'm not going to do anything other than just be here, because I have to be.
We're on Sonoma raceway. We're going up hills, down dales, all that stuff. And then we get to the race like, "Okay, this is the 0 to 60 test. Do you want to plant your foot?" Like, "Yeah, I want to plant my foot." Boom, three seconds, I'm at 80 miles an hour. I'm plastered against the seat in an SUV. It's faster than a Lamborghini. It's like okay. The whole experience is just so different and...
Christopher: Hold on. Before you continue, you're one of the very few people on the planet outside of the company itself who's driven one of these f*cking things, right?
Al Ramadan: Right.
Christopher: Slow down there, handsome. You open the door and then what happens?
Al Ramadan: Yeah, thank you, thank you for reminding me. You get in and it's the full Spotify synchronized music thing. So, all that, the ambient nature of this thing. It says what music and of course, we picked, yeah, Mark Knopfler I think it was, or something like that. The actual seating and the setup of the car is gorgeous, to die for gorgeous. And there's a big screen in front of you which is your driving instruments and everything else.
Christopher: And is that a Tesla size screen? Or how would it compare to what we know in Tesla?
Al Ramadan: Yeah, so there's two of them, there's two. There's one right in front of you. We think of it as like the speedometer and all that sort of stuff in the old cars. And then there's one next to you that's giant like Tesla, where it's got the maps and music and every other freaking thing in the world, sitting on that. So, it's right there.
Christopher: So, the driver doesn't really have a dash, like a normal dash? The driver...
Al Ramadan: No, it's a screen.
Christopher: The driver's looking at a computer screen?
Al Ramadan: Yeah, two screens, right in front of you, one right next to you. The dashboard's simple, beautifully elegant, unbelievably simplistic, but elegant sort of thing. We had my son Lucas and his gal Sarah in the car with me, as well as the Rivian driver. There was tons of room. It feels like almost a Tahoe size SUV. Obviously, we were driving the truck, but it feels like a Tahoe size, so relatively big. The wheels are giant. They're 22- or 23-inch wheels. My Mercedes has 21-inch rims if I remember rightly. I mean they're big wheels. The colors are spectacular, the accessories are insane. The rack on top, you can put a surfboard on it, snow skis, everything goes. The whole thing's done to speak to me as an adventure person, and to you as an adventure person.
You're drooling basically the whole time before you even get in the car. I mean they're insane, they're just beautiful. They're a beautiful piece of work.
Christopher: Then you turn it on, and no sound happens, right?
Al Ramadan: Yeah. Well, to turn it on is like an app. It's not like you do anything. It's like an app, right? And then yeah, there's no sound because there's no motor. When you start moving forward, it's like a Tesla if you've driven one of those, the only noise you hear is the noise of the road, the tires on the road and everything.
Christopher: Now of course, I don't own one, but I've driven them. I almost wonder if they need to have an option for people like me that says, "Make it sound like a f*cking car because this is freaking me out this." I have my Range Rover and my Mustang. When you turn that sh*t on that, you know that sh*t's on, right? That makes me happy.
Al Ramadan: Yeah.
Christopher: And then the other thing, too, is pedestrians and stuff, they can't even hear these things coming. They're silent missiles and sh*t.
Al Ramadan: Yes.
Christopher: So, no noise. You turn it on like you turn on an app, and then what happens?
Al Ramadan: Then you put your foot on the accelerator and starts moving forward. And you go straight up a hill, straight down the other side. It takes over, the car's in charge. It's got self-driving level three or whatever it is, which means that people can walk out in front of it. It's not going to run anybody over, and then it's got this acceleration mode that's nuts.
Christopher: Zero to 60, how long?
Al Ramadan: 2.5 seconds. I went from zero to 80 in three seconds.
Christopher: Not to sound unmanly or anything, but it sounds like that might even be a little scary.
Al Ramadan: Yeah, it was for me. And it's interesting, we're talking about the category potential and the category design side of this and what an incredible job these guys have done to have us as investors understand the real potential here. You're also going to go past that and look at the product design, so there's some of it. This experience we were just talking about, but just look at the ratings Christopher, 35 ratings. This was at the time of the IPO. Thirty-four of them had five stars and the best SUV ever. Think about that for a minute. Version one, one bad rating because it couldn't handle a 400-pound jackhammer in the back, fair enough. Not sure how many people have 400-pound jackhammers, but whatever. Fifty-thousand-person long waiting list…
Christopher: Wasn't planning on getting one soon.
Al Ramadan: Fifty thousand pre-orders and they had to shut it down because there was too much. Man, they literally had to shut down the pre-orders. So, the product design, don't take my word for it, take the best reviewers of automotive equipment, 35 people, 34 of them five stars. In addition to that, look at the competitive set. Mercedes withdraws its eSUV product line from the United States earlier this year. They're not doing it.
Al Ramadan: Audi and BMW...
Christopher: They're not doing it, period?
Al Ramadan: Nope.
Christopher: How can that even be true?
Al Ramadan: According to Fred Lambert from Electrek Co, on February 16th, says that they decided that they weren't going to do the SUV in the United States first. They'll do a luxury town car kind of deal. So, they backed out of it presumably knowing that they were going to run straight into this Rivian headwind.
Christopher: Now's a bad time to be on the wrong side of history on this sh*t.
Al Ramadan: No kidding, no kidding. And Audi and BMW if you look at the ‘trons’ and whatever else is over there, they've always been the ugly stepchild of those companies. They're never going to be the main stage. E-Hummer is dumb, the Tesla cyber truck is even dumber. I mean, the competitive is like you just have to be able to go somewhere in an SUV, and you're probably going to win this battle. And of course, you've got 34 out of 35 ratings. So, super strong product design Christopher, really strong.
Christopher: Now, the other interesting thing about this from a business and category design perspective is most companies as we talked about last time view an IPO as a financing event, and they don't understand that it's a once in a lifetime literally. It's you only go public once opportunity to catapult the company and the category into a whole new level. And we've been doing this a long time Mr. Rama Lama.
Al Ramadan: Mm-hmm (affirmative).
Christopher: That was a 10 out of 10 in terms of turning an IPO into a category defining event and locking and loading them as this niche, if you want to call it nine trillion part of the market a niche, but this adventure vehicle piece of it as distinct from what Tesla is currently doing. Lock and load them as the category leader, bam in one move with the IPO.
Al Ramadan: Yeah, there's a few things that were going on in addition to the demand for this. I think everyone had the same feeling, which is ‘this is the new Apple’ showing up relative to Microsoft to use ‘in our previous lives in sort of way.’ This is someone who just has a passion for building an incredible product and creating an incredible category, not just the car, but all those things we talked about, the charging network, dealerships, financial services, et cetera, but they did a couple other things that I thought stood out during the IPO as well, Christopher. One of them clearly was the Amazon and Ford strategic partnerships. That just underwrote this and make no surprise here, Amazon owns 20% of this company.
So, that's now valued at about 25, 30 billion, something like that. And make no mistake, this is Amazon's climate change play and automotive play. FedEx, UPS, USPS, they're all out of luck. They can't get one of these things. It's exclusively mapped to Amazon. So, you've got the company that is likely to be the distribution king if they aren't already worldwide as a 20% owner of the company. Come on, that's a remarkable thing. The Ford story is a little spottier. They obviously helped a lot with the logistics of building one of these things, and they're incredibly complex, no question, although they're a lot less complex than the gasoline-based cars. Amazon, Ford strategic partnerships big hit on the IPO.
Everyone was like, "Holy smokes, what's this about?" I thought they did a brilliant job of hijacking the United Nation's climate change conference, COP26. They went public basically the same week as that whole thing. So, the awareness of climate and his point of view, which is where we're facing an existential threat, we must change in the fundamental industries from petroleum based to... It was just perfect timing. And then just as a little kicker, Hertz announces that they'll purchase 100,000 Teslas in the same week. I mean pretty nice timing from an IPO's point of view.
Christopher: And this is again something that a vast majority of companies don't think about, which is we want to turn our IPO into a lightning strike for the category and of course, for our company. Well, we know when we're going to plan a lightning strike. We start to think very strategically about timing when we are creating our own event? Are we hijacking an event, headwinds, tailwinds, things that we could do to drive up interest, drive up provocation?
Al Ramadan: Hijacking.
Christopher: Hijacking, train jacking, other mega things, right? So, you just look at this and go, "It's so fu*king legendary when a company gets it all right, and they even do some sh*t that we've never even thought of, right?
Al Ramadan: Right.
Christopher: Compared to so many other companies, the way they deal with their business is like they don't even give a sh*t, right? These guys, every fucking detail.
Al Ramadan: Yeah, and then the topper on top of that is RJ Scaringe, he's an insanely great spokesperson. He's the opposite of Elon Musk. I mean he is just down-to-earth, honest, thoughtful, great speaker. He's not twitchy in front of an audience, doesn't do stupid sh*t. He's just a great spokesperson, and then the production environment or the production line is in Normal, Illinois. That's the town, Normal, Illinois. I mean you can't make this sh*t up. It's like the greatest story of all time.
Christopher: Now, what do you think are the big takeaways, the big learnings from a category design point of view that you would hope as a godfather of category design, category designers around the world would learn from this?
Al Ramadan: Yeah, great question. I think the first one is just on the scope of the problem. I mean what you and I have been doing for many years, but what we always talk to the entrepreneur, the leader leadership team about is what's the actual scope of the problem we're solving, because that will then set the category potential and TAM, right? If you say, "Hey, I can do a teeny, little bit of that, that's a small category. And if you can do something much bigger, then it's a big category." I think what he did a brilliant job of and if you read his point of view, we read it last time on session number one here, it's we're facing an existential crisis and that we have to fundamentally change an industry.
That's a big scope, right? That's a really, really big scope and gives you a lot of flexibility on how you create a blueprint, i.e., all the things we were talking about, what they're actually rolling out. So, that's number one, is that I think he took the biggest scope you could possibly get, climate change and just pounded it and said, "Okay, we're going to get rid of all of that old industry." That's a huge one. I was really impressed with him. His point of view is very powerful. He doesn't even mention electronic vehicles. I mean it's remarkable how good he is. The second thing I thought he did on the category design was he then translated it to TAM, something that investors actually do understand, right?
A nine trillion TAM is better than nine billion TAM, a thousand times better as it turns out, right? So, he did all that work. Then in his S1, I thought he did a phenomenal job of making the case for them being the technology backbone essentially to mobility, whether it's personal mobility or enterprise mobility. I mean you just read that as holy smokes, this guy's essentially describing what is the equivalent of AWS, but to the mobility world, he did a phenomenal job of that. His blueprint was spectacular. The ecosystem side of his story is incredibly strong, too. Amazon forward relation, strategic relationships, the whole rollout of the network of stations and having us all imagine that at every one of those places, there might be a Starbucks or a whatever store that you go into for dinner or lunch or breakfast.
Then suddenly, you start realizing holy smokes, there's a whole ecosystem forming outside of this thing and many more, but I just think they did a brilliant job of all of those things. They all showed up in the S1 if you care to read the S1. I mean it's a brilliantly architected document.
Christopher: I have, and I want to talk to you specifically about it, because I think there's a giant learning in there, but keep going you're on a roll.
Al Ramadan: No, no, no, that was it, that was it. I mean they're the top line things. And in addition to that, every category designer hopes they have a product design and a company designed to connect to the magic triangle as we call it. When those three things come together, the product, the category, and the company, oh my gosh. And they've got five stars on all those corners, and that's going to be really tough to beat, I think.
Christopher: When you get all three of those right at the right time, bam. On the S1, there's this thing that we've thought about for a very, very long time, which is writing the manifesto for the category, an HBR style article, lay out the argument. If you're smart, have some facts and data and research to back it up. You don't want to stand on just being an arm waving idiot and so forth. And as I've thought about that and I think we talked about this last time, I think it's valuable even for earlier stage companies to go now a step beyond the manifesto, and actually write your fucking S1. Maybe you just got a series B. Maybe even after series A, I don't know, but here's what I do know.
And maybe I'm biased because in the last handful of years, thanks in great part to you kicking my ass and getting us to write a book together, but I've become a writer. I write almost daily and as a dyslexic guy, that's a huge commitment, but what I've noticed is by doing that, my level of clarity of thinking is just exponentially different than it was five years ago, because I forced myself and now I do it. It's a pleasure to do, to write pretty much almost daily. A long story longer, you read their S1 and it's all in there. It's all based on a POV. They frame, name, and claim the problem. They frame, name, and claim the category, adventure vehicle as distinct from generic or broad-based EVs.
To your point, the blueprint’s in there and the ecosystems in there and how it looks, and it's depicted. What it made me think about is if you can't articulate your business with this level of clarity and level of detail, what are you f*cking doing? Reaction, doctor?
Al Ramadan: You know what, I think you're right, Christopher. When you think about what an S1 is, it's a document that explains to potential investors why this is a really powerful business ultimately, right? And it stood the test of time, man. I don't know how long the stock market's been around, or how long S1s have been a requirement for going public, but my guess is a hundred years, maybe more. You're right, if you can take a look, you need to take some of those artifacts of category design and bring them together. So, the point of view must be a big part of the first 5-10 sentences of an S1. That's absolutely right.
The problem statement, and what problem you're solving must be so understandable and emotional, you need to connect to this. And in his case, the existential threat to our kids not having a climate that they can live in is pretty understandable and pretty emotional, right? And then laying out the cases and here are the user segments, or here are the segments that we're going to address, consumer in his case, and the Amazon delivery companies in that case, laying out a blueprint. And here's how we're going to solve the problem; this is what it looks like. And if you're going to be the category king, then you need to have all these things filled out, because that's what the category king's blueprint is going to look like.
Even if you don't have them all, putting them on paper and expressing them, talking about the ecosystem, I think you're absolutely right. I think that's actually a brilliant idea. We should create a mini S1 template or something like that to give to people, to entrepreneurs, to say, "Okay, I think it's probably series C is where the crossover is, where that should start playing up." Before that, it's more the manifesto is more important. You really at that point can't really point to many of the... other than maybe early product/market fit. I think yeah, series Cs and above, I love your idea of creating a S1 redux document that you have to fill out and create.
Of course, POV is going to be there, the blueprint is going to be there, the problem statement's going to be there, the ecosystem is going to be there, too. All the artifacts of category design have to show up. So, it'll force you to get it on paper and probably make a pretty good investor deck as well.
Christopher: Yes, amen. And the other thing of course, the act of doing it not only gets the founder, CEO or founding team through a forcing function on super clarity and doing the category design work, really thinking about the languaging. How do we want to express this? How do we want to frame the problem? How do we want to describe our products and technologies and services, et cetera? All that rigor is in there. When you do that, the founding group needs to come together. But if you're wise, of course you do it with your executive team.
Al Ramadan: Yeah.
Christopher: Well, and let's say you got 12 people or maybe even 25 if you want to have a broader group. You’ve got to manage it effectively because you don't want to get stupid about stuff. But when you get a group of senior leaders through an exercise like this and they agree, it becomes the Bible. And if you're smart, every employee reads it and every new employee reads it. And when you do that, that's why language matters, that's why we call it being on the same page, because we wrote some sh*t on a page and we looked at and said, "Yes, that's what we're doing." But if you don't write it on the page, how can you get on the same page?
Al Ramadan: I love it, I love it. Yeah. There's so much truth in what you're saying because Play Bigger the company has been around now 11 years, and this is not a commercial for Play Bigger, but just a little bit of experience playing out here. I think we've done 55 category designs now, Christopher. You were part of many of them in the early days and still are. And we ended up creating three different methods as we call it for category design. We gave them names. One of the simplest or earliest stage method is called Therapy, and that is where you basically come in and answer a few questions. And then we do sessions with you. Then there's this thing called Activate, which is where somebody inside the company is the category designer and we're their council.
And then there's what we call Immerse, which is the full product that you and I have been delivering for many years, where we’re part of your exec team. There are three different methods, and they're aimed at different stages. Therapy is generally series A and before, Activate series B and C and Immerse series C and onwards. And what we find is that forcing yourself to answer some basic questions, and we laid them out pretty well in the book I think, mainly you need to be able to understand what’s the founding insight. Why are you even thinking about doing this? What's keeping you up at night? What's that problem that's burning a hole in your pants kind of thing? So, that's number one. Then refining the problem statement's a really important thing.
Refining the solution. What is it that solves that problem? And then defining a blueprint for that is really important. Creating a powerful point of view as you pointed out is really important as well. And then mobilizing your company and doing a lightning strike, those fundamental phases of category design. Irrespective of which method you choose, whether it's the light, medium, or heavy kind of method, you still have to go through that stuff. And when you do that stuff and like I said, we've done at least 55 times here, we find that it either galvanizes everyone to the right place or doesn't. And when it doesn't, that company's never going to go. It's not going to happen because they're so focused on a feature of a product or a particular go to market or something like that, they can't get the rest, right?
But when it does all come together, you know, and we've found a lot of investors now following us around and making investments in those companies that we do category design with. And your point's right though, is that what category design does for a company in the executive team is either brings you together, aligns you around an incredibly powerful opportunity expressed through the point of view, or it doesn't. And if it doesn't, then you answer your own question from the investor's point of view, which is what the S1 document actually is.
Christopher: Yeah, exactly. Thank you for that. The other powerful thing about writing, whether it's a manifesto when you're earlier or an S1 is as you get a little more mature along the journey, when you go to raise money to your point on an investor deck, well one thing most entrepreneurs never think about is if a VC in general, some people now are just term sheet factories and they just venue money when they see it. But in general, a professional VC is going to take some time, do due diligence. And when the time comes, she's going to create this thing. She's going to write it, called an investment thesis. And she's going to show up at the Monday morning partner meeting, and she's going to have given that to people in advance.
And then she'll have a slide deck that's a summary of that, and they have a conversation about do we believe her thesis. It's not do we like this company or not. But in order to invest this serious amount of money, we need to believe a bunch of sh*t, right? And the best way to believe it is to argue against it and be thoughtful and rigorous, and yadda, yadda. Anyway, the bottom line is VCs create these investment thesis documents. Well, guess what? When you write your S1 internally years before you ever think about going public, you're doing it as a forcing function to get on the same page, right? Guess what? You can f*cking hand that to your prospective investor and go, "Oh, by the way, here's our internal S1 and feel free to use any amount of this you'd like for your investment thesis."
Al Ramadan: Yeah, I love it. I really think there's something there. And it goes beyond the point of view which I really like as well. I think the point of view is such a great mechanism for the emotional attachment to the problem and the characters in the show and the solution, et cetera. But the rigor of the S1, I think goes beyond that to your point. It goes to product design and company design as well. So, I'm a big fan. I think we might try that out one time.
Christopher: We should do it together. We should try one. I'm game if you are. Now, let's just play a little here because it'll be fun about how this broad mega category of EVs could potentially play out, right? So, you've got obviously Rivian and Tesla. We all understand that I think relatively well of now. There's a couple more startups coming that look promising potentially. There are the incumbents of course and look, I don't know anything. So, I'm not saying anything that there's any way, shape, or form insider information. But I read the same things that you read, and most of us in the business and tech world read. And it seems if the rumors are right, that Apple is pretty far down the line here in building a car.
And it seems that they want to create a car that can be a hundred percent autonomous, if you believe some of the rumors and blogs and stuff. And I'm not an expert Apple watcher, but it seems like they're coming. So, you have this scenario where you've got Rivian, Tesla, and maybe a few others, the existing folks and potentially Apple coming. I know you don't have a crystal ball, but it's five years from now, how does this giant mega EV category potentially look?
Al Ramadan: Well, first of all, it's a wonderful question and probably the answer to that is in the trillions in terms of value created. So, we're dealing with something that's incredibly powerful. I think the category EV is probably wrong. It's more about mobility more broadly. That's where I'd start, and I think that's hinted to in the Rivian prospectus. They don't really see EV anywhere actually. They talk about adventure vehicles as one example, and they talk about delivery vehicles. I think they're heading towards more than mobility space. So, I would add mobility into that. And then you think about not just the players you talked about, but you imagine well if Hertz just ordered a hundred thousand Teslas, doesn't that mean something? Isn't that signaling something? Probably and so on.
I think at the end of the day, there's going to be a set of players in the mobility space, this is at the highest level, right? There's a set of players who are going to be in as a service kind of space: Uber, Lyft maybe Hertz. Maybe Avis, those folks, right? So, there's going to be that bunch who essentially think of it as renting out the car in the old day, but it's more the service of getting from A to B, right? So, there's going to be that group, and that's going to be super powerful. There's going to be a group I think of people who are creating the product, the ecosystem, and the charging network and all the other services. So, the vertically integrated stacks that'll be Tesla, that'll be Rivian.
Lucid's another good example. They've gone to about 40 billion over the last few weeks here, good company doing electric vehicles, went public with a SPAC, which is one of the few SPACs that actually worked. And then to your point, all the current automotive vehicle players who have some part of that solution, not the whole part by any stretch, Ford, General Motors in the United States, maybe Chrysler gets off the mat for that. And then you're going to see Mercedes, BMW, Audi, Japanese, Chinese firms. I think you're going to see those point players. I do believe that those two worlds, the manufacturers and if you like the mobility walls, they end up colliding here in the next five years.
And it's going to be tough to distinguish whether you're getting an Uber or a Rivian or a Tesla or a Hertz. They're all probably going to have the same kind of feel, but it's all going to come down to this idea of the experience. The experience of getting from A to B either on a one-time basis or on a regular basis, and that the problem you solve instead of being thought of as being from A to B as a single thing, it's much more about the lifestyle that you lead and having all the mobility support. If you think about an adventure vehicle for a minute and just think about the Rivian test drive, half of the show was like, "Oh, your bike rack fits here, and then the thing for your surfboard fits up here.
And by the way, we have a stove that pulls out from the middle, and that's where you can do all your cooking. And oh the tent, yeah, well it comes out of the top." Right? You see what I'm saying? It's like, "Okay, so you attach to that whole life cycle, and you're solving a much bigger problem just getting from home to the campground. You're solving the whole thing, and that'll be true I think for most experiences that we have in life. And that's what's powerful I think about the idea of Rivian is it's solving that whole problem, and that is of course much bigger than an automotive problem. So, that's my thought on the mobility industry more generally, and that might be a 10- or a 15-year view honestly, Christopher.
I might be stretching it for five years to do that, but my sense is that's where it's going. These worlds are colliding and there's a massive... I mean if Rivian says it's nine trillion just for the vehicles, I don't know what the actual rest is, but I bet it's a factor of that.
Christopher: Well, it's very interesting when you call it mobility, right? That is as we are apt to say, a demarcation point in language creates a demarcation point in thinking, which creates a demarcation point in action. And legendary POVs open people up to a demarcation point in thinking, in action. If you think cars or automobiles or even vehicles, then when you have a hammer, everything's a nail, right? When you change what the hammer is, all of a sudden. So, that might seem trivial to some. However, if they continue to execute the way they are, and they essentially redesign what mobility means, that in of itself could explode. Now, a couple specifics I want to bounce off you.
On the Hertz thing, wouldn't it be interesting if... So, let's say Hertz lost round one and maybe even round two, right They missed Uber and all that sh*t, right? They didn't get that there was a new paradigm emerging, and the one that would have seemed more obvious probably would have been a zip car or something along those lines. And they didn't get that either. So, it's Uber and Lyft slid by, so they go, "Okay, not again." It could be if that they might be experimenting with a real twist on a rental model, they could have a time share business model. They have a more of a SaaS business model going. So, you pay X amount a month to get Y amount of miles, or however they would do it.
So, that could be one way they could go. And then the other thing that made me think that I wanted to just bounce around with you is the scooter companies have this model where if you get on a Bird in Santa Monica and you drive from point A to point B, you f*cking leave it on the front lawn and go into the place you're going, and that's the end of it. And either someone else picks it up, or they have third party contractors that they pay per Bird to bring them home. So, is it possible that we might have a Bird scooter like business model for Hertz with all these Teslas?
Al Ramadan: Man, I think so, and I think it fits within that narrative we just had about what does mobility really mean, and what are the experiences that we need mobility for? Obviously, going to work is one, doing adventure is another, presumably shopping and all that sort of stuff. So, I think it just breaks down into a different set of things. And to your point, Christopher, I remember going to Europe, actually Switzerland, and there were bikes. These were before the electric bikes even came out. There were bikes where you could just go from restaurant to restaurant and just leave them there. They were just right there. I was like, "What the heck? If you did that in Santa Cruz, they'd be all gone, but not in Switzerland."
And I think you're absolutely right. I don't know Hertz very well, but I'm imagining... I don't know how many cars they buy a year, but it's probably hundreds of thousands. So, they'd be pretty good at that I would think getting a pretty good price. I don't know how they do the servicing and everything else, but I'm guessing they're probably pretty good at that, too. It’s what's pain in the ass for me as a car owner, an automotive owner, it's servicing and all that provisioning and all that sort of stuff. Well, if they took all of that away, that's interesting and so on and so forth.
You can see how this starts to play out along these experienced verticals for one of a better term, and I think you're absolutely right, I wouldn't be surprised if we saw Hertz do something like that. And the fact that they've bought a hundred thousand or they've ordered a hundred thousand Teslas tells you something. And it could be just as simple as most of the time, I want an EV, but if I'm going to have to drive up to the snow in winter and it's 400 miles or I want to tow a boat to go fishing, maybe I swap it out for that day and take a gas-based F-150 or something, right? It could be.
Christopher: And if Hertz is smart, they're going to bring that sh*t to you because the f*cking worst part of car rentals is going to the rental place. It smells in there, it takes forever, the line's too fucking long. Then you've got to drag your sh*t across the parking lot. All of that is terrible, right? Think of where we're at, particularly with native digitals. They’re averse to buying anything. The GDP of virtually every major country is shifting rapidly from products to services, and has been over many decades now, but it's been accelerating because we're seeing the service evasion, servicization. I don't know, however the f*ck. Everything's getting servicized.
It is interesting to think, well, if they got rid of all the hee-haw and the car comes to you, and you could just f*cking leave the car somewhere, like you do with the Bird, they could change a lot. Okay, so that's one idea. Here's the other idea I have for you. Last time I checked, the people running Amazon were not f*cking stupid. As a matter of fact, that might be the most well-run company ever. If it's not, I want to know what is, right? So, what's the long-term play here, does Amazon become the front end for how you buy and service Rivian? They have all this logistics stuff they're now selling.The AWS of logistics is an emerging big area for them. Where does this connection with Rivian and Amazon land do you think?
Al Ramadan: I love it, and this is one of the things I get most excited about with Rivian itself is... okay, Christopher if you had to choose one company in the world to be your major strategic partner for getting from A to B, who would it be?
Christopher: Yeah, Amazon.
Al Ramadan: It's not FedEx.
Christopher: No, it's Amazon. This buddy of mine said this to me a little while ago. He said, "If the state government came out and said we've just done a deal with Amazon and they're going to take over the DMV, what would most people think?" Most people think that's a f*cking awesome idea, right?
Al Ramadan: Yeah, or the other one, which is that Amazon's getting into pharmacy which might be the best news I've heard ever.
Christopher: Please Jesus, it's about time, right? Pick any logistical grindy thing that is generally irritating for us as consumers, who's going to touch them on that stuff? What's the play here with Rivian?
Al Ramadan: Exactly, so that's what gets me most excited, right? You are now configuring, servicing, and delivering to the most powerful logistics company in the world, right? If you like the delivery experience, that vertical we're talking about, there's a adventure experience, there's a delivery experience, there's these other experiences that we have in our lives, I think it's so powerful that Amazon's there to do it. I don't think Amazon buys Rivian, in the same ways I'm not convinced Apple becomes a automotive manufacturer. Okay, but I might consider Apple partnering with Lucid to deliver the high-end, super designer experience. I could see that. So, I think this ecosystem is starting to line up around these particular verticals, and having Amazon as the number one investor, I'd be pretty stoked about that for sure.
Christopher: Now, as we go back to expanding the category to mobility, the other interesting thing here of course is mobile phones and their integration with our cars. And now it's to the point where does the phone begin in the car end and vice versa is not an easy question, right? Where do you think Apple and Google are around trying to get iOS and Android, as for lack of better analogy, the MS-DOS of the automotive industry and the mobility category broadly?
Al Ramadan: Yeah, that's another great question too, Christopher. What I do know is three players in that space. There's the Apple iOS, there's Android from Google, then there's Microsoft's equivalent, and that they are all courting all the automotive players. And I think the rub is that as a straight-up technology platform, take Android just as the case in point, if it was just that, it would be easy decision to make if you like the vehicle manufacturers, because they go like, "I got an operating system and I write a set of application on top of that, dah, dah. I deliver an incredible experience." But of course, Google is to your point like, "Well, hang on, we got this thing called Google maps and man, it's a lot better than your maps,” and they're probably right.
So, we're going to add that in as a service, but we'd add three bucks a car or $300 a car…
Christopher: Well, of course Google bought Waze, right?
Al Ramadan: Yeah, absolutely they bought that and then you have all the music services. I bet Apple and Microsoft are like, "Oh, by the way, we've got all the music services. Don't use Spotify, use our stuff and so on and so forth." This is, I think, the battleground for what we're talking about on mobility which is that when you step into your vehicle, whatever that might be, whether you bought it, you rented it, you're using it for the day, you just picked it up or however that all defines, having it fully integrated with your life and essentially the decisions you've made for that, I think that's the Holy Grail. And I saw a little bit of that with Rivian, where I wasn't able to play with it for that long, but my phone worked just fine.
And I use an iPhone just like 85% of the people in the world. And now the question will be does it automatically inherit all your Spotify preferences and does it automatically inherit the fact that I'd rather use Google Maps than Apple Maps? I don't know any of that stuff, but that's the battleground. The battle for the OS is over. That's a commodity business now, just like it was Microsoft 20 years ago. They went from Windows and then they said, "Well, actually we got this thing called Office, and it happens to be these three vertical applications." That's where all their money went and now of course, they've gone to the cloud with Azure and everything else, right? So, the operating system business is not a business.
Christopher: So, the operating system at that level, this sewage and plumbing of car software is it is a lot of it open source now, or is it just commodity or...
Al Ramadan: Yeah, Android obviously is the closest to open source of all of that.
Al Ramadan: iOS is very proprietary and Microsoft's pretty propriety too, but the point is that they're not ascribed much value. And the reason I know this is because as you know, Christopher, I was the senior vice president of mobility for Adobe for many years. And at the time...
Christopher: Yeah, but why should we listen to you about this?
Al Ramadan: Exactly.
Christopher: That's part of why I asked you, handsome.
Al Ramadan: Yes, thank you.
Christopher: I figured you'd be paying attention.
Al Ramadan: Yeah, I was. And at the time, of course we were trying to encourage people to embrace Flash which was a technology that was around on the web, the Rich Media flick technology back in the 2000s to incorporate them on their handsets at the time. Mobile phones, this is before the iPhone itself. And I knew that, and that business model went to price per unit equals zero quickly. I remember being in a negotiation with Samsung for a whole bunch of their phones, and we might be getting one or two dollars per unit from say a PlayStation or something like that. When you're talking to Samsung, it's like, "I'll give you a cent. How about that?" And that quickly goes from that to lower.
So, I just don't think that business is a business, but how much of if you like the mobility experience or services that is carved out for Apple, carved out for Microsoft, carved out for Google, that’s going to be the question.
Christopher: I mean you could imagine a day, for example, where there's a set of configuration options for your car, and you can download a set of apps from the Apple app store or the Android app store, and configure your car on your phone, right? Your in-car experience, and Spotify could be part of that, or whatever could be part of that, or you could imagine being able to watch Amazon movies. A lot of SUVs and sh*t have those TVs, the screens behind them. Well, nobody has a DVD player anymore. I mean they're going to want to watch internet-based, right? My point is you can imagine a scenario where there are a whole bunch of apps that you can subscribe to that enhance in some way your in-car experience.
And I got to believe the major players here want their platforms and ecosystems to be the ones that are the preferred ones because what is a phone and what is a car, and what are the apps supporting those things or available in those environments blurs completely.
Al Ramadan: Yeah, sure does. And you think about well, what skills would you need to have for a vehicle manufacturer to do that. And the first answer is a technology backbone that was born post-2010 at least, right? You look at Ford and General Motors. I got a Mercedes, I love driving the thing. I can't play music half the time on my freaking six-figure Mercedes because the integration with the iPhone sucks so badly, right? They were all born in the Symbian days back in the early 2000s, right? You think about that only makes me more bullish about someone like Rivian. They're born on AWS, mate. It's not even an operating system. Think about that for a minute, that's where they're born… on AWS.
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