Team Favorite: Fueling Success for Mercedes F1 with Toto Wolff

Published Dec 26, 2024, 2:51 PM

On this staff favorite episode, Barry Ritholtz speaks with Toto Wolff, Team Principal & CEO of the Mercedes-AMG PETRONAS F1 Team. Prior to joining Mercedes, Toto spent time in the investment world, founding his own company Marchfifteen in 1998 and Marchsixteen in 2004. In 2009 Toto combined his passion for racing and business by investing in the Williams F1 Team. He eventually came to be the team's Executive Director, helping to lead them toward their first win at the Spanish Grand Prix in eight years. Shortly after that win, Toto became Managing Partner of the Mercedes F1 team, where he now holds a 33% stake. In his time with Mercedes, the team has won eight Formula One Constructors' Championships and seven Drivers' Championships.  

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This is Master's in Business with Barry rid Hoolts on Bloomberg Radio.

What can I say about this week's guest, Total 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 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're going to find this conversation absolutely fascinating. I know I did, with no further ado my discussion with Mercedes F One's team principal Total Wolf. I don't want to 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 racing? It sounds like you were going into finance.

Dropout, dropout. Yeah, so yeah, I was born and raised in Vienna and went to the Vienna u University of Economics, but actually raced in junior formulas at the time and wanted to be a race driver. And when that ended, abruptly ran out of money and we had a very bad spell of accidents in Formula one, so I lost a sponsor. I decided I'm going to quit both. I'm gonna quit UNI and I'm going to quit racing and launch myself into working.

And you were fairly successful as a race so you began an Austrian Formula Ford. You won the twenty four hours of Bahrain, which is an unusually any twenty four hour races difficult. How do you what's the key to winning twenty four hours of driving?

Yeah? So the twenty four hour race was in Dubai and was in so far relatively important because it was the first big raase of twenty four 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 ninth But it was all part of my racing and I loved every minute.

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 fifteenth in nineteen ninety eight. Tell us a little bit about what sort of investing you were doing in the late nine Yeah.

So the first company was called March fifteen and then March sixteen, 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 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 a few websites and met these people, sometimes not even companies. One was a seventeen year old board that round the largest free SMS platform online and set up structure 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 ninety nine and two thousand we started to IPO companies and it became a proper menture capital company from from consulting.

Actually, and let's first forward a little bit to two thousand and nine. You invest in the Williams F one team and eventually in twenty twelve you become their executive director. How is that transition? How do you go from being a venture investor running a team.

Yeah, the ten years in between was going from pretty much tech investor into motor racing. I bought a touring car team. We were doing FORMA three Engines for Mercedes. Was quite an extensive program about our raality team as well, and so in these ten years I kind of merged my passion for the spot with the investment world. And as you say, Williams was the first former one team I got myself into, had a minority stake, and then I run it in twenty twelve with Frank Williams because the CEO decided to depart and This is where basically my Formula one active Formula one story started.

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.

Energy only just energy. Yeah, we didn't have the infrastructure, not the capability. The drivers work were not on the level of Louise 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 moved, We fought against adversity and we want to race just because the people gave it their all.

H 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 that lead to your relationship with Mercedes.

Yeah, that's quite interesting because that when AMG was bought by Mercedes, the racing side was spun out because the big Timeler corporation didn't want to have the headaches with motor racing, you know, with the unions this is weekend work and you want to stay argile as a corporate to say well we're in the spot or we're out without having too much overhead and headache. So that was spun out and it was a really good high tech company. They built engines for Formula three y as 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 broadcast for MG and high margin business. And I bought forty nine percent of that business with the found of MG, and we iPod it and sold it to investors and then to a Katari investment fund and that was a success story.

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 principal.

So it was multi faceted 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 fifty percent would be paid by Mercedes, fifty percent by 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're 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 to bed mouth anybody, but I can, so I did that. They came back and said, would like to offer you to run this as a head of Mercedes multip.

Was that a surprise? Was this? Like? Very did you have any during that conversation? Hey, why is a wealth 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.

I think the board realized that that stage that I bought a world championship team winning team with brawn, and that the results were getting worse and worse and they failed. 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.

So you become a thirty percent owner of the Mercedes Patrona's team and the principal. How long is it before that team starts winning races? What were the first couple of years.

Like, So, my first day was in January twenty thirteen, and it was a difficult situation because I got the job of head of Mercedes Motorsport and at the same time sharehold of the team and executive director. But those two posts were, you know, where we people that were icons in the industry, a gentleman who was running Mercedes Motorsport and then Ross Brown, a highly decorated technical director, was running the team, and so had to manage that situation. Eventually took over and when I joined, we started to win races. In that first year, we won three races with Lewis joined that year as well at the same time as me.

That was his rookie year. You started the same time.

Yeah, we were both rookies and Mercedes basically huh. And that started to be a successfully 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 fourteen, which was really co expertise of Mercedes obviously, and then we had this run of eight consecutive World Championships.

Unprecedented run. We've never seen anything like that, even in the Schumacher era. I don't think he won eight consecutive championships. I have to ask an obvious question. You're in venture capital investing, you're in race saying, what similarities do you find between the two fields. You're dealing with a lot of data, you're dealing with a lot of unknowns. Did your background and venture investing help you put together the winning streak at Mercedes?

It always 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 bunch of people that on this professional journey together. So I around people that run racing cars, and I did the same when I was a venture capital invest stock. I tried to hire and develop the best people to run a specific organization.

And I mentioned when you joined Mercedes you took a thirty percent ownership stake. Did I read this correctly? You recently raised your stake in that, So what's your ownership now of the team?

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 forty percent from the Abu Dabistar and fund, and then Nick Lauder came in and he bought ten percent, so it was sixty Mercedes, thirty myself and ten Niki Lauda. And when Nikki passed away, we found another investor. In today's three shareholders each with thirty three point three percent, so I increased my stake. As you say, 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.

I mean, I couldn't wish for a better shareholding group because within Naios we got a tremendous powerhouse behind us, a very financially profitable organization. Obviously chemicals business and that is you go through cyclics. But Jim Redcliffe, the founder, is involved in Manchester United and an America's Cup, in skiing, in cycling, so that was always that was a good deal financially made sense. It was during COVID 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 situary 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 Coola Calaneus, Marcus Schaeffer CTO and the whole Bot gang is fantastically supportive, and you know that's part of our success.

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 is the competitive drive? Where does this come from?

I don't know it. When I was young, and obviously in racing, it was always a relative competition, you want to 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 a relative and we want to beat our competitor, it is more for us. It's not only me in the team. We want to surpass our expectations and if we lose, it's not particularly losing against 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. It has a meditative component for me that I like. I like the water, and achieving certain depth is expectations that are set myself and I don't need to have anybody competing with me.

What's the longest you can hold your breath? I know you must have timed this to the second.

Four minutes and fifteen seconds.

What do you think about some of these world champions who are holding their breath ten, twelve, fourteen minutes? It seems superhuman.

Yeah, there was obviously the grades of the spot that have achieved it, but there is two different angles to it somehow. Basically, you pump fresh oxygen in your body to fill your lungs and that basically doubles your time underwater holding your breath and when you're doing it without it, without it it forming. It is quite a good benchmark.

So we talked earlier your rookie years with Lewis Hamilton. I know you're a very competitive guy. Did you have any sense when you were first beginning the sort of run the two you were going to go on.

No, not at all. I think when I joined the team they finished fifth in the World Championship, and then we quickly became so competitive. And it is not particularly just because of Lewis and myself. A really good group came together and started to form in twenty twelve before my time, and then it kind of started to rule.

And I want to put some flesh on those numbers. Eight consecutive Formula One Constructors championships from twenty fourteen to twenty twenty one. Seven consecutor drivers championships, and I put an asterisk on it because we all know that eighth one was stolen. We won't go get into that. I don't want to put words in your mouth. This is me saying that you you mentioned the whole team, and that it's not just you were the driver. Tell us about all the various people involved in this team. This really is a team sport.

Absolutely every single team member contributes to the team's success. And how I'd liked to make the let's say the breach to people that would be saying, well, what is my contribution? To the car speed. It is that someone in another team, Ferrari or red Bull is doing your job. Whether it's in accounting, it's finance and cleaning, someone is doing that job. And as long as you're 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 discipline and responsibility, is contributing to making the car faster.

And when you say everyone, 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 brush that you used to clean the ball 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 day stuff for stomach virus is last 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.

I've rarely seen cutting edge businesses without the founder of 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 said, 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, Chross Brown, I was running and I said, well, that's not how Formula one team should look like. And the answer was the engineering is 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, fire and I font team is not the standard. And what is the rest?

Why do people think they're mutually exclusive? You have great engineering and a clean bathroom and lobby.

Yeah, and chose your mindset, I guess. And you mentioned the bathroom story, which has become a little bit famous, and it's not being obsessed. But long before COVID, we had had sanitizers that were drilled into the walls of the races where we were going, 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 prixs and issuing big checks, they are expecting these standards. You can't have a dirty bathroom. And for me, there's no job too small, And I know what I expect from going into a bathroom. So this is how I taught them what I would think it should be done. And yeah, it's maybe one example of many others.

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.

Culture is the immune system of any organization, the immune immune system, because when times are tough, that keeps the team together, keeps the people aligned beyond maybe the co objectives, because when you fail, you know, those objectives become difficult to reach. And here's the crux. You can quickly put some values on a piece of paper and say that's our culture now, and we projected on the wall the PowerPoint and this is the standards we want to live to. But the truth is, you've got to live it in and they out. And for us, attitudes like loyalty and humility, integrity just not just not words that we think about some time because this, but these are the basic principles upon we act. The old motto we're not all cost doesn't work for us. And I don't want to work. I don't want to win, not along those lines, because it means you're not maybe you're playing matter 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 want to 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 twenty years. Huh.

Really interesting. I have a bunch of rule questions for you later, but I want to stay on the topic of culture and people. How do you invest in and retain talents? And I don't mean just a driver, I mean engineers, everybody across the board. How do you find and retain the best talent.

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 guarantee to long term success because environment change or exchange, people change, and I think this is at the core of what we are 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 that such moves. And that's why it's the normal lab and flow with people coming and people leaving. But you want to stay with that core team that your team as being essential for the success.

How do you plan for that? 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 as that team. How do you plan for that? How do you cope with that loss of talent?

I think you need to have an overview about your organization and the 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're 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 anyway, I think an overview of the organization is key.

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, it 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.

It starts with myself. I have to acknowledge that maybe my motivation or my energy levels are not that good if our results just don't happen, but it needs to. I'm the one who kind of needs to have that energy, imparts into the organization and keep the organization up. So do my colleagues on the leadership level. And that's not easy. It's not easy. You're having fald stones. You said 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 ten and twenty years and saying we had those eight consecutive World championships, and then we had a P three. We finished third in a championship, then second in a championship. Now it's more complicated at force, but we want three races. So this is still a more successful season than the once before and it's all part of the learning, as tough as it is when you're right in there.

So you're working on a new legacy with two young drivers. What can we expect from Kimmi Antonelli? How do you compare his driving style to his predecessors?

Obviously, Louis Hamilton is irreplacible, is 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 decided to sign a short term deal with him because we wanted to promote them to nailin to the team and not lose him like we did with a Stub ten years ago. So that is all very structured and amicable. And now we have two drivers in our team that are really juniors since the early days. George Russell was a menacedest junior since he was seventeen and Kimmi since he was twelve. So having a lineup of an eighteen year old and twenty seven 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 in the same way George. It's a great opportunity for George to be the more senior driver and the team at that stage. I'm happy about it.

So Hamilton one Silverstone in July kind of felt like a bittersweet victory. What were you thinking when when he took the podium.

It was only sweet. That was no bitter part of it because we're still racing together. He will be part of Mercedes's history forever, and him winning the British Grumpuin his final year with Mercedes, against all odds, we couldn't have scripted it better.

And 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 are you gonna, you know, put a put a cap on this long term relationship.

When you look at it from a let's say, purely professional side, When 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 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.

Secrets here.

No, 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 is to this moment that's clearly going to be very emotional.

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 is that built into your DNA?

I think, without wanting to be disrespectful, it's different if you're running an organization as an employee that has a certain shild 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 going to be on the board or cham and still responsible for the overall 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 the specific moment.

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.

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're seeing who can you know who is outstanding?

You're literally tracking people a decade before they can even think.

Absolutely, we have our scouts that are on the more junior of international count races that are looking at those kids, and we're not the only ones for Oris doing that and some of the other teams. So and when it comes to engineering, we have a very strong undergraduate program, internships and work experiences. We're 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 a lot of ambition and drives so very early into academic careers, we're looking at people.

Let's talk a little bit about that diversity. I read following the Black Lives Matter protests and the death of some American citizens at the hands of police. Here, you had a long conversation with Lewis 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, the minorities are very underrepresented in F one. How can we expand this? How has that process gone and how successful.

Have you been? I think long before Black Lives Matter, as a team, we have always strived to be diverse. It was part of my upbringing that I saw what it means to be discriminated. Anti Semitism was a strong topic in my upbringing in Vienna, and so that is always how we have been calibrated. And then when obviously Lewis was pushing very hard for more diversity in our population in the team, and we embraced that from the beginning. And then Black Lives Matter started with you know, obviously 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 very much how the Mercedeses are being called in the racing world.

That's the history going back to what the nineteen thirties.

Yeah, the very the first Mercedes racing car or the earlier Mercedes racing cars were too heavy, so we scratched off the white collar and it was the Bay aluminium, the Bell silver and that state but it was a very quick decision. I called the board of Mercedes at least listen, I have an unconventional question, and I think it's good. Are we doing this? And it wasn't. It was an absolute capital letter, Yes, let's do that. And so you can see the support of the White the Mercedes organization for these topics, and here we go. The car is still black until today.

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 it. It now looks like you're not only participating, but enjoying it. Tell us a little bit about your experience with Netflix.

Clearly, Ferrari and do has got that wrong at the beginning, because we decided for ourselves work participants in the Formula one World Championships, and my colleague at Ferrari outspoken Italian said we're not seeing the Solai, so we're not going to 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're 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 racemans or podiums, and that in itself created the interest from our fans for the spot. So you two, we joined, and from then on it's been it's been a blast. They're doing a fantastic job the impossible task of showing is sport, a real sport and honest sport, and on the other side trying to make it spectacular and exciting and drama and glory. But it's been a great success for Netflix and Formula one overall.

So it's obviously brought a ton of new fans, and 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.

I think there were a few pillars that came together for it to be so Formula one to be so successful. We were the first spot to actually race in twenty twenty. We had a very discipline and strangent 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, twenty one, Abu Dhabi, many young drivers being avid social media protagonists, and all of that contributed to a boom of Former One in the United States. 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 four hundred and forty thousand people. And since then Miami has joined, in 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 fifteen to thirty five, believe it or not, and that shows how you know, all the things have come together and we are on a successful path. But you've got to 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 hit some stumbling blocks.

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're just throwing out these little bombs and leaving them there. For some of your competitors, especially at Red Bill, 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?

At the beginning, most of the teams gave Netflix a full access to the premises and to the team members.

And by the way, you could do that if you're the back of the pack, right, you have too much stuff that you don't want anybody else to see.

Yeah, but even front running teams failed. They needed to be left and sent into the camera, and that's not something we wanted to be, so we gave we immersed them fully for our race to season, and funnily enough, these were always our worst performances, but not Netflix's fault. And over time you just you just realize that you embed those people into the team. We put them in team cloth 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 Telly. I'm 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 acting.

That's very fair. Let's talk a little bit about what's going on in F one 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 F one engineering. It seems like it's at an incredibly high level.

Formula one has always been at the pinnacle of racing and high tech. We're 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're trying to utilize the best infrastructure that there exists today, things that are starting to really kick off on AI and as an example, we operate wind tunnels and computational fluid dynamic technologies, etc. Etc. And in that respect, it is a huge, huge engineering challenge. But you know, having the best people and the best infrastructure is still no guarantee for success, as it's been shown in our performance. At the moment, rules change and Formula one and rules change to have 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 winning teams.

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.

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're round to the ground, the faster you are. That smashed 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 be trying 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.

So let's talk about that. What rule do you think should be more strictly enforced? And they kind of softly enforced, Like what are we not being strict about that we should be.

I think the FAA, which the governing body, is trying 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 twenty so they are always on the back foot trying to keep the spot under control and that's not an easy task.

What's your take on the budget cap that's now imposed on F one 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.

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 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 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 have profitable entities and not just the marketing activity. And you can see this today there's four teamstead of I think for for race victory. So he was right.

Where does the budget cap show its biggest effect? Is it in the top speed of the cars? Is it the handler in the cars? Is it the driver selection? Where do you see the biggest impact of that that cap?

Well, drivers for example, are still excluded, which is something we are looking at for the future, and certain marketing costs. But as a matter of fact, everybody spends the same amount of money to date, it's about one hundred and six and sixty five million dollars a year on engineering.

And that's a big number.

That's still a very big number, But we spent double before that. So how should a small team like has compete with a Mecedes juggernaut that's spending double the money on engineering today it's the same. Obviously, that catch up phase is going to take longer because we have infrastructure that's been created since a long time. We spend a billion in our sides I guess in the last ten years, but over time that's going to level out. And that's why it was the right decision.

So let's talk about some other teams. First of all, what do you think about Andretti? Should he be allowed to join? Should there be another team in Formula one?

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 be carefully evaluated like it's being done in the US, like the NFL decides who is joining, and for us, it's a very easy exercise. If a team can contribute to the formula success, Formula one success by increasing its audiences, marketing power, etc. Then it's a logic consequence that as a team we would be for it. But then of course we have no vote, which 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 usb and providing a contribution to the spot that makes it grow beyond the current CP.

Right. So in the US, when we expanded baseball and we expanded football, there was a little dilution of talent. You had a little you had fewer Juggernauts, although arguably Tom Brady and the New England Patriots ran the table for quite a while. Is that a risk if we add more teams or there's plenty of talent to go around.

I think you need to embrace all competition. We are there to fight against the other teams, and whoever's not doing a better job this deserves to win. So that is not at all a limiting factor. I think 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 incumbents and also for a new team and the sport overall.

So let's talk about drivers Lewis Hamilton, Max Rostab and the previous generation Michael Schumacher. How do you rate these top Formula one racers.

Each of them was the predominant driver in the 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 Moss, to Senna to Schumacher and Lewis Hamilton for stubm 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, Lewis has scored the most victories, the most boy positions in his unequal power with Michael Schumacher in terms of titles, maybe he should have could have one more in twenty twenty one. So that's the fact of the methom huh.

Really interesting. So here's what I'm going to do. I'm going to ask my curveball question, and then I have a whole bunch of technical questions. You had this fascinating quote in a voting 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.

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 course of time, mental healths 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 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 exists in your life that I would you know, but that's maybe just my personal view.

Well, that's very philosophical. It's not what we typically think of when we think of competitive sports. It's thoughtful and introspective, and it just stood out to me, is not what I would have expected from you.

I deal with people, you know, this is all about humans being on a journey 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 happened, That's happening to me all the time. So I think, you know, we are more visible leaders in organizations. We should be. We should be speaking more about mental healths rather than appearing like the unbreakable, unbreakable individuals that have never weak moments.

So let's spend some time talking about getting a little technical, talking about some F one 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'm 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.

I think there's two reasons. It's very track specific. Many tracks, even with close performances, you can overtake. Long straights are important factor because the aerodynamic efficiencies of those cars are so good that it's difficult to get out of the slipstream because there isn't anyone any slipstream anymore. The other thing is that the competition is to close. Sometimes you have a second between P one and P fifteen and they.

Are for four second. Wow, that's amazing, that's amazing.

We have top eight cars sometimes separated within three or four tenths, and that's why there is no car ever to be so much faster. So it only works with strategy and entire degradation. But this season has been pretty successful in terms of overtakes and excitement.

So there was a comment from Benito that making AUDI successful will be like climbing Everest. What are your thoughts on that.

I think that's a pretty good analogy. Formula one is a very high entry barrier spot. But if somebody can do it, then an organization like AUDI. I mean, they have been very successful in motor racing in general. The Alemant program was the best ever, and they have 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 are capable of giving the project enough time, like Mercedes has given us enough time to become successful.

Let's talk about gearbox and transmission development. Are we at peak gear changing? Is there more performance to be run out of that?

Now we're getting very specific. Yeah, the gearboxes today a fully thematic, seamless shift gearboxes and it doesn't go you know, there's no talk break anymore.

It's literally instant like there's just a millisecond between gears.

You wouldn't even feel it, which is which is amazing technology. So that is pretty managed, you know, to the max of what it can be. And in power units in twenty twenty six, we're becoming sustainable engines, still highly efficient, highly powerful, fifty percent combustion, fifty percent electric, but with one hundred percent waste based biofueld. And this is where the world is going zero carbon carbon emission reduced to zero because it stays in the cycle. So I think we are rolled. 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 in the quickest cars in the world with a biofuel, I think is a good way of participating in the energy transition.

So you guys have done a lot of work both modeling and using AI for wind resistance and the dynamics of the car in wind tunnels and how it's going to 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 of the aerodynamics to the actual.

Car, 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 driver and the loop simulators CFD 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 called it the weakness between the steering wheel and the engine good and bad days. 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.

It seems more art than science.

I know, I fundamentally believe, and we in 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.

It's a model. What's the old line from Professor George Box All models are wrong, but some are useful. Is that how the ground effects end up working out in the real world.

I I didn't hear that sentence, but it pretty much sums up where we are today.

Yeah, a famous quote about economic modeling. All models are wrong, but some are useful. It very much works out. Let me jump to my favorite questions that I asked all of my guests, starting with besides Drive to Survive, what else do you watch on Netflix? What keeps you entertained?

Well? I was never kind of a TV person so much. I preferred to read, 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 printers. That was different sports that I didn't that I didn't know a lot about. Still about speed, Still about speed. I like to Tour de France, the documentary, So that's more the kind of spectrum that I like to watch.

Let's talk about mentors who helped shape your career, who helped put you on the path that you've been on.

When I was eight years old, my dad got very ill 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 had the responsibility and accountability since my early years, and that's who I am.

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?

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 much too under pressure to find the so called passion at the age of twenty two, which is nonsense. Give them, give them time to be all around us and then in the late twenties to find out what they want to specialize in. But you can become all you want if motor racing or engineering or driving is what you think you're good at, and then give it all you have and you will be eventually 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?

All of it? I mean literally, when I started, I didn't understand many fundamental topics in Formula one. But it's part of the trajectory. You've got to learn it the hard way, sometimes by doing it by failing. So that's all you know was all important.

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 F one team. If you enjoy this conversation, well, be sure and check out all of the previous five hundred or so we've done over the past ten years. You can find those at Bloomberg, YouTube, iTunes, Spotify, wherever you find your favorite podcasts. And be sure and check out my new short form 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 do 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 Rihelts. You've been listening to Masters in Business on Bloomberg Radio

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