[David Senra]
Okay, I want to start with the fact that you sold your previous company for 600 million. You and your co-founder own 90% of it. You find yourself as a very young man with about a quarter billion dollars in cash. What happens next?

[Peter Rahal]
The natural thing is to get into investing. Outside looking in, investing is very appealing. It's like, one, you think it's an intellectual exercise. The second real thing is, it gives you a great lifestyle because you're not operating, so you have no organizational responsibility. I started studying investing and getting into it.

[David Senra]
How did you study investing?

[Peter Rahal]
Figuring out asset classes, how to build a portfolio, grow capital, underwriting deals.

[David Senra]
Are you having conversations? You reading?

[Peter Rahal]
Reading, conversations, best books on it. And then where my time was spent was on

[Peter Rahal]
where I had the best advantage, which was in consumer packaged good investing, or just privates, so early startups. In stage agnostic, seed to growth, didn't matter. And started doing that and quickly realized that the most important skill sets is charisma, or with whale hunting. It's like finding the deal that is quite obvious and then trying to get an allocation. That's really the game, and that's quite gay.

[Peter Rahal]
Chasing men for allocations is something I didn't want to do. My previous experience was like, I'm going to sit back,

[Peter Rahal]
I'm going to spend my time building a product, and my product's going to do the talking. Like, my product's going to do the work. Where in investing, you're taking capital and then you're trying to allocate it into the thing that's going to grow, behind the leader that you're going to bet behind. And that's just too hands-off for me. I'm used to fighting, being in knife fights, and it's just too passive. So, investing is very tempting because you can make a decision and not have to do anything,

[Peter Rahal]
and it works. It grows. The big problem I had with it is the feedback loop's super long. In building and operating a business, you make a decision, whether it's a hire, whether it's a product decision, marketing, and you get the feedback right away. The feedback loop's immediate. Where in investing, it's like, you can develop a thesis, develop this,

[Peter Rahal]
underwrite this founder as really great, and then you make the decision and, all right, five years go by, did it work or not?

[David Senra]
So, you're living where when you sell RXBAR?

[Peter Rahal]
Chicago.

[David Senra]
Okay. You have this huge acquisition, you have a bunch of cash. This is when you moved to Miami?

[Peter Rahal]
Yes.

[David Senra]
You moved to Miami before?

[Peter Rahal]
No, after.

[David Senra]
Okay, after. So now you have the money and now you're like, "Okay, I have a bunch of money." You had this ridiculous idea. This is your own words, because when we were hanging out a few weeks ago, you said, "I had the ridiculous idea of starting a family office."

[Peter Rahal]
Yes.

[David Senra]
So you moved to Miami and you're like, "I'm going to start a family office."

[Peter Rahal]
Yes.

[David Senra]
Okay, explain that part.

[Peter Rahal]
So, I was in Chicago and I just needed a change. I needed a change environment. RX was my identity. I just got divorced. So I looked at the United States and I was like, "Where's the best place to go?"

[David Senra]
Wait, the divorce part. The divorce happened after the acquisition?

[Peter Rahal]
Yeah.

[David Senra]
Was it anything related there? Were you under a lot of stress?

[Peter Rahal]
No, just hubris.

[David Senra]
Say more about that.

[Peter Rahal]
I had success bias where everything I'd done has been successful, and so there's blurred lines between your personal and professional, and I just moved too fast. Thought it was going to be easy. Yeah, because my goal was to have a family, so career success, accomplished, next thing is family.

[David Senra]
And you tried to speed run?

[Peter Rahal]
Yeah, went way too fast. And thinking I'm really good.

[David Senra]
So this is, if I remember correctly, meet, marry, divorce, all in nine months?

[Peter Rahal]
Yeah.

[David Senra]
Okay.

[Peter Rahal]
I beat Kim Kardashian.

[David Senra]
Okay, so you move to Miami. "I'm going to invest." And then what I really want to get into is the fact that you are uniquely unsuited to invest.

[David Senra]
All the other founders I know that I ask about you is like, "This guy's just a relentless animal operator." The idea that he could think that he could sit and be the guy behind the guy. Why do you think you made that mistake? This is very interesting to me, because you did what you did to start, scale, sell, right? Which is very

[David Senra]
celebrated. But I talked to a bunch of founders that did that, and then they're fucking miserable. You're one of them.

[Peter Rahal]
Yeah.

[David Senra]
So, I really want to hone in on what you were feeling and why you were so miserable in this situation.

[Peter Rahal]
My plan was to get out of Chicago, change environments, and then I just looked at a map like, "All right, where's the best place to go to reset a bit and invest, build my family office, get that right?" And then my ultimate goal was to relocate where it's in the best interest to start my next thing. So I chose Miami as a place to reset and invest, and this is before COVID. Got there, started formalizing a family office. And then I think what I underestimated with investing in different entrepreneurs, particularly in food and beverage, is that I just assumed they all had the same tenacity as me. I just thought that's what you did. And I didn't really know anyone else who were founders at the time. And then I quickly realized, I'm probably actually a miserable investor because

[Peter Rahal]
I'm

[Peter Rahal]
handcuffed sitting in the back seat while someone else is driving and they don't know where they're going. And that's a torturous position to someone who knows where to go.

[David Senra]
So you didn't know how rare you were?

[Peter Rahal]
Yes.

[David Senra]
Okay.

[Peter Rahal]
As

[Peter Rahal]
not humble as that is, but yeah.

[David Senra]
I was just sitting upstairs right before this, and I was with my friend Patrick, who does the best

[David Senra]
podcast. He's one of my closest friends, and we just happened to run into Adam Ferrari from Apple Oven.

[Peter Rahal]
Yeah.

[David Senra]
Which again, there's a lot of overlap between you and

[David Senra]
Adam. And we were talking about, essentially, Adam's running this

[David Senra]
cash printing machine with very few employees. He hates entrepreneurs that optimize for vanity metrics, where he said you should just focus on cash generation. It's very straightforward to him. It's obvious to him. And we were talking about the different hires he had and different other founders he knows. And then through a story that he was telling, Patrick had a great line. He goes, "Man, it's crazy. In any domain, it's only two or three guys that are actually good."

[Peter Rahal]
Yeah.

[David Senra]
Just pick any category. There's a sea of shit and two or three, maybe four people that are actually excellent.

[Peter Rahal]
Yeah. And I just assumed that anyone who was getting into entrepreneurship- They're willing to die before their company fails. They are willing to sacrifice comfort to win. They want to win, and I realize, like, no,

[Peter Rahal]
that's actually not what a lot of people do or prioritize.

[David Senra]
When you run into other entrepreneurs like this that you made the mistake of investing in because they weren't like you, when you have conversations with them, what is their response to your extreme approach?

[Peter Rahal]
If I'm the one giving criticisms to the company,

[Peter Rahal]
that's a problem. The CEO should be the most critical. I shouldn't be like, "Hey, man, the car's on fire." That relationship, if I'm the one spotting out problems or saying go faster, that's usually not a good sign. And I kept falling into that pattern, and I don't want to be in a position to be like, "It's your company at the end of the day." I'm not an advisor. I'm just here to try to facilitate stuff, but-

[David Senra]
What I'm really trying to get at is, what is going on inside of you? What is your inner monologue? You're like, "Oh, I fucked up?" What is actually happening?

[Peter Rahal]
This is frustrating.

[Peter Rahal]
I need to get back in the game. This sucks.

[David Senra]
How long did it take for you to figure this out?

[Peter Rahal]
Probably a year. Yeah, 20 to 21.

[David Senra]
Okay, so then what's the next step after that? You're like, "Okay, this sucks. I don't want to be an investor. I need to be an operator. I want to get my own company. I'm way too young to be retired, by the way."

[Peter Rahal]
Yeah, for sure. So,

[Peter Rahal]
one of the good things about investing is you're getting through the deal flow process, you're ideating, you're talking to other movers and shakers, and that's a helpful process to like, all right, is that something interesting? Is that a problem I want to solve? But basically, I had several false starts. I looked at recycling garbage, I looked at synthetic biology, I looked at other consumer packaged stuff. And I started, and then I basically pulled out

[Peter Rahal]
committing to stuff. And the reason is,

[Peter Rahal]
if I go in, I'm fucking all in, and that's a really scary thing, actually, because then my friends go away, my health goes, all this stuff happens to me. So-

[David Senra]
Hold on, we can't go on from that. Okay. Then you need to describe what all in means to you. What you just said, "It's scary. My friends go away, my health goes away." So this is just the only way you can operate? Explain this to me.

[Peter Rahal]
Yeah. My leadership style is just all in,

[Peter Rahal]
burn the bridges. So I can't go into something half-assed, ever. So, what I commit to is very serious. And so, all my false starts were like, "Uh, I'm not..."

[Peter Rahal]
Moving in the direction of starting it, and then just pull back. Moving in this direction of starting, pull back. The other thing that was there was, I needed to start a family. So

[Peter Rahal]
during my hiatus of investing, I was like, "I need to find a wife to go start a family."

[David Senra]
I don't know if Miami is the place, Miami Beach in particular, is the place you should be searching for a wife.

[Peter Rahal]
I agree.

[Peter Rahal]
And then I bought a place in New York and moved to New York.

[Peter Rahal]
But in general, it's because, all right, so if I find something and fall for it, there's a really high chance that

[Peter Rahal]
I'm going to go all in, I won't see my friends, lose my health, and I'll be 50 and single, and that's a version of the future I didn't really want. So I ultimately found my wife, and then all roads led back to protein bars.

[Peter Rahal]
It required some humility of being like, that's my shtick. If I die, on my gravestone, it might say, "Protein bar guy." And I'm comfortable with that.

[Peter Rahal]
Because at first I had some influence of Elon, like, "Oh, I need to go into, like, I'm not the food guy. I'm going over there. I'm not this. I need to prove something." But then I realized,

[Peter Rahal]
I've been in the food business since I was 12. I have a deep intrinsic knowledge of it. And basically, once my non-compete was a year away, it just naturally happened of like, oh, started connecting the dots, like, this is what I should do.

[David Senra]
So wait, you're in the food business since you were 12. How old are you at this point where you're like, "I'm going to start another protein bar?"

[Peter Rahal]
Thirty-four.

[David Senra]
Okay.

[Peter Rahal]
Yeah. So 34. Yeah, so my non-compete was October 6th, '22.

[David Senra]
How long that getting over that dialogue, that inner monologue where it's like, "Oh, I need to do something more impactful, or I have to do biology, or create hardware or something," and just like, "No, I'm going to actually stick to what I actually know and may be the best in the world at."

[Peter Rahal]
It was three years.

[David Senra]
You had to convince yourself this?

[Peter Rahal]
Yeah. Mm-hmm.

[David Senra]
Wow. Okay.

[Peter Rahal]
Yeah. And a little bit of like, because I always think both as an investor when I looked at companies and then a philosophy

[Peter Rahal]
for myself is, the leader of the company, if they have to pick up the phone to fix the product, they're fucked.

[Peter Rahal]
Meaning, the leader has to be able to really deeply understand the product and be able to fix it. And then all those false starts were like, it's kind of dependent on something else, or I didn't have the time

[Peter Rahal]
to get the deep enough understanding of the product to make that change. And so with food, I deeply know exactly what to do. So it just became really obvious. And

[Peter Rahal]
got my wife and then started what is today, David.

[David Senra]
When we talked the other... Why did you laugh?

[Peter Rahal]
It was a very clear process. All right, check your personal life before, so you don't ruin your personal life again,

[Peter Rahal]
because you're going to go all in on something. And then

[Peter Rahal]
once that's done, and then-

[David Senra]
It just so happens you got the family, the non-compete expires, and now you're back at this.

[Peter Rahal]
Yeah.

[David Senra]
But maybe your ambition when you were younger, because you started RXBAR when you were how old? Early 20-something, you said?

[Peter Rahal]
Twenty-four.

[David Senra]
Twenty-four. But now the scope of your ambition is, David is not a bar company. That's the first of the products, but how do you describe what you're working on now?

[Peter Rahal]
We don't want to tell people what not to eat. I think that's a lot of the food business. Like, "Don't eat this." It's demonization and it's pseudoscience. We want to make

[Peter Rahal]
your favorite foods smarter. And so it's a really quiet approach. They're there and they're just more intelligent, they're more effective, they're objectively better. So we're going to do that across multiple categories. The protein bar is the wedge. I know it. That's what we use to get to scale.

[Peter Rahal]
And once you get to scale, you can build the platform for there. You have the organization, you have the route to market, you have the R&D capabilities. So the protein bar got us our platform, and now we're proliferating into- Categories that just make sense for us and our technology.

[David Senra]
When you started David, you knew that you were not going to stay, that you wanted to build a food company-

[Peter Rahal]
Yeah

[David Senra]
... not a protein bar company. So, I'm going to just answer my question that I asked you the way you said it to me before, which I think was excellent, where you're like, "I have to be the best in the world at what I do in my category." And I was like, "Well, what's your category?" And you're like, "CPG." I go, "What does that mean?" You go, "Anything that you can buy in a store."

[Peter Rahal]
Yeah.

[David Senra]
That's the size and scope of your ambition.

[Peter Rahal]
Yeah, we're competing with Nestle.

[Peter Rahal]
I want to build the most important food company in the 21st century.

[David Senra]
And how big? What's the scale of some of these food companies?

[Peter Rahal]
Nestle's 100 plus billion in revenue. They're real global as well.

[Peter Rahal]
Pepsi's probably right around there. Real scale.

[David Senra]
So a couple hundred billion dollar companies.

[David Senra]
How many different products?

[Peter Rahal]
Well, they have these enormous portfolio of brands.

[David Senra]
Yeah.

[Peter Rahal]
And then

[Peter Rahal]
hundreds of brands. And then those brands are different by cultures or geographies.

[David Senra]
They grow by acquisition or no?

[Peter Rahal]
Yeah, mostly.

[David Senra]
Okay. Are you going to do that too?

[Peter Rahal]
Probably it's on the table, but our core competency is the ability to build brands. So, I know how to create an identity and build a brand. So, for the next four years, five years, we'll probably just create brands, but I wouldn't rule it out later on.

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

[Peter Rahal]
The analogy I think of as a brand, it's simply just a human being. So a brand has a name, it has mommy and daddy, it's the founders, its parents. Those parents have DNA. This brand, this individual has values, it has a vision where it's going, it has other traits, tone of voice, has friends. Who do you associate with?

[David Senra]
Hold on. Explain that part to me. Who do you associate with?

[Peter Rahal]
So, who are you going to do partnerships with?

[Peter Rahal]
So David, for example, David Protein,

[Peter Rahal]
is a partnership with Huberman. That's an alignment. We wouldn't do a partnership with,

[Peter Rahal]
I don't know, Miss Rachel doesn't make sense. I'm sure she's great, but-

[David Senra]
Yeah

[Peter Rahal]
... just like a human, the social circle matters. And so in creating a brand, that identity, both from tone of voice, visual, what clothes it wears, who's its friends, its values, vision,

[Peter Rahal]
you define that clearly and that there's like a North Star to it. The most important factor in building brands, it just takes time. So if you keep this identity, it can be dynamic in nature as it grows, but you are consistently doing that over time and with really great quality product and service. The timepiece is critical. You just have to be doing that over time. David's values are around intelligence, beauty, and discipline. And that's rooted in the story of Michelangelo's masterpiece, the sculpture of David. Those values are rooted in the symbolism of that masterpiece. And then the tool, the chisel, which

[Peter Rahal]
is like this crude nail. But the meaning of a chisel is intelligence, discipline, and if you apply those things, you get a masterpiece, something beautiful. So that's the logic for David's

[Peter Rahal]
brand and brand identity. So, if you have a crystal clear identity for a brand and its product offering, its position, the marketing actually becomes really easy. You just constantly hammer those points over and over and over again.

[David Senra]
I want to tell you about the presenting sponsor of this podcast, Ramp. I have been reading a lot about SpaceX lately. SpaceX is one of the most valuable businesses in the world, and one of the main themes in the history of SpaceX is constantly attacking and questioning your cost. Ramp helps many of the most innovative businesses in the world do exactly that. The median company running on Ramp cuts their expenses by 5%. And one thing SpaceX has demonstrated is that a religious dedication to controlling costs can help actually increase revenue because you can pursue opportunities you couldn't otherwise. And we see that in the Ramp data, too. The median company running on Ramp also grows their revenue by 16%. So when you're running your business on Ramp and your competitors are not, you have a massive competitive advantage that compounds over time. Ramp is the only platform designed to make your finance team faster and happier. Many of the top founders and CEOs I know run their business on Ramp. I run my business on Ramp, and you should too. Go to ramp.com to learn how they can help your business save time, save money, and grow revenue. That is ramp.com. Deal is how the best founders turn the world into their talent pool. I've been studying how history's greatest founders operate for a decade, and one thing they all have in common is they understand that recruiting and hiring the very best talent is your most important priority. A players recognize other A players, which is why top companies like Ramp, Shopify, ElevenLabs, Uber, and DoorDash all use Deal. Many of the top founders I know have personally invested in Deal after using their product. And what they discovered is that Deal is the best company in the world at building infrastructure for global hiring. Deal will help your business hire, pay, and manage any worker anywhere in the world so you can retain the best talent anywhere and spend the rest of your time focusing on what you do best, delivering value to your customers. The founder of ElevenLabs has a great description of the value Deal can give your company. He said, "We built ElevenLabs to break down language and communication barriers. With Deal enabling us to hire and support exceptional talent anywhere, we can accelerate our innovation and bring more voices, stories, and ideas to every corner of the world." Deal is trusted by over 40,000 companies and growing fast. Learn how they can help your business by going to deal.com/senra. That is deal.com/senra. How much time did you put into planning this brand identity for David?

[Peter Rahal]
Six months, maybe.

[David Senra]
Okay, so then once you have this clearly defined set of qualities for the brand, and then you're saying, "Okay, then we just extend this over decades."

[Peter Rahal]
Yes.

[David Senra]
Is the plan?

[Peter Rahal]
Yes. You just hammer it.

[David Senra]
Okay.

[Peter Rahal]
Keep going.

[David Senra]
How did you learn the importance of maintaining the same brand identity over a long period of time?

[Peter Rahal]
Just studying, like just studying brands. If you look at the best brands, they're all old. And so time's a factor that's really, really important, and the consistency of that.

[Peter Rahal]
And the thing is, there's an asymmetry where those brands are super fragile. So if you fuck around on quality or something else, it's over really quickly.

[David Senra]
The reason I asked that is because I was obsessed with this guy named David Ogilvy, and I've read every single one of his books. He built one of the greatest advertising agencies of all time, and he would hammer exactly what you... You sounded exactly like him if you read his autobiography or if you read Ogilvy on advertising. And his whole thing was just like, people jump around too much. Like, you pick one brand identity, and you do it over and over and over again for decades.

[Peter Rahal]
Yeah.

[David Senra]
And you came to the exact same conclusion. It's like the best brands are the best brands because they did this for decades after decades.

[Peter Rahal]
And it's fundamentally about the values of the brand. Like, for David, it's about intelligence, beauty, and discipline.

[David Senra]
Why'd you pick those three traits, though?

[Peter Rahal]
They're close to me.

[Peter Rahal]
I love beauty, I love intelligence, and I love suffering and discipline to a negative point of view almost. Protein bars are where I start. So what do people come to protein bars for? They come to it for body composition. Like, no one really eats protein bars as like, "Oh, I'm just going to enjoy this treat." It's very, very functional. Like, "I need to transform my body, either increase muscle or decrease fat."

[Peter Rahal]
So the category in protein in general is very oriented around those values as well. And so

[Peter Rahal]
with David, one of the things I wanted was a weight loss company or a body composition company without being one. So if you look at the great, they're not really great, but the '90s

[Peter Rahal]
brands in weight loss, like Atkins,

[Peter Rahal]
Weight Watchers, Jenny Craig, like, they're super tacky. But people went to them for body composition stuff. So the question was like, all right, well, how do I make that more refined? Really more European, like higher, better taste. And so did that.

[Peter Rahal]
And then the other side, I don't know, but when I turned 35 and just looked around my friends, I just realized everyone I knew had some issue with weight. Like, everyone had struggled with weight loss as you get older.

[Peter Rahal]
Everyone wanted more muscle. Like, everyone I've ever talked to, and it's whether it's a issue they're honest about or they're in the closet about it. So it's like a ubiquitous problem. So the idea is like, how do you create a brand that really embodies that in a refined way?

[David Senra]
Well, I'm going to get back to the masterpiece in a minute, so don't let me forget that part. But you said that you're almost attracted to suffering in almost like an extreme, ridiculous way. What the hell does that mean?

[Peter Rahal]
I always choose the hard path.

[Peter Rahal]
Even when I exercise, I choose the most painful exercises.

[Peter Rahal]
When I take my son out, I refuse to take a stroller.

[Peter Rahal]
I just always carry him. I just like being strong and doing hard things, and I think there's something spiritual about suffering that I find very gratifying once you get through it. And I think physical suffering is easy because you just get really hot, get really cold.

[Peter Rahal]
But what's nice about building a company is it's like emotional suffering. It's like a lot of tough conversations.

[Peter Rahal]
And so I think what I've learned early on is if you face those things, there's growth on the end of it. And so I found this relationship, the more you suffer,

[Peter Rahal]
the stronger and the more growth you experience.

[Peter Rahal]
And so when I see it and I feel it, I lean into it.

[David Senra]
Travis Kalanick, the founder of Uber, was on this podcast, and he said something that resonated with a lot of people, and he's like, "The life stuff and entrepreneurs, I can take more pain than this guy, and I'll prove it to you."

[Peter Rahal]
Yeah.

[David Senra]
Do you agree with this?

[Peter Rahal]
Yeah. It's fun.

[Peter Rahal]
Yeah, I love it.

[Peter Rahal]
Pain tolerance, yeah.

[David Senra]
I want everything that's in your head about pain tolerance and suffering. Let's just put it out here, because I think this is very interesting. Look in your eyes. I don't know if we can get this on camera or not.

[Peter Rahal]
I don't know. It just feels good, and I like...

[Peter Rahal]
I don't know where it's from necessarily.

[Peter Rahal]
I think it's rooted in competitive nature, but

[Peter Rahal]
I think it makes you a better man.

[Peter Rahal]
I think there's nuance. Like, suffering for no benefit is not good, but I think this is actually it. I have a lot of resentment and anger in my life,

[Peter Rahal]
and if I do not harness that in a certain way,

[Peter Rahal]
I

[Peter Rahal]
become a bad person or I start to not be happy. And so physical exertion, exercise, company building stuff is a way for me to channel

[Peter Rahal]
all this spite and anger in a way that's really productive.

[David Senra]
What's the source of the resentment and anger in your life that you feel you have to channel?

[Peter Rahal]
So trauma's relative, but for me,

[Peter Rahal]
when I grew up very beautiful parents, so I don't want to sound like I suffered that much, but when I was a child, I was just labeled disabled because of my dyslexia. And that, I remember hearing conversations of teachers saying, "Oh, is Peter stupid?" Like, I couldn't read well. And I remember that. I overheard those conversations with my parents, and that just, I think,

[Peter Rahal]
broke me in a way that it's like my deep intrinsic motivation to prove that wrong.

[Peter Rahal]
And it's actually why I am so disagreeable with any sort of authority or disagree, or contrarian by nature, because my survival strategy as a child was to say,

[Peter Rahal]
to have self-esteem really is like, "All you teachers are wrong. This whole system is broken.

[Peter Rahal]
Fuck off." So

[Peter Rahal]
I think deep in my personality is that, like, proving that all wrong.

[Peter Rahal]
And then even to just survive in school, it took me just like 10X the effort. To get like a C and D. So I think a lot of my pain tolerance came from some of that.

[Peter Rahal]
But my resentment and anger is certainly rooted in that.

[David Senra]
You still feel this when you wake up today?

[Peter Rahal]
Yeah. No, I think it's like tattooed.

[Peter Rahal]
Psychedelics, therapy, it's like tattooed in me at this point.

[David Senra]
You've tried to get rid of it and you can't.

[Peter Rahal]
Yeah.

[David Senra]
And so you feel the outlet is crushing your competitors?

[Peter Rahal]
Yeah.

[Peter Rahal]
It's winning. And it's like I'm not really proud. I'm just like, it is what it is. I didn't really choose it, but it's like to prove that I'm not that,

[Peter Rahal]
fundamentally.

[Peter Rahal]
But I felt when I was fake working as an investor-

[Peter Rahal]
... I was deeply unhappy because I wasn't able to channel. I was like, "I'm a sideline." I'm not a fucking cheerleader. Like, I'm on the sideline and I need to channel all this anger and thing towards a result. And

[Peter Rahal]
reporting on a portfolio is not doing that.

[David Senra]
I have a younger friend that

[David Senra]
I feel like I can kind of share some of the experience I get to have with this person. And I was just like, as a general rule, the further you get away from the person that actually has talent, the more cautious you have to be. So it's like the founder obviously has talent. You obviously have talent. You created something from nothing and you've done it over and over again and now building this. But you have to be careful of these agents. You have to be careful of these bankers.

[Peter Rahal]
Yeah.

[David Senra]
You have to be careful of these investors. The further you get away from the person with talent, they just are incentivized to kind of like persuade, cajole-

[Peter Rahal]
Mm-hmm

[David Senra]
... act, in many cases, like against your interests.

[Peter Rahal]
Yeah.

[David Senra]
And I was like, just stay close to the people that actually have talent. And you don't need many friends in life. You can have five.

[Peter Rahal]
Yeah.

[David Senra]
And those are the kind of friend group that you should have, where you have all these other fakers out here that are playing politics. You can get ahead that way, which is completely different than how the entrepreneur thinks.

[Peter Rahal]
Yeah, I agree with that.

[Peter Rahal]
Yeah.

[David Senra]
There's another thing that you were saying, because I'm not going to leave this alone. I want to hear more about your resentment and this attraction that you have to pain. So the founder of the Four Seasons, this guy named V.Z. Sharp, he has this great line where he started, he's kind of embarrassingly ambitious, and I mean that in a great way, where he's like, "I'm going to build the world's greatest high-end luxury hotel chain." He didn't know anything about it. He never built a single hotel before he had that goal. And so his autobiography is excellent. And in there he says, one of my favorite maxims in his entrepreneurship, he says that "Excellence is the capacity to take pain."

[Peter Rahal]
Yeah.

[David Senra]
And this same thing, he had this very complex relationship with his father. He had a lot of people doubting him. This idea, like what you just said to me makes perfect sense because it's just in these biographies over and over again, and a lot of people that have come on the show. I just mentioned Adam Vergi. Like one thing that he drove himself was like, "I tried to raise money. I was willing to sell 25% of my company for a million dollars."

[Peter Rahal]
Correct.

[David Senra]
Right? This is the company that's going to wind up being worth 100, 200 billion dollars. They turned me down. These VCs turned me down, and then they funded some of my competitors, so we made it a company principle to put those competitors out of business.

[Peter Rahal]
Yeah.

[David Senra]
So when I hear you, I hear this guy Josh Wolf has this great line where he says, "Chips on shoulders puts chips in pockets."

[Peter Rahal]
Yeah.

[David Senra]
It's like using that pain that you had when you were younger and channeling it to drive an achievement.

[Peter Rahal]
Yeah. And I think the key is if you have that, if you don't channel it and focus it, I think it's destructive.

[Peter Rahal]
So,

[Peter Rahal]
for me, it all gets channeled through the art, through the company building process, and then it's productive because it can be destructive if you don't channel it.

[David Senra]
Okay, so how are you channeling it into what you're building now then?

[Peter Rahal]
The company's output is really impressive. Just a lot of hours, butts in chairs in the office, just dedication.

[David Senra]
What do you think is impressive about the output that you're doing right now?

[David Senra]
What does that mean?

[Peter Rahal]
We're only two years old and it feels like five years. So our relationship with time is really bizarre. But in two years, I mean, we're run rating over 400 million this year. We'll do 300 million this year. We're in the frozen category. We're obviously in protein bars. We have an RTD. We've launched a confection with three different formats.

[Peter Rahal]
We're launching another brand in November.

[Peter Rahal]
In

[Peter Rahal]
my field, you don't see that sort of output. And it keeps getting better. Like, all our products keep getting better. But I mean, we're the fastest growing food company, I think, no, I know, in history. So it's really hard to scale it. And the pace in which we're doing it, I think this would take normally 10 years, and we've done it in two.

[David Senra]
Explain to me why it's so hard to scale.

[Peter Rahal]
Why it's hard to scale is because it's inventory. So you need to go buy the raw materials, convert it into finished product, and some of the raw materials take a long time. And for example, the dairy market was super tight. So if you don't... Like growing 300%, 400% a year is really, really... or even closer every six months is really demanding on the supply chain.

[Peter Rahal]
To take Travis, like this is all atoms. Like,

[Peter Rahal]
we're not a digital business at all. So,

[Peter Rahal]
yeah, the inventory part is really, really challenging. So matching supply and demand has just been very difficult and...

[David Senra]
So you've had times in the company where you ran out of supply, correct?

[Peter Rahal]
Oh, constantly, yeah.

[David Senra]
Is this when you started... I saw

[David Senra]
Rob and everybody's been telling me about David Barr, and then I saw an ad and you were selling cod or something.

[Peter Rahal]
Yeah.

[David Senra]
Is that as a result of the fact that you ran out of supply? What happened there?

[Peter Rahal]
The story of cod was

[Peter Rahal]
we're creating our website and we're doing a comparison table.

[Peter Rahal]
And the one metric we think is really important is how many of your calories are coming from protein.

[Peter Rahal]
And on this chart, we were number one, and we were number one on everything. And for me, my investor influence, anything where I see a chart where it's all number one, I'm like, "It's bullshit." So we were like, "All right, well, we need to find something that's-" Number one, what has a better protein-to-calorie ratio than our gold product? And the only thing we found was boiled cod. And so in our comparison chart, we put boiled cod number one and David number two,

[Peter Rahal]
and just left it there as like a dorky sort of comparison. And why it worked is like the juxtaposition between our bar and the cod is like signals convenience, it signals value, and like cod's pretty unappetizing. And then we're halfway through our first year, and I was like, it's like deja vu for me. I'm like, "This is super boring." Like another flavor. I'm like, "We need to do something bold." And so we're like, "Let's actually sell cod." And not like a stunt, like actually seriously sell fish. And so we did this boiled cod campaign, and it was funny because it was like-

[David Senra]
You like pain. Let me know.

[Peter Rahal]
Yeah, it was like got in the frozen business, and it's back to our brand values. Like, it was actually a very intelligent thing because it centered the conversation around protein-to-calorie ratio. So, but did it in a way that wasn't sort of like, hey, like right on the nose. It was like a little bit of a riddle. And it's like 55 dollars frozen cod online. Like, no one really wants that. So we didn't have product market fit, but it functioned as a really great communication tool.

[David Senra]
So creating a product for marketing benefits.

[Peter Rahal]
Yeah, we call it product as marketing.

[Peter Rahal]
I'm not giving up on it. Like, we're going to keep going. We're going to keep going on cod until we get product market fit.

[David Senra]
I don't think you will.

[David Senra]
I don't think you will, man.

[Peter Rahal]
I know. It's funny because if you look at our website, it's like, protein bars, bronze and gold, pints, frozen ice cream, and then there's like RTDs, and there's like fucking fish.

[Peter Rahal]
And

[Peter Rahal]
it's weird, but like the whole food space is so fucking boring, to be honest. It's like they all say the same shit, they all do the same things. And so

[Peter Rahal]
being a second time, I was like, "We've got to have some fun with it."

[David Senra]
Okay, so that was not in response to

[David Senra]
supply issues, because there was no demand for this frozen cod so far.

[Peter Rahal]
Yeah, no. It happened to work at the same time we were out of stock on some things, but no, it was independent.

[David Senra]
Okay, so let's go back to when I interrupted you because you started talking about pain. You said talk about building a masterpiece. What were you going to say there?

[Peter Rahal]
Oh, it requires

[Peter Rahal]
tons of discipline and intelligence, and it's done over time. And that's really what the brand David's about, is like finish your masterpiece and tap into everyone's inner excellence.

[David Senra]
But how do you apply it to building your company, though?

[Peter Rahal]
Well, I think I start with like the what is a company? So our strategy is like two fundamental things in a company.

[Peter Rahal]
People,

[Peter Rahal]
it's all about people, as cliche as it is. And I think about the organization as a product. So my focus is all about that.

[Peter Rahal]
And then the second piece is product and mastery of the product. And when I think of product, I think of brand and product as the same thing. Like, the product is just the raw thing, and then the brand is like what it wears, like the exterior piece. But if you try to look at the organization as a product, a company's just a group of people aligned towards a mission. So if that's the most important thing, like what actions does a company do to make sure that it's done? So

[Peter Rahal]
for us, when I think of mastery is like we have four processes in the company that ensure our organization is

[Peter Rahal]
done right and culture is lived. So if people are everything,

[Peter Rahal]
who you select is the most important thing, who you select into the organization. How do you train and onboard them?

[Peter Rahal]
Three, how do you select the ones to get promoted and

[Peter Rahal]
rewarded? And then how you

[Peter Rahal]
terminate the ones that shouldn't be there. So those four processes are really critical to building the organization and scaling it. And so we spend a lot of our time refining our hiring process. Training and onboarding is mission critical, and then promotion as well, rewarding the right behaviors, and then firing. And those are all organized around our value system, which is the best way to align a group of people to make sure the right behaviors are matching what we want.

[David Senra]
What are the behaviors that you want?

[Peter Rahal]
We want truth seekers.

[Peter Rahal]
People who have courage to seek truth. That's mission critical. You don't want biases in place.

[Peter Rahal]
Foundational would be humility, which is I define as the freedom of pride and arrogance. So humility is really foundational, and it shows up like intellectually to be like, "I don't know what I'm doing. I need help." Like, I don't want to cover your ass culture where people are like, "I have this data, therefore my decision's good." Like, that's not really productive.

[David Senra]
Say more about that.

[Peter Rahal]
You look at people from big corporate America come in, and then they will generate a bunch of data,

[Peter Rahal]
surveys or whatever, to prove their experiment or

[Peter Rahal]
cover their ass if the experiment goes wrong.

[David Senra]
It's like fake work.

[Peter Rahal]
It's performative in a way of like, "I'm just doing this to cover my ass," versus focusing on the experiment and not worrying about covering your ass. Entrepreneurship is a very important value of the company as well, and that's like so anti. Like to any activity, like any performative activity and fearing of failure is like the opposite of entrepreneurship. You just can't have that as a company scales. And so you get a lot of people coming from different

[Peter Rahal]
corporate environments that have that, like just protect their job.

[David Senra]
Are you able to recruit from other food companies? Because like you're so different.

[David Senra]
Most of these companies haven't been founder-led in, I don't know, half a century, if not longer.

[Peter Rahal]
Yeah. We can and we do. There's a lot of good experience they have. You just sort of have to baptize them when they come in. So that's where the onboarding process is really critical.

[David Senra]
You baptize them?

[Peter Rahal]
Yeah.

[David Senra]
What does that mean?

[Peter Rahal]
You just have to teach them new beliefs, new values.

[Peter Rahal]
If you just sort of throw them in, they're just going to take what they know and apply it. And so you really want to-

[Peter Rahal]
Have them assimilate to the culture in a way, and so a very thoughtful onboarding process where you learn the values of the company. You learn entrepreneurship. We pack boxes, you learn humility, you learn all these things. It's really critical.

[David Senra]
Are the most talented people in your company the ones with no experience, though?

[Peter Rahal]
The most talented people in our company are former founders.

[David Senra]
Say more about this.

[Peter Rahal]
Convincing a founder to not do their thing to join

[Peter Rahal]
a greater company is a really strong signal of the opportunity we have ahead.

[Peter Rahal]
Basically, I would position it as like, this is a platform for you to go do your thing. You could do your thing with amazing technology, you can do your thing with resources, and you don't have to deal with the bullshit of

[Peter Rahal]
raising money, all the bureaucracy that comes with the different stakeholders. And I think you see this in AI, where a lot of founder talent goes to those platforms. Convincing them to join a founder-led company without bureaucracy and

[Peter Rahal]
for them to be able to fill their vision is...

[David Senra]
Do you specifically target founders?

[Peter Rahal]
Yeah, for sure.

[Peter Rahal]
Because they have agency, they have courage, they have humility.

[Peter Rahal]
Yeah. And they're not ruined by corporate America or school. School ruins you, too.

[Peter Rahal]
You have to follow procedures. You're not thinking outside of the box. You're following a playbook. There's no playbook in entrepreneurship. You just have to think from first principles,

[Peter Rahal]
understand the fundamentals, and fucking just go.

[David Senra]
Yeah, we just had Luca Ferrari on this, and he started this crazy company called Bending Spoons. He's doing it from Milan, not exactly like a startup hub, and he's talking about being isolated was super valuable to him because he

[David Senra]
can't even copy the startup mantras because he doesn't know them. He's immune to them.

[Peter Rahal]
Yeah.

[David Senra]
And his point was just he prefers young graduates, or even people that didn't graduate, to over-experience.

[Peter Rahal]
Yeah.

[David Senra]
He's just like, "I don't want your bad experience."

[Peter Rahal]
Yeah.

[David Senra]
"I know what we're doing. Let's just take high-agency, young, smart people that want it really badly." And I think he said he got something like 800,000 applications last year for 350 positions, because he's in markets where there's

[David Senra]
smart people everywhere. There's no great jobs for them. Their economy's terrible.

[Peter Rahal]
Yeah.

[David Senra]
And he's just like, "I'm just optimizing for this, and then I'll come in and indoctrinate them into how we're running the business," which is completely different than school or a company that's like a mediocre company.

[Peter Rahal]
Yeah. Yeah, because the thing with experience is really valuable, but there's a consequence to it where

[Peter Rahal]
you'll naturally reason through analogy or reason through your experience, which can be the right call,

[Peter Rahal]
but you're not going to ask the dumb question or naturally think through first principles because you've already done it, so you're just going to move faster through

[Peter Rahal]
leaning on your experience. And for me personally, I started a company with no experience, really. I fundamentally don't think it's that important if you have good reasoning skills and have the right ability to learn.

[Peter Rahal]
So the best is

[Peter Rahal]
some inexperience, I find, and then

[Peter Rahal]
some damage, some chip on shoulder.

[Peter Rahal]
There are individuals in our company that you can't compete with them.

[Peter Rahal]
They're not giving up. They have something to prove. And those are the most powerful people who you want to organize around.

[David Senra]
Tell me more about them.

[Peter Rahal]
It's all childhood. They got something fucked up in their childhood.

[Peter Rahal]
You know what I mean?

[Peter Rahal]
There's one kid on our team,

[Peter Rahal]
he's going to die before he fails.

[Peter Rahal]
And

[Peter Rahal]
he didn't have a comfortable life, and

[Peter Rahal]
this is different for him.

[Peter Rahal]
So, you want many of those people, but too many probably break things. So in general, you want a balance of those crazy chip on the shoulder,

[Peter Rahal]
some people to balance out the team that are very rational and pragmatic and more conservative. You want a good team design, but the people driving the company are usually those maniacs that have a chip on their shoulder, high agency, and more entrepreneurial.

[David Senra]
Was this person happen to be a former founder?

[Peter Rahal]
Yeah. Mm-hmm.

[David Senra]
How long did it take you to recruit them?

[Peter Rahal]
Well, when we bought EPG, he was a victim of us acquiring that.

[David Senra]
A victim?

[Peter Rahal]
Yeah, because we bought up all the supply. So, he was a customer of the

[Peter Rahal]
Apogee business, so

[Peter Rahal]
recruited him to join us and do it here.

[David Senra]
Victim. I love that you just said that. Okay. So let's get into this, because this is one of the... Again, I've been hearing stories about you for a long time, and then this is the story that other founders repeat so much that's very Rockefeller-esque. Explain what that is.

[David Senra]
What is it?

[Peter Rahal]
Apogee.

[David Senra]
Okay.

[Peter Rahal]
So in

[Peter Rahal]
March of 20-

[David Senra]
Don't go to the acquisition yet. Talk about the fact, what this thing does, why it was a picture of business.

[Peter Rahal]
Cool.

[David Senra]
And then we're going to go to the fact that you victimized everybody else.

[Peter Rahal]
Apogee makes EPG, esterified propoxylated cholesterol.

[Peter Rahal]
Basically, it's a modified triglyceride. So olive oil is a triglyceride. So triglyceride has three fatty acids attached to a cholesterol backbone. Your body can't digest this unless lipase comes and clips these

[Peter Rahal]
fatty acids off. What the company did is they figured if they can lock these fatty acids in,

[Peter Rahal]
lipase can't break it down. And so what that means is you can have the taste and mouthfeel of fat without the caloric, metabolic impact. Why that's a huge innovation is because most of the calories in food are coming from fat. They're twice as much as protein and carbohydrate. This technology was naturally misunderstood, like most food technology, and so it was sitting there, and it's really amazing. You can have your cake and not have the caloric consequences. So think of it as high-intensity sweeteners, like stevia, monk fruit. That sort of level of innovation. So anyway, we were using it for David, and then

[Peter Rahal]
we were buying. We were like 90% of the company's

[Peter Rahal]
sales, and then

[Peter Rahal]
all paths led to litigation.

[David Senra]
Hold on. So

[David Senra]
this is a patented technology?

[Peter Rahal]
Yes.

[David Senra]
Correct? So you had one source where you could buy it from.

[Peter Rahal]
Yes.

[David Senra]
You just said you were 90% of this company's overall sales.

[Peter Rahal]
Yep.

[David Senra]
But there's a handful of other companies that saw that same opportunity and want to use this into their product.

[Peter Rahal]
Yeah.

[David Senra]
Okay.

[Peter Rahal]
Yeah. So we started, and the company was struggling, like a bunch of-

[David Senra]
Their company, not Apigee?

[Peter Rahal]
Yeah. It was like a bunch of cats and dogs trying to like make it work. And it's hard to work with. It

[Peter Rahal]
requires good product development skills. But we were 90% of

[Peter Rahal]
their available supply.

[David Senra]
And you'd be in a bad position if, for whatever reason, that company went under or they decided to cut you off.

[Peter Rahal]
We'd be dead.

[David Senra]
Okay.

[Peter Rahal]
And then eventually we became like 150% of their supply, meaning like they couldn't supply our needs. So anyway, as soon as I started the company and we were using the ingredient, my whole like, just like, "This is a nasty dependency." And on top of it, it was run by

[Peter Rahal]
older gentlemen, mostly lawyers. So you know how that is. Like, lawyers running companies is not good.

[Peter Rahal]
I'm sitting there like, "All right, either they're going to kill us,

[Peter Rahal]
this is going to end in litigation, extortion, or we're going to buy them." But I was like,

[Peter Rahal]
all my attention was making sure

[Peter Rahal]
either we buy them or something. And then in February, basically six months into the company, they came to us like, "Hey,

[Peter Rahal]
you guys are killing it. How about you take it over?" And of course, I'm like, "Let me think about it for a second."

[Peter Rahal]
But so negotiated, and it was an obvious deal. Like, these food companies need to be vertically integrated. Like, if you're out there making a food ingredient and you're trying to sell to a big food company, it's this hell. Because the food company were like, "Well, you don't have enough supply to meet our demand." And then you're like, "Well, I don't have enough demand to generate supply, and then it's too expensive." And on top of it, you're going to like, "Well, I need redundancy. I need two suppliers." "Well, I have the IP. I can't do that." So vertical integration makes the most sense.

[David Senra]
And they could not vertically integrate.

[Peter Rahal]
They didn't have a route to market, yeah.

[David Senra]
So they essentially just bought this patent as a way to make money.

[Peter Rahal]
Yes.

[David Senra]
This is not actually a real company.

[Peter Rahal]
Well, they developed it, yeah.

[David Senra]
Okay.

[Peter Rahal]
They developed the process

[Peter Rahal]
and invested in it. And the entrepreneur, the founder is amazing. It required so much cash that he just eventually got diluted for the lawyers to take over. And it just made sense for both parties to like merge and acquire. And so we did a

[Peter Rahal]
deal where we bought half the company, and then, or we bought the whole company, but half equity, half cash. And then we got in a situation where it was like, all right, David's growing well above our forecast. And then,

[Peter Rahal]
so we are 150% of their supply,

[Peter Rahal]
and at the end of the day, there's all these customers that had no supply agreement. Honestly, their businesses weren't going anywhere. And so if you didn't have a supply agreement, you're just not going to get supply. And by the way, me with David, the first thing I did when we started was negotiating a supply agreement with them. Prior to the acquisition, we had a supply agreement that was good around change of control, that most favored nations on price, most favored nation on inventory. So any inventory that was available was ours.

[David Senra]
How did you know to do that?

[Peter Rahal]
When you have a dependency like that, you just got to make sure you're covered. Even if the deal didn't go through, we didn't have all the supply anyway. Like, we're the elephant in the room with the customer. If you didn't have a supply agreement, you're out of luck.

[David Senra]
So the way it was reported or talked about was there's this very important patentable ingredient he needed.

[David Senra]
He was using most of it. There was these other companies that also used it that he was technically competing with. He buys the company and shuts off their supply.

[Peter Rahal]
Yeah.

[David Senra]
But I didn't hear the second half of the story that then I also recruited from the people that I just copied.

[Peter Rahal]
Yeah.

[David Senra]
You had a lawsuit or something over this, right?

[Peter Rahal]
We had an antitrust claim and lawsuit, yeah.

[David Senra]
Is that still ongoing?

[Peter Rahal]
It was dismissed three times. Because for that lawsuit to function or for them to actually have any merit would mean like,

[Peter Rahal]
it would be like a landmark case in intellectual property. The big lesson, which I think you've had Lulu on, which if I had Lulu in my pocket, we would have managed the comms differently. Like, we

[Peter Rahal]
just like,

[Peter Rahal]
one, we let Apigee manage the comms a little bit,

[Peter Rahal]
and we just did a terrible job communicating.

[David Senra]
Did you communicate at all?

[Peter Rahal]
There was a notice sending out of the acquisition and that if you don't have a supply agreement,

[Peter Rahal]
there will be no

[Peter Rahal]
supply. But that comms, I could have done better. I could have done it with more compassion and called the entrepreneurs or could have done it differently.

[David Senra]
In what way, though? Compassion doesn't seem to be one of your personal traits.

[Peter Rahal]
I think it is. I think compassion is important.

[David Senra]
Do you have it?

[Peter Rahal]
Yeah. To be a good leader-

[David Senra]
Show it to me.

[David Senra]
Where are you hiding it?

[Peter Rahal]
I just don't have sympathy for like... I don't have sympathy for stupidity. I don't have sympathy for

[Peter Rahal]
incompetence, really. Like,

[Peter Rahal]
it was so obvious that if you're going to get into it, if you're going to use an ingredient that has a single source,

[Peter Rahal]
you better make sure you have a supply agreement. It's like fundamental.

[David Senra]
This goes back to something that was like second nature to you that you don't even feel special. Like, remember at the beginning of your conversation, you were like, "Okay, well, yeah, I got all this money. I'm going to chill. I'm going to find a wife, have some babies, and then I'll invest on the side." Obviously, you're an entrepreneur, so it's like life and death for you. You'll take it very seriously. You start cutting checks into this company. It's like, "What is this guy doing?"

[Peter Rahal]
Yeah.

[David Senra]
You didn't know how rare you were.

[Peter Rahal]
Yeah, no, totally.

[David Senra]
So same situation here.

[Peter Rahal]
Yeah, a little bit, yeah.

[David Senra]
How many other companies are involved where you're buying the same ingredient?

[Peter Rahal]
Three, four.

[David Senra]
Okay. So this is like-

[Peter Rahal]
Yeah. And their response was like, "Well, I didn't know I couldn't... I didn't know that was an option." It's like, "What the fuck? [speaker 1 chuckling] What are you doing all day?"

[Peter Rahal]
Like, honestly.

[David Senra]
I found one of my all-time favorite quotes when I was reading the book "Zero to One." The quote says, "The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas." That is exactly what Applovin has done with their advertising platform. Applovin connects you with over a billion potential new customers in mobile games. Applovin allows you to capture undivided attention. Applovin ads are full-screen videos that are watched for an average of 35 seconds. That is retention that blows other ad platforms out of the water, and you can launch on Applovin in minutes. You set the goal, and Applovin achieves it. No complex setup, no expertise needed. And Applovin scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scaled to hundreds of thousands of dollars of spend per day, and increased their revenue by millions. So, you want to get started quickly before all of your competitors are on Applovin, and you can do that by going to applovin.com. That's applovin.com.

[David Senra]
Is this why you had to raise money? Because-

[Peter Rahal]
Yeah.

[David Senra]
So, your first company, you did like a... RxBar was like a friends and family loan? What was the-

[Peter Rahal]
My dad and my partner's mom

[Peter Rahal]
guaranteed a line of credit.

[David Senra]
A line of credit.

[Peter Rahal]
Yeah.

[David Senra]
But no typical venture capital?

[Peter Rahal]
No.

[David Senra]
Okay. What did you start Dave with? Did you raise money right away? Did you put your own money in? What'd you do?

[Peter Rahal]
Yeah, I put 2 million of my own in as, like, whatever pre-seed,

[Peter Rahal]
and then that was enough to get us to launch. And then

[Peter Rahal]
launch, we raised eight

[Peter Rahal]
for working capital just to survive.

[David Senra]
Why not just put up the eight yourself, since you already got it in your pocket?

[Peter Rahal]
Yeah, because I wanted to bring in

[Peter Rahal]
some people who have been very good to me. So, Valor Equity Partners,

[Peter Rahal]
Antonio and John have just been really supportive, and I like how they operate. Like, their name's Valor. They're pretty intense.

[David Senra]
Outside of Valor, it wasn't like typical investors?

[Peter Rahal]
No.

[David Senra]
Okay, so friends and things like that?

[Peter Rahal]
Yeah, some small friends.

[David Senra]
Yeah.

[Peter Rahal]
And then I was like, "We're done."

[Peter Rahal]
Right? Like, we don't-

[David Senra]
Why was that your initial reaction?

[Peter Rahal]
Because I don't want to spend time talking to investors or fundraising. I think in consumer packaged goods, the P&L should work pretty quickly. Unit economics should make sense. So, you should be really capital-efficient. You should not be raising a lot of money, unless you're going to acquire a company or do what we're doing. So, that wasn't on the table in the beginning, so I'm just focused on the business, not thinking about raising more money. So, I thought that was like, "That's it. That's the only capital in." And then we had product-market fit like crazy, and it got bigger, and then-

[David Senra]
And you're like, "I need to raise money to find out how to sell fish online."

[Peter Rahal]
Yeah, exactly. Well, that was funny. So, we eventually raised a round to finance the acquisition, and it turned out we did need more money on the balance sheet.

[David Senra]
Okay, hold on. Before we get there, you raised how much money to do the acquisition?

[Peter Rahal]
We raised 85.

[David Senra]
And who'd you raise it from?

[Peter Rahal]
Green Oaks and Valor.

[David Senra]
Okay. We need to talk about, so Neil Mehta, I'm friends with Neil. I talk to him on the phone all the time. I talked to him about you, I don't know, like two weeks ago, and he's got hilarious stories about you that I'm going to bring up on the podcast, too. But you need to explain, like, why did you choose him? Because-

[Peter Rahal]
Right, yeah.

[David Senra]
... you said, "I'm not putting any more money in." You're a second-time founder. You made a boatload of money before. You have all these other investors chasing you. You don't even like talking to them. You were kind of like, and this is my own characterization, kind of like, not even rude. You're just like, "Leave me the fuck alone. I'm building my company. Go away."

[Peter Rahal]
Yeah.

[David Senra]
But Neil's been, and Green Oaks was chasing you, right? So explain how you wind up selecting Neil and Green Oaks.

[Peter Rahal]
The investor class

[Peter Rahal]
believes they're very, very high status,

[Peter Rahal]
and they always reach out with an entitlement to take my time. And so, I've always viewed it as like, I'm not giving you my time. I will be respectful, but I don't just take investor calls. I just don't do it. I think it's a bad use of time. And plus, I have my own capital, so I was like, "I'll finance it. Fuck it." That's a great position to be in, by the way. I love it, right? Like, I don't need anything. So anyway, my friend Chad Byers was like, "Hey, my buddy Neil wants to reach out to you." I'm like, "For what?" And he's like- ... he's like, "Oh, he's an investor." And I'm like, "Cool. I'm not taking investor calls right now, with all due respect." So I passed. And then two weeks later, Chad says, "Hey,

[Peter Rahal]
I think you should take their time." I'm like, "All right. For you, Chad, I'll do that." And then I got on the phone, and I was like,

[Peter Rahal]
I'm just really focused. So I'm like, "Hey, listen.

[Peter Rahal]
This is not a tech company.

[Peter Rahal]
The math should work really quickly.

[Peter Rahal]
We should be profitable sales. That's how we're going to grow, is profitable sales and then line of credit." And they're like, "Great. Well, if there's any opportunity that comes along, let us know." I'm like, "Great. Will do."

[Peter Rahal]
So, time goes on. We're just heads down. And then I start getting

[Peter Rahal]
messages from former RxBar employees where a firm was soliciting them for, like, offering them to pay them for reviewing or reviewing me. And it's not just one. It's like 20 people I haven't talked to in five years being like, "Hey, Peter, should I take the call?" And I'm like, "Yeah, take the call."

[David Senra]
So basically what they're saying is, "We'll pay you 1,000 dollars if you get on the phone and tell us about your experience with-"

[Peter Rahal]
Yes, with Peter. Like, what kind of leader was he?

[David Senra]
Okay.

[Peter Rahal]
And I'm like, "Yeah, take their money." I had no idea.

[Peter Rahal]
And I thought I was going through the litigation, so I was like, "Oh, they're just trying to fucking find dirt."

[Peter Rahal]
So I had no idea it was an investor. And then I'm like, "All right." And then the Apigee deal happens, meaning the chairman of Apigee comes to me, and we say, "Hey, let's figure out a deal." So then I reach back out to Neil. I'm like, "Hey, this is happening. You guys want to take a look?" And of course, reach out to Valor, like, "Hey, this is happening. We're going to need probably some money for this." Well, this is why I respect Green Oaks so much, is like, even me kind of being rude to them, they had put resources to do diligence on me, and in the best way possible, which was like, diligencing my leadership, which is actually the- I think the most fundamental thing for this investment to work is, like, you got to make sure is Peter the right type of leader. They had already done that when there was no deal on the table.

[David Senra]
Not only there's no deal on the table, you already told them there won't be a deal.

[Peter Rahal]
When I found out it was them, I was like, "Oh, wow. These guys are like, they're good." And I didn't do an auction. I

[Peter Rahal]
want the right people on the cap table.

[Peter Rahal]
And Greenoaks won just out of my respect for their approach. Kept it, like, with just friends I know.

[Peter Rahal]
And then Valor had a conflict of interest because they were in the deal, so they couldn't do M&A because the deal was to finance the other company. So, Greenoaks led it, and

[Peter Rahal]
yeah, they're amazing. I'm very lucky that Chad connected us.

[David Senra]
So, before I tell you the story that he told me about you, you just said, "I didn't do an auction." Why is it that important to not do an auction when you're fundraising?

[Peter Rahal]
The reason why I didn't want to do an auction is, one, we didn't need a lot of money. So,

[Peter Rahal]
it's very important. If we needed a lot of money, I think it's different.

[Peter Rahal]
But we only needed, like, one or two players. We were growing like crazy, and I did not want to consume the company's resources

[Peter Rahal]
in a way that would harm our operating our business. So I'm very sensitive to the resources an auction would take.

[David Senra]
What are the resources an auction would take?

[Peter Rahal]
Well, you got to run tons of management meetings. You have to constantly answer diligence questions. Like, it's a lot of time.

[David Senra]
So your whole thing keeps going back to you're intolerant of wasting any time.

[Peter Rahal]
Yeah.

[David Senra]
You've said this thing in like half a dozen ways, like in subtle ways since we've had this conversation.

[Peter Rahal]
Yeah.

[David Senra]
You're obsessed with time.

[Peter Rahal]
Yeah. So if you think of it as, like, the analogy is like aerodynamic. I want to be super aerodynamic through things.

[Peter Rahal]
And then my goal also is, like, being on the other side as an investor,

[Peter Rahal]
I want to maximize value, but not really. If I want to maximize value, I would run an auction and I wouldn't care. But I don't really want. I want to make sure the investors make money and they're good with the underwriting. So, like, you want to walk to the line where it's like

[Peter Rahal]
rich, but not too rich, right? You can actually, if I'm on the other side, I can underwrite it pretty easily. I want to make sure all my stakeholders make money, and that's my approach. So, the con of that is maybe we could have gotten an extra 100 million valuation, I don't know, but I don't really care. Like, I want to make sure that everyone feels good. And then I-

[David Senra]
Why do you not really care? And I agree with this. I want to get your thinking out in the open.

[Peter Rahal]
What's, like, 2%?

[Peter Rahal]
It doesn't matter. It just doesn't matter.

[Peter Rahal]
And I care about money, but I don't really care about that type of money. I care about how the people on the team feel and are excited and aligned.

[Peter Rahal]
And I've seen

[Peter Rahal]
on the other side of the table, and founders just prioritize enterprise value that early, and it's just fucking gross.

[David Senra]
Why is it gross?

[Peter Rahal]
Because it's not about that. Like, it's about, in this stage, it's about the right people and it's focusing on the mission.

[Peter Rahal]
It's not about maximizing enterprise value at this stage.

[David Senra]
And if you're good, you're going to wind up with the money anyways. It's just going to take over.

[Peter Rahal]
Yeah. And, like, we got a good valuation, which is fair. But I don't want an investor feeling like, "Fine, we'll do it, but I disagree."

[David Senra]
So you said if you were on the other side, you could underwrite it. So essentially, you want to do a deal where, like, if you were Neil, you would take the-

[Peter Rahal]
Yeah.

[David Senra]
... "That's a good deal. You should make that investment."

[Peter Rahal]
Yeah. Exactly. And that's how I underwrite it. Because I'm operating as a CEO, and then I'm operating as an investor too, because I'm participating in all this stuff as well.

[Peter Rahal]
Which is a conflict, but I'm generally trying to bifurcate, like, all right, Peter's the CEO, but he's also an investor.

[David Senra]
You mean you're putting more of your own personal money into the company?

[Peter Rahal]
Mm-hmm.

[David Senra]
Why would that be a conflict?

[Peter Rahal]
Well, because if I could lower the valuation for me, like...

[David Senra]
Okay.

[Peter Rahal]
Yeah.

[David Senra]
You would self-serve.

[Peter Rahal]
Yes.

[David Senra]
You're trying to do what's best for the company, not just best for-

[Peter Rahal]
Yeah.

[David Senra]
I read Michael Bloomberg's autobiography for the first time, like, five years ago. And then I knew he has one of the most profitable private companies in the world.

[Peter Rahal]
Yeah.

[David Senra]
And I've heard crazy rumors that we don't even have to get into, which is, like, way richer than even... Everybody knows he's really rich, but I heard he's, like, orders of magnitude richer than has been reported. And he raised, I think it was Merrill Lynch, if I remember correctly,

[David Senra]
30 million for 30% of the company. Then he winds up buying that first, like, 10% slug back to them from them, like, 10 years later, and whatever. It was like 200 million he paid for that, right? And then he bought the other 20%, I think, in 2008 for like 4.5 billion. So if you look at it,

[David Senra]
one of the best investments he ever made was buying back his shares, right? And essentially now owning all of his company. I think it was all of it or like 90%, something like that. And Merrill Lynch's point was like, "Well, we paid 30 million in like 1979, and by 2008 we made 4.7 billion on it," or whatever the case is. Could you see an example, a future? Because I do think you are kind of

[David Senra]
obsessed with control. Anybody's obsessed with quality and control and everything else tends to... I could see you wanting to buy back the shares at one point.

[Peter Rahal]
The opportunity presented itself, for sure.

[Peter Rahal]
The governance is set up in a way where I have that. So as long as that's there. But yeah, I don't-

[David Senra]
Governance is set up that you have control.

[Peter Rahal]
Yeah.

[David Senra]
Yeah.

[Peter Rahal]
And I'm good with power, so I don't abuse it.

[David Senra]
Are you going to continue to raise money?

[Peter Rahal]
I mean, if we have a need, but right now we don't.

[David Senra]
But in every round, you put in more money of your own? Is that what you said?

[Peter Rahal]
I should, yeah.

[David Senra]
Okay.

[Peter Rahal]
Oh, yeah.

[David Senra]
Okay.

[Peter Rahal]
Yeah. What the fuck else am I going to do?

[David Senra]
All right, so I'm on the phone with Neil, and

[David Senra]
he was like, "Peter's one of my favorite kind of founders," like the founders that he likes to back, which is,

[David Senra]
I kind of hinted at it earlier, which is like, nothing's that you wake up and just like, you don't focus on what's good. It's like everything is just not good enough. And all you see are the kind of flaws in your business, and you kind of attack those flaws, try to make your business stronger over time. Again, very common in the history of entrepreneurship. So I guess he came to visit you, and it was him and somebody else, and it was you and a bunch of people that work with you, and you were doing taste tests or whatever of maybe new products or existing products. And like, "What do you guys think of it?" "This is awesome." And you go, "Wrong. This is shit." And then he goes, he said, "Not only did he say it was wrong, that everything was shit," and then he listed all the deficiencies and the things that he wanted to-

[Peter Rahal]
Yeah

[David Senra]
... to fix.

[Peter Rahal]
Running a business is like

[Peter Rahal]
a river. As long as it's flowing, great. But if there's something blocking that flow, you need to fucking fix it. Like, if something's in the way, I ruminate on it to the point where I can't sleep, that I have to fix it so I can sleep. I ruminate on the problems.

[Peter Rahal]
So they just nag at me. This is actually a problem I have. A flaw of my leadership style is I don't acknowledge the wins or success. I'm only preoccupied about what's wrong.

[Peter Rahal]
So, I'm working on that. But I actually outsource that to people internally to like, "Hey, make sure we're like, say, like our birthday is tomorrow." I fucking hate birthdays. But

[Peter Rahal]
our birthday's tomorrow, so I'm like, "Please do something so we can acknowledge our birthday." But, like, I don't do that. So I outsource it a bit internally, but yeah. If you just fix that, I don't know, the approach makes sense.

[David Senra]
Yeah, it's almost like what Elon does. So we just had Zach Dell on the podcast, and Antonio's on his board. And he says the first, I think it's still to this day, like the first two years, every conversation that Zach Dell had with Antonio, is it Gracias?

[Peter Rahal]
Yeah.

[David Senra]
Antonio Gracias is, "Hey, Zach, how's it going?" "Good." "What's your bottleneck?"

[Peter Rahal]
Yeah.

[David Senra]
He refused to talk about anything.

[Peter Rahal]
Yeah.

[David Senra]
And he's like, "What is the bottleneck? What is the in way or critical path? And then we're just going to talk about this. The entire conversation is this. And then the next thing that is resolved, okay, what's the next bottleneck?" And it's just over and over and over again. It's just relentless focus on the bottleneck.

[Peter Rahal]
Yeah. I think it's like, all right, my job is to scan the holistic picture of the business and react to the problems and then go fix them

[Peter Rahal]
and get the fuck out of the way. Just like constant confronting the problems.

[David Senra]
I think this is, like almost all the elite entrepreneurs have this exact same mentality, where it's like you can even go to like, Buffett and Munger would talk about this when they were talking about people operating all the subsidiaries of Berkshire. It's just like, just tell us the bad news because the good news is-

[Peter Rahal]
Yeah, exactly. It's like the river running. I don't care-

[David Senra]
Just tell me the bad news.

[Peter Rahal]
Exactly.

[David Senra]
Tony Xu from DoorDash, who

[David Senra]
I want to get him back on the show as soon as possible because I can't explain why, but like, you talk to him, I think he's like 41, 42, and you just sit there and

[David Senra]
if you actually look, it's not just a delivery business. That's not what this guy's doing. He gives you like young Jeff Bezos vibes, and he's chasing after something much larger that he

[David Senra]
sees, but you can't really see it at the moment. And he said he has this problem too, where it's just like they hit a milestone, they do some kind of revenue or whatever the case is, and he's like, "I might go out to dinner."

[Peter Rahal]
Yeah.

[David Senra]
"But in many cases, I don't even do that." And it's like, "Okay, I'm onto the next thing the very next day."

[Peter Rahal]
Yeah, same with that. Like our X bar, I didn't do anything. That deal happened, I just, the next day.

[David Senra]
You bought a house in Miami and looked for a wife, though.

[Peter Rahal]
That was a year and a half later.

[Peter Rahal]
Yeah, I did do that at some point.

[David Senra]
So what is the thing that you're trying to unlock right now that you see blocking you?

[Peter Rahal]
So we've reorganized the group to be

[Peter Rahal]
a hybrid organization where we have David as a business unit, which has its sales, marketing, supply, finance, and we have Hall Pass, another BU. So we have two BUs, and we're about to have a third business unit,

[Peter Rahal]
all operating semi-autonomously. And then we have, at the Medici level, sort of shared services.

[David Senra]
Why name the company Medici?

[Peter Rahal]
I love history, and it reflects how we operate organizationally. So the Medicis,

[Peter Rahal]
they created the conditions for the Renaissance to happen. They weren't necessarily the doers. So they created the conditions. They identified Michelangelo, Donatello, Galileo,

[Peter Rahal]
and it's a little bit of the analogy of what our people that work at Medici at the company, they create the conditions for the business units to thrive and flourish, and they're the artists and scientists. So at Medici, it's like the money, the law, like the things that are agnostic live at there, and then the artists and scientists, the people actually doing the work, are at the business unit level. So the name suited how we operate. Medici and our company creates the conditions for the business unit leaders and all the operators to go execute what they need to.

[David Senra]
Say more about the structure. So you have all these business... You just said they operate semi-autonomously?

[Peter Rahal]
Yeah. Semi-autonomously meaning there are some centralized services, but they more or less are their own business unit that have agency and autonomy, run their own P&L, and go do. Versus like a large CPG are typically centralized. So it's a decentralized approach because speed and agility is the main objective. Because you look at it and you're like, all right, your payroll's too high. Like, it's quite inefficient on a P&L basis because you have double sales.

[David Senra]
Yeah, duplication of efforts.

[Peter Rahal]
But to me, the main design objective is speed. And so if it's speed, you're designing for speed, you're going to pay extra people to do that.

[David Senra]
Me and Rob had this exact same conversation yesterday.

[Peter Rahal]
Yeah. Speed's important. Like, it's always been important, and it's really important, especially in our market we're in, where we're dealing with people with mega, mega scale. Our ability to bring product to market fast is...

[Peter Rahal]
I don't want to lose that. And honestly, if we lose that, I'm like,

[Peter Rahal]
I'm done.

[David Senra]
What do you mean you're done?

[Peter Rahal]
Like, if we lose our entrepreneurial, and I say this to the company, if we lose our values and the way we operate, our culture, I'm fucking leaving.

[David Senra]
Why do you just grit your teeth?

[Peter Rahal]
Grit my teeth?

[David Senra]
You just grit your-

[Peter Rahal]
Because it makes me angry.

[Peter Rahal]
Because it makes me angry. I hate big, fat, stupid-

[David Senra]
I'm fucking leaving.

[Peter Rahal]
I hate big, fat, stupid things, and I don't want to be a big, fat, stupid company. The problem is it's actually inevitable as you get bigger.

[Peter Rahal]
Like, my job is to fight bureaucracy, fight the bullshit.

[David Senra]
It doesn't have to be. I mean, you even kind of stumbled upon, or maybe not even stumbled upon, you were probably very intentional about the way you operated this. I just did this episode of my other podcast, Founders, about Henry Singleton, and he led one of the most successful conglomerates of all time. In many cases, a lot of the ideas that we ascribe to Buffett and Munger were actually things they learned from him. And his whole thing is, I think at the time- In the '70s, he owned like 130 businesses, 129 of them were profitable.

[Peter Rahal]
Jesus.

[David Senra]
And essentially, same thing, they ran their own operations. The only thing he centralized was compensation and capital allocation.

[Peter Rahal]
Yeah.

[David Senra]
So, you're on your own, you're making cash, I'm going to leave you alone.

[Peter Rahal]
Yeah, performance equals freedom.

[David Senra]
Yeah, exactly. And then you just send your cash, and then I make the capital allocation decisions for us.

[Peter Rahal]
Yeah.

[David Senra]
So I don't think... And he didn't have a big, fat, stupid, ugly company. So it doesn't have to be the outcome.

[Peter Rahal]
No, I know. But it's like the nature of these organizations. The more people they want,

[Peter Rahal]
nature pulls it in together. It almost wants to be that, a group of people.

[David Senra]
I mean, Luca Ferrari just did the exact same thing.

[Peter Rahal]
Yeah.

[David Senra]
Because he acquires these companies, and in some cases, they have like hundreds of... These are software companies, so he's like, "How are they all making money?"

[Peter Rahal]
Yeah.

[David Senra]
It's like, how are you unprofitable as a software company?

[Peter Rahal]
The best gross margin business there is.

[David Senra]
And it's like, what are these 400 people doing? And in one case, he bought a company that had 400 people, and he got it down to 20. And now it went from losing money to it's a cash printing machine. He's almost making every year in profit what the acquisition cost was-

[Peter Rahal]
Wow

[David Senra]
... originally. But that was his whole thing, it's like it's in human nature to-

[Peter Rahal]
Yes

[David Senra]
... add layers and complexity.

[Peter Rahal]
Yeah.

[David Senra]
And I think he said the company value of his is like,

[David Senra]
anybody in the company can raise their hands like, "I don't want to add this complexity." And he goes, "It's on the person wanting to add the complexity." It's like, you can just raise your hand. You don't have to say anything else.

[Peter Rahal]
Yeah.

[David Senra]
But the person who wants to add this has to be the one in the company to justify it.

[Peter Rahal]
Yep, so you got to fight it.

[David Senra]
Okay, so you have the Medici level, you have all these semi-autonomous business units. How much power does the person running the individual business unit have?

[Peter Rahal]
Quite a bit.

[David Senra]
These are typically former founders?

[Peter Rahal]
Yeah.

[David Senra]
Okay.

[Peter Rahal]
Either former founders or they have to be product leaders. That's like a credential, meaning they have to be back to my, like, they have to pick up the phone to fix the product, they're the wrong guy.

[Peter Rahal]
So they have to be product first. Ideally, a founder or someone who has that experience, but not necessarily. But product leaders.

[David Senra]
Okay, tell me more about the organization now.

[Peter Rahal]
So at Medici is product, cash, people,

[Peter Rahal]
law,

[Peter Rahal]
regulatory. So, that sits there.

[Peter Rahal]
I sit there, and we serve the BUs, right? And then there's a lot of collaboration in general. We're all in the same office. There's a cross-functional team at each BU, so it's supply and demand. So demand is sales and marketing, demand is finance and supply. And CPG, it's very cross-functional. So the

[Peter Rahal]
typical business units are organized around sales, which is working with the retailers, marketing, and that's really demand, right? They generate demand. Marketing can be mostly e-commerce, but it's also all social, digital. And then there's the supply side, which is supply chain, which is end-to-end, so raw materials to fulfillment and warehousing, and then finance, which is forecasting, pricing. And so finance is the referee. So that cross-functional team runs the business.

[David Senra]
Wait, what do you mean finance is the referee?

[Peter Rahal]
Meaning they define the framework for pricing, they define the budget. They're sort of the ones... Because there's inherently tension between supply and demand, right? Like, there's always a healthy tension there. The finance is the referee in terms of they define the rules of the game, and they ultimately run the P&L, in my view.

[David Senra]
Explain the tension between supply and demand.

[Peter Rahal]
Supply

[Peter Rahal]
people are really driven by accuracy and efficiency.

[Peter Rahal]
Sales and marketing people are really more charismatic and want to generate demand, and maybe that requires less accuracy.

[Peter Rahal]
So they have a conflict of interest sometimes because one just wants to grow as fast as possible, the other one wants to make sure the supply is there appropriately and accurately.

[David Senra]
I'm still not understanding, though. Say more about the accuracy. You're using the term accuracy.

[Peter Rahal]
Why would someone be interested in supply chain? Generally, you like to know what you need, where is it-

[David Senra]
You're talking about the personality types.

[Peter Rahal]
Personality types, yes.

[David Senra]
Okay.

[Peter Rahal]
And their function is to make sure what do we have, where is it, when do we need it, how much do we have?

[Peter Rahal]
And then sales is like, "I want to go win." And often

[Peter Rahal]
they will outkick their coverage or there will be issues, and ultimately supply has to go fix those problems.

[David Senra]
Okay, so how many business units do you currently have at Medici?

[Peter Rahal]
One, two, three, four.

[David Senra]
You said something earlier that I

[David Senra]
wanted you to expand on, too. You said, "It's very important for me to be aerodynamic as I go through things."

[Peter Rahal]
Yeah, just like efficiency and simplicity.

[Peter Rahal]
I think the best design is the simplest design, and just I think my nature.

[David Senra]
So how does that manifest, your nature manifest in the way you're building this business? Because it looks super complicated.

[Peter Rahal]
It is complicated, but...

[Peter Rahal]
Well, one, it's a very flat organization, so there's not a lot of depth. So I have like 25 direct reports.

[David Senra]
What's interesting is I read this book on Jensen, and Jensen has famously like 60 direct reports, and a lot of people when that came out in the book, and I think he's talked about this in some interviews too, they're like, "That's way too many. How could he do it?" And it's like, "Well, this guy's running the most valuable company in the world. Seems to be working for him." How many direct reports is too many?

[Peter Rahal]
Well, I used to think that like seven or eight was the most you could have

[Peter Rahal]
to really develop and give the right attention to develop the best leaders possible.

[Peter Rahal]
Now,

[Peter Rahal]
I think the value of having so many direct reports is that it allows you to see a lot, and it keeps the organization, and keeps me closer to the problems.

[Peter Rahal]
And what I tell people if they're reporting to me is like, "I'm not going to manage or tell you what to do. We're going to work together to set priorities. But I am going to expect you to bring things to me. You need to bring the problems to me, and we're going to figure it out together. But I'm not going to be managing your to-do list."

[Peter Rahal]
So it takes a certain type of leader to report to me. I'm not going to manage them. But I'm going to lead them. Yeah, so it requires these leaders to have just better agency and autonomy if they're working with me, versus a conventional organization, which is like, "Oh, I only have eight direct reports." Then you just get this very, very stacked thing that

[Peter Rahal]
the hierarchy gets too stacked and information doesn't flow as well.

[David Senra]
Do you have a co-founder?

[Peter Rahal]
Yeah.

[David Senra]
Are you still working together?

[Peter Rahal]
No.

[Peter Rahal]
He's no longer at the company.

[David Senra]
What happened?

[Peter Rahal]
He was really helpful in the beginning, but most

[Peter Rahal]
founding teams never really scale

[Peter Rahal]
to the promised land.

[Peter Rahal]
The hardest thing in leadership is that the team that gets you started in the different life cycles usually is not the same group of people.

[Peter Rahal]
So that's a true observation that I've had.

[David Senra]
The observation you had is the founding team that says there's two, three, four co-founders, usually it's actually one.

[Peter Rahal]
Yeah.

[David Senra]
It just takes time to reveal who the one is.

[Peter Rahal]
Yeah.

[David Senra]
I've noticed the same exact thing.

[Peter Rahal]
Yeah.

[David Senra]
I talked about Adam Ferrugia earlier in Apple Open, and I think he even said this on the podcast. He wants to run a very strict and ruthless meritocracy.

[Peter Rahal]
Yeah, same way.

[David Senra]
Yeah, and his whole thing was like, well, the co-founder that maybe had the skills to be the CTO at the beginning couldn't hang, so we had to literally... And in many cases, they had a conversation. Adam was the one driving it, but he was just like, "You see what's going on, so do you want what's best for the company or do you want to have this fight?" And in many cases, if you just frame it as like, "This is obviously best for the company. You see what's going on," and it's somewhat amicable.

[Peter Rahal]
Mm-hmm. Yeah, and I don't like the founder/co-founder's titles because it implies some privilege.

[Peter Rahal]
It's inherently anti-merocratic.

[David Senra]
What do you mean you don't like the founder/co-founder's titles?

[Peter Rahal]
I just don't like it. The founder isn't a role. It's not a job. You never hire it, so it doesn't have a role in the company. So,

[Peter Rahal]
I think it's actually people abuse its power, and I don't think it should get special treatment. So, I don't use it. I think it's an abuse of power. Everyone has a role, everyone has duties, and either you do them well or you don't.

[David Senra]
This is what's getting more and more interesting about me having more of these conversations, is to start seeing the same similarities between the people. Because I mentioned Luca Ferrari earlier. Adam Ferrugia mentioned a few times. They both said the same thing. Like, Luca Ferrari is just like, "We don't even like the term founder in the company." And I think it was four founders of Benny's Face. He's like, "We all have the same job, and that job is to do whatever's best for the company."

[Peter Rahal]
Mm-hmm.

[David Senra]
They don't use the title at all.

[Peter Rahal]
Yeah. It's not on my signature.

[David Senra]
So you define your role as what?

[Peter Rahal]
Chief executive.

[David Senra]
And how do you think about that in terms? You wake up every day.

[Peter Rahal]
Yeah, my kind of forever job description is the management team, making sure they're performing,

[Peter Rahal]
make sure we get product market fit,

[Peter Rahal]
and continually get product market fit. Organizational health, so just like, how is the culture? Are people scared? Are people free and creative?

[Peter Rahal]
Are we living the values? Can people recite the values? So, culture. And then four would be alignment of strategy. Are we organizationally aligned? Not in decisions, but does everyone understand where we're going, why we're going, and is everyone incentivized to go there? Is the group of people moving in the right direction? And then fifth would be cash or fundraising.

[Peter Rahal]
So those are my forever. And then

[Peter Rahal]
I have one, what I like to call, this is like founder mode, but what I've always done is I call it my main job is reactionary leadership support.

[Peter Rahal]
So, reactionary in the sense I literally react to it. So, fires or problems, I get information. It's very reactionary, which is generally viewed as negative, but my job is to react to the problems. So, reactionary leadership support. So,

[Peter Rahal]
the leadership support, I either have to drop what I'm doing or prioritize and reshuffle and then go in and assess, figure out, fix it, whether that's directly, indirectly, or whatever, provide resources, just shine a flashlight on it, and then get the fuck out of the way. And I expect that on all leaders in the company.

[Peter Rahal]
I call it reactionary leadership support.

[David Senra]
I want to go back to this. I think one of the most fascinating things about you is this

[David Senra]
divine discontent. You wake up with this fierce competitive drive, but also, I'm not going to call it unhappiness because I don't think that's the right word, but this discontent-

[Peter Rahal]
Yeah

[David Senra]
... of where you are and this constant desire to improve things every day. When Travis from Uber came on,

[David Senra]
he had a warning because... How old are you?

[Peter Rahal]
Forty.

[David Senra]
Okay, so he's about 10 years older, right? And he's like, "What you have to worry about is that you get so..." He's like, "The act of entrepreneuring is just dealing with problems constantly." And he

[David Senra]
said something like, "When a warrior fights too long, he might be too zen." So he's kind of like zen on the outside, but he's so used to adversity and it doesn't bother him anymore, right? And he's worried that-

[Peter Rahal]
Yeah, he's numb.

[David Senra]
Exactly. Numb is a great way to put it.

[David Senra]
And the point that he's making is you want to wake up being bothered and not being used to adversity.

[Peter Rahal]
Yeah.

[David Senra]
Doesn't prevent you from acting, but you want to essentially react to it. This is your reactionary leadership, what you just said there made me think of this. So, how do you think about what's actually going on inside of you?

[Peter Rahal]
Emotionally?

[David Senra]
Yeah.

[Peter Rahal]
I do have a sensitivity and get angry, but I harness it in the work, which is good.

[Peter Rahal]
It's not a fair analogy, but I

[Peter Rahal]
love the fight, so I seek it.

[Peter Rahal]
But I don't think I'm good at tapping into my emotions on the spot. I think that building the pain tolerance is very good, though, to being able to handle it over long periods of time. Because if you are too sensitive and you react to it

[Peter Rahal]
and it affects you in your sleep, then you will break. So I do think it's important to be able to have that zen, be able to get punched in the stomach and you're just chill with it.

[Peter Rahal]
But yeah, you definitely can't lose the emotional response.

[Peter Rahal]
Things don't bother me like they used to. I'm getting better at it, but I still have that response if things aren't right. But I imagine with Uber, he just got really, really

[Peter Rahal]
thick-skinned about it to the point where

[Peter Rahal]
everything was... I don't know. I don't know his experience, but I could see how that happened.

[David Senra]
So what keeps you in it is you like to fight.

[Peter Rahal]
Yeah. I love conflict.

[Peter Rahal]
Healthy conflict, but...

[David Senra]
Thanks for taking the time. This was awesome, man.

[Peter Rahal]
Thank you.

[David Senra]
Appreciate it.

[David Senra]
I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review, and make sure you listen to my other podcast, "Founders." For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through "Founders."