I was just listening to the F1 theme song to get pumped up.
Yes. It's so good. I just got new speakers here in Acquired HQ North, and actually thanks to a recommendation from a listener in the Acquired Slack, and yeah, it was bumping.
All right, let's do this.
Who got the truth? Is it you? Is it? Is it you? Who got the truth? Is it me down? Another story on the way.
Welcome to the spring 2026 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.
And we are your hosts. Today we dive into a sport that started in the 1930s that began for the pure love of auto racing, extremely dangerous auto racing. Then after World War II, the British Air Force veterans and mechanical engineers joined the sport to push the limits of technology and physics. It eventually became the sport of rich guys who want to own teams to gallivant around Europe, losing colossal sums of money along the way. And in fact, David, since the sport began, over 100 separate teams have entered and exited the competition, mostly because they went bankrupt. And today, the sport has been dragged kicking and screaming into being professionally managed and is now owned by the publicly traded US company that has owned the Atlanta Braves, SiriusXM, and Live Nation. That is Liberty Media. And against all odds, Liberty has managed to turn the sport, the teams, and the drivers into real viable businesses. Today's episode, listeners, is on Formula 1, the world's premier motorsport series. Woo. I was going to save this for later in the episode, but do you know what else among the many other like hundreds of companies that Liberty has owned? Do you know what else they owned? You won't guess it because there's so many. Excite@Home.
From our Google series throwback.
That's awesome. Well, listeners, really what we're doing here today with Formula 1, it's three sports in one. It is, of course, the world's best race car drivers showcasing their skills, but it's also the World Cup of Engineering. These days, it's fair to say that the races are more determined by the design feats of the thousand plus people that work on each car than the drivers. And Formula 1 is the only motorsport in the world that requires a team to design and build their own car from scratch, which is an insane engineering feat to enter the competition. And as one listener put it to us, it's also the World Cup of Office Politics. Or as another one put it, it's Real Housewives of the garage, which that makes for a fantastic Netflix show.
Oh, does it ever. We might talk about that towards the end of the episode here.
Yes. The sport itself is completely insane. It is a grid of 20 drivers competing at over 200 mph in races that last 190 miles. And they do this every week or two in a different city around the world. They load the entire circus, the cars, the teams, the hospitality onto a fleet of seven Boeing 7s between races and they set up shop in 24 different cities from Monaco to Bahrain to Melbourne, Australia. Each car costs $20 million to make and hundreds of millions of dollars to develop. The cars have three to 600 sensors on them. And shockingly to me as an American, David, I don't know if you knew this before we started researching. It's actually the world's most popular annual sporting series with over 827 million viewers.
Yeah, I had no idea until we started researching because we're Americans and you know the Olympics and the World Cup don't count because they're every two and four years. So pretty crazy. Listeners, starting in just 5 days, a season will kick off that's going to see some of the biggest changes in the sport in decades. So, we've got new regulations, which means all new car designs, an expansion to an 11th team with Cadillac, Audi and Ford are also entering the sport, and a brand new broadcast partner in the US in Apple TV. And well, everything got much more professionalized. It's still owned by a bunch of rich guys who love auto racing.
They're just no longer money losing rich guys.
That's right. So listeners, just like our NFL, NBA, and IPL cricket episodes, this show is about the business of F1. So, we apologize in advance if we don't spend time on your favorite rivalry or regulation detail or the V10 engine sound. You can join the email list to get updates every time an episode drops at acquired.fm/e. You get to vote on future episodes. And the email list is just getting much, much better. So, we now have episode summaries, our big takeaways, and exclusive photos from our research process. That's acquired.fm/email. Chat about this afterwards with us with the whole acquired community in the Slack. Acquired.fm/slack. And before we dive in, we want to thank our presenting sponsor JP Morgan Payments. Yes. And just like how we say every company has a story, every company's story is powered by payments. And JP Morgan Payments is a part of so many of their journeys from seed to IPO and beyond.
So with that, this show is not investment advice. David and I may have investments in the companies we discuss and this show is for informational and entertainment purposes only. David Rosenthal, where do we dive in? Well, first off, we owe a huge thank you to Joshua Robinson and Jonathan Klee, who are the sports editors over at the Wall Street Journal and just recently published I think the best business history book of Formula 1 called The Formula. It was one of the main sources for this episode and they both actually helped us in the research. So, thank you guys.
Yep. So, Ben, Formula 1 as we know it really started after World War II in 1950. But unlike a traditional company or even many of the sports leagues that we've studied over the years, it doesn't have an exact sort of founding moment. Its origins are really part and parcel with the beginning of motor racing itself. So, it didn't take long after the invention of the modern automobile, which is generally agreed upon to be by Carl Benz in Germany in the late 1800s, that people had the idea to start racing racing. I mean, after all, like people raced horses, why wouldn't they race cars, too?
So, throughout the first few decades of the 1900s, various automobile clubs popped up across Europe, and they would host these races. They'd sell tickets and advertising to fund prize purses and drivers and manufacturers would travel from all over the world to compete in these races. 1906, the Automobile Club of France, which was the largest in Europe at the time, hosts an inaugural race just to the southwest of Paris called Le Mans. And this group of organizers, they decide to call this Le Mans race by a very literal name in order to attract spectators and participants. They call it the Grand Prix de l'Automobile. Literally translated as the big prize.
It's great. Carries all the way forward to this day.
Yes. The names in this sport are very literal. So the success of this Le Mans Grand Prix causes a bunch of similar races to pop up across Europe all throughout the teens and 20s copying the same rules or formula as the Automobile Club of France. You had Monza pop up in Italy. You had the Monte Carlo race in Monaco. You had the Nurburgring in Germany, etc., etc., etc. You've probably heard of all these places.
Yep. Eventually in the 1920s all the major European automobile clubs get together in Paris and they say why don't we centralize oversight of this formula into one international organization and that becomes after a series of name changes over the years the Fédération Internationale de l'Automobile or the FIA which still exists today and still administers the rules of Formula 1. And as Josh and Jonathan point out in the book, the sport is literally named after the rule book.
There's a lot of fighting about the rules in this sport, both when they're setting the rules every few years and in races when they're going up to yell at the race stewards, oh, this is illegal, this is not illegal. Anyone who is sort of complaining that this sport is too into the rules, needs to remember it is named after them.
It's named after the rule book. Yes.
Okay. So at this point, you've got all these Grand Prix and these famous racetracks that you know today, and you have the FIA as this sort of rules body overseeing the common regulations amongst them, but they're all independent events. There's no championship series. There's no league. There's one winner at the end of each race and then you go to the next race.
There are a couple attempts before World War II to create a championship series, but they all fizzle and then of course the war disrupts everything. After the war, however, there's renewed interest. Everybody wants to have a world drivers championship. And so in 1949, the FIA announces the inaugural Grand Prix World Championship for Formula 1 drivers, a global drivers competition of seven of the most prestigious Grand Prix races set to begin the following May 13th with the running of the British Grand Prix at the Silverstone Circuit in England. And that becomes the first race of the first season officially of F1 1950.
Now there really are three sort of foundational pillars of this early era of the sport. There's one in the UK, there's one in Monaco and there's one in Italy. So taking them in turn first in the UK. Britain was and is the heart of the sport both in the early days and all the way through to today. So today 70% of the F1 teams are based in the UK. Really the only notable exception is Ferrari which of course is in Italy.
Yes. All of these teams despite having such different cultures and opinions and rivalries a giant amount of their employees at least on the technical side work in a very small area in the English Midlands within tens of miles of each other.
Yes. It's like very, you know, seemingly random. So why was the UK and this weird part in the middle of the country like the natural home of F1? If anything, given the proto history, it should have been France or maybe Germany. Well, after World War II, Britain had been, as you alluded to in the intro, absolutely the right set of circumstances for this all to come together. Yep.
One, unlike Germany, they'd actually just won the war, but the country was in bad shape and like in desperate need of entertainment and redevelopment. And then, unlike France, Britain had a ton of empty airfields and lots and lots of newly unemployed British fighter pilots and mechanics. And what better way to, you know, redevelop the infrastructure in the heart of the rural area of the country than to put all of these people and abandoned airfields to work racing fast cars. And much like the development of Silicon Valley, which we talked about in our Lockheed Martin episode, there's sort of this positive feedback loop that keeps that area the main area for this. So there's universities that specialize in aerodynamics and engine design and mechanical engineering. It's still the best place to source talent to build an F1 team.
Yeah. Even the teams that are owned and nominally operated by companies in other countries, most of them still base their actual operations in the countryside in the UK for this reason.
Yep. So, one of these newly unemployed Royal Air Force pilots is a man named Colin Chapman who also happened to be a mechanical engineer in addition to a former pilot and who along with Enzo Ferrari probably did more than any single person to shape the first era of F1. So Chapman founded the Lotus Racing Team in 1952 with 25 pounds as his initial startup capital in a set of empty stables in North London. Even then 25 British pounds was not enough to build a car capable of racing in F1. So he had to have another way of making money. In parallel, he also started the Lotus road car business, which quickly became, you know, look, hey, it's not Ferrari, but like decently successful.
In fact, the first Tesla Roadster was based on a Lotus Elise chassis.
That's right. So, in 1958, Chapman finally has enough capital together to build an F1 car. He enters his first car in Formula 1, and he revolutionizes the sport. I mean, today teams are super professional operations with hundreds of engineers and tons of equipment. Back then, it was much more like the early days of the NFL. You have like one or a couple people who are team owners, managers, coaches, and sometimes also players or drivers.
Yes. And it says a lot that there actually was not a constructor's championship when it first got started. That wasn't until 1958.
Yes. It was just about the drivers, right? It was just the drivers championship because often these were the same people, right? So for anybody who follows the sport today, there's sort of two different things you're competing for. Can the driver individually win the season or can the team between its two drivers win the constructor's championship called constructor's championship? Of course, because each of these teams is required to construct their own vehicle.
Yep. And enter two cars and thus two drivers in the competition. So Chapman was the first constructor to realize that building a winning race car wasn't just about adding more horsepower to the engine, which was kind of the Ferrari prevailing view at the time.
That was Enzo's, you know, arguably till he died, what he really cared about was power. Chapman had a great quote on this. He said, "Adding power makes you faster in the straights. Subtracting weight makes you faster everywhere." So he realized like a whole bunch of stuff that like being lighter is better, having better handling is better because it's not like these racetracks are like NASCAR racetracks where the cars just go around in a circle. There's all these technical corners, there's hairpin turns, there's chicanes, there's double apexes. It's a very technical sport, not just from the engineering for the cars, but also for the drivers.
Yep. There's one other very important element that Colin Chapman introduces to the sport during his time in F1, which was sponsor logos on the cars. So, until Chapman adds sponsorship to his cars, all the F1 cars had just been painted whatever color the FIA assigned their country.
Yes. And that's how you have silver with Mercedes and British racing green and of course Ferrari red.
And they stick to this day. So Chapman when he goes out in the 60s and finds a sponsor to, you know, finance his building activities, he paints his Lotuses red and white in the corporate colors of his new sponsor, Gold Leaf Tobacco. And this is the start of one of the most important partnerships in F1 history, Fast Cars and Cigarette Companies.
Yes. And this was illegal for a long time. The FIA did not allow you to have sponsorship. And then they realized, okay, we're being too much a purist about this. These teams are all going to go out of business, but there are companies lining up to try to pay them to put the logo on it. Okay, this is the way to make the sport viable.
Yep. Ironic because then the EU would legislate tobacco advertising and sponsorship out of existence in the early 2000s once again. But it's actually really weird. Go look at any of the sport's historical greats like Senna or Michael Schumacher or Alain Prost. They all had the Marlboro logo all over them or John Player Special. I mean, there were these cigarette companies, some of which I'd never even heard of, but they're so dominant on the cars for a long time there that you actually don't see the team name. At least on the liveries now, you see the team name and their big sponsors. This looked like it was Team Marlboro Racing or Team John Player Special, not, you know, McLaren or...
Yeah. I mean, they actually painted the cars to look like cigarette boxes going down the track. Yep.
Unfortunately, his story has a sort of strange and sad ending. Did you find this, Ben?
Yeah. So, in the late 70s and early 80s, he gets tied up in an embezzlement scheme with John DeLorean. Chapman designed the chassis for the DMC-12, you know, like the Back to the Future car, which would be awesome if the car didn't suck and the company didn't end in a giant scandal.
Totally. The company collapsed and British prosecutors accused John DeLorean and Colin Chapman of each embezzling $8 million in government incentives that they supposedly were going to use to build the factory. Chapman dies of a heart attack once this comes out at age 54. Truly sadly. And then DeLorean goes on to be arrested by an FBI sting in LA attempting to buy 220 pounds of cocaine with the intent to distribute to like pay off his debts for DeLorean. Man, you can't make this stuff up.
He was a man with a dream, David.
Through all of this though, the cowboy nature of the teams, the individual iconoclastic owner, mechanic slash designer drivers, the cigarette money, the vague or not so vague whiff of fraud that totally embodies the early era of F1. It was the wild west in Europe.
Yep. And just so people can really picture it, I think you kind of know what an F1 car looks like now. An open wheel car with a giant spoiler or rear wing. It's got a front wing. When we first started here in 1950 and really even into the 60s too, these cars didn't look anything like that.
They look like soapbox derby cars.
That's exactly right. Almost like little bullets.
Yep. So the UK contribution and the Chapman story really reflects this wild west aspect of F1. If that's all there was in the beginnings of the sport, I don't think we'd be doing this episode today. Right around the same time that Lotus is coming into the league, there's another very different founding pillar number two of F1 taking place in Monaco, which is that in 1956, the sovereign Prince Rainier III of Monaco, as we talked about at great length in our Hermès episode, married the American movie actress Grace Kelly and brought her to live in the Prince's Palace of Monaco. This brings together all of the old world luxury and heritage and legitimacy of Europe with the glitz and the glamour of Hollywood and the new world in a way that's still very much part of F1 today. I mean basically this marriage was like the 20th century's version of, you know, Travis and Taylor, the NFL and, you know, Swifty crossover, like it was the crossover event of the century. So, as we said a minute ago, there had been Grand Prix races on the streets of Monaco for many years going back to before World War II, and the track and the location was already quite prestigious. But when Princess Grace comes to the party, things go to a whole new level. So, all of her Hollywood circles start coming out to the race to visit her. And conveniently on the race calendar, it, you know, just happens to coincide with the Cannes Film Festival right up the road in Cannes in France. So Frank Sinatra becomes a regular attendee to the Monaco Grand Prix, the Beatles, the Rolling Stones, etc., etc. Eventually, many, not most of the F1 drivers start moving to Monaco and becoming stars themselves. I mean, like today, Lewis Hamilton, Max Verstappen, Charles Leclerc, Lando Norris, they all live in Monaco.
Well, it also has some tax benefits.
Yeah, it also has some tax benefits. But for anybody who has been to Monaco or seen pictures of Monaco or really any towns sort of on the French Riviera in that area, you might think, "Wait, but it's like cliff side and the streets are all really narrow and old and winding. These cars that we were talking about at that time, it kind of made sense to race those cars in these types of environments. It makes a lot less sense now. There's no chance they would add Monaco, with the cars being the size that they are today, to the race calendar. Yep. But there's also no chance that they would ever get rid of Monaco. This is what brings luxury into the sport. And today, again, also this doesn't seem that radical. It's part of sports league setup playbook 101. Like look at, you know, our episode on the IPL. This was so far ahead of its time back in the 1950s and also totally by accident. Which leads us then to the third Italian founding pillar of F1, Ferrari. Undeniably the most important team, company and person of this first age of F1 was Enzo Ferrari. Enzo actually founded the company before World War II purely as a racing company.
Yeah. Wasn't he racing Alfa Romeo cars?
Yes, that was the purpose of the company was to race Alfa Romeo cars.
Also a red racing team because they were Italian.
Yes, indeed. Ferrari itself didn't start making cars until after World War II. But of course, when the F1 championship series starts in 1950, Enzo has to join. This is the pinnacle of racing. And Ferrari is the only team that's been part of every single F1 season going all the way back to the beginning.
There's a funny thing here where you might think, oh, Formula 1, that's the big established series that legitimizes an automaker by being a part of it. It actually works the other way with Ferrari. Ferrari participating in Formula 1 legitimizes the series. Ferrari, if they ever decided to stop racing in Formula 1, would make people go, "Oh, so what is the big racing series?" Yes, totally. Formula 1 is actually the marriage of two separate things. The teams and the racetracks. Unlike just about every other sport out there, these are separate entities. It'd be like if the Seahawks, you know, were a team that would play wherever, whenever they could get a game going and they didn't have any relationship with, you know, Lumen Field in Seattle. So, what Formula 1 the organization is doing is they are bringing this set of teams and this set of racetracks on the calendar, this set of Grand Prix together.
And in the early days, it was kind of a different set of teams and drivers at each of the Grand Prix. Who can we get to come race at this track when? And it would come together in a very haphazard way.
So, back to Enzo and Ferrari. Unlike Chapman and Lotus and the Brits, Enzo actually had business sense. He was an entrepreneur and he was the first person who realized that there was an absolutely incredible business opportunity at the intersection of these really fast cars, these sort of legitimizing racing heritage and all the glitz and the glamour and the wealth of the celebrity that was represented by Monaco. And that opportunity was selling fast cars to the rich and famous.
Yep. So Ferrari pretty quickly after World War II becomes a legitimate luxury brand. I think you could maybe even argue they are the only legitimate luxury brand established in the second half of the 20th century.
Oh, that's interesting. Yeah. And it's very impressive how fast it happened.
Before the war, it was Enzo racing a bunch of Alfa Romeos and then suddenly it's Ferrari, right? Because as he's participating in F1, Enzo's also handmaking cars for all the European royalty and all the American movie stars that are flowing through F1. And so just like the equestrian heritage kind of serves as the like legitimizing soul of Hermès, motor racing in F1 serves as the legitimizing soul of Ferrari. It's just that they were co-developed together here in the 50s and 60s after World War II.
So, we need to talk much more about Ferrari on another episode of its own.
Oh, yeah. We should do a Ferrari episode. For the purposes of F1, they really were that unifying factor that pulled together the glitz and the glamour and the luxury and the hardcore racing because the Ferrari cars became this tangible way that fans, even though they couldn't afford to buy them, could relate to what was happening on the track by dreaming about buying these road cars that they saw their favorite celebrities or, you know, royal monarchs driving around. Because a lot of these other teams are building one or two or three cars period and they're racing them and then that's it.
Yep. Totally. Whereas with Ferrari, probably every boy growing up around the world, you know, myself included, probably you too, like has had a poster of a Ferrari or a model of a Ferrari in their bedrooms.
Okay. So, you might be wondering where are the Germans in all of this? We've talked about the Brits with Colin Chapman. We talked about Monaco. We talked about Ferrari. In the 50s, Mercedes actually was a major player in Formula 1 and auto racing. But while they were racing one of their cars in Le Mans, it actually crashed and killed 82 people.
Oh, yeah. It was one of the worst disasters in motor racing history.
They actually pulled out of I think all racing and they didn't return to Formula 1 for another 40 years. That accident was so devastating that four of the remaining Grand Prix were cancelled. Racing was just so dangerous in this time. I mean, you had 14 deaths in F1 alone, not even counting other racing series or audience attendees across this first decade.
Totally. Mortal danger was actually, I think, a core part of the appeal of the sport in those early days. What better to go along with all your glitz and glamour than an element of mortal danger? These guys were gladiators. They were risking their life every time they got in a car. In the 1950s, you had 14 deaths. So that's 1.4 a year. In the 1960s, you also had 14 deaths plus 15 spectators in the 1961 Italian Grand Prix crash. In the 1970s didn't get much better. You had another 12 deaths. And then it starts to get safer from there, and we'll talk about all that later. But the first three decades, you were on about a one to two death per year rate.
So that's five to 10% of the entire racing field would die every year. Yep. And there were many, many more crashes and many, many more injuries. These were just fatalities. Famously, Niki Lauda's head caught on fire and he was scarred for the rest of his life.
Yeah. And then he was back out racing several weeks later. It's insane.
So, back to Ferrari, though. He's really the entrepreneur that figures out how to build a real big business at the intersection of everything that's going on here. He's just doing it through his road car business. There's a great quote from another team owner during this era and it goes, "Formula 1 is Ferrari and Ferrari is Formula 1. It's that simple." This is another team owner that is saying that like a competitive team to Ferrari. And you might know who the team owner was who said that quote.
Yep. It was the person who quite literally would replace Enzo in that quote. Bernie Ecclestone, the supremo impresario owner of F1.
Owner of some part of F1, but controller of all of F1.
So Josh and Jonathan in the Formula book have a great quote about Bernie and Ferrari. As it turned out, no one would get richer off the Ferrari mystique than Bernie, a man who has never once been employed in Maranello.
And that will be our protagonist today. But before we begin Bernie's tale, now is a great time to thank our presenting partner, JP Morgan Payments.
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Okay, so David, enter Bernie Ecclestone.
Bernie Ecclestone. So Bernie was born in 1930 and he was a hard scrabble kid. He grew up in Southwark, which is to the southeast of London. His dad was a commercial fisherman and his mom was an authoritarian homemaker according to many biographies about him. You never really know what the legends about Bernie, but that's the story at least as he wanted it told.
Yep. After the war, Bernie ends up getting into the wheeler dealer business in London with surplus cars and motorcycles from the war. He opens his own showroom in the outskirts of London where he starts to specialize in selling luxury automobiles to the newly rich and famous. Basically, he becomes like the London celebrities' car guy. You know, you got your jewelry guy, your clothes guy, you got your drugs guy in the 60s, you got your car guy. Bernie's the car guy.
People refer to him as a former used car dealer, but that's not really right.
Yeah. Well, I mean, it is right. He started that way.
It's like calling someone else's Patek Philippe or Rolex a used watch, you know? It's not really used.
No. No. It's like, you want a Ferrari or you want a Bugatti? Hold the phone. Let me make some calls and see if I can get you one.
Right. There's also always been plenty of gossip over the years that Bernie was involved in more underground activities, shall we say, at the time. And Bernie himself would encourage this. So, specifically, there was a long-standing rumor that Bernie was the mastermind behind the Great Train Robbery of 1963, where 2.6 million pounds was stolen from a British Royal Mail Train. This is like one of the most famous train robberies in history. Bernie loved this speculation. So in 2005, a long time later, he finally addressed it when he's what, 70 years old or something.
Yeah, 75 years old. He gives a quote to the media when asked about it. There wasn't enough money on that train for me to be involved. I could have done something bigger. You start to get a flavor of, you know, who Bernie is, which actually is correct given what he would go on to do.
Very correct. 2.6 million pounds. That's chump change. So, criminal mastermind or not, Bernie is smart. Once he gets into hawking cars to the new money rich folks in London, he doesn't just sell them the cars. He also steers them into financing, which I think is basically how car dealers make money. They mark up the cars a little bit, but then they really get you on the financing and the servicing fees, etc., etc. And when you're selling really expensive cars, the financing fees start to add up. So this nets Bernie his first small fortune. Now the deeper that he gets into this luxury auto world, Bernie has the same realization that Enzo Ferrari had a decade or two earlier, which is that motorsport and racing is the legitimizing heritage of all of these fast luxury cars. So, just like Enzo himself, Bernie wants to have his dealership and his brand associated with Formula 1. So, in the mid-60s, Bernie starts hanging around with F1 drivers. And being the wheeler dealer that he is, he pretty quickly becomes the agent for a few of his pals, negotiating better deals for them with their teams for their salaries, you know, for a small fee, of course.
Yes, of course. Eventually, he cooks up a scheme with one of his star clients who actually drives for Lotus for Colin Chapman, a driver named Jochen Rindt, to leave Lotus and buy a team together for themselves. They're going to become not just the talent. Jochen's going to become an owner. Jochen at the time, he's one of the best drivers in the world. He's on top of the standings in F1. He's blowing away the field throughout the 1970 season. And then tragically during his practice session at the fourth to last Grand Prix of the season crashes and is killed. And Rindt and Chapman were constantly fighting about the safety of the Lotuses that he was driving. Rindt was so far ahead of the pack in the standings when he was killed that he would actually win the driver's championship that year.
Yeah. Posthumously. He's the only driver ever to win a championship. So, he got zero points in all of the races after his death, but he was so far ahead that he still won.
Bernie, as the story goes, is devastated after Rindt's death. And to honor the memory of his friend, he decides that he's going to carry through on the plan that they had together, the dream they had. And in 1972, Bernie buys the Brabham F1 team for 100,000 British pounds, which would be about 2.3 million today. Today, I think every single F1 team is worth at least one and a half billion, I think, is the floor.
Bernie doesn't make that much money on the Brabham team, as we will see. But he sells it for what, five million later?
Five million a couple years later. Yeah. So, you know, a nice return, but definitely the fact that team valuations go from £100,000 to a floor of one and a half billion is thanks to Bernie.
Well, thanks to Bernie for part of it and then specifically thanks to Bernie leaving after that.
Yes, for the other part of it as we will get into. So when Bernie buys the Brabham team in 1972, along with it, he also gains membership into the quote Formula 1 Constructors Association. Now this is a very loose organization. Organization is being generous here of all the team owners that Colin Chapman had actually kind of taken the lead in pulling together back in 1963 with the original purpose solely of coordinating joint travel and transport logistics to getting their teams and cars to all the various races around the world. It's like, hey, you're my bitter rivals. I never want to associate with you. I battle to the death with you out on the tracks. But we are going to the same place. We're going to the same place. Why don't we share a ride, so to speak?
And today actually, Formula 1 management does handle all this. And I think they make a little bit of profit on it. Like it's a service that they sort of sell to teams. A tiny amount of profit relative to the rest of it, but they handle the logistics of moving the whole circus around the world.
Yep. Well, one thing I can guarantee is that once Bernie takes it over, he's definitely making a profit on it. So, Bernie, when he joins this owner's table, shall we say, pretty quickly realizes a couple things. One, except for Enzo Ferrari, none of these other guys have a lick of business sense. All they care about is fast cars and winning races. Whatever money they have or don't have, it's all going down the tubes in pursuit of victory. The second thing he realizes is that except for Ferrari, and by this point in time, Enzo has sold half the company to Fiat, so he has major resources behind him in Italy, none of these other guys actually have any real money. I mean, for God's sakes, Colin Chapman is about to nearly go to jail over an $8 million embezzlement case with DeLorean. $8 million went a lot farther back in the 70s. But these cars are quickly becoming very expensive, and the teams are becoming very expensive to run. There is not a sustainable way to run a team. I think the average tenure over the entire existence of Formula 1 is about six years for a given team. Just to make this exact point, here is the list of F1 teams in 1972, the year that Bernie buys into the league. Lotus, Tyrrell, McLaren, probably know that. Ferrari, you definitely know that. Surtees, March, BRM, Matra, and Brabham.
So there's two that exist today.
And at that point in time, only one of them is a real business. So Bernie sees this and he's like, "Dang, there's an opportunity here. All these other guys are focused on winning races. Yeah, I'd like to win, but I really care about getting rich. And there's quite a void of power here that I can insert myself into. So, just to paint the picture of the business state of F1 when Bernie came into the league, each individual team negotiated their appearance fees with each individual Grand Prix separately. So, they're like a whole bunch of Grand Prix, each with their own race promoters and organizers. They're a whole bunch of teams, nine of them to be exact, and they're all negotiating separately with each other.
Assuming there's, I don't know, 15 races or something, that would be 135 distinct agreements between teams and local races.
Everybody's getting paid wildly different amounts and usually not very much. And these things sort of need to depend on each other because how valuable is a race to go to if the other teams aren't going to show up to that one, right? I mean, this is like the sports business world's worst practice number one. Not only is it bad for overall revenue, you know, you have no centralized leverage over the tracks if you're all negotiating separately. To your point, Ben, it's just plain bad for the sport.
How are you supposed to sell tickets and tell fans they should come if... right? You don't know if Ferrari's going to show up or if McLaren's going to show up. There's no way to know as a fan until you actually showed up at the racetrack who was going to be there. The other aspect of the sport that I say would be in shambles, but wasn't even in shambles because it didn't exist, was broadcast and television and promotion. There was none of it.
Yeah. Thankfully, Bernie came along before that became too big. I mean, can you imagine if each of these racetracks was trying to do their own media rights deal? I mean, he came along at the perfect time. It was already criminally too late that F1 and the Grand Prix hadn't gotten to television. I mean, we're talking about the mid-70s. If you look over at the NFL in America, they're already making like 50 million plus a year in broadcast rights.
Yeah, it was 10 years into their... I think 1961 was their first national broadcast deal. I mean, they had already launched Monday Night Football in 1970. It's not like there wasn't a playbook for this out there.
F1, meanwhile, is just as, if not more, popular, is a global sport, has great demographics, and is making zero dollars in media rights. So Bernie shows up. He's hardly a media professional here. But even he can see that there's room for improvement on both of these fronts.
Even before realizing, hey, media rights are going to be super valuable. The thing that he clearly sees is centralizing these negotiations is going to be the way to extract the most value.
Yes, there's two opportunities here. The near-term easy one is centralize the negotiations with the racetracks, extract the most value, capture a bunch of it for myself. And then there's a longer term play of like, ooh, what can I do about these television deals? I think it's actually worth one more quick pause here to compare contrast Formula 1 and the NFL and Bernie and Pete Rozelle because these are sort of happening at the same time. But Bernie is like the anti-Pete Rozelle. You know, Pete Rozelle was this consummate manager, professional media guy from Los Angeles. He started as the LA Rams PR guy and then he gets drafted by the owners of the NFL to be an employee of the league to serve them and their interests as commissioner and the league is owned 32 ways by the owners of the teams.
Right? So Rozelle's unifying vision to the NFL owners was communist capitalism as we talked about on that episode. Like hey, this league first, we're all in this together. Let's centralize our negotiating and our media rights so that we can all grow the pie and share the spoils evenly. Bernie's MO isn't league first, it's me first. He does centralize things, but it's not like Formula 1 becomes owned by all the teams equally. It's more like he says, "Okay, I'm going to start a company, and that company is going to go sign agreements with racetracks, and then you're all open to do business with me to figure out what it's going to be like for you to race at those racetracks."
Yep. So, the way he does this, he proposes to the other team owners, hey, obviously we need to centralize our negotiations, and you know, I can tell that you guys don't want to do this, or you would have already done it. Why don't you just leave it to me? I'll take care of everything. You give me your rights for your team appearances and I will go fight with these race promoters, many of whom are probably gangsters...
themselves, and I will get us the best collective deal. I'll tell you what, I will even take all the risk and guarantee to all of you other guys upfront that you're going to get paid at least as much as you're making now. And you must come to the races. That was the teeth. No more of this like I might show up, I might not.
Yes, that was also part of the motivation of we got to fix the sport. Nobody says, 'So, I'll do all this and I'll just take a small fee off the top for my services.' Supposedly, in the meeting of the constructors' association, he verbally says that he will only take 2% of the total race fee revenue off the top for his services.
Really? But of course, nobody writes anything down because Bernie never writes anything down. And when the dust finally gets settled and many decades later, all of the books and stuff become public through a whole series of court cases, turns out Bernie's actually taking 8% off the top for his fees, which is, you know, a healthy amount. In addition, he's also an owner of one of the teams, so he's getting his owner split. Honestly, 8% is not bad. If you are massively increasing the amount that every team is getting paid by doing this and you are sort of like organizing and orchestrating the sport, taking 8% for those services, it seems quite reasonable.
Absolutely great point and you are 100% correct. Bernie is doing a great service for all the F1 teams and owners. He is instantly making the sport a lot more valuable
And sustainable. Totally.
Every single team would go bankrupt except Ferrari otherwise.
Yep. So before Bernie gets there, the average prize purses and payments that teams would get from a Grand Prix, and obviously they varied wildly, but on average it was like $10,000 per team. So like nothing. In Bernie's first year running the show, he takes the average prize and fee payment up to $40,000 a year. So 4x in one year, and then a couple years later by the mid-70s it's up to 150k per race. And then by the end of the decade he's gotten it up to 200k. So like massive, massive improvements
per team per race. Yeah. So suddenly you can start to actually fund your operation if you know that every time you show up to the track you're getting 200k to do it.
As Bernie would never fail to point out, all of the other team owners should be massively grateful to him for essentially saving their asses here at funding their teams. Yep. And back to the original purpose of the constructors' association of coordinating travel costs, Bernie also goes out and negotiates competitive rates with freight providers and massively improves travel costs on the logistics side of the business for the teams. Basically, Bernie's sort of first act in F1 reminds me of one of my favorite sayings that I heard earlier in my career from a mentor: he may be a thug, but at least he's our thug.
Yes. So, it's worth taking a pause to say the FIA is still the governing body of the sport of this racing series. And so, Bernie takes over this thing called the constructors' association, but really the FIA and their set of rules is still governing what happens between these teams at the racetracks. He's just the one sort of organizing the commerce through the constructors' association.
Yes. And importantly, the FIA is the one who blesses each of the racetracks with being a Grand Prix part of Formula 1.
So, what happens next? As you might imagine, you know, these race promoters are none too happy about this little guy from England coming and beating them up, right? Someone's aggregating all this power in the ecosystem and they're negotiating with us and it doesn't feel good because they've got all this leverage now.
Yep. They go to the FIA and say, 'Hey, you got to do something about this Ecclestone guy. He thinks he's running F1.' Yep. This results in a whole series of protracted negotiations between Bernie and the Constructors' Association and the FIA that finally get hammered out in 1981 with the first Concorde agreement, which is still the name of the roughly every five-year agreements that govern F1 to this day. Do you know why they're called the Concorde agreements?
I do. That is the physical location in Paris of where they were negotiated, right?
Yes. Of the FIA headquarters at the Place de la Concorde, which gives you a sense here. The Place de la Concorde in Paris is one of the ritziest, most famous parts of Paris. It was a bunch of like, uh, stuffy bureaucrats.
And so what is the FIA? Is it a nonprofit? Is it a government body? Is it like an NGO?
It is an NGO. That's exactly what it is. It is an international organization that was formed by all of the respective European country motoring clubs. So the FIA also regulates like rally sports, endurance racing, etc., etc. It's not just Formula 1. It's just that Formula 1 is the pinnacle of racing. It's a standards body.
Yeah. Exactly. So in this first Concorde agreement, the two sides, Bernie and the Constructors' Association and the FIA and racetracks by proxy, agree on four things. One, the FIA will have full unilateral and unchallenged jurisdiction over the rules of the sport going forward. The Constructors' Association and Bernie, they have no say over the technical rules of the sport. Two, the constructors' association teams will commit to showing up and participating in every official Grand Prix race. In return, all of the race fees and prize money now contractually must be paid centrally to Bernie and the Constructors' Association. And three, Bernie and the Constructors' Association will control all rights and income from any future televising of F1 races for the next five seasons.
No rights to the race organizers, no rights to the FIA, all the TV money flowing through Bernie, which if you look today, that is the single largest revenue stream of the whole thing. Of course. How could it not be?
Yep. So, what's interesting is both sides here actually feel like they're getting a pretty good deal. And to be fair, the reason that they thought that was the TV media rights weren't actually worth anything yet.
Well, did they put in that the TV media rights when they do happen, Bernie still only gets 8% and the teams get the rest of the 92%? Or is that yet to be negotiated?
Okay. Bernie thrives in the gray zone.
So at the time, European and British television was mostly state-controlled, with organizations like the BBC and its peers all across Europe, and behind the US in terms of monetization and sophistication of televising sports especially, but any kind of media. Again, these are mostly like the equivalent of PBS in the US. They're public broadcasters. There's not a competitive ecosystem. There's really one party to go to.
Yep. So, the teams and the FIA and the tracks. Yeah. Even though they're giving up all the TV rights to Bernie, they don't look that valuable to them. They're like, 'All right, you want to go have a boondoggle and see if you can figure this out? Good luck to you.'
Right. And to be honest, it sounds hard to film. You got these racetracks with 15 turns and cars that whiz by real fast and crappy technology at the time to try to film them. And you want to go do business with the government to try to get them to broadcast. Okay.
So Bernie, unclear if he had a vision for this all along or if he was like, 'Ooh, here's something I can grab. Let me go see what I can do with it.' Either way, he basically executes it perfectly. So once he gets the TV rights, he goes to an umbrella group of all the public broadcasters all across Europe called the European Broadcasting Union, and it represents 92 different countries' national public broadcasters, including the BBC in the UK, and says, 'Hey, you have a lot of F1 fans in your respective countries. That's a big sport in Europe. I now have the rights to broadcast this sport. How about I'll sell them to you for super, super, super cheap. A couple million a year for all 92 countries.' So like amortized in aggregate, basically nothing for any individual broadcaster to take these rights. The only thing I want them all to do is promise to show every single race on the calendar, not just the ones that are in their home country.
So, seems like a pretty good deal, right?
So, he's in grow the sport mode, right? Not capture value right here. This is a growth opportunity.
Yep. This is a long game. So, they all say yes. And then, Ben, as you were saying a minute ago, it pretty quickly becomes clear, hey, all 92 public broadcasting entities don't really have the expertise or the interest in figuring out how to televise this sport. Seems hard.
It's still true today. The way that most of the broadcasters around the world take F1 is they take one main feed that is produced and then they do more stuff on top of it.
So this is when that starts. Bernie says, 'All right, no problem. I'll take the risk. I'll fund the investment upfront personally to create a central single television feed for each race that Formula 1, quote unquote, slash me, Bernie.'
Yeah. What is Formula 1 at this point?
Yeah. What is Formula 1? So, we should say Bernie loved to operate without contracts. Here's his exact quote: 'I carry out my business in a very unusual way. I don't like contracts. I like being able to look someone in the eye and then shake them by the hand rather than do it the American way with 92-page contracts that no one reads or understands. If I say I'll do something, I'll do it. If I say I won't, I won't.'
And who owns these things? I don't know. I'm making sure it happens. So Bernie goes and sets up a new company, Formula 1 Promotions and Administration, or FOPA, not to be confused with FOCA, which was the constructors' association that, you know, just did that deal with the FIA, right? That Bernie is now de facto head of, but doesn't have any legal ownership of, right? The first thing that he has FOPA do is create this centrally produced TV feed from England and then distribute it out to all the various broadcasters all across Europe.
He just keeps running this playbook over and over again of, okay, cool. I'll centralize something. I'll aggregate something and now I have leverage to go and do business with the rest of the ecosystem.
Yep. And his plan has been, like you identified, I'm going to get all these public broadcasters across Europe to basically go develop the market for me, right? They're making the next negotiation much more favorable to me. They're out there right now. Sure, we didn't really exchange much money, but they're out there building the brand, getting people excited, and then as soon as that agreement period is up, then I'll go to them and say, 'Okay, it's really expensive and I am the one who you have to pay.'
Yes. I'm going to be sitting in the middle as the choke point for what will now be a hugely in-demand television product, which is exactly what happens. Now Bernie also gets really lucky here because in the intervening years the pay TV ecosystem in Europe finally comes online.
So one of the reasons why America was farther ahead in developing the television market is that cable and pay TV had become a thing earlier in America. And so there's just a lot more bidders for content out there in America. When Bernie started this adventure, it wasn't clear that the same thing was going to happen in Europe, but it did.
Yeah. And there was one other element that developed in all this, too. In addition to these agreements that Bernie was having everyone sign, race organizers were required to surrender income from trackside advertising and corporate hospitality to Formula 1 owned entities. So this now means that the race organizer, the track business model is really just ticket sales.
Yep. So as it's becoming clear that TV rights are now going to be really valuable, the original 1981 Concorde agreement term comes up and Bernie now needs to go negotiate a new deal.
Oh. Because FOPA and the TV rights were actually not a party to the previous Concorde agreement.
Right. Exactly. It didn't exist yet. Bernie created it in the interim. TV rights are a thing. We're pretty sure they're going to be valuable going forward. We deserve a cut. No teams, no tracks, no races. We want in on this.
So Bernie says, 'Okay, okay.' He starts with, 'Why don't we just divide it all up a third? A third, a third. FOCA and the teams, you'll get a third. FIA, you guys can get a third. But then a third really should officially go to FOPA. I'm the one that created this and we're producing the broadcast.' So after a whole bunch of negotiation, it ends up splitting out that the FIA gets 30%. FOCA and the teams get 47%. And FOPA, Bernie's company, gets 23%.
FOPA is just a guy. You're just saying and 23% of it goes to me, a thing I fully own.
Yes, this company that I created. Bernie is a master at playing everyone off here. This split gets negotiated before Bernie really ramps up running bidding processes in each country for the TV rights. So, he actually renews the European Broadcasting Union deal for another three-year term to sort of keep growing the sport and not value maximize just yet because he doesn't want a lot of money to start going to the other organizations.
So, that was the second Concorde agreement. When the third Concorde agreement comes up for negotiation in 1992, Bernie goes to the FIA and he's like, 'You guys, you're getting the TV money, but you can't be happy because it's really not that much, you know, and there's a lot of complexity here. You're an international organization. What if I just make this easy for you? I'll pay you a flat fee. Rather than you taking 30%, I'll pay you $5 million a year going up by 1 million every year up to 9 million at the end of this term in exchange for your percentage of the TV rights. This will be way easier for you.' And the FIA is like, great, that sounds like a great deal. Let's do that. So Bernie now has the 23% he originally had plus another 30% that used to belong to the FIA for which he has to pay 5 to 9 million a year.
And you can actually imagine if you're an international regulatory standards body, the fact that a guaranteed payment is being made available to you so you're not taking risk anymore might actually be great.
Of course, and this is the justification that they all give to the press when the deals are done. So deal gets done. Bernie's now got 53% plus all of his cuts that he's taking from the constructors' association for his services plus his team ownership, etc., etc. Deal gets signed, he goes out, runs auctions across Europe and really across the globe with any TV provider who's interested in showing F1. All of a sudden, TV rights go from small single-digit millions in aggregate to F1 to over 25 million a year just flowing into FOPA and Bernie from the TV rights.
But call it 40 to 50 million a year. So a big, big step up.
Okay. So how do the teams feel about this? I mean that suddenly there's this guy that's getting half-ish the revenue from the broadcast of their sport.
That is the key question. You would think that the other owners would be pretty pissed and some of them were to be fair. One of the other owners, Ken Tyrrell of Tyrrell, which fun fact is actually the forerunner of the Mercedes team today, publicly accuses Bernie of, quote, 'stealing F1 from the teams.' But that's kind of a minority opinion. By and large, they're all still pretty grateful to Bernie at this point because turning F1 into this major TV sport meant that all of a sudden all of their individual team sponsorship deals just got way, way, way more valuable.
Ah, that makes sense. Before F1 was televised, all that sponsors were getting when they got their logos on the cars was just exposure to whoever happened to show up at any given track for any given race. And really, it wasn't even the totality of the fan base that showed up. It really was only fans that were sitting close enough or at the right angles where they could actually read the logos on the cars.
It's interesting because at this point in time, the more valuable real estate would have probably been the trackside advertising, whereas today the trackside advertising is not nearly as valuable as the space on the car because the cameras stay fixed on the cars and on the drivers. That's the valuable space that people are after. And unless you're televising it, the cars are the thing in motion whizzing by, right? Yeah. There's no way you're going to be able to read what's on an F1 car when it's whizzing by live.
So, this is when sponsorship money and in particular tobacco money really starts funneling into the sport. In aggregate, until it finally gets banned by the EU in 2006, tobacco company advertising poured $4.5 billion into team sponsorships in F1 over the years. That is a lot of money. And that was just one category. And in particular, part of the reason why tobacco is so interested in here is there was sort of a loophole that as there was all this pressure to ban tobacco advertising on TV and on radio and on billboards and in newspapers, putting it on a car that happened to show up in a TV broadcast, oh, that was a sponsorship of a team. It's sort of this way that the tobacco companies got to stay on TV and it was heavily associated with a brand image that they wanted to cultivate. It's glamorous. There's speed. It's risk-taking. They get to do these full takeovers of the liveries of the cars. I mean, it is a full screen ad. It's just not classified as a TV advertisement.
Okay. So, finally, thanks to tobacco companies and TV media rights and Bernie, there's all this money flowing into Formula 1 to fund these ever increasingly expensive operations. And of course, the question then is what do they do with all this money? You know, these teams want to just go out and beat each other. And so they're going to spend into an infinite limit to attempt to do so.
Oh, yes. And of course, they come up with some pretty clever ways to invest slash burn that money and make the cars go faster on the grid.
Yes. But first, listeners, now is a great time to thank longtime friend of the show, ServiceNow, the platform that puts AI to work for people. And listeners, we're doing something fun and special today. One of the main ways that we did research for this episode was to go to the Las Vegas Grand Prix with ServiceNow, and we spent a ton of time with their CMO and EVP, Colin Fleming. Colin also happens to be a former Red Bull test driver. So, it was amazing to hear a lot of research directly from him and just grill him with questions all weekend. We have him here with us today. Hello, Colin.
Thanks for having me, guys.
So, we thought a fun thing to do this segment would be to share one of the F1 tidbits that you shared with us when we were in the paddock club together. So, what is one of the things that you think most people don't know about the sport?
Everyone talks about the technology and speed, but the under-discussed component is the human side. An F1 driver is operating at fighter pilot-like cognitive load for 90 minutes straight. 6 Gs under pressure, which means their head weighs like 80 pounds at that moment. Their heart rate is 180 beats a minute or more and they've lost 5% of their body weight during the course of the race. They're doing this making micro decisions thousands of times with no timeouts, no commercial breaks, and I don't think there's another sport like it.
We're talking a lot this episode about the specific technologies that were leaps forward in different F1 eras. What do you think was the most significant over the years?
For me, it was the hybrid introduction. I think it was 2014. It moved the sport from being about pure horsepower to being about energy management. And as a result, the drivers' lives got way busier. Now they're managing battery deployment, harvest modes, engine maps, and they're doing this at unreal speeds. And Mercedes cracked it first. They won eight straight championships.
Okay. Now, from the ServiceNow angle, I'm very curious why you decided to sponsor an F1 team in Aston Martin. What is the business case?
Three things that are really critical for us: storytelling, hospitality, and brand. It's a super complex sport and as we know, logistics, technology everywhere, and that is the life that our customers live every single day. So we didn't just slap a logo on it. We deeply embedded our technology into the organization to help them really find that one-tenth of performance they're all looking for. The hospitality gives us the opportunity to tell that story and the brand is truly a lead. We're thrilled to be part of it.
Okay, last question while we have you. What's the latest in the world of ServiceNow?
Well, anybody that's deploying AI today knows it's absolute chaos. Companies don't know what's running, what's working, what's not. And that's why we've built the AI control tower. It helps companies turn that chaos into control, giving them visibility, governance, orchestration, and to really understand what value it's bringing together. So, we think the answer is ultimately this incredible probabilistic intelligence with deterministic controls and that orchestration layer from ServiceNow. And in May, we're going to show it all off at Knowledge.
Amazing. We hope all of your listeners will join us.
Well, a huge thanks to Colin for joining us today and to our friends at ServiceNow. You can go to servicenow.com/acquired to learn more. Okay, so we're in this era now where team owners have a lot more resources at their disposal and boy are they deploying it? Ben, what are some of the crazy things that they start doing during this time?
So, in 1968, Colin Chapman from Lotus had become a really big believer that the way that his drivers could go faster in the turns was applying more downforce so they'd have better traction on the road. And they put the first airfoils or wings on the car. And in '68, that was just really small wings. They almost look like early Formula 1, the cars that were just these like long tubes, but with like little hints of what Formula 1 would become on them. It's this kind of amazing transitional period. We'll link to it in the show notes.
And then don't they go to like big wings before the FIA regulates those out of existence? Right.
There is a lot of experimentation. Yeah. That happens in this period. It's really fun. In the email, we'll put a bunch of pictures of crazy F1 cars that were technically within regulation when they were first tried before all these tactics were made illegal. But it's probably time to stop and do a little physics lesson here. I never really understood this. So, this is listeners' education for me. Lighter cars are faster. So, why would you want to put a spoiler on a car that pushes it into the ground harder? You don't want a heavier car. And so, you sort of have to separate this idea of downforce pushing down on the ground from just weight. There are ways to get downforce, which can be good, that is different than a heavy car.
Yeah. It's funny. Before doing this episode and learning all this alongside you, I always just sort of assumed that like at least road car manufacturers put this stuff on cars to make them look cool, not to actually do anything, right? But you want downforce to make it stick to the road better on turns. But the issue, of course, is that with a big spoiler, yeah, you're creating downforce, but you're actually creating a ton of drag also. So the car is facing resistance to going forward as a byproduct of what you're attempting to really do is force the car down. So if you focus too much on optimizing for downforce on the turns, you end up slowing yourself down in the straightaways. So the takeaway from lesson number one here is downforce good, drag bad.
Yep. So let's flash forward 9 years from that 1968 initial aerodynamics experiment. So we're now here in the late 1970s. Lotus is still working on this issue. They were trying to figure out a way to produce downforce that doesn't produce a lot of drag. And what followed is the stuff of F1 lore. You will hear racing nerds talk about the Lotus 78 and the Lotus 79 as if these are like gilded vehicles,
So, the first breakthrough is, well, wait, what if we can turn the whole car into a wing? I mean, rather than our traditional shaped car with a wing slapped on top, what if we made it actually part of the body style itself? So, the whole thing gets pushed down. And when you look at the Lotus 78, it really does look like one big wing. I mean, Google it. We'll put it in the email. It's really cool. The second breakthrough is a fun one from the world of fluid dynamics. Everyone listening is probably familiar with how airplanes generate lift. The wing is shaped in a special way such that when the plane moves forward, you generate high air pressure underneath the wings, low air pressure over the wings, and thus the airplane is pushed up into the air. Well, what if you did the opposite? That is what the Lotus team did. They shaped a car like an upside-down airplane wing. So, the bottom of the car had a special skirt on it that shaped airflow to speed up under the car, squeezing air into a very small space since it's super close to the road. As the air molecules move along at high speed under the car, which creates that low air pressure zone, and then carefully control the air with a gradual upslope and a diffuser to guide how the air comes out from underneath the car in the back. The effect this had was to create low air pressure under the car, high air pressure over the car, and essentially suck the car onto the ground. And in physics, this is called the venturi effect. So the areas under the car are called venturi tunnels.
Ah, that's why it is funny. When you and I were at the Vegas Grand Prix and we kept saying, 'Oh my god, these are like fighter jets on the ground.' They actually are like fighter jets on the ground.
Yes, they really are like upside-down fighter jets. So did it work? Absolutely. Mario Andretti upon driving it said that it cornered as if it was painted to the road and he won both the drivers' championship and Lotus won the constructors' championship in 1978. Interestingly, by the 1980s, it was producing so much downforce that the drivers could take these corners at super fast speeds, and it actually became a safety hazard, especially because if the car would go up on a curb or the skirt slipped in any way, the cars were then going way faster than they otherwise could have without that sort of sucking to the ground, the ground effect to cause the traction. So, in 1983, these ground effects were outlawed and regulations were updated to say that you must have a flat-bottomed car.
Yes. But for fans of ground effects, they would make their way back for the 2022 to 2025 regulations, which that's what we saw in Vegas. David, it was crazy cool to watch because I think 70% of the downforce from those cars is created by the ground effects, not from the pushing down of the spoiler, but the sucking of the car onto the track. And so it was kicking up all that dirt, especially during qualifying cuz it's driving around on these Las Vegas roads that just have sand and dirt and silt that sort of builds up and creates these just like huge clouds of dust in the air from all the sucking. And then qualifying in the rain was insane. Seeing like all the rainwater just shooting up off of these cars.
Yeah. The rooster tails as they call it. And I think it was 2 years before we went in Las Vegas, one of the cars even sucked up a drain cover that had been welded shut and basically wrecked the car. But these cars produce so much downforce that if you drive over even a welded shut manhole cover, junk, it sucks it right up.
Wild. Yeah. So ground effects very, very powerful. There are a few other just giant leaps forward that would happen in areas other than aerodynamics also. So engines over the years have gotten way more fuel efficient with only 50% of energy in an F1 engine lost to heat compared to 70 or 80% in a road car being lost to heat. So this obviously is something that F1 teams care a lot about because if it's more efficient, you can carry less fuel, have a lighter car, go faster. So huge, huge advantage. They've also gotten a massive increase in horsepower, tripling from 300-something horsepower engines when we first started in the '50s to a thousand-ish horsepower coming out of these engines today.
Insane. In cars that are light enough that you could basically pick them up, a half to a third as heavy as like an average road sports car.
The F1 cars were that light because of all the carbon bodywork.
Yeah. So, a thousand horsepower in something that's basically light as a feather as far as cars go.
And then, of course, there's turbochargers, which are an insane invention. This harnesses the unused energy from the exhaust gases to spin a turbine and then use that to compress the air that is going into the engine, which ultimately means then there's more oxygen in each engine cycle. So you can have a more powerful combustion every single engine cycle and thus more power again in the car.
Which actually raises an important point too. It's not like any of these teams, even the ones that were backed by actual car manufacturers, were doing this with the goal of advancing technology for consumer road cars. But as a byproduct, a lot of this technology over the years did make its way into the consumer landscape.
Yes. And it did become an intentional strategy over time and it provided air cover for a lot of spend especially for these constructors that were also consumer car makers if they could say, 'Oh, this is R&D and stuff's going to go into cars.' And it did. I mean, you had paddle shifters and carbon or even just turbos. I mean, so many cars, even like not sports cars are turbos these days, and a lot of that technology got perfected in F1.
Yeah. I think people sort of overstate this when they say there's all this technology that came from F1 cars, but I think it's more like the technology was sort of iterated and perfected or they would explore new material science or something in F1 cars that would eventually go into road cars.
So that's engines on top of aerodynamics. Then there's this whole third category where they really had a breakthrough in electronics. So all the cars we've been talking about at this point were very, very manual and analog. And in the early '90s, the Williams team comes along and realizes, oh, this technology is finally good enough for us to try to automate some of the systems in the car in real time.
Let's add software, baby.
This is the early '90s. I mean, this is pre-internet. So, they come up with this whole crazy broad set of ideas and remarkably they implement basically all of them and they work very, very well. So, the systems are traction control, anti-lock brakes, active suspension, semi-automatic transmission. Speaking of road relevance, David, and transferability to consumer cars.
All of these worked together, and the car even automatically adjusted its ride height, customized to each corner on each racetrack. So, competitors saw this and got so mad and accused Williams of making a car that drove itself. But for a couple of years this was legal and they won both drivers' and constructors' championships in 1992 and 1993 with Nigel Mansell and Alain Prost. In fact, the car was so dominant that Prost's old teammate and rival from McLaren, the great Ayrton Senna, who we have not yet talked about in this episode, the three-time world champion, wanted to jump ship from McLaren to join Williams. And Prost was actually retiring after that '93 season. So, a spot did open up for Senna to join Williams in '94. But then the FIA made it illegal to do all this software stuff,
change the rules as soon as he gets there and says, 'Hey, you can't have all these electronic driving aids.' I mean, I know it makes the car really desirable, but no, this is not the same sport anymore because it actually decreases the amount that the driver matters so much that we aren't really willing to go there. So Senna is then left on a new team with a car that's just on par or quite possibly behind the quality of the whole rest of the grid when they had to take out all these electronic innovations. And sadly early in that 1994 season, the racing world would witness its most infamous and fatal crash in that Williams car.
Yeah. Which was obviously Senna's death in 1994, which becomes this global moment. I believe still to this day, Senna's funeral in Brazil is the largest attended public funeral in history.
I think three million people showed up in the streets.
It's this horrible tragedy. He had just sort of gone from rising star to clearly the best race car driver in the world. Just this natural talent. There's a beautiful documentary released in 2010 for anybody who's interested to go learn about his life and this crash.
I mean, one, it shined this light on just the sport in general in a way that hadn't happened since the modern television era began.
Two, it specifically shined a light on how unsafe it still was.
Yeah. So it's interesting because by this time the fatalities had really dropped off. So we mentioned, I'll just go through the counts here by decade. 1950s there were 14. In the '60s there was another 14. In the '70s there were 12.
Yeah. You know, more than one a season.
Yes. So then they start implementing a bunch of obvious stuff. The FIA has to inspect every track and make sure it is complying to all the rules before every race. You can't have straw bales anymore.
That's right. The barriers used to be straw bales. Yes. Now you need these guardrails. They have to be double reinforced. You need separation on the pit walls. There was a lot of stuff going on sort of near the pits that drivers were going too fast or accelerating too fast. Finally, you get fireproof overalls in the 1970s. You get fuel safety cells, mandatory seat belts, multi-point harnesses. So big steps in the '70s.
Yeah, this is one of the craziest things to me in doing the research was for a long period of time, F1 drivers actually refused to wear their seat belts because they wanted to get thrown out of the car so they didn't catch fire after it crashed, right?
They didn't want to limit their options in a dangerous situation. So, after all that, then in the 1980s, you have four deaths, a lot better than 14 or 12. And in the '90s, the only two deaths were this one weekend, Roland and Senna. And so it did kind of come as a shock because I think people felt like, oh, we're through this era, things are a lot safer, but obviously they still have a long way to go. So what happened after Senna's death from a safety perspective? And what impact did it have?
The biggest one is they just slowed down the cars, right? I mean, all this R&D and sticking to the road and getting crazy traction and taking high-speed turns, the faster you go, the more dangerous it is. And so, interestingly, F1 racing today is not that much faster than it was in 1950. The top speed is like 40 mph faster than the old top speed. I would have thought, oh, all this R&D, these cars are probably two, three, four times faster. No, they're not. And so right after Senna's death, they limited the aerodynamics of the cars. You couldn't use as big of wings. You couldn't use as big of diffusers. In 1998, a few years later, they grooved the tires to reduce cornering speed. So they actually looked a little bit more like the tires we use on the roads instead of the flats or the slicks that you see real race car tires. There were also some structural things they put into the cars. So deformable crash structures, survival cells, front impact testing, higher sides on the cockpits, and they changed the tracks too. A lot of corners were given larger runoffs and upgraded barriers. So that all did help. But in the 2010s, there were also two fatalities. And so this is when the really big noticeable change happened.
The halo. So in 2018, in response to the 2014 crashes, the FIA says enough is enough. We are going to mandate that every car has this really, really rigid, robust, heavy thing that you put right on top of the driver. And there's a giant bar directly in the center of the driver's field of view. So, there's a giant compromise here, but it has saved at least three people's lives since then because it can protect a driver even when a car is upside down and skidding. These innovations have made it so we have had zero fatalities since 2014. It's, I think, the longest stretch in F1 history without a fatal accident.
Yep. It certainly seems like this sport is a lot safer these days. Yeah, it's still dicey, but over the last 70 years, they've observed all the lowest hanging fruit of ways that they can protect the driver.
Yep. So, bring it back to the business narrative here, one of the kind of great ironies here of the obvious right decision to focus on safety and slow the cars down, is it just further fuels this sort of spending spiral amongst the teams? Because the harder you make it to go fast, the more they're going to be incentivized to spend every last dollar and look in every last little corner and find every last little loophole to get an advantage.
Yeah. I mean, when the sport first started, there were giant gains to pick up left and right, and you could sort of do all sorts of crazy stuff. And we were talking about all the different car designs with spoilers that are up on giant poles. And I mean, truly wacky ideas. There was a six-wheeled car at one point, right? Cuz it wasn't in the rules that you only had to have four wheels. And over time, as they start adding more and more guidelines for safety and for all these other reasons, the way to succeed in Formula 1 shifted from making a more powerful engine or figuring out the very best aero to figuring out how to exploit the rules.
Yeah. And do more and more exotic stuff.
Yes. What is left unclear in the rules where I can see a little bit of daylight between what they intended to write and what they did write and what can I catch that the other teams won't catch and how do I sink $50 million of R&D into achieving some speed outcome with that.
It's really funny, I hadn't thought about this till now, but actually the right analogy is the semiconductor industry and Moore's law. It's like a different set of rules. It's like the rules of physics instead of the rules of the FIA. But as you progress, like TSMC and ASML, and they got to spend incrementally more and more capex and more R&D every year to push the boundaries farther and farther and all the low-hanging fruit is gone and they get more and more exotic with lasers melting tin just in time, you know, etc., etc.
Good point. Yeah, I hadn't thought about it that way. Meanwhile, while the teams are spending themselves into unprofitable oblivion, Bernie, starting in 1993, becomes the highest paid corporate executive in Britain, taking home in 1993 $44.5 million in cash, and that's only what's reported to Her Majesty the Crown in that year, as we'll get into. He's also getting older by this point in time. He's in his late 60s. He's on his second marriage. He has two young daughters with his second wife, Slavica. And he starts to think about estate planning and maybe some liquidity for his family and his estate. But in doing so, he just about causes the whole thing to fall apart. Because even though he was the highest paid corporate executive in Britain, that didn't necessarily mean that he was running FOPA and F1 like any kind of professional organization. He did everything himself and intentionally didn't keep any records. He minimized the number of contracts that he would sign intentionally. He kind of operated F1 like a sole proprietorship, shall we say? The whole corporate operation was run out of a building in London that was also his house. Seriously, like the bottom four floors of the building were F1 offices and then he had the floors above and supposedly he had all the rooms in the offices bugged so he could listen to what everybody was saying at every point in time. And famously he would kick everyone out at 6:00 p.m. He'd be like, 'All right, leave my house now. It's time for y'all to go home.' Yeah.
Wow. This continued until Liberty takes over in 2017. He had a few lawyers and finance people to make it all function. But there was no marketing department for F1. There was no research or data department. There was no sales department besides Bernie.
Well, there weren't actually that many things to sell. They weren't selling a lot of sponsorship at the league level at that time. That was pretty much all teams. I guess TV rights you have to sell.
Exactly. Like, yes on the sponsorship side, but TV rights, you know, they're in 90, soon 100, 120, 130 countries, all with different contracts and different providers. Bernie's just out there doing this more or less all by himself, though we should say he also had a right-hand man and essentially number two in the business, a former Formula 2 driver and also owner of another team in the league, the March team, a man named Max Mosley, who happened also to be a
lawyer. Very useful for Bernie's activities. There's this great quote that Bernie recalls saying to him when they first start working together: 'Your problem, Max, is you always want things absolutely clear, and sometimes it's better if things are not clear.' So he gets with the program and they pretty quickly become two peas in a pod. In 1993, that same year that Bernie becomes the highest paid executive in the UK, he kind of shadow arranges to get Max installed as the new president of the FIA. Meanwhile, he had already somehow connived to get himself, Bernie, already an official role at the FIA as the vice president in charge of promotional affairs. In addition to all this, at one point along the way, he also took over as the promoter of the Belgian Grand Prix at Spa.
Oh, so he was paying a race fee to himself.
Yes. So at various times, Bernie was serving in a principal role in all of the major F1 stakeholder categories: team owner, race promoter, official FIA representative, and of course CEO and owner of FOM and de facto the league itself. And I think at every point in time, he was always in at least two, if not three or four of those roles simultaneously.
He really takes the, you know, no conflict, no interest phrase to new heights.
Absolutely unbelievable. There's a great quote from Eddie Jordan, who is a Formula 1 legend. Do you know this quote?
Uh, no. No, no. He said that Bernie Ecclestone was someone who sold Formula 1 four times, has never bought it back, has never lost its control, and still owns it. And do you know the most important thing? He never effing owned it in the first place.
Yes. So, let's tell that story about how he sells it four times, never buys it back, and still owns it and never owned it in the first place. That is such a great quote. I hadn't found that. I love it. I love it. Yes. But listeners, before we do that, now is a great time to tell you about one of our favorite companies, Vercel. And funny enough, as we were preparing for this episode, I was in the pit lane at the Las Vegas Grand Prix, and I ran into none other than Vercel founder and CEO, Guillermo Rauch.
Which is very fitting since Vercel is known for speed.
Yes. They are known for lightning fast performance and the insane iteration velocity that they enable for developers. So it's no surprise that they are emerging as the ideal production layer for AI agents.
Yeah, I mean gosh, all signs are pointing to 2026 as the year that AI moves into actual agents that do actual work. But building an agent is the easy part. Operating a whole fleet of agents at scale, that's hard. And doing it with governance, isolation, enforcement, really hard.
So that's where Vercel comes in. They've already built the modern platform for the web that is trusted by companies from Notion to DoorDash to Stripe. And that makes them uniquely positioned for the agentic web because they already power the plumbing underneath many of the world's biggest applications.
Yep. If you're building with AI right now, you're almost certainly already touching Vercel's infrastructure. Their AI gateway and sandbox are used by everyone from one-person startups to the biggest global enterprises. And their AI SDK is the toolkit to build AI-powered products. And it's downloaded 7 million times each week. They recently launched Vercel Agent, a suite of AI-powered developer tools that they are calling self-driving infrastructure for building, deploying, and operating agents. It's the first step toward a fully autonomous cloud operation. Vercel is your one-stop shop for everything you need to build for this AI era. Agents, apps, sites, dashboards, whatever. With Vercel, you can just ship.
So, you can visit vercel.com/acquired to get started. That's vercel.com/acquired and just tell them that Ben and David sent you.
Okay. So, Bernie's many sales and monetization opportunities. Here in the mid-90s, he starts exploring liquidity options for himself. And in particular, he wants to funnel that liquidity into a new set of offshore vehicles to avoid British estate taxes for his family after he dies. And you know, this is like a natural activity for somebody approaching their 70th birthday. What Bernie didn't foresee, or anybody else, is he had another 25 years at least in him. At least, because he's still alive in 2026.
Yep. Now, also to be somewhat fair here, protecting his estate from the heavy British inheritance taxes is a legitimate concern because otherwise there would be no way that his family could keep control of F1 after his death. It would have to be broken up and sold just purely to fund the estate taxes. So if you actually are a team, this is starting to become kind of an existential risk of what if Bernie dies suddenly and then they have to sell F1 off into different parts with different owners.
And you say, you know, if you're a team owner, it's not just if you're a team owner. If you're a team owner or a race promoter, you want to play on here. So it just so happens here in the mid to late 90s that we're in the height of the dot-com era.
Wait, that plays into this?
Oh, yeah. So, what's the natural thing to do? Bernie's gonna IPO F1.
Oh, I've totally missed this.
Oh, yeah. Oh, there is so much delicious chaos that gets unleashed here. By this point in time, Bernie's various companies, and there are even many more than we have talked about on this episode, just for simplicity. Collectively, they're earning about 250 million British pounds a year in revenue, and they have 50% plus EBITDA margins. And remember this is at a time when the British pound is worth call it 60 to 70% more than the US dollar. This is a very IPO-able business if it were a, you know, regular business.
Yes. Nonetheless, times are so crazy that Bernie hatches a plan with his bankers at Salomon Brothers to consolidate all the various F1 companies that he owns into a single holding company called SLEC Holdings. And he's going to transfer his ownership of that new company to his then second wife, Slavica, for tax reasons. So SLEC was short for Slavica Ecclestone, and float it in a dual-listed IPO in the US and England with an anticipated valuation of around $4 billion. We should also note here too, we've been a little glib in this episode. In 2023, Bernie ultimately pleaded guilty to tax fraud as a result of all the machinations we're about to talk about and had to pay a 653 million pound payment to the crown in back taxes and fines. And he also received a, I think, 17-month jail sentence which was then suspended probably in large part to his advanced age.
Crazy. All of this lurking in the background may have been part of the reason that famously he turned down several offers of knighthood throughout his life.
Yeah. Although you'd think it would actually bode better for you if you're a knight going into some lawsuit with the government over owing the government money.
Good point. Yeah. Does the crown sue one of their own? I don't know.
Anyway, as he starts formulating all these plans with Salomon Brothers, they're like, 'Well, I see your revenue. I see your EBITDA.'
And what were those again?
250 million British pounds of revenue and call it 50 plus percent margins on that.
Yeah, great business. What they don't see is any sort of formal legal control or document that he has from anybody giving him the actual rights to a lot of this. You know, he's got the actual rights to the TV stuff, but the promoter fee stuff, the transportation, we haven't even mentioned the Paddock Club that gets set up along the way here, there's a lot of money flowing through that. And to be clear, these are all income streams to Bernie. I mean, so of course we've talked about the media rights, but what a race promoter does is if F1 is thinking about going to a racetrack, the person who owns the racetrack or a company affiliated with the racetrack or a government affiliated with the racetrack pays a giant amount of money to Bernie for the privilege of having a race there. That's a promoter fee.
Yep. So conveniently, right at this same time as they're doing IPO preparations, it comes time to negotiate the fourth Concorde Agreement with the teams and the FIA. In this new agreement, Bernie swaps in a new entity called Formula One Administration Limited, a new company owned by Bernie, for the original FOA, so that he can now legally have all the rights to everything he's doing. And remember who the new president of FIA is that just got installed.
So he's just gonna rubber stamp it, of course.
Or that's at least the belief.
Yeah. Well, it passes. Let's just say that the path is now paved to IPO. Except there's one snag that comes up. News of the plans as well as Bernie's recent sort of consolidation of legal power gets leaked to the press. And this causes the European Union antitrust investigators to start poking around.
Bernie is doing so much self-dealing here that there's no way he's going to survive an investigation.
So Bernie shelves the IPO idea and also resigns from his official role as a vice president at the FIA. And the combination of those two things is enough to at least get the EU off his back for the moment. But he needs another plan for getting liquidity. So he switches banks to Morgan Stanley and convinces them that instead of IPOing, they should issue debt on F1 and use the proceeds from the debt to pay himself and his new offshore entities a special $1.4 billion dividend.
What? Secured by the future TV rights streams, by the revenue streams from the future TV rights.
This deal actually happens. It's called the Bernie Bonds.
It is always something you should be a little bit worried about if a company is raising a giant amount of debt principally to pay out its primary shareholder a special dividend.
Yes. Especially if it's Bernie.
Why would you buy that debt?
That's a really good question. The offering, I believe, was intended to be $2 billion. But there was not enough demand and Morgan Stanley could only rustle up 1.4 billion worth of money that was willing to do this deal.
Either way, the deal happens on a Friday. All gets done. Debt's issued. Bernie gets his dividend. Money gets transferred to the offshore entities. On the following Monday, Bernie calls up his bankers and says, 'Oh, there was something else that I didn't tell you. I'm having triple bypass heart surgery today.'
Today. So, they just did the debt deal, just issued the special dividend, took $1.4 billion out. Three days later, Bernie is having triple bypass heart surgery. The entire future success of this thing is heavily dependent on Bernie being in the seat.
Yes. Fortunately for him and everybody else, he survives the surgery, gives a quote to the press from the hospital room: 'I have disappointed so many people,' which later one of his principal bankers would recall her response being, 'If you make it out alive, I'm gonna come kill you myself.' Oh man. Well, Bernie survives. Later that year, we're in 1999 now. His wife Slavica, i.e. really Bernie, starts selling off equity stakes in SLEC Holdings to various private equity firms including, cannot make this up, in February of 2000 they sell a 37% stake in F1 to Hellman & Friedman, the giant private equity firm based in San Francisco. H&F then goes and buys out some of the other minority owners that Slavica/Bernie had been selling stakes to, and Hellman & Friedman collectively gets a 50% ownership stake in F1. And then they go negotiate with Slavica and Bernie an option to buy another 25% from them for 600 million pounds and gain 75% majority ownership of F1. So they get the option, the option's papered one month later in March of 2000.
This was in March of 2000, right when the dot-com crash happened.
The dot-com crash is about to happen, but it gets crazier before the bubble pops.
In March, H&F gets an unsolicited over-the-top bid from a German new media company called EM.TV to buy their entire stake in SLEC immediately, right away. This is the height of dot-com craziness right before the crash. So this German company EM.TV, they had just previously bought the Jim Henson Company in the US, which of course makes the Muppets, and they were just trying to roll up all of these media properties and they were going to bring them into the digital era or something, some sort of dot-com fever dream. H&F hits the bid. They sell out.
So, how long did H&F own Formula 1?
H&F owns Formula 1 for one month. They make an immediate 241 million pound profit in one month. On how much invested?
1.1, 1.2 billion invested.
So, you know, a 20% return, but like in a month. I got more. So, 50% of F1 is now in the hands of EM.TV. They want to exercise the 25% option that H&F had negotiated, but they don't have any more cash. They blew it all on the first transaction.
The Muppets. So, EM.TV goes out and does another 1.6 billion euro debt deal to raise the money. So, they take 600 million from JP Morgan and Lehman Brothers and they take a billion from a local German bank called Bayern LB. They use this debt. They exercise the option. They now own 75% of F1 and Bernie and Slavica hold the last 25%.
And then the bubble burst.
And wow. So all that was done like in days, weeks, like right up to the end times. The music is ending as this is all happening. Bernie, meanwhile, is just getting tons of money into his bank accounts.
The bubble bursts. EM.TV misses their interest payments. Shocking. Shocking.
Another German media mogul named Leo Kirch comes in and saves the company. His company, Kirch Media, takes over EM.TV. They now assume F1 ownership. 18 months later, they go bankrupt.
So 2002, the net result of which is that ownership of the 75% stake in F1 transfers to the debt holders.
Bayern LB, the German bank, JP Morgan, and Lehman Brothers. With Bernie and Slavica still owning the 25% minority share.
Okay, so it all comes to a head in 2004 when the banks are super frustrated because Bernie's still running the thing as he always did, paying himself everything. The banks keep trying to tell Bernie what to do. They're like issuing him directions as if he's their employee, and Bernie just keeps ignoring them. So, the bank consortium sues Bernie for control of the sport. The judge rules in favor of the banks. However, Bernie addresses the media after the court proceedings and says that the verdict would mean, quote, 'nothing at all' and he's planning to continue business as usual because he's got an ace up his sleeve. Separately, he has been negotiating with CVC Capital Partners, the large European private equity firm. The deal gets done with CVC. They buy out the banks. They also buy out Bernie and Slavica's 25%. So, more money going to Bernie now here.
Whoa. But Bernie will remain CEO.
He's just an employee. He's hired by CVC to continue being Bernie, and he gets the opportunity to use some of his proceeds to invest with CVC alongside them in the deal.
All told, CVC and Bernie for his portion spend about $2 billion acquiring 100% ownership. They finance 1.1 billion of it with another set of debt. So, they put 900 million of cash equity into the deal.
Compared to I believe over three billion that Bernie and his trust had pulled out of the company through all the debt and equity machinations that we discussed earlier.
This is important to know. The CVC/Bernie buy-in to this new F1 entity is about 900 million of equity.
$2 billion total purchase price including the debt. Bernie resumes his job with renewed vigor now that he is newly incentivized to grow revenue and profits again. So the first thing that he does after CVC cleans up the ownership is he kind of goes right back to his original bag of tricks, which is extracting more money from race promoters. So by this point in time, 2005-ish, there are basically three types of Grand Prix races. You have the prestigious historic ones like Monaco and Monza and Silverstone. They're not going anywhere.
The European heritage tracks, if you will.
Exactly. They don't pay nearly as much in race fees to F1, but they're sort of there to build and maintain the brand.
Yep. Then you have a new set of races like Bahrain and China that had just come on.
They are paying huge fees to F1 in order to have their races on the calendar.
Yes. 30, 40, 50 million a year-ish.
And today even into the 60 millions.
Yes. The problem opportunity at this point in time is you had a whole bunch of races in the middle. Canada, Australia, Spain, Belgium, the second race in Germany that wasn't the Nürburgring, the second race in Italy that wasn't Monza, etc., etc., etc. Those other races actually made up most of the calendar, but they neither brought in a lot of revenue, nor were they any sort of strategic value. Like, nobody got excited.
Right? They weren't an expansion opportunity for the sport. They weren't a way to find new audience.
Yep. So Bernie goes out and he courts Abu Dhabi, Singapore, and India to come in and displace some of those middle races and be new Grands Prix. And just like Bahrain and China, these are big money deals. So India is 40 million a year just in race fees to F1. Abu Dhabi is the biggest. They commit to a billion dollar total F1 investment over the coming years, including constructing a whole new track from scratch in the desert outside the city. So Bernie's on a roll with these new races. So then in the early 2010s, Bernie lands the big one, Russia. He'd been trying to get a Russian Grand Prix for a long time. Russia had just won the 2014 Winter Olympic bid for Sochi. Yep. And put $50 billion into the ground in infrastructure at Sochi for the Olympics. Bernie and F1 goes and convinces them that the best way to sort of amortize the cost of this investment in Sochi is to put a race there after the Olympics. Probably not wrong. Totally not wrong. So they sign a deal with Russia, and of course it's a deal with the state. You know, anytime you're negotiating with Russia, you're negotiating with the state.
Increasingly, a lot of these flyaway races are.
Yes. This is not unique to Russia here.
It's not a local entrepreneur race promoter with a racetrack. These are sovereign deals.
Yes. To construct a new $270 million F1 track around the Olympic Park and pay F1 $50 million a year for seven years to host the race. There's an amazing Bernie and Putin story. As they're in final negotiations for the deal, the Russian contingent asks Bernie to fly over to Sochi and sit down with Putin to finalize the deal. To which Bernie responds, 'Do I look stupid? If they think I'm going to go negotiate this contract with Putin, no way. If they want me to go, they can send back the contract first, signed,' which they do. And then Bernie goes to Sochi and sits down with Putin and do a press conference and announce the whole thing.
I guess that's how you negotiate with Putin is you don't negotiate with Putin. So ultimately the Russian Grand Prix would get canned early in 2022 after Russia invaded Ukraine.
I was going to say it's not on the calendar I saw.
No. No. Bernie would get asked on a British morning TV show after the Ukraine invasion what he thinks about all this and he famously says that Putin is a, quote, 'first class person' and that he, Bernie, would take a bullet for him.
Yeah. Okay. I did hear from some folks that I talked to, and I'd always ask the question, 'What was it like working with Bernie?' Overwhelmingly people said delightful.
That like when all the dust settled, like the terms, you kind of look at the terms and go, oh, whoa, there's actually not much here for me.
But just delightful to work with.
He's a very loyal partner.
Yeah. So anyway, that's the racetrack side of things under the reinvigorated Bernie and CVC. The other big piece, of course, is the team relations side of things. We previewed this earlier, but at this point, the whole stick of, 'Hey, I'm getting rich, but you're getting rich, too,' has way worn out its welcome.
There's also the fact too that now it's not just Bernie getting rich, it's the private equity firm that's also getting rich on the backs of the teams and all the investments that they're making into the cars and R&D. And by this era in the kind of mid-late 2000s, it's truly gotten out of control. The top teams are spending like 4 to 500 million a year on their cars. And the race calendar is insane because you know it started in the 50s, 60s of hey we'll go wherever we can get enough teams to race and then it turned into we'll go wherever anybody will write a $40 million or larger check.
Let's put this circus on a plane to Russia and China.
And now the, like by this point in history we're talking about here, the mid-late 2000s, the broadcast calendar makes no sense. You've only optimized for who will pay us the biggest race promotion fees. These races are being run at all hours of the day and night.
So, team relations are pretty bad. And then 2008 hits. The biggest teams with the biggest budgets, yes, they're spending themselves way into the red, but at least they were sort of backstopped by actual consumer car manufacturers that own them and were investing into them for all sorts of, you know, strategic or R&D or brand marketing purposes. So, you know, you had Honda in the sport, Toyota, BMW, obviously Ferrari.
Yeah. As we hit 2008 and the financial crisis, the consumer car businesses for all of these guys except Ferrari just fall off the cliff. So, all of a sudden, it becomes no longer tenable either financially or just public perception wise for Honda or BMW, etc. to keep operating these money sinkhole F1 teams.
So, as they get into 2008, Bernie, CVC, and the FIA all team up and they float a solution, a lifeline to the teams. We are going to help you guys institute a cost cap on manufacturing and we'll help you design it. Let's get it approved by all the teams. This will save you. Basically, what they're proposing is the F1 equivalent of a salary cap in other sports like the NFL or the NBA, except instead of on the players, the salary cap is going to be on the investments into the cars.
Yes. And there are some teams that are a fan of this. And there are other teams who hate this more than anything they could possibly imagine.
Yes. Specifically Ferrari and McLaren. Ferrari would like nothing more than to lose half a billion dollars a year making their F1 cars as long as they get to win. They do not care. It pays back infinitely in brand marketing if they are just a winning F1 team for their particular line of business.
You know what car manufacturer is basically unaffected by a global financial recession? Ferrari.
Yes. Their customers are staying on the wait list no matter what the financial climate is out there. So Ferrari and McLaren has a lot of the same dynamics. They threaten to pull out of the sport and ultimately they bully all the other teams into joining them in opposition to the cost cap. There's also all of this pent up bad will against Bernie, all these deals that have happened, CVC, the FIA, etc. In 2009, eight of the 10 teams threatened to pull out of the sport and start a rival breakaway league called FOTA, the Formula One Teams Association.
Yeah. And they announced that they're doing it and they're creating their own series starting in 2010.
Yeah. So, the Formula 1 Teams Association or FOTA was really two things in one. One, it's can we band together as a team to negotiate as one to get leverage in whatever we're negotiating over. And in this instance, it's we don't want a cost cap. The other thing is it is a legitimate breakaway series.
Which it would be a really hard thing to start. I mean to go figure out how to sign all these new deals with the best tracks in the world and media rights deals. There's a lot of value in what Bernie and the series are actually doing.
Yeah. So it works. The cost caps didn't happen. They did impose a 10-year freeze on engine development. And so in the short term, this is kind of how these negotiations go. The teams got what they wanted without actually having to leave by having a credible threat to leave.
Yep. And specifically what they got was Max Mosley's resignation from the FIA or at least agreement not to stand for reelection.
It's hard for them to actually link arms for too long because kind of two reasons. One, Bernie and Max could offer different things to different teams to get them to individually cave. So, like they can go to the Brawn team, and we'll talk about the Brawn team in a minute, but there was this shoestring budget team, scrappy upstart. Bernie had been withholding their payments from the previous year when they had raced as Honda because Bernie's opinion was, 'Well, you're not the same team, so you don't deserve your payout.' And so, save it. Brawn really needs the cash. So, it's very easy to go and get them to capitulate when you owe them a few million bucks. And you're going to wire the money immediately as long as they break ranks with the other team. It's a great way to bust a strike. But the biggest thing is it's just this kind of misaligned incentives where all these constructors actually have very different reasons for racing and different incentives and so it's hard for them to be unified on anything given the wildly different incentive set.
Yep. So, I don't know if you knew this, David, I talked to Zak Brown, the CEO of McLaren Racing to prep for this episode, and I specifically asked him why teams don't form a breakaway series now. And we'll talk about the economics of what the business looks like today. And he had a great answer. So, he said, 'Prior to Liberty's acquisition of F1, there had been many discussions and even attempts at a breakaway series. Of course, the teams would unite around the sport themselves, but it always fell down when the teams had to discuss how to share the pie.' And you know, it's one of these things where Ferrari is gonna say, 'We're entitled to this and our heritage for the sport.' And McLaren and Mercedes, they're gonna say, 'Oh, we're really good, so we deserve more.' So, yeah, they just never would agree on how to divide up the pie.
Yeah. The net of this is that team and league relations in F1 are at an all-time low.
Yes. Here at the end of the 2000s.
Yeah. And we didn't even talk about, if you're a fan of F1 during this time period, you know about Spygate and Crashgate. Both of these, McLaren magically wound up with a giant binder full of the complete specification of Ferrari's car for that year and there was this all giant hullabaloo and court hearings and everything about these stolen documents and did they use them to win? At the same time you have Crashgate.
Yeah, this is bad. Where it ended up looking pretty conclusive that a team intentionally had one of their drivers crash in order to get a safety car to come out which would advantage their other driver to do better in that race putting one of their drivers' life at risk.
Not just one of their drivers, like other drivers too could be involved in the crash. Yeah. And they're covering it up and they're... these are major sports integrity issues.
Public trust is at an all-time low.
Yeah. Yeah. Yeah. Yeah. So, ironically, miraculously, and certainly despite all of Bernie's best efforts to the contrary, pretty much this whole situation gets fixed by two new teams that enter Formula 1 who nobody saw coming. One of which was an auto manufacturer and dark horse re-entrant into the sport.
The other was a, well, I was going to say energy drink manufacturer, but I don't think we can say manufacturer because they don't actually make the drink.
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All right. So David, you mentioned an energy drink company.
Yes. So let's start with Red Bull. The Red Bull company story itself like absolutely deserves its own Acquired episode someday because it is truly insane. So briefly, Dietrich Mateschitz was an Austrian toothpaste salesman for Unilever and P&G who goes on a business trip to Thailand in 1984, decides to radically change his life and brings back a local Thai energy tonic to start bottling and selling, or again I can't even really say that because he outsources manufacturing, start bottling and selling it and turns it all into a company that now does over $10 billion a year in annual sales. Like astonishing. The key pillar of what Red Bull the company actually does is of course marketing. And one of the main pillars of its marketing strategy has always been extreme sports. Red Bull, their entire business model is, 'Yeah, we sell these drinks, but really you're buying the drinks to associate with a lifestyle, and we need to educate you about the lifestyle that you are, you know, associating yourself with.'
So, in 1989, like I mean actually five years, pretty quickly after Dietrich starts the company, Red Bull sponsors its first F1 driver. And then they steadily grow their investment in the sport until ultimately they become the title sponsor of the Sauber team in 1995.
Is that the team that's now Audi?
Sauber. Yep. Yep. Yep. Yep. This is where Red Bull starts.
Huh. The Red Bull entrance into F1 was so perfectly timed because this is right as the EU regulation is coming online, forcing tobacco finally out of the sport.
And so the great irony is that it's actually like an energy drink company that replaces the cigarettes. There's a great quote that Josh and Jonathan have in The Formula: 'Two decades after Marlboro execs looked at F1 drivers and saw the heirs to the American cowboy, Mateschitz recognized them for what they really were: overcaffeinated adrenaline junkies with scant regard for their personal safety. It was a match made in marketing heaven.'
Perfect. So Red Bull totally breaks the mold of what an F1 sponsor should be doing. Previously, the sponsors were all leaning into like the prestige aspect of the sport, you know, the luxury, the aristocraticness of it, you know, all the Monaco stuff, the oil companies, the watch companies, none of these sponsors are rocking the boat, right? And importantly, just like F1 and Bernie itself, none of these sponsors except maybe the cigarette companies are interested in younger audiences. Bernie has a great quote about this when he's asked about the challenges F1 faces of its aging demographic. He says that younger audiences are not a priority because they, quote, 'don't buy Rolexes.'
Yet. That is the key thing, Bernie. Yet. Yet.
Anyway, Red Bull though of course is the opposite of this. They are all about young people, the extreme lifestyle. They don't just sponsor F1. They sponsor all these extreme sports like jumping out of planes in the stratosphere, you know.
Yeah, they are unique among the F1 sponsor set. The problem though for Red Bull is that Sauber isn't very good. So there's another great quote from Mateschitz in The Formula: 'If an insurance company sponsors a team and that team loses, people don't change their insurance company. But when the Red Bulls lose, people get a new drink.'
In 2004, Red Bull dumps Sauber and makes the radical decision that rather than sponsoring another team, they are going to directly get into the business. And Mateschitz and Red Bull buy the failing Jaguar Racing team which was at this point in time owned by Ford because Ford had acquired Jaguar and with it came the F1 racing team. Jaguar was going through all sorts of trouble as was Ford during the financial crisis and the lead-up to it. Things are so bad for the team that Ford is willing to sell the whole team to Red Bull for one British pound.
Really? I didn't realize that.
Yep. The purchase price that Red Bull paid was one British pound to establish Red Bull Racing.
Now, the problem is they still got to make the team good. But can we talk about the like amazing full circle moment of this year now that Ford is...
Yes. The partnering with Red Bull on their power units.
Yes. Yes. It's so full circle. It's amazing.
Also, Ford actually did make engines for F1 for a long time. So, it's interesting that like their exit from the sport was they were no longer an engine manufacturer. Then they had this weird team with Jaguar. They divested that and then they're dormant in the sport for 20 years. Yeah. Back to Red Bull taking over. Yes. They need to make the team good. Obviously, that's not going to happen overnight, but they start, you know, putting steps in place. What they can do now that they actually own a team instead of just being a title sponsor is they can act however they want within the paddock. So when Red Bull rolls up to the paddock the next year in 2005, which remember is the first year of CVC's ownership and the new Bernie regime, they bring, no joke, a mobile nightclub named the Energy Station as their team paddock facility to all the Grands Prix around the world. And they have a radical open-door policy. So previously the paddock was like the, you know, sacred place corporate sponsors and high rollers could spend for paddock club access was very limited. Red Bull rolls in and we're like the door is open all the time. Anybody who is in the paddock can come in to our Energy Station. You could be from any other team, you could be any other sponsor, you could be a guest. Just come on in and party with us. So they have DJs at all hours. They have a team of girls, the Red Bull Formula Unas team of, you know, hostesses who are there. They have a swimming pool on the roof.
Do you know what they did in Monaco?
I read about this but I can't remember.
They, there's not room for the Red Bull Energy Station because it's Monaco and there's not room for anything. Right. And so they constructed a temporary building that they put on pontoons and they have it out in the harbor.
Amazing. Amazing. Yeah. They're just like giant middle finger to the whole establishment.
There's alcohol everywhere. Drinks are flowing. And of course there is Red Bull free for, I mean it's genius. It's absolutely genius. So, all of this is masterminded by Dietrich and the young team principal that he hires, takes a chance on to run the team. Christian Horner.
Who, you know, if you watch Drive to Survive, you probably know all about Christian Horner.
The other team owners and principals and Bernie hates this. Like hate it. They hate it so much. You know, they're trying to control everything. This is a serious sport. This is a serious enterprise. And here's Red Bull just partying.
And Red Bull got much better as a racing team. But the essence of the strategy is basically still the same. They generate zero profit despite being one of the best teams and the highest revenue teams, or near zero profit, very thin, to create the biggest marketing spectacle that they can to sell energy drinks. It's just a super different business model than anyone else in the...
It's almost like, like Amazon and streaming, you know, like Prime Video, which we'll talk about later. Like the business model is not the streaming, it's...
Anyway, obviously all the other team owners hate it, but the drivers and the staffs love it. You know, these are all young people mostly who are driving the cars, working on the engineering as mechanics, etc. All of a sudden, there's like a 24/7 party following them around the world. Like, hell yeah.
So, McLaren goes so far, they even forbid all members of their team from entering the Energy Station. Like, it's like a fireable offense if you're caught.
No fun. And honestly, like you're gonna go have drinks, you're probably gonna share team secrets. It's probably a good policy.
Exactly. Exactly. So, one night, back to Christian Horner and the strategy of like, how do we actually start building a winning team here? He clandestinely invites McLaren's legendary technical director over to the Energy Station for a chat late at night against rules. And that technical director just happened to be a man named Adrian Newey, the single most legendary car designer probably in history.
The way people talk about Adrian Newey is basically the same way that they talk about Kelly Johnson from Skunk Works from our Lockheed Martin episode. And I've heard the comment from more than one person. It's like he can see air.
Yes, he is a savant of aerodynamic design.
And Adrian's book is great talking about sort of his career in F1 and what he's learned. He still draws by hand.
Yeah. Yeah. In the age of CAD and AI and everything.
He just sort of like envisions physical forms of cars, how air will flow around them and then draws with a pencil.
Yep. So her and Dietrich lure Newey into joining Red Bull, and this is how they build a winning team. It takes a couple years to ramp, but starting in 2010 — so what's that? Five seasons after they enter the league — Red Bull starts a run of four consecutive drivers' and constructors' titles.
From 2010 to 2013. And importantly for the product on the field, up until this point, the racing had gotten pretty boring because Ferrari had been on this huge run where Michael Schumacher was just dominating the sport and like blowing away all competition.
Well, I mean, there were some years where it really came down to the wire or didn't go Schumacher's way. But if you were an F1 fan in the '90s and early 2000s, it is totally fair to say there was Schumacher and then there was everyone else.
Yeah. And that had started to fade, as we'll get into in a minute.
And was this Sebastian Vettel in 2010 that kicked off the Red Bull run?
Yep. This starts a new dynasty within F1 of an energy drink company.
I know. And it's so fun watching. I mean, they are truly a central figure of the Drive to Survive narrative. Starting with Sebastian all the way through, you know, Max is arguably the best driver in the sport today. And so it's so fascinating that he's on an energy drink team.
Right? The most insane thing about Red Bull, I think, is I used to think they were like a sponsor — like, oh, this energy drink company uses F1 for marketing — but they have developed so much competency in actually being a constructor that...
They're building a car, right? Like a road car.
Yeah. They're like a real car company now.
Not technically road, but track. So they're building a supercar, limited production and all that, but like a car that you can go buy and race on a racetrack. I think it's the RB17. It's the last thing Adrian Newey did when he was there, is design this car. And I mean, you look around — like, what does a car company do? It makes the body, it makes the power units. Red Bull has Red Bull Powertrains, which is a lot of former Honda people that they've sort of hired, and now they're working with Ford. But like, they do a lot of the things that a car company does.
Yep. It's an incredible story. And as you start to think about dragging this sport kicking and screaming into the 21st century and positioning for the social media era, you could imagine that this is a really good thing. So meanwhile, during this era, as we alluded to earlier, there is another hugely successful team that builds its own dynasty that comes out of nowhere, also gets purchased for one British pound. And listeners, I suspect unless you are a hardcore F1 fan, you probably will not be able to guess what team this is, but see if you can figure it out as we go along.
But who is it in 2006, David? What does the team start as?
So we talked a second ago about Michael Schumacher's dominance of the league in the late '90s and early 2000s at Ferrari. Side note: did you know he is one of the first athletes to pass a billion dollars in career earnings? It was apparently right around the same time as Tiger Woods.
No way. I didn't know that.
Michael Schumacher was getting paid $60 million a year.
In that era. Like, that's what Max and Lewis make today.
And with all the inflation that's happened with the growth of the sport, I mean, this illustrates just how much Ferrari is perfectly willing to burn money to win. Like, they will generate an infinite amount of losses in order to win in Formula 1. You had the driver of his generation, sort of the person who took the torch post-Senna, and is so obviously the best driver.
And obviously, you know, most athletes that you would think of who have become billionaires didn't become billionaires because of their sport salaries, right? It was off the field, but...
And Schumacher had a lot of off-the-field stuff too. Interesting. Interesting. Huh.
All right. Well, so one thing we didn't talk about in Schumacher's dominance at Ferrari was like, yes, it was him. He was the driver of his generation, but it was also the engineering team behind him, and specifically the engineering team led by the technical director at Ferrari at the time, Ross Brawn.
Okay. And the whole tires thing. We got to talk about that.
Okay. Well, I'm going to get into it. So what Brawn realized, maybe not first, but I think better than anybody, was the dynamic we talked about earlier, that after the FIA started clamping down so much on the rules, the way to win was to exploit loopholes. So Brawn figured out a whole bunch of stuff together with Schumacher.
And Schumacher's work ethic was unbelievable. I mean, there's another great documentary that people should watch, Schumacher on Netflix. But he was like a driver and an engineer, or like a driver and a mechanic. He's always in the garage. He's there at all hours. He's getting as many test laps in as he can. And this is an era where you could do that. He's spending, you know, if he's not on the track and he's not in the garage, then he's working out, and his work ethic is just like unbelievable.
Yeah. He's an animal. He's like the Max Verstappen of his era, but he's got a wrench in his hand and he's also the ultimate collaborator for the engineers.
Yes. So they figure out that there's a loophole with the way tires work in F1. So for a brief period of time, you could pick between one of two tire manufacturers. Bridgestone had a big issue. So almost everyone said, 'Oh, we're going to move away from Bridgestone to Michelin.' And Ferrari and Ross Brawn in particular realized, 'Well, wait a minute. If we're the only ones that stick with Bridgestone, like, yeah, it's counterintuitive to do that because these tires apparently have a big problem, but if we send a bunch of engineers over there, they send a bunch of engineers over here, we can effectively have custom-made tires just for our car and just for Michael's driving style.' And so they spent a year working together, basically getting to develop their own custom tires, whereas everyone else who was on the Michelins had to use this sort of common-denominator tire that worked with all the cars and all the driving styles.
Yep. It's important we should note here for folks who are not deep F1 fans: the one, I think maybe the only part of F1 cars that's common-mandated across the whole league...
Tires and the halo. Yep. Yep. Whereas if you look at like NASCAR or other motorsports out there, a lot of stuff is mandated to be common, and the degrees of freedom of parts of the car that you can actually engineer is like much, much, much narrower. It's part of what makes F1 unique and so expensive, is that every car truly is custom-engineered except for the halo and the tires.
Yeah. Teams are designing their own bolts.
Yes. Yes. So here, Brawn and Schumacher and Ferrari are like, 'Oh, wow. We just found a way to custom-engineer our own tires.' Like, 'Hell yeah.' So that was a big part of Schumacher and Ferrari's dynasty.
So the FIA eventually closes the tire loophole. Brawn leaves Ferrari and becomes the team principal of Honda, which he joins in 2007 ahead of the 2008 season. Now, remember we said a minute ago that in 2008, with the financial crisis, Honda exits the sport.
So Brawn is one year into the job and they come to him and they're like, 'Ah, sorry, we're going to shut the team down. We got to get out of the sport. Like, this is untenable in this environment. We can't be operating an F1 team.' Brawn is scrambling. He just went from like top of the world at Ferrari to getting to be team principal at Honda and now he's out of a job with, as good as he is, no real prospects for another one because this is bad times for the sport.
And there are very limited chairs in this world.
Yes. So he's scrambling and he's like, 'Wait, wait, wait, wait a minute, Honda. You're worried about looking bad to the public and shareholders by continuing to operate an F1 team in this climate. You know what's going to make you look even worse? If you lay off the like thousand people that are part of this team. So how about instead... you just give me some time. I understand you might need to lay everyone off. Look, that's business reality. Give me a few months and I will find a buyer for the team. I just need you to keep everyone employed so that there's something to sell.'
Looks around, can't find anything, as you would expect. Come 2008, the world's falling apart. Back to Honda and says, 'Look, I know we have very limited time left. We're not going to find another buyer.'
What about a management buyout?
Yeah, I'll take it off your hands. And when I say buyout, I'm also not really going to give you any money.
But what if there's some period of time where you agree to keep funding people's salaries, I'll give you one British pound.
Yep. You give me the team and then at some point you're fully out, but we have some sort of consulting agreement in the meantime, some contract, you know, run way down to, you know, do a soft landing here for the team and these people, but you get to tell your board and the shareholders that like you are no longer wasting money on this extraneous thing and you're not going to lay off, you know, a thousand people in England.
So apparently, I don't know if you read this, Bernie of course gets wind of what's going on.
Oh, Bernie does not like Ross Brawn.
He does no, no, no. He doesn't like Brawn anyway. He definitely doesn't like somebody else buying a team for one pound. He tries to swoop in and convince the Honda board that they should sell it to him instead.
Oh, I didn't realize that.
Yes. Yes. Yes. Never mind that he's like head of F1.
he's still willing to buy the team.
He just generally doesn't like the idea that there's a transaction that doesn't go through him.
Yes. Or that there's a good deal to be had and he's not getting in on it. Great drama. If only this drama could be televised.
In fact, there is a great Keanu Reeves documentary.
Yes. Yes. It's called Brawn.
Called Brawn on this team. It's awesome.
Anyway, back to the story at hand. Amazingly, Honda doesn't go with Bernie. The board decides, you know what? We're going to stick with who brought us. We'll sell the team to you, Ross, for one pound. But when we say we're out, we'll fund you for the year, but we're really out. We're not going to give you an engine anymore.
Right. So Ross is like, 'But surely I can just like enter into a commercial agreement and pay you like $15 million or, you know, whatever it is to be the engine supplier and you'll give me an engine. Like, you've already made the engines in the years past. They're going to be the same or similar. This used to be your team, right?'
Nope. They're like, 'This is where we draw the line. We can't be putting any more money besides the salaries of these people into F1.'
So quick pause. It is worth noting every team makes their own engines. There's only at any given time a handful of engine suppliers. And so like Mercedes today makes the engine for the Mercedes car, but McLaren also goes and buys the engine from Mercedes. So this is like reasonably common.
Yeah. Ferrari will supply engines to other teams.
Cadillac is racing in a Ferrari engine.
Yep. Yep. Yep. Exactly. So Ross is desperate. He goes and chats with Mercedes, who, as you said, Ben, have been out of the sport since I think 1955 or whatever we said earlier.
Yeah, they at this point in time do not have a team, and since that horrific crash all those decades before, not in F1.
Not in F1, but they had been supplying engines to McLaren. So Mercedes says, 'Okay, Ross Brawn. We have our McLaren relationship that's very important to us, but we respect you and your body of work at Ferrari, and we respect what you're trying to do here. We will supply you an engine for 2009. You know, we're still loyal to McLaren, but like we will give you an engine so that you can compete with your team this season and not shut it down.'
And it like it sort of doesn't fit in the chassis that Honda had developed. They had to like do some real aftermarket janky stuff. So everyone thinks this car is going to absolutely suck.
Oh, by the way, the team is called Brawn GP. It's not even like a real company. The team just looked at Ross Brawn and they were like, 'You're a leader, so how about calling it Brawn?' Like the whole...
Yeah. They couldn't even line up a title sponsor.
And they're even landing sponsors for like individual races because they can't actually land for...
The financial crisis. Nobody wants to... Yeah, exactly.
The whole thing. Nobody expects anything performance-wise out of this team.
