The transcript from this week’s, MiB: Toto Wolff, Mercedes-AMG PETRONAS F1 Team, is below.
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00:00:02 [Speaker Changed] Bloomberg Audio Studios, podcasts, radio News.
00:00:09 [Speaker Changed] This is Masters in business with Barry Riol on Bloomberg Radio.
00:00:15 [Speaker Changed] What can I say about this week’s guest, Toto Wolf. Principal, CEO of Mercedes Formula one race team. What an incredible career. From a winning racer to an investor and venture capitalist to a, a person who just kind of became a principal at Williams. And then eventually after that team, surprisingly began to win, got recruited over to Mercedes where he has put together a fantastic track record. His rookie year at Mercedes was the same rookie year for Lewis Hamilton. Obviously they’ve had an amazing run together. I don’t know what else I could say about this conversation. If you’re a fan of Formula One racing, if you’re a fan of managing a team of people, if you’re interested in how to ring out every last millisecond of performance, you are gonna find this conversation absolutely fascinating. I know I did. With no further ado, my discussion with Mercedes F one’s team principle, Toto Wolf. I don’t wanna waste time singing your accolades. Let’s just jump right into this undergraduate Vienna University of Economics and Business. How did you end up in, in racing? It sounds like you were going into finance.
00:01:37 [Speaker Changed] Dropout.
00:01:38 [Speaker Changed] Dropout. Yeah.
00:01:40 [Speaker Changed] So yeah, I was born and raised in Vienna and went to the Vienna University of Economics, but actually raced in junior formulas at the time and wanted to be a race driver. And when that ended abruptly run out of money and we had a very bad spell of accidents in Formula One. So I lost a sponsor. I decided I’m gonna quit both. I’m gonna quit Uni Uni and I’m gonna quit racing and launch myself into, you know, working.
00:02:07 [Speaker Changed] And you were fairly successful as a racer. You began an Austrian formula Ford, you won the 24 hours of Bahrain, which is an unusually cha any 24 hour race is difficult. How do, how do you, what’s the key to winning 24 hours of driving?
00:02:23 [Speaker Changed] Yeah, so the 24 hour race was in Dubai and was in sofar, relatively important because it was the first big race of 24 hours in the Middle East. So you have three drivers of four and you’re having two hour stints. And it’s, and it’s challenging from mentally and from the human body because sometimes you have to get up at two o’clock and drive from two to four in the night. But it was all part of my racing and I loved every minute.
00:02:45 [Speaker Changed] So you go from racing to saying, all right, I don’t have a career in racing. I’m gonna go into finance. And you found March 15th in, in 1998. Tell us a little bit about what sort of investing you were doing in the late nineties.
00:03:01 [Speaker Changed] Yeah, so the, the first company was called March 15 and then March 16. And there is not a lot of meaning behind it, it was just the data incorporated it and that felt the easiest. So back in the day, you wouldn’t think a lot about brand. And I went to the US for a couple of months and realized that internet companies were coming, coming up here, Yahoo, America Online and Netscape, and went back to Austria and figured out who is doing that in Austria and stumbled up upon, upon a few websites and met these people, sometimes not even companies. One was a 17-year-old boy that run the largest free SMS platform online and set up structures around it. It was equity for consulting. So I didn’t get any, didn’t buy anything because I didn’t have the money. And it was just a good timing. In 99 and 2000 we started to IPO companies and it became a proper venture venture capital company from from consulting actually.
00:04:01 [Speaker Changed] And, and let’s fast forward a little bit to 2009. You invest in the Williams F1 team and eventually in 2012 you become their executive director. How, how is that transition? How do you go from being a, a venture investor to running a team?
00:04:18 [Speaker Changed] Yeah, the, the 10 years in between was going from pretty much tech investor into, into motor racing. I, I bought a tour car team. We, we were doing from a three engines from Mercedes was quite an extensive program about our rally team as well. And so in these 10 years I kind of merged my passion for the sport with the investment world. And as you say, Williams was the first former one team I got in myself into, had a, had a minority stake. And then I ran it in 2012 with Frank Williams because the CEO decided to depart. And this is where basically my formula one active formula one story started.
00:04:59 [Speaker Changed] So, so Williams at the time wasn’t exactly front of the grid. You help them win a big race and suddenly you’re now competing with much better known, better funded teams. How are you competitive with, you know, you’re fighting an uphill battle when you’re at Williams
00:05:18 [Speaker Changed] Energy? Only
00:05:19 [Speaker Changed] Just energy. Yeah,
00:05:20 [Speaker Changed] We didn’t have the infrastructure nor the capability the drivers were where, not on the level of Louis Hamilton and others. It was the energy in the team. People gave it all, they had heart and soul and I think we moved, we moved barriers, we, we, we moved, we fought against adversity and we won a race just because the people gave it their all.
00:05:44 [Speaker Changed] Huh. So you’re involved in an initial public offering for HWA ag, the company behind Mercedes racing. Tell us a little bit about that. IPO and did that lead to your relationship with Mercedes?
00:06:02 [Speaker Changed] Yeah, that’s quite interesting because that when EMG was bought by Mercedes, the racing side was spun out because the big Daimler corporation didn’t want to have the headaches with motor racing, you know, with the unions, this is weekend work and you wanna stay agile as a corporate to say, well we are in the sport or we are out without having too much overhead and headaches. So that was spun out and it was a really good high tech company to build engines for formula three years. I said before touring cars for the very famous DTM racing series, this is the equivalent of NASCAR in Germany or in Europe, limited editions road cars for a MG and high margin business. And I bought 49% of that that business with the founder of A MG. And we iPod it and and sold it to, to investors and the then to a Qatari investment fund. And that was a success story.
00:06:59 [Speaker Changed] So how did that IPO lead to you eventually getting tapped by Mercedes to both take a piece of the, of the team and become principle?
00:07:11 [Speaker Changed] So it was multifaceted because we had this company where we were basically doing all the work for Mercedes racing outside of Formula One. I had a driver management company where 50% would be paid per Mercedes, 50% per myself. And so we established a trusting relationship and then I obviously embarked into being with Williams, which was a competitive of Mercedes. We won a race and they were interested to understand how can that be, you are underfunded back market team and you’re beating us on track. And they asked me, could you evaluate that? And I said, I don’t want bad mouth anybody, but they can. So I did that. They came back and said, we’d like to offer you to run this as a head of Mercedes Motorsport.
00:07:53 [Speaker Changed] Was that a surprise? Was this like very, did you have any during that conversation, Hey, why is a well-funded big team asking me how we beat them? It sort of seems like an unusual situation, especially how competitive everybody seems to be in the paddocks.
00:08:09 [Speaker Changed] I think the board realized at that stage that it board a world championship team, team winning team with Braun. And that the results were getting were getting worse and worse and they felt, they had no grip on what was actually happening. And that’s why they asked me. They knew that I was not biased because I had another team, but I was with them in touring cars and this is how it all came about.
00:08:31 [Speaker Changed] So you become a 30% owner of the Mercedes Patronas team and the principal, how long is it before that team starts winning races? What were the first couple of years like?
00:08:46 [Speaker Changed] So I, my first day was Jan in January, 2013. And it was a difficult situation because I got the job of head of Mercedes Motorsport and at the same time shareholder of the, the team and executive director. But those two posts were, you know, were with people that were icons in the industry, a German who was running Mercedes Motorsport and then Ross Brown, the highly decorated technical director was running the team. And so I had to manage that situation eventually to over and when I joined, we started to win races in that first year. We won three races with Louis joined that year as well, same time as me.
00:09:21 [Speaker Changed] That was his rookie year. You started the same time he started?
00:09:24 [Speaker Changed] Yeah, we were both rookies in Mercedes basically. And, and that started to be a successful year and by the end we were front runner and we finished second in the championship. And from then on we introduced new engine regulations in 14, which was core, a really core expertise of Mercedes obviously. And then we, we had this run of eight consecutive world championships,
00:09:44 [Speaker Changed] Unprecedented run. We’ve never seen anything like that. Even in the CHUMA or era. I don’t think he won eight consecutive championships. I have to ask an obvious question. You are in venture capital investing, you are in racing. What similarities do you find between the two fields? You’re, you’re dealing with a lot of data, you’re dealing with a lot of unknowns. Did did your background in venture investing help you put together the, the winning streak at at Mercedes?
00:10:15 [Speaker Changed] It all starts with the human being because in tech, human beings have ideas, they manage processes. And it’s the same in Formula One. When you talk about a company or a team, what is that? And it’s basically a, a a bunch of people that are on this professional journey together. So around people that run racing cars. And I did the same when I was a venture capital invest investor, I tried to hire and develop the best people to run a specific organization.
00:10:45 [Speaker Changed] And I mentioned when you joined Mercedes, you took a 30% ownership stake. Did I read this correctly? You recently raised your stake in that. So what’s your ownership now of the team?
00:10:56 [Speaker Changed] Yeah, exactly. When they offered me to run it, I said, that is super honorable, but I’m a shareholder at Williams. And the deal we found is that I bought 40% from the Abu Dhabi IGN fund and then Nick Lau came in and he bought 10%. So it was 60 Mercedes, 30 myself, and 10 Nick Lauder. And when Nikki passed away, we found another investor, and today three shareholders each with 33.3%. So I increased my stake as you say.
00:11:24 [Speaker Changed] So you’re, you’re not a majority shareholder, but you’re the principal. How do you juggle dealing two other substantial shareholders, especially when things become challenging?
00:11:35 [Speaker Changed] I mean, I couldn’t wish for better shareholding group because with AEOs we got a, a tremendous powerhouse behind us, a very financially profitable organization. Obviously it’s chemicals business and that is, you go through cycles. But Jim Redcliffe, the founder, is involved in Manchester United and in America’s Cup in skiing, in cycling. So that was always, that was a good deal, financially made sense. It was during Covid and, and then Mercedes obviously providing us with this mighty car brand, the seven most valuable brand in the world. And I’m running it. And between us it’s very well understood who contributes. And I deem myself very lucky that I have a shareholder with Mercedes that’s basically giving us the keys, the responsibility for this brand. And it’s been great. The current CEOA Lanius, Marco Schafer, CTO, and the whole board gang is fantastically supportive. And you know, that’s a part of our success. You,
00:12:33 [Speaker Changed] You seem to thrive in very competitive environments, not just investing and racing, but America’s Cup and yachting free diving. Like you do a lot of what some people would perceive as calculated high risk activities. What, what is the competitive drive? Where does this come from?
00:12:56 [Speaker Changed] I don’t know it. When I was younger and obviously in racing it was always a relative competition. You wanna beat the other guy. And I realized over the years that it was actually more a competition with myself setting expectations and trying everything in order to achieve that. And today racing, whilst it’s still relative and we wanna beat our competitor, this is, it is more for us. It’s not only me in the team, we wanna surpass our expectations and if we lose, it’s not particularly losing against the another team. It’s losing against ourselves. And the activities, like you mentioned, is a fight against myself. How far can I push myself? And I love free diving. That has a meditative component for me that I like. I like the water and you know, achieving certain depth is expectations that I set myself and I don’t need to have anybody competing with me.
00:13:52 [Speaker Changed] What, what’s the longest you can hold your breath? I, I know you must have timed this to the second
00:13:57 [Speaker Changed] Four minute and 15 seconds. What, what
00:13:59 [Speaker Changed] Do you think about some of these, you know, world champions who are holding their breath? 10, 12, 14 minutes? It seems superhuman.
00:14:08 [Speaker Changed] Yeah, there obviously the greats of the sport that, that have achieved it. But there is two different angles to it. Some are basically you pump fresh oxygen in your body to fill your lungs and, and that basically doubles your, your time underwater holding your breath. And when you’re doing it without it, without it, it the form it is quite a good benchmark.
00:14:32 [Speaker Changed] So we talked earlier, your rookie year is with Louis Hamilton. I know you are a, a very competitive guy. Did you have any sense when you were first beginning the sort of run, the two you were gonna go on?
00:14:46 [Speaker Changed] No, not at all. I think when I joined the team, they finished fifth in the world championship and then we, we quickly became so competitive and it is not particularly just because of Louis and myself, A really good group came together and started to form in 2012 before my time. And then it kind of started to roll
00:15:07 [Speaker Changed] And I, I wanna put some flesh on those numbers. Eight consecutive formula one constructors championships from 2014 to 20 21 7 consecutive drivers championships. And I put an asterisk on it ’cause we all know that eighth one was stolen. We, we won’t go get into that. I don’t wanna put words in your mouth. This is me saying that you mentioned, you mentioned the whole team and that it’s not just you or the driver. Tell us about all the various people involved in this team. This really is a team sport.
00:15:43 [Speaker Changed] Absolutely. Every single team member contributes to the team’s success. And how I’d like to make the, let’s say the, the bridge to people that are, that would be saying, well what is my contribution to the car speed? It is that someone in another team at Ferrari or Red Bull is doing your job, whether it’s in accounting, it’s financing, cleaning, someone is doing their job. And as long as you are able to outperform that person and you keep that in mind, you’re contributing to the team’s dynamic and to the team’s success. And that’s why everyone in their position, if done with, with discipline and responsibility is contributing to making the car, the car kafa.
00:16:24 [Speaker Changed] And, and when you say everyone, I, I want to go into some details about some of the things you did because initially people thought it was ridiculous and then the data backed you up. At one point you had the people who cleaned the bathrooms make sure everything was wiped down twice a day you did these changes to something as simple as the, the brush. They used to clean the bowl and people thought you were a little obsessive compulsive about it. Hey, why is toto so nuts about the bathroom? But it turns out your team gets ill last they suffer stomach viruses last. This just, there was a uptick in the overall health of everybody in the organization. Once you implemented that, what detail is too small for you to notice?
00:17:14 [Speaker Changed] I’ve rarely seen cutting edge businesses without the founder, the CEO or some of the top management being obsessed with the detail you have to be, because if you don’t have an attention to detail, how should the rest then fly? And I came into the office my first day and I sat in the lobby and there was an old daily mail week old Daily mail newspaper and some old coffee cups. And when I came to the guy, Ross Brown who was running it, I said, well that’s not how Formula One team should look like. And the answer was, the engineering is what, what makes a car quick and not the appearance of the reception. And I said, well, I disagree because it’s the attention to detail that is important. And if the reception as a point of sale for NF one team is not the standard and what is the rest,
00:17:57 [Speaker Changed] What, why do people think they’re mutually exclusive? You can have great engineering and a clean bathroom and lobby. Yeah.
00:18:03 [Speaker Changed] And shows your mindset, I guess. And you, you mentioned the, the, the bathroom story, which is has become a little bit famous and it’s not being obsessed, but long before Covid we had hand sanitizers that were drilled into the walls of the races where we were going and we had a hygiene manager to today’s, many of them that looked after our health. When you have sponsors and CEOs and husbands and wives that are visiting our Grand Prix and issuing big checks, they’re expecting these standards. You can’t have a dirty bathroom. And I, for me, there’s no job to small and I, I know what I expect from going into, into a bathroom. So this is how I taught them how what I would think it should be done. And yeah, it’s maybe one example of many others.
00:18:48 [Speaker Changed] I mean it’s an extreme example, but it points to a certain culture and mindset. Talk a little bit about the importance of culture to any organization.
00:18:59 [Speaker Changed] Culture is the immune system of any organization,
00:19:01 [Speaker Changed] The immune system, immune
00:19:03 [Speaker Changed] System. Because when times are tough, that keeps the team together, keeps the people aligned beyond maybe the, the the, the core objectives. Because when you fail, you know, those objectives become difficult to reach. And here’s the crooks, you can quickly put some values on a piece of paper and say, that’s our culture now and we project it on the wall in a PowerPoint and this is the standards we wanna live to. But the truth is you gotta live it day in and day out. And for us, attitudes like loyalty and humility, integrity are just not, are just not words that we think about sometime because these, but these are the basic principles upon we act. The old motto win at all, cost doesn’t work for us and I don’t want to work, I don’t wanna win at along those lines because it means you’re not maybe playing by the rules or you’re stretching the rules to a degree that I feel comfortable. We are in a business of reputation and in that respect I wanna do it the right way and everybody in the team wants to do it the right way. We’re playing the long game. It’s not a game or a race, but it’s the next 20 years. Huh.
00:20:17 [Speaker Changed] Really, really interesting. I have a bunch of rule questions for you later, but I wanna stay on the topic of culture and people. How do you invest in and retain talent? And I don’t mean just a driver, I mean engineers e everybody across the board. How do you find and retain the best talent
00:20:38 [Speaker Changed] Like any other team and company out there? That’s the most complex of all actions because hiring the best talent and developing isn’t yet a guaranteed a long term success because environment change, re exchange people, people change. And I think this is at the core of what we’re trying to achieve and retaining them in the same way, you know, we’ve been successful eight times in a row, won the championship, and then obviously people get interesting opportunity if somebody doubles your salary and another team, you have to have the responsibility towards your family to consider such moves. And that’s why it’s the normal ebb and flow with people coming and people leaving. But you want to stay with that core team that you deem as being essential for the success.
00:21:25 [Speaker Changed] How, how do you plan for that? I, I know there’s a sort of hyper competitive set of, I don’t want to use the term poaching, but someone says, Hey, we need this sort of mechanic or this sort of engineer. I like that guy at that team. How do you plan for that? How do you cope with that loss of talent?
00:21:46 [Speaker Changed] I think you need to have an overview about your organization and, and a blueprint of how you want to have it. And sometimes you operate even sometimes you operate along those lines and you still fail in terms of the results. So knowing who performs to which levels where you are having gaps, do you need to hire outside or develop from within bring up talent and who is, who is at risk to be poached anywhere? I think an overview of the organization is key.
00:22:17 [Speaker Changed] So, so let’s stay with that topic. Last year was a really challenging season. How do you keep the team motivated? How do you face challenges when just, it seems like maybe two years ago especially felt like everything was going wrong for the first half of the season. How do you keep everybody’s spirits up and people focused on the job at hand?
00:22:39 [Speaker Changed] It starts with, with myself, I have to acknowledge that maybe my motivation or my energy levels are not that good if, if our results just don’t happen. But it needs to, I, I’m the one who kind of needs to have that energy impacts into the organization and keep the organization up. So do my colleagues on the, on the leadership level. And that’s not easy. It’s not easy. You’re having false downs, you set your expectations based on the previous results and if they were great then obviously everything is a failure. So it’s been a process over the last three years to rationalize, not be carried away with your emotions either way. And it’s a valuable time and I’m sure we will be looking back in 10 or 20 years and saying we had those eight consecutive world championships and then we had a P three, we finished third in the championship, then second in the championship. Now it’s more complicated with fourth, but we won three races. So this is still a more successful season than the once before and it’s all part, part of the learning as tough as it is when you’re right in there.
00:23:45 [Speaker Changed] So you’re working on a new legacy with two young drivers. What can we expect from Kimmy Antonelli? How do you compare his driving style to his predecessors?
00:23:56 [Speaker Changed] Obviously Lewis Ham is irreplaceable. He’s the greatest champion that has existed. He’s a fantastic personality, he’s a core family member of our team, but he decided he wants to pursue the Ferrari dream and like every Formula One driver wants to do that. He got a fantastic framework of an agreement and I’m at peace with it because we, we, we decided to sign a short term deal with him because we wanted to promote Anton to the team and not lose him like we did with first stop 10 years ago. So that is all very, you know, structured and amicable. And now we have two drivers in our team that are really junior since the early days. George Russell was a Mercedes Junior since he was 17 and Kimmy since he was 12. So having a lineup of an 18-year-old and 27-year-old is our future and that means developing. And there will be moments where we tear our hair out, but he’s quick and we’ve seen that. And the same way George is’ a great opportunity for George to be the more senior driver in the team at that stage. I’m happy about
00:25:00 [Speaker Changed] It. So Hamilton won Silverstone in July, kind of felt like a bittersweet victory. What were you thinking when, when he took the podium
00:25:10 [Speaker Changed] It was only sweet. There was no bitter part of it because we are still racing together. He will be part of Mercedes’s history forever and him winning the British Grand Queen his final year with Mercedes against all odds, we couldn’t have scripted it better.
00:25:24 [Speaker Changed] And I, there has to be some sort of farewell we’re planning for him at the end of the year. What are you thinking about? How, how are you gonna, you know, put a, put a cap on this long-term relationship
00:25:39 [Speaker Changed] When you look at it from a, let’s say, purely professional side? Well he’s, he’s leaving Mercedes, he’s going to one of our competitors. Do we want to leave that like that? And the question is, the answer is no, certainly not. We had so much success with with each other. We want to celebrate the time that, that we had. And in that respect, I think there’s more many activities planned. He doesn’t know about it, he doesn’t know what it is.
00:26:04 [Speaker Changed] We won’t reveal any secrets here.
00:26:05 [Speaker Changed] No, he, he knows that something’s coming, but he doesn’t know what it is. And I’m very much looking forward to that emotion, which to this moment that’s clearly gonna be very emotional.
00:26:14 [Speaker Changed] It does seem like you are playing a very different game, a very long game than everybody else. I sometimes, and I know drive to survive is, you know, emphasizes the conflict and stuff, but it sometimes seems that people are just thinking about this race or maybe this season you guys really are looking out a decade or so into the future. How, how is that built into your DNA?
00:26:42 [Speaker Changed] I think without wanting to be disrespectful, it’s different if you’re running an organization as an employee that has a certain shelf life and needs to perform in order to stay in the job or my situation as a shareholder, being able to look at the long term. If you’re, if you know that, you know, I know if I’m not in principle, I’m gonna be on the board or chairman still responsible for over for the overall co company. So I kind of get that, that other people need to have more short term perspectives. It’s their livelihoods and their professional career. And on the one side I can look further down into the future, but that shouldn’t be an excuse of not being successful at a specific moment.
00:27:24 [Speaker Changed] You, you mentioned some of your drivers have come from Mercedes Junior teams. Where do you see talent coming from these days? Not just driving talent, but crew and team members, mechanics, engineers, where are you looking for the next great hire for team Mercedes?
00:27:41 [Speaker Changed] You just need to have a knowledge about the various channels that talent can come up in on drivers. We are looking at car drivers from the age of eight years old and we are seeing who can, you know, who is outstanding. You’re
00:27:53 [Speaker Changed] Literally tracking people a decade before they can even think about
00:27:57 [Speaker Changed] One. Absolutely, yeah. We have our scouts that are on the most junior of international cart races that are looking at those kids and we are not the only ones. Ferrari’s doing that in some of the other teams. So, and when it comes to engineering, we have a very strong undergraduate program, internships and work experiences. We are giving opportunities to underprivileged and underrepresented groups into the team because we believe not only for the sake of doing it to do good, but we believe more variability and diversity in our people will give new perspectives and new perceptions and, and a lot of ambition and drive. So very early into, you know, academic careers, we are looking at paper.
00:28:38 [Speaker Changed] Let’s talk a little bit about that diversity I read following the Black Lives Matter protests and, and the death of some American citizens at the hands of police here you had a long conversation with Louis Hamilton, you painted the car black, which was sort of unprecedented, that hadn’t been done before. Kept it that way for at least a season, if I remember correctly, and then made a commitment to, hey there minorities are very underrepresented in F1. How can we expand this? How has that process gone and and how successful have you been?
00:29:13 [Speaker Changed] I think long before Black Lives Matter as a team, we have always strived to be diverse. It is was part of my up upbringing that I saw what it means to be discriminated antisemitism was a strong topic in my upbringing in Vienna. And so that is always how we have been calibrated. And then when obviously Louis was pushing very hard for more diversity in, in our population in the team, and we embraced that from the beginning. And then Black Lives Matter started with, you know, obviously the, the things that happened in the, in the US and he said, shouldn’t we, do you think we should paint the car black? Which is a highly unusual question because the silver arrows are very much how the mercedeses are being called in the racing world.
00:30:03 [Speaker Changed] That’s, that’s the history going back to what the 1930s?
00:30:06 [Speaker Changed] Yeah, the very, the first Mercedes racing car or the earlier Mercedes racing cars were too heavy. So we scratched off the, the white color and it was the bare aluminum, the bell silver, and that stayed, but it was a very quick decision. I called the, the board of Mercedes, at least. Listen, I have an unconventional question here and I think it’s good. Are we doing this? And it was, it was an absolute capital letter. Yes. Let’s do that. And so you can see the support of the wider Mercedes organization for this topics. And here we go. The car is still black until today.
00:30:41 [Speaker Changed] Let’s talk a little bit about Netflix and Drive to survive. I’m a fan of the show, I couldn’t help but notice that in the first season you guys really didn’t participate in, in it, it now looks like you are not only participating but enjoying it. Tell us a little bit about your experience with Netflix.
00:31:03 [Speaker Changed] Clearly Ferrari and us got that wrong at the beginning because we decided for ourselves, we are participants in the Formula one world championships. And my colleague at Ferrari, outspoken Italian said, we are not s sole so we’re not gonna act. And my approach was try to be pragmatic and said, the moment you have microphones on you and cameras, you’re going to start to act and I don’t want my engineers to act for some cameras. So we said we are not doing it. But that was a blessing in disguise because as we were not playing as the main protagonists, Netflix was showing smaller teams was showing drivers that weren’t competing for race wings or, or podiums. And that in itself created the, the interest from our fans for the sport. So year two we joined, and from then on it’s been, it’s been a blast. They’re doing a fantastic job at the impossible task of showing a sport, a real sport, an honest sport, and on the other side trying to make it spectacular and exciting and drama and glory. But it’s been a great successful Netflix and Formula One overall.
00:32:07 [Speaker Changed] So it’s obviously brought a ton of new fans in, not just overseas, but especially here in the United States. And now there are multiple races that take place here each year. How has the Netflix documentary expanded the audience and expanded where you guys actually run races?
00:32:27 [Speaker Changed] I think there were a few pillars that came together for, for it to be suc Formula one to be so successful. We were the first sport to actually race in 2020. We had a very disciplined and stringent covid protocol. People were at home, Netflix was showing our series, and the racing was excited, exciting. The first up Hamilton Saga, the Grand Prix that you mentioned, the 21 Abu Dhabi, many young drivers being avid social media protagonists and all of that contributed to a, to a boomer from one in the United States. We, we’ve always been in Austin. It’s a fantastic place. And last year was the single biggest event in the United States to my knowledge with 440,000 people. And since then, Miami has joined and Las Vegas has joined, and Formula One has been booming in the United States in that affluent demographic. Our strongest growing group is the young females, 15 to 35, believe it or not. Huh. And that shows how, you know, all the things have come together and we are on a successful path, but you gotta be wary. We know that we are in the entertainment industry. We need to provide a product that is exciting and if we fail to do so, we could as well, you know, hit some stumbling blocks.
00:33:46 [Speaker Changed] So you do a pretty good job at not only maintaining your emotions, but not revealing a lot. I kind of got the sense in the beginning of the first season that you participated in, I was like, all right, this is an annoyance, but I’ll play. It seems like over the past few seasons you’ve kind of learned to enjoy yourself more on camera and sometimes it feels like you are just throwing out these little bombs and leaving them there. For some of your competitors, especially at Red Bull, you seem to like to get under other people’s skin in a very subtle way. How much fun has the entire Netflix drive to survive experience been for you?
00:34:30 [Speaker Changed] At the beginning, most of the teams gave Netflix a full access to their premises and to, to the team members. And I, but
00:34:39 [Speaker Changed] By the way, you could do that if you’re the back of the pack, right? You have too many, too much stuff that you don’t want anybody else to see. Yeah.
00:34:45 [Speaker Changed] But even front running teams felt they needed to be front, left, and center into the camera. And that’s not something we wanted to be. So we gave a, we immersed them fully for our race season. And funnily enough, these were always our worst performances, but not Netflix fault. And over time you just, you just realize that you embed those people in, into the team, we put them in team clothes so they weren’t looking like aliens in the garage. And since then they have just been part of our, of our, of our sport. And they’ve always been very fair when it comes about, you know, cutting out stuff that it was not appropriate or that wasn’t right to say. And it’s been a great, great relationship. And some of our, you know, some of my colleagues, they, they’re just keen and being a little bit more on tele, trying to stay authentic to who I am. Sometimes that, you know, makes me shine in a not so good light. I’m not proud for some of the moments that were captured on the other side. I want to just continue to, to be like I am and not act I’m not good at act.
00:35:48 [Speaker Changed] That’s very fair. Let’s talk a little bit about what’s going on in F1 today. It’s pretty clear that over the long haul, no single team has produced the best car year after year, you could have a run, but eventually the platform changes, the rules change, it’s sort of cyclical. Just how challenging is the F1 engineering? It seems like it’s at an incredibly high level.
00:36:16 [Speaker Changed] Formula One has always been at the pinnacle of racing and high tech. We are an organization of two and a half thousand people, half of them on the engine, the other half on the chassis. And it’s science. We are trying to utilize the best infrastructure that there exists today. Things are starting to really kick off on ai and as an example, we operate wind tunnels and computational fluid dynamic technologies, et cetera, et cetera. And in that respect, it is a huge, huge engineering challenge. And, but you know, having the best people and the best infrastructure still no guarantee for success as it as it’s been shown in our performance at the moment. Rules change in formula one and rules change to balance performances out. And twice these changes were thrown at us and we came out on top. And this last time with ground effect cars, we were caught out and we were not among the, you know, winning teams.
00:37:13 [Speaker Changed] So let’s talk a little bit about some of those rule changes, including rules that don’t really seem to be enforced first. What’s your most and least favored rule change of the past few years?
00:37:26 [Speaker Changed] Well, obviously have a certain bias. So if I look from the team’s perspective, ground effect cars caused a lot of problems because the lower you run to the ground, the faster you are that smash the flaws up. And we were really not great at finding the best compromise here. But, you know, the rules are the rules you need to, you need to be trying to, to do, to be the best. And it’s the same conditions for everyone as long as everyone plays by the rule book. And that’s the tricky bit.
00:37:53 [Speaker Changed] So let’s talk about that. What rule do you think should be more strictly enforced and they kind of softly enforce? Like what, what are we not being strict about that we should be?
00:38:06 [Speaker Changed] I think the FAE, which the governing body is trying to, to be compliant and to enforce regulations. But sometimes, you know, they are facing a group of many thousands of engineers on the team sides and they are maybe 20, so they’re always on the back foot trying to keep the spot on the control and that’s not an easy task.
00:38:25 [Speaker Changed] What’s your take on the budget cap that’s now imposed on F1 teams when they did this in the National Football League here? It was to create a level playing field so all teams could be competitive. What are you seeing with this cap? How is it affecting the way you guys hire and engineer the cars?
00:38:45 [Speaker Changed] Well, the cost cap was implemented by Chase Carey, who knew everything about media and football in the United States. And he said, I’m gonna, I need to protect you from yourselves because Red Bull, Ferrari and Mercedes, we were outspending each other to have the best talent and best technologies and therefore we were always going, we were going faster than many of the small teams. And he, he came in with that I was against obviously because we had the resource, but he came in and our business models have changed since then. We are profitable entities and not just the marketing activity. And you can see there’s today there’s four teams that are fighting for, for race victory. So he was right.
00:39:24 [Speaker Changed] Where does the budget cap show its biggest effect? Is it in, in the top speed of the cars? Is it the handling of the cars? Is it the driver selection? Where do you see the biggest impact of that, that cap?
00:39:37 [Speaker Changed] Well, drivers, for example, are still excluded, which is something we are looking at for the future in certain marketing costs. But as a matter of fact, everybody spends the same amount of money you today, it’s about a hundred, 6,000 $65 million a year in engineering. And
00:39:53 [Speaker Changed] That’s a big number.
00:39:54 [Speaker Changed] That’s still a very big number, but we spend double before that. So how should a small team like Haas compete with a Mercedes juggernaut that’s spending double the money on engineering today? It’s the same, obviously that catch up phase is gonna take longer because we have infrastructure that’s been created since a long time. We spent a billion in our sites I guess in the last 10 years. Wow. But over time, that’s gonna level out and that’s why it was the right decision.
00:40:18 [Speaker Changed] So let’s talk about some other teams. What, first of all, what do you think about Andretti? Should he be allowed to join? Should there be another team in Formula One?
00:40:28 [Speaker Changed] First of all, the teams have no say in this. It’s the governing body and the commercial rights holder. My personal opinion is that if a team wants to enter Formula One, it should, should be carefully evaluated like it’s being done in the us Like the NFL decides who is joining. And for us it’s, it’s a very easy exercise. If a team can contribute to the, to the, to Formula One success, formula one success by increasing its audiences marketing power, et cetera, then it’s a logic consequence that as a team we would be for it. But then of course we have no vote. We just can we just give our opinion, and I think this is the exercise that Formula One and the governing body, you need to evaluate who is providing a real USP and providing a contribution to the sport that makes it grow beyond the current curve.
00:41:20 [Speaker Changed] Right? So in the US when we expanded baseball and we expanded football, there was a little dilution of talent. You, you had a little, you had fewer juggernauts, although arguably Tom Brady and the New England Patriots ran the table for, for quite a while. Is that a risk if we add more teams or there’s plenty of talent to go around?
00:41:45 [Speaker Changed] I think you need to embrace all competition. We are there to fight against the other teams and whoever’s doing a better job, Des deserves to win. So that is not at all a li a limiting factor. I think like the US leagues have done it, it needs to be carefully evaluated what the benefit is of increasing, of increasing the amount of teams joining for the, the incumbents and also for a new team and the sport overall.
00:42:14 [Speaker Changed] So let’s talk about drivers. Louis Hamilton Max Fortin, the previous generation, Michael Schumacher. How do you rate, rate these top Formula one racers?
00:42:27 [Speaker Changed] Each of them was the predominant driver in their areas eras. Each of these drivers have been the predominant drivers of the, of their era. And it’s very difficult to compare Fangio to Mos to Senna, to to Cher and Louis Hamilton now because they’re all different. And we wouldn’t do them justice by doing such a simple comparison. But if you look at the pure numbers today, Louis has scored the most victories, the most poor positions in his unequal power with Michael Schumer in terms of titles. Maybe he should have, could have won, won more in 2021. So that’s the fact of the meta.
00:43:17 [Speaker Changed] Huh, really interesting. So here’s what I’m gonna do. I’m gonna ask my curve ball question and then I have a whole bunch of technical questions. You had this fascinating quote in, in a boating international, which I thought was really, really interesting quote. I think in life you must have three motivations, somebody to love, something to do and something to dream of. Explain that. That’s not exactly what I think of when I think of a Formula one principle.
00:43:49 [Speaker Changed] I think I had some tough moments in my life. My upbringing wasn’t easy. My father died very young. We literally had no money. And over the co course of time, mental health has been something that I have struggled with at times. And so I came to the realization after, you know, becoming older, what is it really that makes us happy, that makes us strive? And these three things kind of summarize it from, for me, when you are running out of dreams or when you’re running out of activity, and if you can’t have someone to share it with, then for me there is such a big gap that, that that exists in your life that I would, you know, but that’s maybe just my personal view.
00:44:38 [Speaker Changed] Well, well that’s very philosophical. It’s not what we typically think of when we think of competitive sports. It it, it’s thoughtful and introspective and it, it just stood out to me as not what I would’ve expected from you.
00:44:53 [Speaker Changed] I deal with people, you know, this is all about humans being on a journey in, in the team trying to be successful. And if you are, you know, more vulnerable in terms of your feelings, you introspect more. That’s happening, that’s happening to me all the time. So I think, you know, we more visible leaders in organizations, we should be, we should be speaking more about mental health rather than appearing like the unbreakable, unbreakable individuals that, that have never weak moments.
00:45:30 [Speaker Changed] So let’s spend some time talking about getting a little technical, talking about some F1 issues that I think are really fascinating. So it seems like a lot of the head-to-head racing takes place in the middle of the field, not the front of the field. What do you think about some of the proposals and some of the ideas to make that head-to-head passing in the front of the field? How are the rules being considered so that you just don’t, I mean, Monaco is a special case, but it seems like in some races it’s much harder if you have two people neck and neck for the number two car at the front of the front of the grid to pass the number one car.
00:46:15 [Speaker Changed] I think there’s two reasons. It’s very track specific. Many tracks, even with close, with close performances you can overtake long straights a important factor because the aerodynamic efficiencies of those cars are so good that it’s difficult to get out of this slipstream because there isn’t anyone any slipstream anymore. The other thing is that the competition is so close, sometimes you have a second between P one and P 15 and therefore
00:46:40 [Speaker Changed] A second. Wow, that’s amazing.
00:46:41 [Speaker Changed] That’s amazing. We have top eight cars sometimes separated within three or four tens and that’s why there is no car ever to be, to be so much faster. So it only works with strategy tire degradation. But this season has been pretty successful in terms of overtakes and excitement.
00:46:57 [Speaker Changed] So there was a comment from Benito that making Audi successful will be like climbing Everest. What are your thoughts on that?
00:47:08 [Speaker Changed] I think that’s a pretty good analogy. Formula One is a very high entry barrier sport, but if somebody can do it in an organization like Audi, I mean they have been very successful in, in motor racing in general. Their Lamar program was the best ever. And they have the, the capability and they will attract the people to make it a success. But one thing that I’ve learned in Formula one, you need time. And I hope that as an OEM, they’re capable of giving the, the project enough time like Mercedes has given us enough time to become successful.
00:47:45 [Speaker Changed] Let, let’s talk about gearbox and transmission development. Are we at peak gear changing? Is there more performance to be run out of that?
00:47:54 [Speaker Changed] No, we’re getting very specific. Yeah. So gearboxes today are fully automatic seamless shift gear boxes. And it doesn’t go, you know, there’s no talk break anymore.
00:48:07 [Speaker Changed] It, it’s literally instant, like there’s just a millisecond between gears,
00:48:12 [Speaker Changed] You wouldn’t even feel it, which is, which is an amazing technology. So that is pretty managed, you know, to the max of what it can be. And in power units in 2026 we’re becoming sustainable engines. Still highly efficient, highly powerful, 50% combustion, 50% electric, but with a hundred percent waste based biofuel. And this is where the world is going.
00:48:36 [Speaker Changed] Zero carbon,
00:48:38 [Speaker Changed] Carbon emission reduced to zero because it stays in the cycle. So I think we are role, we need to be role models in the auto industry. We need to be innovative. Ev hasn’t been, as the implementation of electric vehicles, hasn’t been as quick as we all thought, and therefore fueling the best engines in the world and the quickest cars in the world with the biofuel, I think is a good way of participating in the energy transition.
00:49:08 [Speaker Changed] So you guys have done a lot of work both modeling and, and using AI for wind resistance and, and the, the dynamics of the car in wind tunnels and how it’s gonna react. It seems like that is the most challenging aspect to take from the computer to the track. Is there some sort of a formula where you’re testing something? How do you decide this is go or no go when it comes to actually implementing all, all of the aerodynamics to the actual car,
00:49:43 [Speaker Changed] There’s lots of science behind it. And it’s not only wind tunnels because that is pretty old technology, but there’s simulations, simulations, tool drive in the loop simulators, C, FD and lots of other highly sophisticated development capability. But correlation to the track is then another is then another topic. First of all, you have a driver in the car, the human being, you could say the engine is, call it the weakness between the steering wheel and the engine good and bad days. How do you, how do you put that into data? So correlating that is today the crux of the matter. And that’s something that all the teams struggle, that their simulations are telling them one thing, but the drivers are telling them something else.
00:50:32 [Speaker Changed] It seems more art than science.
00:50:35 [Speaker Changed] No, I, I fundamentally believe and we and the team do that it is science and it must stay science, but we haven’t, with this current ground effect cars, all of us figured out why sometimes it doesn’t correlate with the virtual world.
00:50:51 [Speaker Changed] Huh? It’s, it a model. What’s the old line from Professor George Box? All models are wrong, but some are useful. I i is that how the ground effects end up working out in the real world?
00:51:03 [Speaker Changed] I, I didn’t, I didn’t hear that sentence, but it pretty much sums up where we are today.
00:51:07 [Speaker Changed] Yeah. That a famous quote about economic modeling. All models are wrong, but some are useful. It, it very much works out. Let me jump to my favorite questions that I ask all of my guests starting with, besides drive to survive, what else do you watch on Netflix? What keeps you entertained?
00:51:26 [Speaker Changed] Well, I was never kind of a TV person so much. Like, I prefer to, to read or, or do some sports. But most recently there’s more and more interesting streaming series coming out. I like sports documentaries. The last one that I enjoyed was sprinters. That was different sport that I didn’t, that I didn’t know a lot about.
00:51:53 [Speaker Changed] And still about speed,
00:51:55 [Speaker Changed] Still about speed. I like the Tour de France, the documentaries. So that’s more the kind of spectrum that I like to watch. Let
00:52:03 [Speaker Changed] Let’s talk about mentors who helped shape your career, who helped put you on the path that you’ve been on.
00:52:13 [Speaker Changed] When I was eight years old, my, my dad got very ill and, and died a few years later. And my mother could barely make our living. I was responsible for myself and my sister and that very much carved my personality. There was no mentor. I was, I was, I had the responsibility and accountability since my early years and that’s who I am.
00:52:39 [Speaker Changed] Our final two questions. Someone’s interested in a career in racing, in Formula one, in high performance engineering. What sort of advice would you give them?
00:52:50 [Speaker Changed] My advice to someone would be like, if you’re able at an early age to find out what you enjoy doing, and that may change, I think, by the way, young people are much too under pressure to find the, so-called passion at the age of 22, which is nonsense. Give them, give them time to be all around us and then in the late twenties to, to find out what they wanna specialize in. But you can do, you can become all you want. If motor racing or engineering or driving is what you think you’re good at, then give it all you have and you will be eventually
00:53:24 [Speaker Changed] Successful. And our final question, what do you know about the world of Formula One racing today that you wish you knew when you first started out with the Williams team?
00:53:35 [Speaker Changed] All of it. I mean, literally when I started, I, I didn’t understand many fundamental topics in Formula One, but it’s part of the trajectory. You’ve gotta learn it the hard way sometimes by doing it and by failing. So that’s all you know was all important. Hmm.
00:53:52 [Speaker Changed] Thank you Toto for being so generous with your time. We have been speaking with Toto Wolf. He is the principal and CEO of Mercedes F1 team. If you enjoy this conversation, well be sure and check out all of the previous 500 or so we’ve done over the past 10 years. You can find those at Bloomberg, YouTube, iTunes, Spotify, wherever you find your favorite podcast. And be sure and check out my new podcast at the Money Conversations with experts about your money earning it, spending it, and most importantly, investing it at the money wherever you find your favorite podcasts or in the Masters in Business Feed. I would be remiss if I did not thank our crack team that helps put these conversations together each week. Steve Gonzalez is my audio engineer. Anna Luke is my producer. Sean Russo is my head of research. Sage Bauman is the head of all podcasts here at Bloomberg. I’m Barry Riol. You’ve been listening to Masters in Business on Bloomberg Radio.
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