McLaren CEO Zak Brown on the business of F1: sponsorships, Drive to Survive, AI regulation, and poaching wars

be revisiting these stories over the course of the show, but we have our first guest of the show in the waiting room. Zack Brown from McLaren Racing is here with us in the TV Ultra. Zack, good to meet you. How are you doing?

Yeah, I'm very good. Yourself?

We're fantastic. Uh thanks so much for taking the time to jump on the show. I know it's later uh where you are uh but we appreciate you taking the time. I would love to

looking forward to this.

Would you would should we start at the beginning? Should we go through sort of the the journey to how we got here?

Okay. So the backstory is that people in tech say they love F1, but they've really just watched maybe one maybe two seasons of Drive to Survive. So they know you in that assume the the audience knows you in that context. But we wanted to have you on to actually understand your history more and then uh talk about how F1 is the business of F1 and then also how technology is shaping it today because obviously it's always been engineering le but there's some a lot of exciting advancements. So yeah should we start at the beginning?

Yeah I'd love to know.

Absolutely.

Yeah. Yeah. I'd love to know like the you started in carting. What was the first uh initial spark that got you into racing so many years ago?

Uh 1981 Long Beach Grand Prix. I'm originally from LA. So I was 10 years old at the time. And uh my mom and dad who didn't have any involvement in in motor racing. It was kind of like the circuses in town. And uh they took uh myself and my brother. And as a 10-year-old kid, when you get around a Formula 1 car and you hear it and you see it uh and the size and the scale and the speed, I became a uh a Hot Wheels kid and then um went to high school

barely uh with uh uh someone that was was in racing and so went back to the Long Beach Grand Prix in 1987. Uh at that point I'd really had the bug and met Mario and Drey. uh one of my uh heroes and asked him, "How do you get started in racing?" And he said, "Carting." And there happened to be a little ad in the uh race program for Jim Hall cart racing school. I'd been on Wheel of Fortune teen week at 13 years old. Went and sold a bunch of his and her watches at a pawn shop in Ban Eyes. Bought my first go-kat cart and that's how it all got started.

That's amazing.

Amazing. Uh can you can you take me through uh getting like your first interaction with the business side of racing uh just motorsports marketing? Like what was the inciting element that got you into the business side of racing?

Well, I didn't have any family resources or certainly not the family resources needed uh to to go racing. My mom was is a travel agent and so I just kind of school a hard knocks of how does this sponsorship work? how do you raise money? You just call companies and ask them for logos on race cars. And it's much more uh sophisticated, certainly much more sophisticated than that uh today. And uh she got me an intro to uh TWWA airlines at the time and did a barter deal where they gave me some airline tickets and then I would go to companies and say, "Sponsor me and I'll give you some matching value and airline tickets." and then just totally immersed in uh and and kind of bartering and understanding what was TWWA trying to do with their business and and just became uh obsessed with my career and knowing that the only way I was going to advance my career was through getting sponsorship. So therefore I became obsessed with understanding how companies how I could help companies. Uh, and then once I, uh, was done with my career, recognized I wasn't as famous as a lot of the racing drivers out there. So went back to a lot of the contacts and said, "Forget about Zack Brown. What if I could take you to NASCAR, Formula 1, Indie Car, Jeff Gordon, McLaren, etc." And had a lot of credibility as a racer that I understood how the sport worked. No one was advising corporations on how to get the most out of motorsports. It was more people representing racing teams and that uh turned into a big business kind of by accident. It wasn't by uh design.

Yeah. I I think a lot of people uh when they think of like a partnership, they just think logo on the car, but it's a lot more than that. Like when did you how did you how how were you uh positioning partnerships uh to actually like h to move the needle for a brand like TWWA or someone else that you worked with? What was the key success or like the key innovation that led for led to maybe more confidence to deploy not just free airline tickets but real dollars behind partnerships with motorsport?

I think it was trying to get corporations to not think about uh our our business i.e. motorsports, but to think about and inform us what are you trying to do with your business and then you know I help bridge the gap between this is what you're trying to do with your business you know TWWA or or you know now the you know the world's leading companies and then I understood how motorsports work so I kind of played uh middleman if you like not just in brokering the deal but helping uh race teams understand what corporations needed and helping corporations understand how motorsports worked and help them leverage it. So, it was really tell me what your business needs are. What are you trying to do? Build brands, you know, get new customers, retain customers, upsell customers, demonstrate technology. And every company has some similarities and then every company's different. And then approach the industry based on what I knew corporations wanted. Hey, I think you make sense in NASCAR. I think you make sense in Formula 1. I think you make sense with this team for those reasons and really be uh focused on what the corporation needs and still very much take that principle uh you know very much today is you know what are the Googles and the Cisco and the Dells and we've got an unbelievable group of partners and just trying to understand their business and how we can help them move the needle.

Yeah. C can you talk a little bit about scaling the the marketing firm? Uh uh like how small was it at the beginning? How how did you think about hiring? How did you think about actually uh just servicing a larger swath of the market? Did you go region by region or or league by league or category by category? Like what was the philosophy around uh careful growth and scaling of that business? Yeah, we we've been fortunate uh where if you look at the brands on our car, they're they're like-minded brands. Uh they're global, you know, we're we're great in the technology space. You know, I'm sitting in here at McLaren Technology Center, you know, so you know, our brand is known as a as a premium brand, a lifestyle brand, a technology brand. We're racing around the world. So we approach companies that we uh feel are like-minded. We approach companies that we're already doing, you know, business in. So you know, you take a Cisco, Cisco all throughout McLaren long before

we put our partnership in place. Dell, you'll see Dell all throughout McLaren long before there was a commercial arrangement. So we're in a very fortunate position that we can do business with companies that want to do business with us and that we think we can make a difference. We don't need we're not in a position where we need to just do business for the sake of doing business. So that's a great place to be. Mastercard being our new naming partner which we announced uh last year. So we're quite proud of our partnership ecosystem. I've very much taken the same approach back when I had an agency. So, we have the largest uh to my knowledge marketing department, but size isn't all that matters. It's it's quality. So, I'd like to think we uh we have the largest staff. I'd like to think we have the best staff and we're very much same principle of being focused on our partners' needs. We have partners of all shapes and sizes. We're much more concerned with the affiliation than the size and scale because that kind of takes care of itself uh over time and we very much play the long game and uh and that's what our track record shows if you look at our partner base since uh we kind of got started in what we're calling the papaya era. Um our retention and growth speaks for itself and that's because we're focused on what our partners need.

Yeah. Um, ho how as a leader, how do you uh deal with uh just managing the emotional roller coaster that is an F1 season or a series of seasons together? It feels like one of the most tumultuous organizations like there's so many organizations where they're managing to like quarterly earnings or even just how did we do this year and you have a very different results that come in on a very much much faster basis and I imagine that uh a big win or a setback can echo through the productivity of the organization even for people that aren't uh you know in the seat directly. Yeah, it's it's all about culture. I I think that's our greatest strength is our is our people. We've been working together uh a long time. We've added people. We haven't changed much, you know, since we've had our uh success here the last couple years. You know, I'm looking as CEO

five years out. I'm I'm obsessed with our people. That's my number one job is to have the right people in the right roles, giving them the right feedback, the right resources. My philosophy is I work for the race team. They don't work for me. So, I go around every day, what what do you need? How can I help? So, I'm here to serve uh the racing team, not the other way. Uh around it is difficult at times. You know, culture is tested when things aren't going well. You know, a lot of what happens you see at the same time as as I see it. So, our report card gets marked. You know, sometimes when you have quarterly uh shareholder meetings, you have time to plan for the results. Here um you know, I go from having three or four strategists on Pit Wall to about 3 million on social media instantaneously. Um a lot of which, you know, are not very well

informed because it's a very complicated sport. But, you know, sport is all about emotion for the fans and that's great. cheering, booing, favorite drivers, you know, good guys, the villains. But back at the factory in the racing team, there's no place for emotion. We're passionled. There's a fine line between passion and emotion. And I think our job is to stay cool, calm, and collected. Usually, when we've made a mistake, it's not an individual person's failure. It's a sequence of events. So, you know, when you're emotional, you have a bad pit stop, the right rear uh doesn't go on well, everyone wants to, you know, your instinct, the emotional response is that right rear driver might not have stopped. Could have been a mechanical failure with the gun. Maybe a light didn't work. Maybe it was the person's fault. There's three people. One's taking the tire off, one's putting the tire on. The other's using the gun. could be like so you got to be very careful because you know it's kind of like those emails that we've all written and over time you you know what I should have put that in my draft folder and saved it and checked it in the morning and I'm a big fan of when something happens unless you need to correct it real time say it's a bad pit stop it's over so review it Monday when the you know the the passion the emotion the you know you can't fix it at that moment it's done. So, I'm a big fan of tackle it in the moment if you can change it in the moment. But if it's, you know, something that's happened, do a proper debrief on Monday because, you know, it's hard to take, you can say sorry, but if you overreact or you say something, it's hard to unwind uh an allegation, an accusation that was, you know, sorry, I was just emotional. Well, you still said it. So I think that's also part of just being calm uh in in the heat of the moment.

Yeah. You uh you mentioned that uh you know F1 is a sport that or just a business where you have you know uh a chattering class. You have so many armchair critics. Uh I want to know about your thought process going into the first season of Drive to Survive. It felt like a risk. You're you're potentially shining more of a light on your operation. you're going to get more armchair critics and yet that choosing to actually participate in the very first season feels in retrospect like a fantastic decision for you and the organization. Uh but how were you processing it at the time as you reflect on that decision and what has happened to the team and the and and and F1 broadly uh on the back of drive to survive? Uh how how do you think about that initial season? So, I think our, you know, our initial thought was this was just going to be more shoulder programming. There's been shows done before. So, I don't think any of us anticipated it having the impact on the sport that it had. Two teams didn't actually participate in year one and they got all sorts of grief from from their partners, their fans. Um, you know, I've always been I'm a huge fan of racing and I think about that 1981 Long Beach Grand Prix and I think about the impact it had on me. I think about the first racing driver I met, the first autograph I met and so I thought here's a wonderful opportunity to go from being a very exclusive sport to a very inclusive sport. So, we were all in. And the impact it's had when Liberty acquired, there were three main areas the sport needed to grow. Needed a younger audience, more diverse uh uh women, and it needed a younger audience. Sorry I mentioned that and a US

and you got to give drive to survive in liberty a tremendous amount of credit and to the industry for acting differently because I think uh under previous leadership the sport was very closed book it was kind of what's behind the curtain and that works because that was intrig but you know we kind of open the curtain and let you saw what the Wizard of Oz was all about and I think you know especially

I think we have some technical sport.

Sorry, I think we just

Can you hear me? Okay.

Yeah, we're good.

Y that that that sport and entertainment aren't one and the same. Anything you buy a ticket to, whether it's a movie, sporting event, fireworks show, that's called entertainment. I'm buying a ticket to go sit down to watch something. So, I think the sport's always been fantastic, but it's been closed shop. And I think Netflix gave us the opportunity to show everyone, we only have 20 drivers, now 22. you only have 10 teams. So, I became it became very easy for the audience to get to know everyone. And it's an unbelievable sport. Probably a sport that has more excitement off the track than any other sport, right? Most sports are concentrated on the field of play. And our field of play is as much off the track as it is on the track. So, it's it's been awesome. It's continued to grow and it's changed our sport. And it's it's great to see how big our sport now is with a younger audience, women, North America, and uh we just need to keep doing the the same. I don't see any headwinds in our sport other than, you know, the crazy stuff that's going on around in uh in the world at the moment.

Yeah, makes sense. Jordan,

can you give us a history lesson on the major technology cycles in F1? In tech, we talk about web, mobile, cloud, AI. How what what are the equivalents in F1 and then bring us up to the present?

I mean it's everything you just mentioned. We're the most technology sophisticated sport in the world. I think it started with data and then you know applying that data you know we have and and some some people will be impressed by this others will go that's nothing because I know who the audience is uh you know watching your show but we're pulling down uh one and a half terabytes of data a weekend. We run 50 million simulations. We have 300 sensors on the race car. We change about 80% of our race cars. over 50,000 parts. The amount of simulation that we run, uh, if you take the car at the beginning of the year and you let that was on pole first and it was untouched, by the end of the year it would be last. So, the pace of development in our sport, we live in a prototype world. Soon as that suspension is done, we're right back to the drawing board of how do we make it lighter? How do we make it stronger? How do we make it more aerodynamic? So, we are constantly developing. We don't kind of do something and go, "Right, we're done. Let's go produce that for the next five years." So, we live in a prototype world. Of course, AI is here in a big way. We're fortunate to have Gemini as is a huge partner of ours. We learn a lot. You know, our technology partners are all integrated into our business. We have two different types of partners. We have consumer brands.

I see your your Coke. You got to turn it a little bit if you want to kind of get some impression. There you go. That's how you do it, guys. That's how you do it. So, we have consumer brands.

And what we do with our consumer brands is we want them to help us engage with our fans, grow our fan base, build our fan base. So, that's what we look for from the Monsters, the Mastercards, the Googles. Then on the technology side, we look at the Googles, the Dells, the Ciscos, the Workdays to help us be a more efficient business, run HR better, run finance better, produce our race car quicker, do our financial forecasting better. So that's where partnerships have evolved to is in the good old days it was I need your money to go racing. Of course, this is an expensive sport. We need their investment, but we also need their technology because that's how our data is getting moved around. That's how our communications are are happening. That's how we're using AI to figure out strategy, entire strategy. And so all this new technology, we embrace it. And we have the type of people at McLaren and Formula 1 in general that want to know what technology is coming tomorrow. Mhm.

Uh how do you guys sort of develop and maintain your own sort of IP and processes as a team? One of the things that uh having gone having gone to um a number of races, I've always found it fascinating that I could just walk into one of the garages and I see, you know, uh computer monitors. I'm looking around. I can, you know, so much of it is out is out in the open. And yet you guys are trying to maintain an edge and develop constantly kind of developing and refining your approach. How do those two things balance?

So healthy degree of paranoia um a high amount of trust with our our team members. Um you know IP is is is critical obviously security in itself because you got a lot of bad actors around this world. So, you know, protecting because there's two things. There's people that just want to disrupt. You know, we had an incident 25 years ago where someone broke into our radiocoms in the Australian Grand Prix. We were running first and second and this was just someone in the grand stand broke into our radio coms, told our driver Mika Hackin to pit and he did. Fortunately, we were running first and second so we were able to reverse him. But, Right. So you have everything from bad actors in this world who would love to you know we can't start our race car there's not keys you started on a laptop so you know the redundancy and the protection cyber security how quickly we're moving data around the world because we're very much like NASA whether we're racing in Australia Austin or China it's all coming back to woken here um you know not far from my office um and So protecting that with with people um from from bad actors and then of course you know we're in a very competitive sport where we're we're constantly analyzing the competition. Things like 3D scanners were coming into play. We do a lot of photography of each other. 3D scanners have now been banned. But that's certainly trying to understand what the competition

So so just just to be clear that's that's a team walking around and effectively trying scan another team's

vehicle or equipment.

Correct. Correct. 3D scanning is now banned, but it wasn't before.

You'll see.

Do you think it still Do you think it still happens, though? I mean, there's a lot of things.

No, I mean,

you would see somebody with a scanner, right?

Yeah, you would see it. I I I I I think you know our job in Formula 1 is to um find the loopholes, push the boundaries, but there's a difference between working the gray areas. So, I'll give you an example. You're not allowed to have uh movable aerodynamic devices. I mean, we do now with with DRS, but we weren't in the past. So, these very clever engineers found materials that flex under load. Yeah. Yeah. So, it's not a movable aerodynamic device, but it does flex. Ah, very clever. Then the FIA, our governing body went, okay, we're going to do a push down test on your rear wing to put load on it, and you can only have so much flex. So, then the teams went, ah, so there's a push down test. Now, let's come up with aerodynamic where it falls back. Now, there's a pole test. So, the engineers are always one step ahead. and then the governing body who do a very good job go I don't think so and that's that's the cool part of this sport right where when you have technology that is constantly evolving you're always trying to figure out what's the new technology AI is an interesting one because we have limitations on how much CFD and wind tunnel time we can use but we don't have regulations around AI yet so I think

yeah we had George we had George Curts on the show on Friday and he was he was saying uh he was saying that there there eventually could be restrictions on like how much

how much compute you can have as a team because of what I think you're getting at right now.

Yeah,

exactly right. And I think that's where the sport it's never going to stop because technology is never going to stop. So, it's about how do you get that competitive advantage so you get to, you know, what the sport called is flexi wings eventually they stop that. But because we're looking for the smallest incremental gain for as long as possible, you go until they tell you to stop and then you go find something else until they tell you to stop. So it's a constant as technology evolves I think there will be regulations around AI that don't exist today that will exist in one year two years three years four years and then there'll be another technology and that's the beautiful thing about our sport and technology is the ball is always moving up the field and it's about finding that competitive advantage and trying to capture it for as long as possible.

Yeah. What are the norms around uh poaching? There's in in uh in Silicon Valley there's a famous email exchange between uh Steve Jobs and and Larry Ellison or is it Adobe?

No, I think it was with Google, was it?

Oh, goo Google. Yeah, sorry. Sorry. Sorry. Mixing it up. But anyways, basically like people having a kind of a handshake agreement not to poach. Uh but uh obviously drivers are kind of open season, but uh what about like the rest of the people on on the team?

Yeah, it's interesting. So where a lot of sports are regulated, you know, there's trade windows and we know the what was it the I think the Dolphins had a bit of a no. If I got the team wrong, I'm sorry. You know, what was it? Talking to a a quarterback and they're not allowed. We don't have any of those. We have contracts, but if I want to go talk to a driver or someone wants to talk to my drivers, we have contracts, but there's no nothing stopping them from having conversations or taking them to dinner. Um, America tends to be a bit more of an atill state uh a country from an employment point of view where here on the more senior side, you get into two, three, four year contracts. We've got gardening leave. We have non-competes. the more senior the the the tougher those are. But you do sign people early and play the game of because we live in a cost cap world. We are signing people early and then the competitive team has to go how long do I want this person around that I know is going to competitor? When do I shut them off from IP knowledge? Then if you put them on gardening leave, you got to pay them. We live in a cost cap world. So that presents a challenge of I want to spend every penny on performance of my race car, whether that is on performance of my people, their technology, or the race car. So now I'm in a predicament of I'm now paying to park someone so they don't go to my competitor. So, I'm stopping my competitor from getting smarter faster, but I'm actually really not getting great value for money because I'm paying someone to not work. So, those are the tricks of the the trade. So, you know, the senior people are under contracts and that's and what's happening is people are getting signed earlier and earlier. So, we're not, you know, we're regulated by a contracts, a contract, but there aren't rules in our sport like there are in other sports, trade windows and and rules and, you know, in other sports they publish, you know, the players salaries, things of that nature. So, it's a fascinating game of of poker, chess, and bat gaming. Uh, which again, I think is part of the draw of what fascinates people about our sport.

Last question for me. uh if a company came to you looking for general advice, they had a h 100red million of annualized revenue and they wanted to get into sponsoring F1, obviously you'd put together, I'm sure, a nice package for them at at McLaren, but uh how how would you think about breaking into F1 sponsorship as a kind of a midsize company today?

Yeah, I think it's all about what are you trying to do with your business? who are the uh companies involved with that particular race team. Are those companies synergistic? If they're, you know, conflicting, then obviously

So you Yeah. You want

you want you want synergy is you think it's like helpful to have kind of a shared cuz I've I when we were in Vegas last year for the race it was f it was so funny cuz we had friends companies were basically on every team because like every company needs like a neocloud now or every team needs a neocloud etc. But you're looking for like synergy across the portfolio of of sponsors.

Absolutely. You know, we I call kind of Formula 1, it's 24 Super Bowls from a consumer point of view and it's 24 Davos from a businessto business point of view. And so, you know, our ecosystem, everyone does business together. They benefit from giving each other exposure. When Cisco runs a global television campaign, all the partners benefit from that. We know Dell runs their campaign. You know, the Dells, the Googles, the Ciscos, the Massacers, they're all doing business together. And there's a lot of stuff that goes on behind the scenes, businessto business that people don't necessarily see. So, that all comes down to, you know, the Davos side of our business. when you come to a Grand Prix brings a tremendous amount of seale executives and the amount of business that we've facilitated for from dinners at grand pris and we're very active in that. You know it comes back again to knowing what our partners want. We're a technology extension, we're a brand extension. We're a sales extension. We're a culture extension. And so once we understand what our partners are trying to do, we're not thinking just about going racing. That's what our racing team's thinking about, but our commercial team's thinking about Dell has this objective. Ah, this person's there this weekend. And and so there's a tremendous amount of business to business that's going on.

That's fantastic. Doing deals.

Oh, yeah.

I think uh yeah, there there's I I love that that uh how much you've embraced um you're you've embraced the commercial side. I'm sure there's I'm sure there's managers that just think of it as like a necessary evil. I'm going to do the bare minimum to like keep the keep the team running, but clearly it pays dividends to really invest in the in the uh in the partnership side and um I really appreciate the time we've been so much.

We uh we love it and thank you for uh giving us the opportunity to uh chat and

good luck this weekend.

We'll talk to you soon.

Cheers. Uh, up next we have Will Herd returning