How I Built This with Guy Raz - How I Built Resilience: Live with John Foley

Episode Date: July 18, 2020

While upending many businesses, the pandemic has benefited fitness brands like Peloton, which saw a surge in demand in mid-March. Peloton founder John Foley talks with Guy about the unique challenges and opportunities posed by this moment. These conversations are excerpts from our How I Built Resilience series, where Guy talks online with founders and entrepreneurs about how they're navigating turbulent times.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca.com. 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. When did you first start to see something odd 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 think it was that, you know, the 12th or 13th of March.

when the world realized that what we were hearing about in obviously China and Italy 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, interestingly, I think we talked about this last time, guys, that we have a uniquely seasonal business where I think we've said 60s, percent of our demand is between Thanksgiving and the end of February because of holiday sales and the cold winter months. Right.

In the summer, you're running 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 after Thanksgiving and Black Friday and aggressive spikes where it's multiples beyond what it was a couple weeks prior. Yeah. And so we had seen it. We just hadn't seen it in 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 coming out of the holiday season, and they took a turn in the other direction. So you weren't prepared for this. I mean, you wouldn't have been prepared for it because it wasn't predictable. Yeah, no, not at all. What served us well, I would say, is two things, Guy. We are an ambitious bunch at Peloton, and we see 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 myself, but the hundreds of people around me, they were excited about the challenge of dealing with it. And it's a beautifully dynamic group of people at Peloton. And the challenges that we faced, which were many over the last several months, including working from home, but also an exploding business, it was really fun to watch everybody triage.

rise to the occasion and it's been it's been weirdly fun to be honest all right just give me a sense what what is the percentage increase in in sales what's been the percentage increase in sales over the last couple months yeah it's tricky guy as if i think when you and i met we were a private company yes and now you're public so i could be yeah so i could be a little more forthcoming last time we spoke uh oh you got a with your quarter right every right i got you 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 sale as i as i as i I have said. Anecdotally, I'm hearing that there's a waiting list for people to get their peloton

just because of the surge. How long, on average, now, is it take to get one? Yeah, I think it's spiked at 10 or 11 weeks in some markets, and I think we're down to six or seven weeks in most markets at this point. And as we continue to build capacity in our manufacturing pipeline and supply chain, we're able to, you know, meet the demand a little bit more faster. So it's coming down and it's something we care deeply about because 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 our future members. Let's just talk sort of brass tacks for a moment.

You've got supply chain, right, because these are made overseas and they've got to be shipped across the Pacific Ocean and come to L.A. 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 vans that go to people's homes and set them up. How does that work? Yeah, that was probably the biggest thing that we had needed to triage to make sure that our employees and our members were safe in this new COVID world. And we found, again, the creativity of my colleagues.

We found a lot of creative solutions on how to deliver bikes. We do what's called a threshold delivery where we don't even come into your home. We will put it on your porch or the precipice of your garage and help you set it up and tell you what you would need to do. And we've created new tools online to help you do what our delivery folks would have done 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 your bike. and by the way, our team doesn't want to be in your home, and it's a shared anxiety. You know, we want to keep our members safe and we want to keep our employees safe, and it's working. We've found some good solutions.

I mean, you've got thousands and thousands of classes 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. How are you doing that safely? 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 with our instructors. We sent, you know, a couple hundred thousand dollars of hardware and software into a few of our members or a few of our instructors' homes and set up an ad hoc television streaming studio. It was fascinating to watch how quickly they were able to get world-class content streaming from a living room of one of our instructors.

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 going to get when they purchased their bike or their treadmill. So we've been trying to honor that. And I think it's really worked. I think 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 relevance you're able to have and the connection you're able to bring to our members in their home when you're talking about what's going on in the world in that moment. And so it's really, it's really been cool to watch.

How have instructors been providing inspiration through, and especially our instructors in New York, you know, like, this is such a difficult time in New York in April and May and March, obviously. How have they been able to kind of do that, to kind of stay upbeat and to keep people motivated and inspired, you know, despite all of the stress and challenges around them? I mean, I have to imagine that you've had conversations with instructors where they're just like, John, I'm burned out. Like, I don't know how I can do this. Yeah, I mean, we have close to 5,000 people at Peloton now. 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 different types of voices, you know, we had instructors who didn't want to come to the studio when we were still running the studio because they had. a 80-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 25, I'm comfortable going to the studio. Members need me more than ever now. So this is, I want to be on the front lines. And we had everything in between.

And we supported each one of these emotions because they're all real, you know, how people are dealing with this, this new world order of COVID and working from home and being isolated is fascinating and an important part of what's going on. And so to the extent we're bringing connection and we're helping people relate and we're understanding and we're supportive and we're there for them. And in 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 that we've experienced. Yeah, I mean, we're all learning about new ways to connect and meaningful ways to connect. I mean, here we are talking and I haven't seen you in a year. And it's great to

to see you, but, you know, as you know, John, most small, medium, and large businesses are in crisis in the U.S. 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? I mean, your stock is doubled from where it was in September. I mean, of course, it's great for Peloton, but is a part of you just, I don't know, conflicted about that? Absolutely. It's been a whipsaw wild 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 losses and all of a sudden there was concern

about growth and it was no one who cared about profitability now 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, 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 psychic positioning perspective. I was, you know, competitive business guy.

I was so excited to show that Peloton is an awesome business. as in 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 absolutely tricky. There's no question. It was a good question, Guy, 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 Raz, 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 Cozart. You know, you are a media company, logistics company, a hardware company, a software company. Hardware, as Eric points out, is hard. It's really hard. What was the biggest lesson that you learned or that you took with you going through the early stage product development? I would say hardware isn't hard. Tom Cortezzi, my co-founder who runs product development and is our product visionary,

I try to pin him on what's harder, software or hardware, and he'll go back and forth on different months. And oftentimes he'll say software is harder than 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 figure out how you're going to sell these things and it can't scale as fast as software. I joke that certainly eight years, 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 $750,000 in and 18 months later you sell it for a billion dollars. That was the excitement. The Snapchat was the same type of story. That's what they want. They don't want the grind of go-manufacture stuff and figure out how to bring it to market. And if you messed up, then you have all these products out in the market that you need to replace the hardware. It's just, to your point, hardware can be hard. But to an ambitious group of people like the Peloton founders and now the Peloton team,

You know, it's a competitive moat over time, which is why I think our investors are excited about at this point. John, you went to business school in your late 20s. 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, that will be a surge in people applying to business schools. It's unclear, obviously. Do you think that would be a good decision to make for somebody in their 20s right now who is looking out at the world and saying there are going to be no jobs here? I mean, 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 given the economic outlook now, if you were, you know, back in your late 20s, would you have taken, maybe taken a decision like that? Yeah, that's a good question. I hadn't heard that, but that makes sense, guy, that people would try and take the next 24 months to get educated if the jobs are going to contract and the economy is going to 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 public high school where 90 kids graduated and I think maybe 10 of them went to college. It was a very non-college prep environment. And my dad was an airline pilot and I had great parents, but I didn't know much about business 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 I worked in manufacturing in Waco, Texas. 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, you know, 28-year-old kid. 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 Northeast or lived in New York City or San Francisco or have parents who have a little more access to the world of business, business school could be a waste of time and a waste of money to your point guide. And I had $100,000 of debt when I came out.

My wife, when I met her, she was going to law school. And so I was 35 years old with $250,000 a student debt. It took eight years to pay that down. And so it is a real thing that, you know, you've got to approach it in a commercial way. Running headlong in a business school just for sake of business school can be a bad decision for some people. Building on this question, this comes from Austin Birch. He is in Scotland. Hello, Austin.

He's asking, what qualities do you see as most necessary in young entrepreneurs? Yeah, I think the cliche resilience and can-do attitude, even better than myself from an entrepreneurial perspective, my colleague, Tom Cortese, 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 the next day with some ideas and we'll test them and, you know, nine of them will fail and one 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 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 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 dynamic environment where you don't know what your job's going to look like tomorrow. And it is a certain type of person who enjoys that book 15 years ago of who moved my cheese. If you get anxious when someone moves your cheese, you're probably not going to be a good entrepreneur. 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, 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, $50 million apiece, I believe, 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 a destination for our community and they're a great place to meet your favorite instructor. But to your question, guy, because of

of COVID is forcing us to test content in people's living rooms and our instructor's living rooms, we now have these mobile apparatuses that we can plug into different places. 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. On a human level guy, you know, I think all of us, you can't get this time back with your children, you know, to the extent that this is galvanizing the family nucleus and allowing your kids to get to know you and spend time with you, whether it's for another couple weeks or a couple months or a couple years, hopefully a couple weeks, God willing, it's really special. And I am considering I was 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 when you're not working, you're there, with your family, even when you are working, you're there with your family. I mean, it's a lot of family time, as you know. But it's been great. John Foley, co-founder and CEO Peloton, thank you so much for being with us. Thank you, Guy. It's always a pleasure.

It's fun to connect with your rabid user base. That's an excerpt for 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.com slash 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 Candice Lim, with help from Ali Prescott, El Manion, Gianna Capadona, 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.