Jeff Wilke: From Amazon Exec to Rebuilding American Manufacturing

Kara Miller:

Welcome to Instigators of Change, a Khosla Ventures podcast where we take a look at innovative ideas, the people who come up with them and those who invest in them. I'm Kara Miller, and today Jeff Wilke joined a small company in the late '90s, it was called Amazon and he helped build it into what it is today. But when he stepped down as CEO of Amazon's worldwide consumer business in 2021, Wilke didn't exactly rest on his morals, he's back with a new company.

Jeff Wilke:

We've had some great early successes. We bought nine companies in the first 18 months, and those companies came with capability in terms of engineering talent and revenue, principally revenue in the US, which is where we're focused.

Kara Miller:

Today, We talk about the possibility that lots of manufacturers can be learned to America and why that matters.

Jeff Wilke:

Without manufacturing capability of the right things or of strategic things, we are beholden to any nation state who has those capabilities and to me that makes it a national security issue.

Kara Miller:

Plus Wilke's thoughts on the current health of the American consumer and what he's advising startup founders right now. That's just ahead on Instigators of Change. For some business leaders, boiling down their goals to a few sentences is tough, not Jeff Wilke.

Jeff Wilke:

The strength of our country depends on our economy, including our supply chain in the manufacturing plants that they feed. And we think good paying jobs matter of course, industries that create value robustly matter, and manufacturing contributes one of the highest combinations of both good jobs and value creation.

Kara Miller:

That he says is why we need to reclaim our role as a great manufacturer and why he's devoting the next chapter of his life to making sure we do just that. Wilke is now the chairman of Rebuild Manufacturing, which as he noted, has already gobbled up a bunch of companies. Why? Well, to help manufacturers design better products, get engineering support, draw on a web of suppliers and protect their intellectual property. During the pandemic, notably, the US reported adding to manufacturing jobs, a sector that's been losing employees for decades.

Jeff Wilke:

We've been able to get those companies that were small and typically founder led to collaborate in much more sophisticated ways, which allows us to bid on way more sophisticated sub-components that end up in the kinds of things that we ultimately buy from large manufacturers, including automobiles, flying on planes, things that are involved in electrification, and so on.

Kara Miller:

The idea is to create an ecosystem for complex highly technical products like cars and planes right here in the US so it's easier to be a manufacturer here and to find those little components that you need to build the big stuff.

Jeff Wilke:

The goal is to over time, build our own factories. We decided to purchase some companies that had both engineering capacity, capability, and production capacity to get started, and we thought we'd get started faster that way, but over time we'll end up building our own factories for ourselves and on behalf of our customers.

Kara Miller:

Okay. So is the idea then that knowing what these big companies need can allow you to bring them here to the US to manufacture things because you're like, look, we've got x, y, and z capabilities, we've got all these suppliers here for you and that's what you're going to need to make this car?

Jeff Wilke:

Well, if you think about the manufacturing that has moved offshore and that people have talked about moving back over the last decade or so, the answer to the question why can't you move production of X back often begins with, because we don't have a base of suppliers in the US everything from engineering to component supply that can support us. And so we'll end up importing those things from overseas just to get them here to do final assembly, which ends up being more costly. So part of what we want to do is rebuild the multi-tier supply chain that again starts with engineering and goes all the way through production that's necessary for very complicated things to be made. While there are a few very vertically integrated firms in some of the market segments we've talked about, most firms rely on really sophisticated capable suppliers around them, and these suppliers can be small and medium businesses too. And if we don't have those in the US, it's much harder to do any of the things that we aspire to do on shore.

Kara Miller:

Got it. But China for example, has that infrastructure?

Jeff Wilke:

Correct, and it was built on the back first China entered the WTO and capital began to flow quickly and in very large volumes to Asia and over 30 years they built out an enormous capacity and great expertise in particular kinds of technology and production. I think we can build that capability back in the US. We're not going to do it in the same way. We won't rely on inexpensive labor in the same way that China did. In the US, you'll have a different approach to environmental concerns and intellectual property, but I think with the support of the right technology, including the right amount of automation being close to customers and a very large market in the US, certainly the recent moves by the federal government will help, but I think in the end we'll be able to create the kind of capability that we lost. It's just going to take time. This is not going to happen on a term of the House of Representatives, and this is going to take years to rebuild something that it took years to dismantle.

Kara Miller:

And I feel like I hear you saying that you're making this delineation between certain kinds of manufacturing and manufacturing blue jeans. It doesn't sound like you're saying let's bring blue jean manufacturing back to America.

Jeff Wilke:

Well, I mean, I toured a highly automated blue jean plant in LA months ago and was really impressed with the technology that they're employing, but I don't think that product is going to be the primary focus for rebuild manufacturing. Now, what might happen is we might help design better automation for a blue gene factory that ends up in the US where highly skilled human labor is complimented by machines doing the routine work, and we can participate in that business that way.

Kara Miller:

When you bring up automation, you get at this very core issue, which is the reason obviously that a lot of manufacturing went overseas in the first place, which is if you have a country where people just simply live on a lot less per day, whether it's Thailand or Sri Lanka, China, obviously, you cannot possibly compete with labor costs. And one of the things that you seem to be saying is don't compete on labor costs, really just take a whole bunch of labor right out of the equation.

Jeff Wilke:

Yes, I'm not a believer that all labor is going to come out. I actually think the labor that you want to eliminate is the unskilled labor and have machines do the things that are really routine and frankly boring and can often cause things like repetitive stress injuries and have humans do the more complicated and intellectually difficult work. And that pairing in addition to the transportation benefit of not having to ship finished product all the way across the Pacific Ocean, the time benefit of not having things sitting on an ocean container for weeks, which really increases the inventory in the entire system and with advantages like the largest purchaser in the US being the federal government, which has a keen interest in buying more American, put all those things together and I think we have a chance to compete.

Kara Miller:

I actually remember at the beginning of the pandemic, the Trump administration saying, and many scholars had been saying this for a long time actually, that we hardly make any pharmaceuticals anymore in the US. I believe something like 90% plus of our antibiotics come from China, same for our ibuprofen. And China's not a country that we've had a perfect relationship with. And that seems like a lot to depend on a supplier, a country, thousands of miles away, you're deeply, deeply dependent on them and you just really have no control over the supply of something that's crucial to you.

Jeff Wilke:

For sure. I think the number that I heard was 85% of pharmaceutical APIs, which are active pharmaceutical ingredients are made outside the US, which is for the top hundred drugs or whatever, which is really shocking. And at the beginning of the pandemic, when I was noodling on this problem, I was talking to a friend named Bob Nelson who is a well known biotech investor, and he was lamenting the same thing that clearly we had lost the capability to support our own healthcare with the most prescribed medications and decided to do something about it. And so as I was thinking about what I'd focus on, Bob began to build a company that is now called National Resilience with the aim to bring back production of some of these APIs to the US by restarting and reconfiguring existing and mothballed pharmaceutical plants here in the US. And when he laid out his vision, I thought, okay, that one's covered. We're going to work on some other things.

Kara Miller:

So how much do you think of what you're doing, but even really the broader picture here, as a national security issue?

Jeff Wilke:

Oh, I think it's definitely a national security issue. And when I talked about our vision up front, I said without manufacturing capability of the right things or of strategic things, we are beholden to any nation state who has those capabilities. And to me that makes it a national security issue. You mentioned medical and pharmaceutical, certainly supplies and equipment for military applications and everybody is now aware of the problem of having semiconductor production offshore and concentrated in a region that is volatile.

Kara Miller:

You know, I'm sure talk to executives all the time, what is their biggest hesitation when they're like, yeah, okay Jeff, this sounds great, but what for them is the thing where they say, this is the sticking point where I'm not sure that manufacturing can really come back to the US. What is that sticking point for them?

Jeff Wilke:

Well, it depends on the kinds of executives. When I talk to people who are in the manufacturing world, they believe that it's not only possible, but it's inevitable. In part because wages are rising faster outside the US, the recent inflationary pressure aside. And that's just because they're coming from such an incredibly low point. And so at some point this benefit of an enormous amount of very cheap labor is going to go away and then you get to compete on technology and intellectual property respect, and so on. And so people that know how to manufacture things are pretty confident this is going to happen. They will always say, and I believe this, that it will take time. These kinds of businesses are not built in the same timeframe as a software business that catches consumer interest. For example, I follow the growth of Instagram in the first year and it's remarkable what a small number of people were able to do in a business like that.

But manufacturing doesn't scale in the same way because it's so capital intensive. And even with some of the ideas that people have to remove capital intensity, including 3D printing, and so on, it's still way more capital intensive and hence slower to scale than software businesses. And so that we and manufacturing tend to agree on is that it's going to take time, it's going to take capital. When I talk to people who are investors, where their skittish is, is it is a lot of capital. This is not one of those businesses that's not going to have a balance sheet and you'll get lots of consumer adoption, rapid revenue growth, and then you'll be able to just leverage an initial fixed cost investment. It doesn't work that way when you're producing things in the physical world. So we will have to deploy capital, we will have to build balance sheets.

I had some experience with this at Amazon in the early days, people asked me why we were building fulfillment centers, why aren't you just serving orders and letting somebody else do that work? And I always believed that we would by building our own infrastructure, have both a higher quality level which turned into Prime and a lower cost, which allowed us to compete with other great retailers on low prices. And I do think that in this space you'll see the same thing. You will see investment and balance sheet and capital yield significant returns, but it'll be over a longer duration. So I think some of the private equity funds that have become accustomed to buying manufacturing companies and polishing them for a couple years and then flipping them, I don't think we're going to rebuild manufacturing with that mob. So this is why we set up our company as a company, as an evergreen company.

We expect it to last a long time. We don't buy companies with a plan to sell them, we buy them with a plan to integrate them and the employees work for us. We want to build a large American, and I'll use this word conglomerate, even though it became a bad word, but I think we want to get back to a point where there's a premium for aggregating and successfully encouraging collaboration among all of the engineering disciplines in a large manufacturing firm that's going to have a balance sheet too. And that means some investors are going to be a little bit nervous about it because of the time duration and the capital deployed, but the very forward thinking, I would say patriotic investors with some expertise and experience in manufacturing get it. And those are the ones that have supported us and also are encouraging their hard tech investments to work with us and others as partners in design and production.

Kara Miller:

So is your pitch to investors like we're assembling the components here of what you need to make this very complex product that you make and once we learn enough investors into the US to do this kind of manufacturing, you're going to need us because we own the nuts and bolts of the whole thing?

Jeff Wilke:

Yeah, I'm a chemical engineer by trade, so I'll use a word like auto catalytic, but I hope that what happens is that the US flywheel for manufacturing starts to spin fast enough that it just then draws, to your point, it just draws others to onshore and then you get all of these network effects that China has seen over the last 30 years.

Kara Miller:

Let's talk a little bit about cost. And this goes also back to the question of different kinds of products and what can be manufactured in America, but certainly when you look at let's say Walmart, which before Amazon disrupted consumer behavior in the US, you're really looking at a big piece of why offshoring became such a big deal because it turns out Americans love low prices and that obviously push companies to figure out, okay, well, where can we make things cheaper than we've been making them? Do you feel like then for consumer products, things are probably status quo, we're really talking here about a different kind of thing, a different level of product?

Jeff Wilke:

Well, I think for commodity products, for a while it's going to be hard to compete with very low labor in Asia. But for more complicated things where there's a lot of technology in the design and the production, I do think we have a chance to deliver high quality and low cost. And that has to be the goal. I don't think consumers are going to accept for automobiles, for example, and Toyota proved this, if you can deliver an incredible car at 30% less than the other luxury cars and it has higher quality, you're going to build Lexus and people are going to be happy to pay less for a car that performs as well or better as the brands that they were used to. So I don't think people are going to pay more to buy American generally, and that means we're going to have to be great at building these processes and deploying technology to ensure we can be price competitive.

We do have the advantage as I said before of not having to ship across the pacific ocean and hopefully eventually we can correct some externalities like environmental impact and in countries that have a lower cost for that because they don't have a set of laws. But I'm not sure that's a requirement. I think just with deployment of great technology, some of the incentives that the government has now created and transportation savings, we've got a good shot.

Kara Miller:

What have you made of the recent push to bring semiconductor manufacturing back to the US? And we've seen Pat Gelsinger, the CEO of Intel, push very hard and say this is really significant and others have too. I've also heard push back from people saying, I don't know that this is going to have staying powered despite the infusion of cash from the US government. What do you think of what's happening here?

Jeff Wilke:

Well, I think it's vital for the US. I think we cannot be dependent on the sophisticated semiconductor manufacturing that is so concentrated in Taiwan, for example. I mean, we have to have a better diversity of sourcing including production here in the US in my opinion. And so I agree with Pat and others who have said this is pretty vital for the country. I think it's important when you do these kinds of things to create the right incentive alignment. I think it's important to make sure that this isn't an IV drip that basically props up inefficiency. So we have to make sure over time that what we build here is the best semiconductor manufacturing in the world. I mean, to get started, we need this massive infusion of capital, but shame on us if we don't deploy that capital to build something that is truly competitive.

Semiconductor manufacturing is one area where you don't need low cost labor to win, you need great technology to win, and you don't have to know how to run that technology, these plants are extremely finicky getting yields to be very high in any business like this is super hard. You just have to have cycles of learning and we need to get started on those cycles of learning. And then once we have them protect them and invent on top of them so we can maintain whatever lead we built.

Kara Miller:

Tell me a little bit about geography, because there certainly has been, whether it's politicians or executives, there's been talk about helping the parts of the country that really relied on manufacturing and where much of that manufacturing has disappeared. But then you also see whether it's a company like Amazon or Google or whatever, this real clustering around the Bay Area, around New York, places where there's people with certain kinds of educational backgrounds. So I just wonder what you see the geography being if we are to be successful with pulling manufacturing back to the US.

Jeff Wilke:

Well, I think the good news is with success, we will have to have dispersed production. There just won't be enough people, land, and even plant managers to run manufacturing if it's only located in Southern California or New York or Silicon Valley. And because I do believe we're going to end up in a world that's a hybrid of human labor and machine work, you'll have to have plants in places where you can get skilled labor. And I grew up in Pittsburgh, I remember what it was like when manufacturing was thriving. I remember what it was like when manufacturing began to leave and how hard that was. And I know how many talented skilled people remain in that part of the country. And so as we think about where to locate our factories, we've talked a lot about some of the cities that lost so much manufacturing capacity in the last 30 years and hope that lots of companies will consider bringing it back.

I've been close to some of the things that are happening in, and for example, Detroit and Cleveland and Rochester, New York and Pittsburgh, and I'm really impressed with the way the communities are coming together, business, government, universities, to try to leverage all the things they have that are unique and frankly, they've got less expensive land, they've got larger pools of labor, and they have a work ethic that I think really matches what's necessary to succeed in manufacturing. So I'm kind of optimistic about this trend if it really does take off spreading wealth very broadly as opposed to being as concentrated as software development has been for the last 30 years.

Kara Miller:

I've actually done a lot of innovation reporting in Pittsburgh. And as you say, it is such an interesting place, partially because even though there was the decline of one industry for sure, there were always the seeds of future industries. You've got Carnegie Mellon and University of Pittsburgh and you see it now. Those seeds are sprouting and there's the regrowth of tech and all sorts of different industries that rely on that base.

Jeff Wilke:

Yeah, for sure. And you've mentioned a couple of the key pieces I think that are important. I think the university system that Pittsburgh and other cities have is really vital. It allows for the newest ideas to be deployed very close to where you might invest, which is super helpful, I would say, because I know Pittsburgh well, and as I've come to know Seattle over the last 20 years, there are cities like this that created generational wealth years ago, decades ago, in Pittsburgh's case a hundred years ago plus. And the people who the families who benefited from the industrial revolution, for example in Pittsburgh, put their money back into the region.

So one of the reasons I think it was able to make a transition from what happened in the '60s and '70s to a healthcare and robotics and technology driven economy now is that the wealthy families spent their money to make sure that the city would thrive, that it had great universities, that had great artistic institutions, that there were great neighborhoods to live in, and basically preserved. They either on purpose or accidentally, because it came about so much longer in the future than they might have imagined, but they allowed it to have an insurance policy for a downturn that allowed it to get through.

Kara Miller:

One more question about manufacturing, which is, how do you think a more robust manufacturing base in this country might affect different industries in ways that we haven't anticipated?

Jeff Wilke:

Well, I mean, one of the challenges we're going to have is that we're going to need more skilled workers and the skills those workers are going to need are not being produced in high enough volume by, for instance, community colleges, certainly not by four year institutions and even high schools. So for example, one of my colleagues went to a vocational tech class at a public high school in the northeast and got a tour of the shop and the facility and he saw a huge amount of equipment that was focused on maintaining and understanding internal combustion engines. And to the instructor, he said, so where's the high voltage power applications and motors and motor controllers that are going to be necessary to power the cars that are going to be around when these kids are in their peak earning years? And the poor teacher had to say, well, that's not what we do.

We don't have the money for that. So I think as manufacturing comes back, it is going to affect companies and institutions that produce educated people at all levels. And I think some of what we're going to have to do is borrow from, for example, the Germans who do a great job of directing kids to mechanical and physical engineering vocations in high school. And those jobs are respected in a way that we used to, that we've drifted from. And I think we have to get back to that in our educational institutions. We have to make it okay for people to learn a trade that's really hard, be great at it, and go out into the world and build a life on top of that education, the continuing education that today's innovation is always going to require.

Kara Miller:

It's interesting, I feel like I've heard this from other companies, the frustration, whether it's manufacturing in the biotech area or whatever, that people are not coming out of school with the skills they need. Though I have seen some degree of partnership, there are examples of companies that have partnered with high schools or high school pluses where they're really saying, this is what we need. We need trigonometry, we need these certain things. And the schools train kids for those things. I don't know if that's a model you're seeing more of.

Jeff Wilke:

Oh, I totally agree. In fact, at Rebuild Manufacturing we have 16 leadership principles. We call it The Rebuild Way. And principle nine says, we seek to improve the communities where rebuild operates with the focus on apprentice programs and STEM education. So we're doing just that. And I agree with you, I've seen a lot of American companies recognize this need and being willing to pour time and money into helping solve it.

Kara Miller:

A couple of questions that are not related to manufacturing. Let's just talk for a couple minutes about the consumer, which well, you spend a lot of time thinking about at Amazon. I feel like we're in this place where we hear very conflicting reports about the consumer. A lot of credit card companies say, no consumers are out spending, airline tickets are in super high demand, and yet people have also pulled back on buying certain kinds of things. And of course, there's inflation in that mix too. What do you see in America when it comes to the consumer?

Jeff Wilke:

Well, I don't have the same lens that I had 18 months ago.

Kara Miller:

Yeah.

Jeff Wilke:

I would say at this point, I'm just a consumer of the information that every other listener of this podcast is. I have a point of view about certain things, but I'm bullish on America, on the American consumer. We've just gone through a very rough couple of years. And I also think we have some measurement problems, and this is way more complicated than we'll have the time to talk about here. But there's some evidence from some great academics that if you think back to the launch of the iPhone in 2008, in that timeframe, and all of the services that within a few years became available to consumers for free, there's some argument that there was actually deflation that wasn't fully measured because we don't know how to measure utility of things that are free in our GDP accounting.

Kara Miller:

Right, right.

Jeff Wilke:

So we had this huge windfall for consumers over a decade plus. And you could argue that that real interest rates were actually considerably higher than they appeared to be from 2008 or nine until we started to raise them recently. And that the correction was really dramatic with the pandemic coupled with less steep trajectory of innovation in these free consumer products over the last couple of years. And that's been the most impactful, aside from energy prices impact on consumers. So that's the only thing I might add to what's already out in the [inaudible 00:29:11] case. But overall, I'm very bullish on the US. I think we're so lucky to live in a place that is a democracy, that has such a diverse population and workforce, that respects property including intellectual property, and that is putting its muscle toward bringing back great jobs and an industry manufacturing.

Kara Miller:

One more question about consumers. When you take a long view, I'm sure you thought about this some at Amazon, even the five or tenure view, even though I know you're thinking quarter to quarter, do you have an overall thought of how consumers have changed, are changing, if we were to have this conversation again in five or 10 years, what are big shifts that are going on that maybe people who've not been in a real consumer focused business might not be able to see?

Jeff Wilke:

So I do think that we will continue to remove waste from the daily activities of consumers. So, for example, before Amazon was delivering with Prime, and even before that, customers drove to the store, did their own picking, packing, shipping, got paid nothing for that. So they spent a bunch of their time, which is pretty valuable, and that was okay. And then all of a sudden you have this different channel that allows consumers to not have to spend their time that way without being paid. And it creates jobs where people are being paid for that work. And I think we're going to see more and more of that where with the help of the gig economy and hopefully lots more flexible work, there will be things that people do now that they don't really want to do themselves, and there'll be a way to get a higher quality version of it from the market and for people on the other side to supply their labor and be paid for that labor.

So I think that's a continuing change in both consumer behavior and capability that I would expect to continue over the next decade or more. I think more and more non-creative tasks will be handled by ever more sophisticated machine learning and AI, including for consumers. And I think that's a good thing. So the ability to turn our minds toward the most important creative tasks, including the things we do as we raise children and interact with each other and support each other and so on, is it's good for consumers and good for the world. I think consumers are going to be healthier. I'm increasingly optimistic that the progress we're making in characterizing biology more precisely and employing sophisticated, again, machine learning and AI techniques to that world, including, for example in protein design and what we've just seen with mRNA, we are going to be healthier, we're going to solve many diseases.

My friendly hood who is working on this problem now in his eighties, is the believer that we're going to move from this state where at age 20 or 30, you begin the decline of your health to multiple transitions over the course of your life where we detect a decline in wellness and we intervene to correct it and get you back onto the plateau that you were previously on. And that you'll go through those transitions throughout your life. But what that'll do is extend lifetime dramatically. And I think it's one of the societal challenges we're going to have is what do you do when all of a sudden the population is living to be well over a hundred versus where we are now? What does that mean for consumer goods? What does it mean for how consumers live and work and buy things?

There's a lot of change that's coming and it's not going to be continuous, it's going to be pretty discontinuous. I think we'll be energy independent and not require fossil fuels, which is a big concern of consumers of course right now. But I think it's a multi-decade transition and I think we have to be really careful about it. I'm a huge fan of innovation, nuclear power. I think we made a mistake by being so anti-nuke. I think natural gas is going to be a part of that transition and we should do it purposefully. There's a team at Princeton that put out a study about two years ago that was, or maybe 18 months ago, in the Centerlink Center that is about the different trajectories for making the transition from where we are now to a world where we're primarily electrified. And one of the conclusions, of course, is that the grid has to be four times as large, and so on.

But it was interesting to me that whatever course you choose, as long as you get started now, the ultimate cost to the US at least is not going to be that different. The key is that we have to actually make the transition instead of letting it happen to us. But I think those things are going to change consumers, it'll change what we drive, what we fly in, how we use energy, and so on. And then last thing I would say is I do think climate change is going to get worse before any large scale impact can make it better. And we, as consumers, we have to plan for that, we have to adapt to it. We shouldn't give up. I don't think it means that we're in some permanent state of decline, but we do have to recognize that we're not going to fix these problems overnight, and that will affect consumers for sure.

Kara Miller:

This ties into a little bit of what you said about creativity and people switching what it is they are doing. You left Amazon during the pandemic in 2021. Do you feel like the last couple of years, which is obviously the pandemic was really disruptive, a lot of people changed or their priorities, how they think about things, how they wanted to spend their time. Do you feel like it changed your way of thinking about the world in some ways or about your own life?

Jeff Wilke:

Yeah, I had already made the decision to leave Amazon before the pandemic. So it didn't really change that part of my life.

Kara Miller:

Okay.

Jeff Wilke:

It did bring into focus the manufacturing hobby or interest that I've had for a very long time. I mentioned growing up in Pittsburgh, but I also went to a graduate school at MIT to study manufacturing and worked for six years in manufacturing operations. So the desire to see successful manufacturing in the United States, throwing off all the positive externalities that I think it throws off has been a part of me for a long time. I think the pandemic, maybe what I saw with the Asian economies during the tariff period, and then certainly the difficulty that we had in the supply chain during the pandemic really cemented the importance for me of a vibrant manufacturing industry in the United States. And perhaps for me, that's the biggest impact of what we've all been through in addition to all the loss and the pain and suffering of that all of us have had. And knowing friends and family members who have been deeply impacted by this pandemic, that's something you can't erase entirely.

Kara Miller:

I want to ask you a couple questions focused on entrepreneurs. During your time at Amazon, which was a long two decorate career, there were obviously times that were harder for the company where there was hunkering down. I'm guessing since you advised entrepreneurs, you sent some of that now from them, what do you say to them?

Jeff Wilke:

Well, it is an interesting time because many of the entrepreneurs today have not been through what happened with the.com crash in 1999, 2000, and with the 2008 downturn. And so there are a couple of overall themes in these conversations. One is that look at your cash flow because the simplest way to lose your company is to run out of cash. So it's really important for companies to understand their cash flow and how much runway they have. But beyond that, I think that in these kinds of hard times, there's a saying that basically says good firms survive and great firms thrive. And I think that the very best entrepreneurs will take advantage of this time to, for example, hire people that they couldn't have hired before because they weren't available, to find investors who are thinking about the long run and either raise capital or deploy capital now on things that were much more expensive before to accelerate their potential pace of growth once the demand comes back if demand has suffered during this downturn.

I do think that we got way out of kilter with revenue versus cash flow. And I now have this rule when all of my VC friends are only talking about multiples of revenue. You have a very good signal that a crash is coming because revenue doesn't matter unless it turns into cash flow. And you can argue that, look, you don't want people to focus too much on costing cash flow early on because they can stunt their growth, I couldn't agree more. But in the end, you have to have a business that actually produces positive cash or you will run out. And I think this is a positive thing from this environment for many of these entrepreneurs is that instead of chasing growth at all costs, they're now thinking about how do I build the company that has sustainable economics, a sustainable organization, and looking a little bit longer into the future, which for the best ones, it's going to be very lucrative, I think.

Kara Miller:

Do you hear panic or do you hear that's okay, we can ride this out? What do you hear from people?

Jeff Wilke:

Well, I mean, the ones that are nearing the end of cash are panicked. When the runways not there and all of a sudden the sources of cash have dried up, that's where you get people selling, doing fire sales and doing very large layoffs, and so on. But no, the founders that I support are to a person I think really thoughtful. They have been humble in asking for counsel, which I think is the mark of a smart person. When you seek outside ideas and you change your mind based on those ideas, they've been open to counsel, they've been asking questions of people who have been through this before, but they're going to invent their own way too. I think the best ones aren't going to just copy whatever Amazon did in 2001 and 2009. They're going to make their own way, but use some of these patterns to guide them.

Kara Miller:

Final question, I read that you spent the weeks after you left Amazon learning to code in Python, which seems like an unusual way to unwind after 20 years at Amazon. Why?

Jeff Wilke:

Well, I've always been interested in computers going back to teenage years. I was a hacker in high school and spent a lot of time at night writing code. And first two years after college I worked at what's now Accenture writing software. And I had thousands of software engineers working for me at Amazon for 20 years. But over the last, I would say 15 years or so, I had drifted from being able to read some of the code that people were writing and really understand more of the detail and how things were being developed to a more abstract higher level architecture view of things. And that's fine. I was still able to help a lot with that point of view, but I just wanted to know more about what it was like to write code these days. So for me, just like it was for me in high school, actually IT was soothing.

I mean, basically I was only on the grid to connect to whatever I needed to write code, and I just stayed off email. I spent dawn to dusk just learning and then writing some fun little things. And it was a great transition actually. And what I left the two weeks with was a deep appreciation for how enabling the libraries of code we now have are. I had seen the value of APIs and web services with AWS, but there's such an amazing corpus of work that is exposed human work that with a lot of sweat, has been productized into class libraries and APIs and repositories, and so on. And you get to, as you're building things, stand on the shoulders of all this work that's already been done for you. It's just so enabling. I mean, I just felt so optimistic at the end of those two weeks, the things that I could build in a short period of time were astounding compared to what I could have built as a teenager.

Kara Miller:

The potential for lifelong learning, I feel like you're underscoring.

Jeff Wilke:

Yes. Well, yeah, I hope so. You have to decide to do it. But anybody who's listening to this and has a desire to do it, you can learn Python pretty quickly and it's really powerful. So if you want to do it, go.

Kara Miller:

Jeff Wilke is the chairman of Rebuild Manufacturing. He's the former CEO of Amazon's worldwide consumer business. Jeff, thanks so much, this was great.

Jeff Wilke:

Thanks, Kara it's great to be with you.

Kara Miller:

And thanks as always to you for listening. You can subscribe to Instigators of Change on Apple Podcast, and while you're there, leave us a review. Our show is produced by Matt Purdy. I'll talk to you next week.