Transcript

How I Built Resilience: Live with John Foley

Hey everyone and welcome to How I Built This Resilience Edition. On these episodes, we're talking with entrepreneurs and other business leaders about how they're thinking creatively during such a disruptive time. And today my conversation with John Foley, the founder of Peloton. Peloton makes stationary bikes and treadmills stream live classes right to your home. We feature John Foley and the Story of Peloton on the podcast back in April of 2019, so if you haven't heard it, it's well worth checking out. Anyway, when the pandemic shut down fitness studios all around the world, People still needed a way to work out. And Peloton saw a huge surge in demand. I spoke with John from his home in New York just a couple days ago, where he's focused on meeting that demand.

And keeping the Peloton community motivated. All right, let's talk business. Um, when did you first start to see something odd in in like orders for Peloton. Did you start to see like a weird surge even before the pandemic really hit? I don't think it was before Guy. I I think it was that You know, the the twelfth or thirteenth of March.

Uh when The world realized that what we were hearing about and obviously China and and and Italy and and some other places in South Korea That it was going to come to New York and all of a sudden That following week it started shooting up the demand.

A demand that you had not seen in the previous eight years of Peloton's History? Well, uh interestingly, I think we talked about this last time, guys, that we have a uh a uniquely seasonal business where I think we've said sixty percent of our demand is between Thanksgiving and the end of February because of uh holiday sales. in the cold winter months. In in the summer you're you know, you're running and and working out outside a little bit more, and in the winter you want a Peloton platform, Peloton bike or tread. And so we've dealt with these spikes in demand, um

after Thanksgiving and Black Friday and and aggressive spikes where it's multiples beyond what it was a couple of weeks prior. Yeah. And so we had seen it, we just hadn't seen it in um this type of surge in demand. We hadn't seen it in the third week of March. I mean that was obviously very unique and generally sales are declining I mean you wouldn't have been prepared for it'cause it was it wasn't predictable. Yeah, no, not at all. Uh uh what served us well I would say is two things, Guy

We are an ambitious bunch at Peloton and we see Peloton bikes and treadmills and future products and our content. as the future of fitness globally. We are planning to grow geometrically for years and years to come. And in order to do that you have to be investing heavily in supply chain and logistics and stores and people and infrastructure and member experience and you have to be really investing for growth. And we had been doing that, so we were more prepared than a company that wasn't ready for growth. And the second thing what we benefit from, Guy, which was really fun to watch, was how entrepreneurial the folks at Peloton are. Not not myself, but the you know hundreds of people around me, they were excited about the challenge of dealing with it. And and it's you know, it's a beautifully dynamic group of people at Peloton.

And the challenges that we faced, which were many over the last several months. w including working from home but also an exploding business. Um it was really fun to watch everybody triage and rise to the occasion and it it's been uh it's been um weirdly fun, to be honest. Alright, just give me a sense. What what is the percentage Yeah, it's tricky, guy. Yes, and now you're a public company. Yeah, so I could be a little more forthcoming last time we spoke uh Oh you gotta win for your quarter, right. Every I got ya. Yeah.

But there's been it's fair to say there's been a surge, right? There's been a surge. There's been a wind in our sail, as I as I have said. Anecdotally, I'm hearing that there's a waiting list for people to get their peltons just because of the surge. How how long on average now does it take to get one? Yeah, I think it's spiked at uh ten or eleven weeks, um, in some markets. And I think we're down to six or seven weeks in most markets at this point, and and Um as we continue to build capacity in our in our manufacturing pipeline and supply chain um we're able to uh you know meet the demand a little bit more faster. So uh it's it's coming down and and um It's something we care deeply about'cause we want to get off on the right foot.

Not just because it's good for business, but it's good for our communities as well, and the mental health of the of our future members. Um let's just talk s sort of breast hex for for a moment. Um You've got a supply chain, right?'Cause these these are made overseas and they've got to be shipped across the Pacific Ocean and um come to LA or Seattle or whatever and then distribute around the country. But you also have you're also a logistics company. You also have stores where you display and allow people to try the bikes or the treadmill. So

Let's talk logistics first. I mean you've got Peloton um vans that go to people's homes and set them up. How is that? How's that work? Yeah, that was uh that was probably the biggest thing that we hadn't to triage to make sure that our employees and our members were safe in in this new c covid world. And we found uh again the the creativity of my colleagues, uh we found a lot of creative solutions on how to

deliver bikes, uh we do what's called a threshold delivery. where we don't even come into your home, we will uh put it on your porch or you in in your uh the precipice of your of your garage. and help you set it up and tell you what you would need to do and and we've created new tools online to help you do what our delivery folks would have done uh had they delivered it and spent the half hour setting it up and now it's more of a self service model because you don't want our team touching You know, your bike and and and by the way, our team doesn't want to be in your home and it it's it's a shared anxiety. Uh you know, we wanna keep our members safe and and our and we wanna keep our employees safe and it's working. Uh we've we found some some good solutions. That are recorded, that are available.

But you've got live classes. I mean, that's the whole attraction to Peloton, is that you've got a live instructor and you've got a studio, I mean you're a media company. Um, how are you doing that safely? How are you H how do you have instructors come to the studio in New York and get filmed for the live classes? Yeah, it's a good question. uh with our with our instructors. We sent you know

a couple hundred thousand dollars of hardware and software into a few of our member or a few of our instructors' homes. And set up a an ad hoc. Television streaming studio. It was fascinating to watch how quickly they were able to get world class content streaming from a

a and a a living room of one of our instructors. Um and so yes, we did care about the authenticity and the freshness of our content. It's something that we told our members that they were gonna get when they purchased their bike or their treadmill. So we've been uh trying to honor that and I think it's really worked. I think um versus taking a class from two years ago which are still available and still awesome. There's something about the conversation you're able to have and the the relevance you're able to have and the connection you're able to bring to our members in their home when we're talking about what's going on in the world in that moment. Uh and so it's really uh It's really been cool to watch. How have instructors been Providing inspiration

um through and I'm especially our instructors in New York, you know, like this is it was such a difficult time in New York in in April and May and um and March obviously Um, how have they been able to kind of do that? To to kinda stay upbeat and to keep people motivated and inspired, um, you know, despite all of the stress and and challenges around them. I mean I have to imagine that that you've had conversations with instructors where they're just like, John, I'm I I'm burned out. Like I don't I don't know how I can do this. Yeah, I mean we have uh close to five thousand people at Peloton now and and you know some people are anxious, some people are isolated, some people are lonely, some people are scared within our company and globally, obviously. And so the authenticity of the voices and the and the different types of voices. You know, we had instructors who uh didn't want to come to the studio when we were still running the studio'cause they had a eighty year old mother that they were still visiting and

They were nervous, so they didn't come and we had other people who were less scared and they said, I'm twenty five I'm comfortable going to the studio. members need me more than ever now, so this is I wanna be on the front lines and and we had everything in between and and we supported each one of these emotions because they're all real, you know, how people are dealing with this, uh this new world order of covet and and working from home and being isolated is fascinating and and an important part of what's going on and and so to the extent we're bringing connection and we're we're when we're helping people relate and we're we're understanding and we're supportive and we're there for them. And in and

a wild way it feels like Peloton was built for this moment of helping people connect virtually It's a really beautiful thing that's uh that we've experienced. about new ways to connect and and and meaningful ways to connect. I mean here we are talking and I I haven't seen you in a year and it's gr great to see you but You know, a as you know, John, most small, medium, and large businesses are in crisis in in the US How do you grapple with the reality that this crisis is a public health crisis, but you guys are actually really doing well and growing. Um your stock is doubled from where it was in September. Um

I mean, of course it's great for Peloton and but do y is a part of you just I don't know, conflicted about that? Absolutely. Uh It's been a whipsaw wild uh reality of going public and the first earnings call was all about profitability. No one thought we could become profitable and path to profitability and everyone was thinking that we were hemorrhaging cash and it was this terrible thing. The following call we

Closed our uh losses. And all of a sudden there was concern about growth and it was no one who cared about profitability now it was growth. And the third earnings call We were profitable and growing tremendously. But it was this new world order, to your point, guy.

And it was all of a sudden Oh gosh. We don't want to be vilified for being profitable. To your question, it's we we we decided we need to really stay humble. and really just focus on the fact that we're servicing a great need in our societies right now. Our communities need connection.

They need fitness. But you're right it has been from a from a psychic positioning perspective. I was you know, competitive business guy was so excited to show that Peloton is an awesome business and the total addressable market is massive. It's not small as some of the narrow minded investors thought. So I was excited to show that, but all of a sudden it was

Through this lens of Covid and so it was it was absolutely tricky. There's no question. You're it was a good question, guy. I I agree. When we come back in just a moment, we'll hear from John about one of his earliest struggles at Peloton, and also he offers some advice to aspiring entrepreneurs. Stay with us. I'm Guy Roz and you're listening to How I Built This Resilience Edition. From NPR.

Hey, welcome back to How I Built This Resilience Edition. The surge in sales for Peloton has made John Foley a very, very busy man right now. But some of our viewers to our live conversation had questions for him about the early years of the company. This is a question from Eric Kozar. You know, you are a a media company, logistics company, a hardware company, a software company, um hardware, as Eric Eric points out, is hard. It's really hard. Um what what was the biggest lesson um that you learned or that you took with you going through the early stage product development? I would say hardware isn't hard. Um I uh Tom Cortesi, my co-founder who uh uh runs product development and and is our product visionary

Um I try to pin him on what's harder, software or hardware. And he'll go back and forth on different months. Uh And oftentimes he'll say software is harder than uh hardware. The problem with hardware

is that investors Are nervous about it. Investors Shy from things that require hardware. Because then you have to have logistics and you have to have manufacturing and you have to uh figure out how you're gonna sell these things and

And it can't scale as fast as software. I I joke that Um certainly eight years eight seven or eight nine years ago when I was trying to raise money for Peloton in the early days Everyone was looking for the next Instagram where you put seven hundred fifty thousand dollars in and eighteen months later you sell it for a billion dollars. That that's th that was the excitement. The Snapchat was the same type of story. That's what they want. Um they don't want the grind of uh go manufacture stuff and figure out how to bring it to market and

You know, if you messed up then you have all these products out in the market that, you know, are you need to replace the hardware. It's just Um to your point, hardware can be hard. But um to an ambitious group of people like the Peloton founders and now the Peloton team, um, you know, it's uh it's a competitive moat over time, which is uh which is why I think our investors are excited about it at this point. John, you went to business school in your late twenties. There's been some speculation that because this economy is likely to be soft for the next year at least, probably two, maybe three years There will be a surge in people applying to business schools. That's unclear, obviously.

Do you think that would be a good decision to make if s for somebody in their twenties right now who is looking out at the world and saying, there are gonna be no jobs here. I mean th the the risk is, you know, you take on a lot of debt But was it a good decision for you and do you think that um given the economic outlook now if you were, you know, back in your late twenties, would you have taken maybe taken a decision like that? Yeah, uh that's a good question. I hadn't I hadn't heard that, but that makes sense, Guy, that people would uh try and take the next twenty four months to to get educated if the if the jobs are gonna contract and the economy's gonna contract.

For me specifically it was a great decision, but I will tell you I grew up in the Florida Keys and went to a uh public high school where ninety kids uh graduated and and I think maybe ten of them went to went to college. It was a very non Uh college prep environment. And my dad was an airline pilot, I and I had great parents, but I didn't know much about business uh growing up in that environment. I didn't know much about much, to be totally honest. And then I became an engineer at Georgia Tech and and I worked in manufacturing in Waco, Texas, and I and I didn't know much about the world of finance or the world of business or the world so

For me I was a uniquely, I would say ignorant, uh you know, twenty eight year old kid. Um and I needed both the education and I needed the confidence. for a lot of people that I've connected with that are educated in the north north east or um lived in New York City or San Francisco or have parents who have um a little more access uh to uh b the world of business um business school

could be uh a waste of time and a waste of money to your point, Guy, and you you know, I I had a hundred thousand dollars of debt. When I came out, my wife, when I met her, she was going to law school. And so we had I was thirty five years old with two hundred fifty thousand dollars of student debt. You know, it took eight years to to to pay that down. Um and so it is it is a real th thing that you know, it's you got approach it in a commercial way. Um running headlong in a business school just for sake of business school could can be um a bad decision for some people. Um building on this question, this comes from Austin Birch. Um he is in Scotland. Hello, Austin. He's asking, um, what qualities do you see as most necessary in young entrepreneurs?

Yeah, I I I think the cliche, uh resilience and um can do attitude. Um even better than myself from an entrepreneurial perspective. I I my my colleague Tom Cortez, I always say I would never start another company without Tom, but He loves problem solving whatever comes up. in anything, whether it's in his sweet spot or outside of his sweet spot, he will research it on Wikipedia and he'll come back to m the next day with some ideas and we'll test them and you know, nine of'em will fail and one of them will work and all of a sudden we have a prototype of something we didn't know how to do yesterday. Whether it's marketing or fundraising or or product development or whatever, but I think it's a spirit of loving adversity and loving challenge and again

when we went into Covid world I I really saw that part of the Peloton culture and the type of people we've been able to recruit and retain Love that type of uh dynamic environment where you don't know what your job's gonna look like tomorrow. Um, and it is a certain type of person who enjoys that that book uh fifteen years ago of Who Moved My Cheese. Um if you get anxious when someone moves your cheese, you're pr you're probably not gonna be a good entrepreneur.

Um before I let you go. What do you want to take with you from this time that you've learned and experienced into the future in five years time? when you look back at this moment, what will Peloton be doing that it learned from this moment? Well yeah, uh one of the things that tactically that I think our members will be excited about is the learning that we can do remote content.

We have these fancy studios in New York and London. And we've spent you know fifty million dollars apiece, I believe, on these on these two studios, so real investments. And we're excited to get them open and we're excited for people to come visit and they're kind of uh a destination for our community and they're a great place to meet your favorite instructor and But uh to your question, Guy, uh because of Covid is forcing us to test content in in people's living rooms and our instructors' living rooms, we now have these mobile apparatuses that we can plug into uh different places and and that I think will be a fun thing that our members will benefit from as we continue to be creative with the styles of content that we bring to them. Um on a human level, guy, um

You know, I think all of us you you can't get this time back with your with your children. Um you know, to to the extent that this is galvanizing the the family nucleus and allowing your kids to get to know you and um spend time with you. you know, whether it's for another couple of weeks or a couple of months or a couple of years, hopefully a couple of weeks, God willing It's really special and uh I I am Considering

I was I what I would call a not so good dad. working too hard, certainly in the early years of Peloton. For me to be able to put some fuel on the bank of my family. during Covid. I'm still working just as hard, but You're just not commuting and you're not going out and you're

When you're not working, you're there with your f your family. Even when you are working, you're there with your family. I mean it's a lot of family time as you as you know. But uh it's it's been it's been great. John Foley, co founder and CEO of Peloton, thank you so much for being with us. Thank you, guy. It's always a pleasure. With your rabbid user base. That's an excerpt from my conversation with John Foley, the founder of Peloton. To see our full interview, you can go to Facebook.com slash how I built this and search for videos.

And if you want to see all of our past live interviews, you can find them there or at youtube.comslash NPR. If you want to find out more about the how I built this resilience series or other virtual NPR events, you can go to nprpresents.org. This episode was produced by Candace Lim with help from Ellie Prescott. L. Mannion, Gianna Cappadona, John Isabella, Julia Carney, Neva Grant, and Jeff Rogers.

Thanks for listening, stay safe, and I'll see you back here. In a few days. I'm Guy Raz, and you've been listening to how I built this. From NPR.