Ep.26 Ian Wright: Unpacking innovation, building Tesla and the future of Silicon Valley

Maria Rampa: Hi, I’m Maria Rampa, the host of Aurecon’s Engineering Reimagined podcast. To those of you who joined us in Seasons 1 and 2 welcome back, and to those who have just discovered us, thank-you for tuning in to Season 3.

After the year that was 2020, it can be argued that innovation and creativity are needed more than ever to help solve the increasingly wicked problems our world faces.

This season join Aurecon - Australasia’s Most Innovative Company (as named by the Australian Financial Review in 2020) - as we find out what we can learn from people from all walks of life who are adapting and reimagining the future.

We’ll be speaking to everyone from Silicon Valley entrepreneurs to sleep experts to uncover exactly what makes innovative people tick, how they create innovation in their fields of work and life, and how that can be bottled for success.

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It’s not every day that you end up starting a company that will change the world by walking into a Halloween party.

But that’s exactly how Silicon Valley-based consultant Ian Wright found himself agreeing to start Tesla, a company that would go on to change the world’s perception of electric vehicles forever.

Tesla is just one part of Ian’s illustrious career. From growing up fascinated with vehicles on a rural sheep farm in New Zealand, to helping found three companies and filing multiple patents, Ian’s career has been focused around innovation across network computing and electric vehicle technology. After founding Tesla Ian went on to start Wrightspeed, a company specialising in efficient range-extended electric vehicle powertrains and has consulted with various companies around renewables.

From discussing why venture capital funding models are broken, how to come up with new ideas, and whether Silicon Valley will remain an innovation hotspot, we unpack the ingredients for innovation success with Ian and Aurecon’s Chief Digital Officer Andrew Maher.

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Andrew Maher: You've had a formidable career, having founded three companies, including Tesla, and you've developed a number of patents related to electrical vehicle technology. What does innovation mean to you?

Ian Wright: The number one thing is, you know, building something, creating something where there was nothing, that process of creation, but it's also solving problems in new and better ways. And sometimes it's even just fixing things that already exist, and that are broken in some way that nobody can fix. That can be it too.

Andrew Maher: It’s an interesting distinction between inventing something in the process of innovation and being able to scale a process up, massive amount of ingenuity goes into that. And of course, you grew up in a remote sheep farm in rural New Zealand, and you learned to drive at the age of eight, which no doubt helped spark that lifelong interest in vehicles and innovation no doubt. So life in Silicon Valley must look pretty different. What's that journey been like for you?

Ian Wright: Well, I went to Australia first. So I actually lived in Sydney for 10 years and then three years in Perth, where I met my wife. And then I've been in California for 27 years.

But as it happens, you know, we've got seven acres of forest up in the Santa Cruz Mountains here and I've got a sawmill and a bulldozer and a vehicle collection and you know, there's still some rural aspect to it.

Andrew Maher: Now you were one of Tesla's four co-founders, how would you describe your experience with helping to found that company? And what's it been like watching that company progress?

Ian Wright: After one too many beers at a Halloween party, it seemed like a good idea at the time. And that's literally how I got involved with it. I'd say we were incredibly naive. The original business plan said we needed $25 million to get to shipping cars. And in the end, it took about a billion dollars to get to that point.

Of the original founders, we all had a networking electronics and software background. And I was the only one that knew anything about cars, really, I built and raced cars successfully when I lived in Australia I managed to stay out of, you know, the lawsuits between the other co-founders and all of that stuff. But yeah, it was quite the experience.

Andrew Maher: It probably needs that naivety to start something like that, doesn't it? And many other things, no doubt along similar lines.

Ian Wright: Yes, yeah.

Andrew Maher: After leaving Tesla, your plan was to build super high-performance electric cars. But you were unable to secure funding. And you've credited this lack of interest from venture capitalists to inspiring your successful Wrightspeed business building electric drive systems. So what role can knockbacks or failure have in success?

Ian Wright: For the sort of vehicles I was trying to make, that there actually isn't a big enough market to make the return on investment look interesting to venture capitalists. So that sort of forces you, it's a reality check. It forces you to say, well, okay, so it's cool technology, how else could we use this technology that would it be a big enough market to be interesting to investors? And so that sort of led me to say, well, you know, what problem we're really solving here. I mean, this is hugely efficient. And I was trying to solve the performance aspects of it, and that wasn't going to get funded.

So how can you sell the efficiency part of it? What vehicles use the most fuel in the least efficient way that you could get the biggest gains, save enough money and fuel to make it compelling? And the answer to that would be trucks. So that, can be very, very useful. Most of the feedback you get from investors, when you're trying to get an idea off the ground, most of that feedback is garbage. The VC model is pretty broken. It's a bit of a country club around here. It's sort of who you know, not what you know.

Andrew Maher: In Australia, we often refer to the Tyranny of Distance, which is a title of a book by one of our greatest historians, Geoffrey Blainey, but it really talks to the goods and services created in Australia because of our remoteness to some extent, the physical things is still difficult to transport around the world.

In your native New Zealand, there's a similar narrative known as the number eight wire, which I'm sure you're very familiar with - anything could be fixed or substituted by a useful piece of wire. And I think both these narratives Australia's and New Zealand's both speak to a certain ingenuity and a resourcefulness. But I wonder if these sorts of narratives can also serve to stifle innovation? What do you think about that? And do you still have the number eight wire mentality wired into you?

Ian Wright: I step back a little bit and say most countries are actually pretty insular. In the US, you know, the world news is what's happening in the other 49 states. We run a World Series here for baseball without bothering to invite any other countries. When you're starting a company or innovating or building a business model, you know that the local market probably isn't big enough to get to sort of business result you're looking for. So you don't design your product only for Australia and New Zealand, you design it with the idea that we can take this to the US we can take this to Europe. And that isn't a thought process that people go through so much in the US. So I think that's perhaps a strength of doing this New Zealand or Australia.

But, that leads me to New Zealand is, I read somewhere the other day, responsible for something like 30% of the advanced composites in the world and in boat design they’re way up there as well, you've got Rocket Lab down there. Then you've got some of my heroes, like, you know, Bruce McLaren, and John Britten, Bill Hamilton, who invented the jet boat, and that company is still a huge success, even today. And you go all the way back to Richard Pearce, and he was the first guy to do power control flight nine months before the Wright brothers.

Andrew Maher: I suppose with COVID-19, whether the adoption of remote working and digital technologies to conduct business, not necessarily face to face may change some of that, especially as we continue to digitise what we do.

Ian Wright: Well, I'm involved in a start-up company that I can't talk about, unfortunately, because they're still in stealth mode here. But they're spread from the Bay Area to Minnesota to Montreal to Sylvania, and England. So COVID-19 or no COVID-19, it's quite a communication problem amongst the whole team. The COVID-19 thing makes it a little more obvious and a little harder to deal with and sort of forces people to think of ways of solving those problems. But I think when it's all said and done, and when it's all over, it's going to get sort of much more back to normal.

Andrew Maher: Yes, I suspect you may be right. That’s one of the things that I am concerned about myself is that there are some things I don't want to see coming back to normal. But just to talk about our firm Aurecon and, and pat ourselves on the back. We've just been named the most innovative company in Australia, New Zealand by the Financial Review. We have more than 5000 staff. I'm interested in your views of innovation within large established firms. What do you observe? And what do you think they do well, or could do differently?

Ian Wright: So I've had a bit to do with this, of course, you know, through the Tesla thing with competing with the big car companies So we wound up sort of not hiring engineers that had had more than 10 years or one of the big guys because they would have had all the innovation beaten out of them by then. So what they do in those companies is they specialise. So you'll find an engineer in there. In Ford, he's the door hinge guy, he knows everything there is to know about door hinges, and he's been designing them for 30 years. But he doesn't know about anything else, any other part of the car at all. It's worth it for Ford to pay an engineer salary for 12 months. If they can reduce the bond costs by 50 cents. It's worth it. That's a good payback for Ford. So you get an awful lot of that kind of engineering work going on in the big companies. And they do it very, very well. They do fantastic engineering, there's no question. But they don't innovate, and they don't take risks.

When we're getting Tesla going, and we're saying, Well, you know, when should we start shipping when we've done enough testing? If you’re Ford, and you're putting out a new, new version of the Focus, and you discover six months in that you've got to recall them? What is that, 5 million cars, you know, for Tesla, that would have been 50 cars. So, we could afford to do that, and they couldn't. It looks very different when you're a big company in sort of stable volume production. So how do they do it? So I think, Cisco, they would take some engineers that were working with Cisco and wanting to do something new and couldn't do it inside the Cisco world. And they'd send them out into a startup company, and they'd fund them.

So you're trying to build this particular thing. I mean, we'll pay your salary while you're trying, and if you succeed, then you own stock in this thing, and we'll buy the company from you, and you'll make millions of dollars each. And if you fail, well, okay, you won't get that, but at least you had a guaranteed income while you're doing it. And so if they succeeded, they'd fold the company back in, the engineers make a ton of money, and Cisco would get some rapid innovation. And, you know, I know of engineers that went through this process three or four times, you know, they really don't need to work anymore.

Big companies can buy startups and Cisco did some of that as well, that didn't tend to work so well. And I've seen this not work very well in the automotive world as well. And it's the integration that's the killer. The cultures are so different, that you know, what was working in the startup company six months after it's been transferred to the main company, it's not working anymore, and probably most of the people aren't even there anymore. So that's much harder.

Andrew Maher: Not very long ago, the large car manufacturers dominated the industry, and it was thought madness to try and challenge them And now we see startups across the industry. And it would seem to be another example of software eating the world. And I'm interested to know whether you agree with this, with the connections between the physical and the digital and the Internet of Things, is that creating opportunities to challenge older industries and manufacturers? And if so, can this be extrapolated across from vehicles into other areas of the economy?

Ian Wright: Well, let's deal with all these startup car companies first. I mean, they're all gonna fail, the investors are going to lose all their money. It's just another case of the lemmings trying to, you know, get a Tesla kind of return on their investment, without really understanding how that works. So I think they're all going to fail and the autonomous car companies are going to fail to their monies are going to get flushed.

Andrew Maher: Lots of DeLoreans?

Ian Wright: But with a lot more money being flushed. And, you know, the VC world has had a history of doing this sort of thing back when I was in DataComms. You know, somebody invented an Ethernet switch. So they funded 50 Ethernet switch startup companies, two of them succeeded. In terms of your other premise. I think a few things are going on. One is that sensors and electronics processes, switching silicon, all kinds of things, in electronics, have become so much better and so much cheaper, that it's economic now to do electronic control with communications, of all sorts of things that it wasn't economic to do before, they were mechanically controlled, or they weren't controlled, or you had no visibility into them. And what that's going to turn into, you know, I don't really know, it's going to be very interesting.

Andrew Maher: Can you name some key ingredients to build an innovative culture?

Ian Wright: So I think the number one thing is to have a really crisp idea of what problem are we solving. And you have to keep that crisp through the whole process. And the second sort of key cultural thing, it's always got to be okay to say, I don't know. And it's never okay to make stuff up. So you're going to be pushing the envelope, you're going to be doing things that haven't been done before. And you're not going to know all the answers, and you won't know why something didn't work the way you thought it would work. And if you're in a culture where you can't admit that, that's it, you're dead right there, you've got to be able to say, as an individual, as a team, as an entire organization. Well, that's funny, we don't know why that happened. We don't know how to solve that problem. But we'll find out. And that sort of gets you to the sub point, which is, it's got to be part of the culture that you will get to the bottom of things.

When you know, a lot of innovation famously happens when you do an experiment, and it doesn't turn out the way you expect. And you say, Oh, that's funny, what's going on there. And then the last thing, I think, is straight out persistence. And it's one thing to have, you know, the conceptual innovation at high level, we were going to do this thing nobody's ever done before. It's a cool idea. But there is an awful lot of work to get from there to a product that works and that you can ship and that people can use. There's a lot of forks in the road, there's a lot of work, and you've got to have a culture of persistence, you're not easily going to give up.

There's a great, I think podcast, actually with the Dyson guy and a Dyson vacuum cleaners. He's a long distance runner, and he says, you know, when you get to that point where you can't go on, you're really at the end of your rope and you think you can't go on anymore, if you push on at that point, that's when you win, because that's when everybody else gives up.

Andrew Maher: Yeah, that's great. There's a great quote you've published, which we'll read out here. "As an engineer, I believe in asking the right questions." We're also big believers in asking the right questions, and we encourage our engineers to stay in the problem for a while before jumping into solution mode. So what sort of questions do you think people need to be asking more of as they're progressing an innovative idea or concept?

Ian Wright: So often, the actual conceptualisation of a new idea or new innovation relies on bringing in ideas from other fields. So people that are more successful at this tend to have knowledge in a bunch of different fields. And that gives you insights that you can apply to the problem at hand. Whereas the people that have just specialised in that particular thing that you're trying to innovate around, don't necessarily have those insights or that knowledge. And I've noticed that I've actually become better at this as I become more experienced. So, I'm generating a new patent right now. And I'm 64. And I didn't do any of this when I was in my 30s. I think the reason is that I have so much more knowledge and experience across different fields now that I can connect dots that I didn't even know existed before.

Andrew Maher: You've spoken about this before, it's important to hire the right sort of people and get the right people around you. So what's your process for doing that?

Ian Wright: There's a book by Peter Thiel that I like and I give to people called “Zero to One” about innovation and startups. And he makes quite eloquently the point in there that if you're looking at engineers, there's at least a 10 to one difference in productivity between the best and the average ones. but there's a lot of social factors that go into putting together a good team for doing this sort of innovation. You can't change people, you can only select them. So you got to select people that are going to fit in with your culture.I think it works best for innovation if you have people in the team that don't live in silos that, they might be a real time software engineer, but they talk quite happily with the people designing the transmission, they talk with the people designing the combustor for the turbine, you don't have to call meetings to get these people to talk to each other. They just do it naturally, because that's the kind of people they are.

You need a certain risk tolerance, you mean stuff is going to fail. You're going to try things that don't work out. And most startups actually do fail and everyone loses their job and you get to go do it again somewhere else. So you’ve got to have people that aren't paralyzed by the fear of failure. And the last thing I would say is, you know, and it sort of goes back to the first one is it's got to be a no gossip kind of situation. If you've got a problem with something that somebody is doing that you think is impacting your work or the company then you need to go tell that person don't talk about it around the coffee machine with somebody else.

Andrew Maher: Yeah, I think that's some really interesting points that you make. And I think the one around engineers and the aversion to risk is something that probably also needs to be thought about back as they do their training as well.

So fear of failure. can mean different things to different people in different situations. But an appetite for risk is something that we really need to be thinking about how we train people for I think, [yeah] Or do you think it just comes naturally?

Ian Wright: Yeah, I think you've got to select the right engineers. I think, you know, there was a Harvard Business School paper, I can't remember the title of it, how to motivate people, something very famous. It's the most reprints of any business school article ever. And they make the point in that, you can't actually motivate people, the motivation comes from within, people are motivated to do something or they're not.

Andrew Maher: So finally, a question on Silicon Valley itself. Even before COVID-19, there were claims that the innovation culture in the area that it's been so renowned for was in danger of some dilution, do you think it will remain the hotspot of innovation?

Ian Wright: No. A bunch of reasons for that. I think California has become, you know, very hostile to business. I think it's reached the breaking point for a lot of entrepreneurs - why should we do this in California, it's just too expensive and too hard. And, you know, the VC model for funding is kind of broken these days. It was, I mean, it's always been not brilliant. But I think if you go back 30 years, it was a lot more successful than it was now in terms of how much innovation they got per dollar.

Cost of living here is enormous. I mean, you're talking a million dollars for a pretty average house. And all the other costs that go along with living here, insurance and property tax, and everything is expensive. If you're starting a new company, you're competing with Google, you're competing with Apple, it's like three or four years ago, I was trying to hire controls engineer interview, this guy liked him a lot. He's working for a startup that had been funded by Google and then acquired by Google. So now he was a Google employee. And we get to the point where, what do I need to pay you, you come over here. And he said, well, you know, my taxable income last year from Google was $500,000. And this is a, fairly junior engineer. So we could not possibly afford to pay that much money, so we couldn't hire the guy. So I think for an awful lot of reasons, it's not Silicon Valley is not what it used to be.

Andrew Maher: Yes, and I think maybe we'll get back to thinking about what happens after you know, or the process of change through COVID-19, and where people may choose to work from. Thank you, it's been terrific to have you join us and wish you all the best with whatever new adventures that you are heading towards.

Ian Wright: Thank you very much. It's been fun.

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Maria Rampa: I hope you enjoyed those insights into the ingredients of innovation success. If you’re enjoying Engineering Reimagined, tell your friends about it, leave a review and follow us or subscribe on Spotify or Apple podcasts. Until next time, thanks for listening.