John Foley and Peloton: What Went Wrong?

**Caemin** (0:09)
Good morning, folks, and welcome to today's episode called John Foley and Peloton. What went wrong? Now, I wanted to dig into this story purely because what I knew about Peloton and John Foley, it was just from the headlines. During the pandemic, you had stock pickers and the business media. They crowned Peloton the business of the future. It was called the Apple of Fitness. You had the Obamas, Usain Bolt, Leonardo DiCaprio, dozens of high-profile celebrities endorsing the product and some of Peloton's live classes. They had bigger audiences than Madison Square Garden. And then, just as quickly, the same press that had lauded Foley turned on him. Foley and Peloton became the poster child for pandemic-era hubris. A company that had reached a $49 billion valuation is now just worth $2.6 billion. Was it all John Foley's fault?
That's what we'll find out in today's episode. It is a cracking story. Enjoy.
Now, John Foley, born 1971 Family lived in Key Largo, Florida. His father flew for Delta. His mother was a housewife. And Foley was working at McDonald's from just 14 years old. Because he's always had a great work ethic. Here's a quote from him.
I don't think I'm quite smart enough. And I don't think anyone is quite smart enough to just show up and use their intelligence and win. I think you have to have some baseline of intelligence, but the rest is just flat out hard work. And look, as someone who has a pretty average, I'd say low baseline in intelligence, I agree with Foley 100% here. Now in 1989, he got into Georgia Tech to study industrial engineering, but to pay for it, he joined Georgia Tech's co-op program. So this is where he did a semester in college, and then he worked at Mars for another semester. He worked at their Skittles factory in Waco, Texas. And he did that for four years, graduating in 1994 and stayed with Mars, where at just 23 years of age, he became production shift manager. He was over 120 people. Then in 1996, you have the.com boom was taken off. And at 25 years of age, he joined a.com startup called City Search. This was an online local directory, restaurant reviews, that kind of thing. And in 1998, City Search went public. But Foley said he didn't make a fortune from the IPO. And to quote him, he said, I was such a junior guy that I didn't have any real equity. But he obviously made enough to put himself to Harvard Business School because he went there in 1999 and spent two years getting his MBA. And it was around this time he also met his wife, Jill. She's an attorney and they've gone to have two children. Now, after his MBA, he rejoined City Search. And by this time, City Search had been merged with Ticketmaster, which was owned by Barry Diller. Now, I did an episode on Diller a good while ago. I really like Barry Diller. And the one thing that he was so good at was nurturing talent. He had this philosophy when it came to hiring. Basically, Diller believed that hiring senior level talent was a sign of failure. Instead, he went out and looked for young people with fresh energy, with raw potential, qualities that he could shape. It was a gamble, but it worked mainly due to Diller's ability to read people properly and put them in positions to succeed. Like young executives who worked and succeeded under Diller. They included Mike Leisner, who would go on to run Disney for 20 years. Jeffrey Katzenberg, who became chairman of Disney Studios and co-founded DreamWorks SKG. Dawn Steele, she went on to make history as the first female to head a studio when she took the top job in Columbia Pictures.
Dara Kostrashahi, and I know I'm pronouncing that wrong. He's the current CEO of Uber. He worked under Diller. Strauss Zelnick, the CEO of Tutu Interactive, the company behind Grand Theft Auto. And there were loads of other junior executives who rose through the ranks and became very, very successful executives in corporate America. So when Foley joined Diller, Diller was in the process of building IAC. This was his massive media and internet empire. On the internet side, they had various search and comparison websites. They had Ticketmaster. They had the biggest online dating sites, including match.com. They had travel sites like Expedia, TripAdvisor, hotels.com. So it was a huge, very, very successful business. And while Diller nurtured talent and did give them plenty of breathing space, it wasn't easy. I mean, the culture was intense. It was data heavy, demanding, real discipline around stuff like customer acquisition cost, search engine optimization, conversion rates, you know, the consumer lifetime value. Both Foley obviously did very well because he rose through the ranks. He was appointed president and CEO of eVice. This was a digital party invitations website, and he turned it into a profitable business unit for IAC. And as a result of this success, IAC then backed Foley to incubate and launch pronto.com. This was a price comparison search engine. And again, while I don't have any revenue figures, in IAC's quarterly earnings reports, pronto.com was repeatedly singled out as a top performing business.