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The $8 Trillion Megacity: Inside NEOM's Massive Budget Blowout
61 Plays2 months ago
Join Jason and guest host Sam Hanisch as they explore three hot topics in construction and technology:
🏙️ NEOM Project Developments: Shocking revelations about Saudi Arabia's ambitious megacity project, including a staggering cost blowout from $500B to $8.8T, and the challenges of mega-project management.
🚇 Stockholm Metro Expansion: Stockholm's innovative approach to underground transit infrastructure, comparing construction methodologies and highlighting the benefits of strategic infrastructure planning.
👨💼 Leadership Transition at Procore: A significant leadership change at construction technology giant Procore and its implications for the industry amid rapid technological transformation.
Key Timestamps:
00:00 - Introduction
04:03 - NEOM discussion
20:35 - Stockholm Metro
30:49 - Procore leadership changes
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Transcript
Introduction and Host Change
00:00:00
Speaker
You talked about, I think, previously on one of the last times you were the podcast, which was like, the best thing is good news. The second best thing is bad news now as opposed to, yeah.
00:00:13
Speaker
So, yeah, it'd be good if could, yeah, there's that quote of like what the culture was like, I think. Yeah, yeah, there was a great article. i think this guy's gone now. I think he was the chief executive for Neon, but this is- He hasn't moved to Bali. Just check that before you um yeah before you go dropping this story.
00:00:28
Speaker
So um if you're wondering why there was probably, I think there was probably a culture where people were scared to give bad news. This is a quote in the second paragraph from the CEO. If you don't tell me who is responsible, I'm going to take a gun from under my desk and shoot you.
00:00:45
Speaker
Yeah.
00:00:52
Speaker
Welcome back to the Offsite Podcast. I am Jason Lansini, joined by Sam Hanisch, filling in for Carlos, who is off for a week or so. Sam, welcome aboard in the guest host position, mate. How are you?
00:01:07
Speaker
Very well. thanks for Thanks for having me back. Good to good to be here in 2025. Awesome, mate. ah So we're going to cover three really interesting topics that are all related to news in the week.
Neom's Ambitious Vision and Challenges
00:01:21
Speaker
It's been a jam packed week of news.
00:01:23
Speaker
First thing off the bat, recent news out of Neom, which ah shows that the what was 500 billion investment might be 55 trillion or some other equally inimaginable, unimaginable number. and a lot of gossip and stuff behind the scenes about the future of that project, which we'll dive into.
00:01:44
Speaker
Second, we will dive continuing on this theme of like European Metro projects, ah a super interesting project with totally different construction methodologies in the Stockholm Metro expansion project. And then finally, in ah big news out of the last week or so, Procore founder and CEO, Tui is transitioning out of the CEO role into an executive chairman role. And we'll talk about what does that mean for the future of one of construction technology's biggest players.
00:02:18
Speaker
Before we dive in, mate, how's your week been? Yeah, good. Equally busy year. I was ah ah surprised when looking at the articles. They all literally dropped in the last week.
00:02:28
Speaker
It was really a jam-packed week of um of news. Yeah, no scraping the bottom of the barrel. We would never do that, but yeah none of that needed. There were either some other things that like came up which we kicked out to the the next week. It feels like yeah a month of news in a week kind of thing happening.
00:02:46
Speaker
Yeah, although must be cheering. That was the easiest bit of research you ever had to do. Don't give away that someone else does the research. How's the yeah how's the the weather and temperature in Bali?
00:02:58
Speaker
It's actually turned back into the rain season, so it's not great. um So, it's yeah, it's been bucketing all day and night, unfortunately, but I don't think anyone's going to shed a tear for me over in Bali, so ah i I'll leave it there. i was just i was just trying to get I was just trying to get my relative cue score up ah relative to you by reminding people that you're in Bali.
00:03:18
Speaker
Have you broken 10 degrees yet in Germany or is that that's a not quite? It's like crazy weather. It was like there was a period where it was so absolutely freezing. Like it was like single digit negatives to like maybe five degrees or four degrees in a day.
00:03:32
Speaker
And then it went to this weird period, went to like twos to fifteens for like a week and then back now to like zero to six or something. horrible. But I'm talking like I know what the normal is. I don't know what the normal is. it just It just struck me as weird.
00:03:48
Speaker
yeah uh when i walk out of the house and i'm either like way way way way overdressed or way underdressed uh i get the pleasure next week i'm heading to london for a week so spending time with the team there for yeah a full week which will be wonderful so why don't we dive into topic number one i know you're uh particularly uh interested in in neom spend most of your time thinking about it i'll give you a bit of i'll give uh listeners a bit of the background For those that have heard us talk about this project before, in 2017, Crown Prince Mohammed bin Zaman unveiled this audacious vision of a futuristic mega city in the Saudi desert.
00:04:26
Speaker
The idea was powered by
Neom's Unrealized Ambitions and Cultural Challenges
00:04:28
Speaker
this kind of cutting technology cutting edge technology running on 100% renewable energy. There was going to be flying taxis, an artificial moon, just the kicker, a 170 kilometer long linear glass city that was going to rise 500 meters out of the desert.
00:04:44
Speaker
ah The recent bit of news ah is, and by the way, this was going to cost 500 billion US dollars and somehow happened by 2030 something was the original vision. But this month, an internal audit that was provided to to the prince and to other authorities has been kind of made been made public.
00:05:05
Speaker
And it's pulled back the curtain on what might be the most expensive reality check in economic history. The project's cost has been forecast in this internal audit to balloon from $500 billion dollars to a staggering trillion and the timeline has slipped slightly to possibly 2030 out to 2080 and the project that was called the line this 770 kilometer long linear glass city that was there's already under construction is going to be scaled back just slightly to 2.4 kilometers long so
00:05:45
Speaker
There's a lot in here around cost overruns and delay and this like ambition for this mega city or project. But in the article and in the audit, there's a whole bunch of other things going on behind the scenes talking about,
00:05:59
Speaker
ah huge amounts of money paid to consultants. So the amount of things talking about the the money spent on consultants versus actual construction. There's a whole bunch of ah also conversation around like the culture and people leaving. So yeah, what, where do you want to start? there's ah there's ah There's a bunch of places to go here.
00:06:18
Speaker
I mean, let's start with the the cost. I mean, who's really surprised, um you know, project this size, what are they eight years from inception? You look at the price tag, what they're trying to build.
00:06:31
Speaker
I mean, did anyone ever think that it was going to land in 2030 something for for that price tag when you see what's happening, you know, in the middle of the desert? Yeah. So i think I think if you ask anyone, honestly, they were always expecting that there was going to be some sort of cost while, you know, there'd be a time delay. It's pretty much hand in hand with mega projects these days. But when you look at the number, what is that? That's like 16 times the cost and $10.
00:06:56
Speaker
a 50-year blowout. So I think there's something, you know, a conversation around managing expectations when you come out with these sort of um these mega projects. i think the um I think a lot of people will have seen something about the project, but I...
00:07:12
Speaker
i um I don't think the ridiculous scale of like what the idea was ah fully translates. It's kind of like when you look at a a photo of a project versus standing on the ground and feeling like all of the construction work around you, it's hard to like grasp.
00:07:32
Speaker
But the original line vision of 170 kilometer long city was supposed to have, uh, be able to house by 2045, 9 million people.
00:07:43
Speaker
Like if you put that in context of cities around the world that hold 9 million people, The scale is pretty ah crazy. for for To put that into context, scaling that back from 170 kilometers to 2.4 kilometers, which was like a 90 something percent reduction in scope, yeah still means that the line that they are building, this 2.4 kilometers, is expected to have the housing capacity of three times midtown Manhattan in the U.S.,
00:08:14
Speaker
So is this 2.4 kilometers what's coming out by 2034? Is this the scope they've reduced down to? Yeah, by 2030 or somewhere 2034, you know, give or take a decade sort of thing.
00:08:26
Speaker
That thing, um that reduced scope is still three times the the housing stock of Midtown Manhattan. and that In that span of time. in that span of time and with that spend.
00:08:39
Speaker
um And you know, that's the housing stock, then you need, you're in the desert, you need power, water, you know, all the other stuff, you know, ah around it for people that actually might want to live there because I guess people might choose to live in the city. So you kind of need all those other services.
00:08:56
Speaker
it definitely yeah It definitely suffers from ah the understanding the scale of the job. Like all the artists' renditions, it's just a you know it's a big glass monument that sits out that you're looking out from a few kilometres and then there's some sort of internals of it. but when you start to When you start to hear about the ambitious, like the things that they're looking to include, you're looking like a high-speed rail,
00:09:20
Speaker
You know, there was ah an artificial moon, which you mentioned. There was one that I caught when I was reading about, i guess, the culture, ah which we'll get to. But ah the Crown Prince is a big Marvel fan, and he apparently engaged one of the artistic directors from Marvel to come over to design a yeah monument, which is going to be a glass skyscraper that they were going to hang from a bridge.
Consultants' Influence on Neom and Project Management
00:09:44
Speaker
yeah I don't know if you heard about that, but it's just... like i probably not yeah probably not a yeah Probably not necessary, but that's the sort of ah you know that's all the extra stuff on the inside. so yeah We've obviously done our fair share of complaining as ex-construction people hanging up the boots of complaining about architects, but I don't think I've ever had to claim complain about ah ah a Marvel ah studio artist concept that was not buildable.
00:10:11
Speaker
Yeah. um One other thing to make a correction on what I did say before that 2030 target, the 2034 first section is even shorter than the 2.4. I think it's planning to be a half mile long.
00:10:23
Speaker
Yeah. The reason for that being urgent is that has the ah stadium suspended stadium. That's like 200 millimeters in the air. And they're because they're, they're bidding or they've won a FIFA world cup, which is like hosting it then. Yeah. Yeah.
00:10:40
Speaker
which is supposed to be played there. So cue the total shitshow of that coming up. um There's one other angle with this project, which is was interesting to me, which is that we've we've obviously done conversations over the last ah months or or year or so about this project. We even interviewed people that have been on the project recently,
00:11:07
Speaker
ah We know people that have worked on there and this common theme kept coming out of like, ah if you want something to get approved, pitch the most ridiculous out there, crazy idea that you you can.
00:11:21
Speaker
um And ah that's the thing that they like want to encourage or go for, which seems like the the complete opposite of what you wanna do when you're trying to run a construction project.
00:11:33
Speaker
um What was interesting is this idea that Vision 2030 that everyone always talks about with this project, ah which was a white paper that I'd imagine no one's read um and gets like attached to the thing that they're trying to do.
00:11:49
Speaker
actually in that document talks about a whole bunch of learnings that the country should take forward or the kingdom should take forward from the ah the failures of a prior mega project they had, which was the King Abdullah Financial District.
00:12:05
Speaker
And one of the ideas of that was, ah one of the learnings from that was don't try and build everything at once because you end up like drawing all your talent in, you end up, you know, you over have an oversupply or over demand of resources, costs go up, things get delayed.
00:12:24
Speaker
And so this document that is like, held up as the reason why we're building this futuristic city thing the document has no mention of the city in there it's basically like learnings from things that we stuffed up in the past um and has somehow been like transformed in spirit to this like ah No room from anything traditional.
00:12:46
Speaker
Build the craziest out there thing that we can possibly build. And as a result, like you kind of think about why that might have happened. And one of the other like interesting wrinkles here inside of this audit, it showed that consultants, specifically consultants like McKinsey, have been paid ah in the order of year.
00:13:10
Speaker
for consulting services on this project, which meshes anecdotally with what like we've been hearing ah behind the scenes of like all this work happening in consultants and advisors and ah only a small fraction kind of like really landing in actual construction. Do you have a take on on, is this like just only going to get worse given that kind of backdrop?
00:13:35
Speaker
So just to clarify what you said, are you talking about there was a paper that was around the 2030 vision that was that had all these ah findings from ah this previous mega project?
00:13:49
Speaker
Or it was a different audience. All of this work that's happening in Saudi Arabia, whenever you hear it talked about in the news or whatever, you'll always hear like, oh, this is part of Saudi's Vision 2030. They're like attached to the two things. Like we're doing all this crazy shit because of our Vision 2030.
00:14:06
Speaker
Vision 2030 is a white paper that was released, I think, in 2016. When you review that document, it has nothing to do with like flying cars, you know we're going to build a glass city in the desert, none of that. It basically is originally focused on driving like government efficiency, educate like all of the boring shit that a normal government paper would have, education, we need to build more facilities.
00:14:34
Speaker
Uh, and steering investment away from oil as well. Wasn't it? They were looking at, a some diversification. Yeah. Yeah. But like nothing, very little of that relative to like what was largely in there. Well, there's a big section of like, yeah, learnings from when we've built big ambitious things in the past. And it's like, here's all learnings. And it's like almost that set of learnings is taken off as like the to-do list. we we We must repeat.
00:14:59
Speaker
Someone missed that disclaimer. Yeah. um okay cool yeah that's uh that's that's crazy i i didn't realize that it sounds like that no one should read those things together now because you go to the 2030 vision website and it's just like a grocery list of all these ridiculous projects that you'd be scared to tackle once at a time and they're tackling like 10 of them um yeah but yeah going to your i guess uh when you're talking about mckinsey because i think that was a big part of the headline of the article it feels like the uh The consultants have been getting dragged through the mud all around the world.
00:15:32
Speaker
um I think they're going to be a natural part of the life cycle of these mega projects anyway. ah You know, ah the way ah these government bodies are set up all over the world that, you know,
00:15:44
Speaker
They're not geared to have enough people to sort of deliver the feasibility that you need to go through the steps like the initial engagement um to work out these projects.
00:15:55
Speaker
Having said that, it's quite clear there's something dodgy going on when ah there's all this anecdotal evidence of, you know, McKinsey ah higher-ups being told by execs within the NEON project or within the Vision 2030 to be changing some of the, yeah I guess, just cooking the books essentially to get the return investment up to justify the, you know, internally, yeah, we're still hitting our projected return on investment targets.
00:16:26
Speaker
Yeah, it's... It's like that there's that like ah behavior that can sometimes happen in construction projects where you get like a commercial consultant or a quantity surveyor in that's like a, this is going to sound like I'm s slighting quantity surveyors or whatever, but like they're,
00:16:44
Speaker
so that is merit They're in as a consultant. And then like the first thing they do is like start an argument with yourself with the subcontractor over some payment or whatever, yeah in which case you need to bring like more of their resources in. So like they have the ability to kind of like generate their own work by making by by causing chaos Um, it does feel like there's a bit of that going on, not just McKinsey, but all the consultants where it's like, let's pitch more crazy shit. That means we have to go and reevaluate the whole business case. And then when we reevaluate the whole business case, you know, it's like, we just keep making more.
00:17:16
Speaker
We can, there's just billable hours coming out the wazoo here. See, I don't like, I have a slightly different take when I read it. I think that reading about the the culture stuff that was going on there, that there seemed like no one wanted to give out bad news, like talked about, it you know, in various places about this fear of, you know, delivering bad news. And I think that being highly amplified, these consultants were in the position like I can...
00:17:41
Speaker
I'd be shocked if the majority of them weren't quite aware of these things and there were people in senior positions within the government looking after the project going, no, no, like we can't show this right now. What can you do?
00:17:55
Speaker
What can you do? And that's where there's probably been some you know um you know, unethical, unprofessional behavior on what you would expect from someone like McKinsey, but they'd all be guilty of it.
00:18:06
Speaker
Um, but I don't think they're necessarily cooking the books for their own game. Yeah, I know. I get you taking the side of the consultants. That's a, that's a bold strategy. Um, no, that I, I totally know what you mean. Like,
00:18:19
Speaker
I've been on a bunch of projects where there's definitely that culture of like political influence or being careful about the timing and how we present bad news. And you kind of like batch bad news up until some other that event where you've got ability to kind of like all of that crap.
00:18:38
Speaker
Um, and some of the stories that were in there that you were talking about before we started recording look definitely like there is that culture of like, Not openness, not sharing of information, which 100%, I think, drives bad outcomes on projects. You talked about, I think, previously on one of the last times you were on the podcast, which was like, the best thing is good news. The second best thing is bad news now, as opposed to, yeah. Yeah.
00:19:08
Speaker
um So, yeah, it'd be good if you could, yeah, there's that quote of like what the culture was like, I think. Yeah, there was a great article. i think this guy's gone now. i think he was the chief executive for Neon, but this is- He hasn't moved to Bali. Just check that before you um yeah before you go dropping this story.
00:19:25
Speaker
So um if you're wondering why there was probably, I think there was probably a culture where people were scared to give bad news. This is a quote in the second paragraph from the CEO. If you don't tell me who is responsible, I'm going to take a gun from under my desk and shoot you.
00:19:41
Speaker
Yeah. I think i've been on i've been on ah I've been on some projects where there's been a ah ah nervous, there's been poor sharing of information and I like ah wrote an adversity bad news, but I don't think I've ever been on a project where I've been directly threatened to be shot.
00:19:58
Speaker
So that's probably another level. Not a surprise, um but ah yeah, it's ah it's fascinating to watch and it's only 2025. They got a long way to go. So yeah.
00:20:10
Speaker
Yep. So the state of play is they're about 50 billion into the spend of originally forecast 500. The project is they've got some deadlines they need to hit, especially for World Cup in the 2030s.
00:20:22
Speaker
The forecast cost is currently 8.8 trillion, which is 25 times their annual budget. Look forward to the next. Whoever's leaking the internal audit reports, look forward to the next one.
00:20:34
Speaker
Yeah. Cool. Let's keep moving
Stockholm Metro Expansion
00:20:37
Speaker
then. Second thing we're going to dive into is Stockholm Metro. So this relates to a a article that was released and written by by our team ah here in the offsite podcast newsletter.
00:20:53
Speaker
For context, beneath the streets of Stockholm, this like big engineering project is starting to take place relating to enable this the city's expansion. um It's one of the most ah significant infrastructure transport projects since the 1970s there.
00:21:11
Speaker
At the heart of it is a big like technological shift. for the way that the country builds metros. What I'm referring to is historically in Stockholm, tunnels have been built through a drill and brass method, and we can dive into the detail of how the drill and brass method is used in the background and history of that.
00:21:32
Speaker
But for the first time, they're gonna start building this metro with ah with a TVM. The project itself is a three plus billion US dollar equivalent project.
00:21:43
Speaker
The target completion is 2030. It's starting basically now-ish. ah It includes 20 kilometers of new track and 11 new stations.
00:21:54
Speaker
um And the crazy, well, one of the craziest bits is there's a station that has a depth of 100 meters. That's blowing my mind in like in the construction method.
00:22:06
Speaker
And then the second bit is this, yeah, this fundamental switch from TBM, from drill and blast to TBM. I went pretty deep on like, TBM, drill and blast is not a method I've used been exposed to for tunnel construction um so i went pretty deep on just out of interest into why and the history of that um but yeah it's ah it's a pretty cool project isn't it yeah look i uh i was ridden with envy reading about this project and watching the videos about it um
00:22:42
Speaker
it was kind of like all you read about is, ah I guess, terrible mega projects. I can't remember last time I read about, you know, a mega project and i was like, oh, this is great. Like they've really, yeah you know, you'll achieve like some sort of engineering marvel, but there's is like a huge cost or like time burden associated with it and it just feels like a lot of pain.
00:23:03
Speaker
Whereas reading about this, it was just amazing engineering feats happening all over the place. It seemed like a very well thought out, well planned project. You know, super interesting things they were doing all across the network and really tackling a lot of lines and stations at the same time.
00:23:21
Speaker
ah So, yeah, it was it was super impressive. What did you learn about the, yeah so I did ah ah did a skin deep while I scratched the surface on the drill, drilling blast. So yeah you what did you learn about it? they They've built most of their previous Metro projects through this drill and blast method, which I didn't, I had no, i had no idea that that was like a common method.
00:23:45
Speaker
Obviously it relates to the, the geological conditions, uh, in Sweden and around, around the city of Stockholm. um the They've got kind of like a lot of rock.
00:23:58
Speaker
TBMs are not the biggest fan of rock. They've also got a lot of variable soil conditions. so They've got like a lot of water problems and rock and you know all the stuff that you kind of don't want when you're using a ah TBM. ah The thing that has enabled the change is largely like a technological shift, which relates to something we talked about in a previous a previous podcast, this kind of like variable this like variable density or variable condition a TBM method, yeah um which has more tolerance for the variable conditions.
00:24:32
Speaker
But yeah, you were talking about like the ability and the speed at which they could do. I had no idea that they could move so fast in terms of um progress on ah drill and blast.
00:24:43
Speaker
It's all based on cycles. And like I was reading, they were talking about the efficiencies of drilling blasts and you know obviously doing it historically, they'd be some of the best in the game at it. They'd know all about the different um rock types that they're drilling in. But ye yeah, it was talking, but they talked about they were able to change an explosive type, which was increasing cycle times of you know setting up and drilling the next cycle.
00:25:06
Speaker
section the next shot and blasting it so you know the the like i guess there's a couple of factors about this project or about how they typically do metros which enable drill bar so first of all it's like the ground conditions the second is that they're in this case they're probably if i was to over generalize building a line in anticipation of like population growth.
00:25:31
Speaker
So they're not kind of like tumbling under highly dense, highly densely populated areas. In which case, again, drill and blasts, like we've all heard stories about, you know, in Australia or the UK buying Bose headphones for people because of, or air conditioners because of noise and stuff from a TVM yeah going underneath. Once you get a drill and blast crew, it's not going to be, you can imagine.
00:25:56
Speaker
Yeah, and so the i just yeah the progress they could make, I'm trying to find the numbers of the cycle times. Yeah, 5 to 15 meters per week on drill and blast they were able to make in the most recent metro project in the Blue Lion extension.
00:26:13
Speaker
15 meters a week is moving, isn't it? Well, you think so. And then you think about, you know, you don't have all the other issues with trying to like launch a TBM, like the amount of expense to go out and set up your access and where you're going to pull it out the other end, um you know, and the expense of the TBM. It's a pretty...
00:26:32
Speaker
you know I think if the rock you know if the ground conditions made sense, maybe not Australia because it's a bit sensitive for Australia, but if the ground conditions exist, you know I'd say the dollars stack up compared to TBM.
00:26:44
Speaker
With the very the method you were talking about, is that like the ability they can sense for water ingress and they can pump ground and like sense for changes in the geology and pump ground in front of it? Kaos was talking about it in the...
00:26:58
Speaker
I think it was maybe the Toulouse Metro was where they also had it, where I think there's a combination of there's like a reverse pressure. There's like some, maybe some bentonite injection thing going on. Right. I don't want to like, there'll be some subset of people listening. They're like a hundred percent tunneling people like you, you dummy.
00:27:17
Speaker
Um, but for the people that are not them, yeah, there's some like, there's some pressure, like reverse pressure thing going on. Nice reverse pressure. Yeah. Um, no, no, I know nothing about it. So I, I passed the question to you.
00:27:32
Speaker
Uh, but no, I thought I was, yeah, the drill and blast was awesome. And they had some great videos. I think, uh, you know, all mega projects should take a leaf from their, you know, PR media team. They had this full sort of like internal doco going on, ah looking at all different stations, um, you know, showing the drill and blast.
00:27:51
Speaker
Uh, I think it's, Yeah, I think a lot of people, you know, I think of Oz and I think, you know, a lot of people would be fascinated to see the progress because it often just feels like, oh, this job's still going. What's actually happening?
00:28:03
Speaker
You know, it wouldn't hurt to share a bit of that information. so true Yeah, I think the and like the scope is not insignificant. 20 Ks of track, 11 stations and like the cost is like probably there's something to be said for the idea of building the infrastructure before the houses. Yeah.
00:28:21
Speaker
because nice china they're building 11 stations and 20k of track for something like the cost of one central london station on a crossrail type project and so yeah having a bit more of the say greenfield rather than letting all the houses and infrastructure get built and then go how do we thread the needle of of a metro line back under this thing yeah i think they're in the they're they're probably in the minority worldwide to have that you know as city of that size to have that opportunity but it does show you the you know the savings and costs um Yeah, we talked previously about like a Riyadh Metro where there was a bit of that happening as well.
00:28:56
Speaker
and Certainly, if you take a forward-looking view of things, it makes a ton of sense. But yeah, certainly in the minority because you need all the capital and there's like a billion other things you'd be also needing to spend the money on.
00:29:07
Speaker
Yeah. Before we jump off the topic, any thoughts on 100-meter depth ah platform? Yeah, it's um it's pretty deep. i wouldn't want to be taking it every day. It feels like it's pretty hot take. Spicy take.
00:29:23
Speaker
i don't Why are they going 100 meters? see It feels like ah is there a reason? Is there another metro they're threading underneath or are they just trying to flex, do we like the reverse of the – i my guess uh from from let's call it educated guess guess feels i'm just throwing something out there based on the data that i saw i think it's like a combination of the the ground conditions rise and fall quite a lot and so the the line is out of depth because it's driven by another part of the metro and there's only so much greater you can get on the the track yeah so i think it's i think it's
00:29:59
Speaker
Yeah, the ground going up and down. Ground goes up and down ah is the technical answer. Yeah, I hold my take. That's deep. And I feel ah feel bad for everyone else to take that every day.
00:30:11
Speaker
i don't know if you've taken the one in Parliament Station in Melbourne. I think that's probably like 40 metres and it feels like it takes, you know, five minutes to get down. Yeah. Well, in I've not never taken the pi of the one, but there's a couple of stations in London, like Covent Garden, where there's no ah escalator. It's just a lift or an elevator. And there's always next to it the sign that says, like, stairs to platform.
00:30:34
Speaker
And there's always a sign of, like, how many stairs it is. And you're always tempted to be like, yeah, I could do 200 steps, no problem. But I think the 100 meter depth, what would that be? Steps.
00:30:45
Speaker
Do the math. A couple of hundred. Yeah.
Procore's Leadership Transition and Strategic Challenges
00:30:49
Speaker
Righto, jumping onto topic three before we totally run out of time. This is, don't know, maybe there's not been a huge amount of like opinion pieces written on this. The news is probably a week-ish old, but I'm surprised there isn't more.
00:31:04
Speaker
So for background, after 23 years at the like the helm, TUI, the founder of Procore, has announced that he'll transition from CEO to executive chairman.
00:31:17
Speaker
um which is, I guess, more than, least in my view, more than just a leadership change. It's a pivotal moment for the construction technology space, Procore.
00:31:28
Speaker
ah For some context, Procore, since his founding of the company, grew from what really at the start was like a ah struggling startup startup,
00:31:39
Speaker
um with ah very little revenue to a more than $10 billion dollars public company ah serving more than 2 million users across 150 countries.
00:31:50
Speaker
I guess the the context of this, if we zoom out, is this transition or change in role comes at a really big critical juncture for construction industry, construction technology.
00:32:02
Speaker
where there's these big waves of AI revolution coming in the mix that is continued and maybe increasing competition in the space um driven by ai driven by other other companies seeing the success that Procore has had and wanting to ah have their own version of that in maybe different markets or different verticals.
00:32:26
Speaker
And it raises the question of like the type of CEO that the company will search for, that they will select what it means for how the company operates, what it means for, yeah I guess the, the legacy of that, of TUI and Procore.
00:32:40
Speaker
Maybe to like tee up some discussion, I think there's like two sides to it. One is One could argue that this is a natural ah evolution. This is a common pathway for founder CEOs after some time of growing the company to kind of want to ah have a succession plan that injects new energy and blood into the company. And often this role of executive chairman is is where they'll end up.
00:33:09
Speaker
For example, I think the same path was followed by like a ah Jeff Bezos. um Similarly, I think the founders of Intercom did a similar thing. There's a long pathway, there's a long tradition of this kind of like move from CEO to executive chairman.
00:33:23
Speaker
It has a bunch of its own risks associated around succession planning. we saw We saw recently over the last few years, like Disney did have a transition of their CEO, Bob Iger to executive chairman who then came back in as CEO. So there's a whole story there we can dive into.
00:33:39
Speaker
What would your take be on what this means for the company and maybe yeah what this succession looks like on whether it's set up for success or I guess a bumpy couple of years?
00:33:53
Speaker
Yeah, it'd be, yeah I think, you know, no one's going to know unless they're in the room, but it'd be interesting to see if the feeling was a natural one, like this was no we this has been on the books for a while or that they felt the threat in the market and realizing that, you know,
00:34:12
Speaker
ah i made it they needed someone else with fresh ideas with it, you know, being at this juncture where they're at risk that they're going to behind. Because I don't think like they have a huge market share, but ah do you see the pace of tech moving now and these AI startups and the ideas that are coming in.
00:34:30
Speaker
it's There's a lot of people in there with a lot of amazing ideas and, you know, in you know in the matter i can't remember like it's been two years now has it with uh like chat gbt sort of establishing or open ai that they have this you know model that's producing is it four three i think three years so it's not it's not long um and most companies would probably be feeling i think in the tech space if they don't have a clear vision of how ai integrates or excels their product that they're probably feeling in fear that they're behind so be interesting to know if they're like i'd say they're big enough they've got the right people that they've got a solid plan in place um but yeah i'd say this definitely would be contributing to it
00:35:17
Speaker
One could make an argument that there's a big technological shift underway through AI and that the leadership of the company you know i would look at the, that this is kind of like a recommitment to the the next big like you know, it'll take years to decade commitment to see this kind of thing through.
00:35:42
Speaker
And that maybe given the 23 years at the helm of the company, he goes, maybe there's someone else better to to ah hit this with the energy kind of the warrants or deserves.
00:35:55
Speaker
Hmm. But on the flip side, what you said is totally true, right? It's like this is if you're going to fundamentally change a company, if this AI thing is like the future of a whole bunch of their like product stack and whole parts of it's like it's like this horizontal layer that will touch every part of their business. If you if you take it and it's like most ah evolved, you know, highest potential state of it.
00:36:21
Speaker
And that requires like fundamental change across every part of the business in how they sell, in the way that the product is architected. um There's like teams of people, there's like 150 people in a data and AI team inside of Procore as an example. there's like lots and lots of people that have to be aligned to this like mission that is gonna like, you know, you're turning the big boat analogy.
00:36:45
Speaker
I think there's another strong argument. It's like who has... Who has the authority to kind of make those changes better than the person that started the company versus someone new that's going to turn up and try and institute change and might get the whole organization kind of like pushing back at it.
00:37:04
Speaker
The road is littered with many examples of situations where it takes kind of like, let's call like the founder authority to kind of make the change that, you know, possibly lies ahead.
00:37:17
Speaker
So I think if it was driven by this idea of there's this big change coming in, someone with the energy needs to lead the change. That's a risky call, given there's one could definitely argue that there's no one better than him to to lead it.
00:37:32
Speaker
And then it puts a lot of pressure on that person and finding the right person that's going to be able to do that. yeah Can you imagine being in those shoes? Are you coming into this to take over from the founder of this incredibly successful company that,
00:37:45
Speaker
um in many ways having the original founder there i think i read this article there's like this idea that this person is that he called it like the source but it's it's just to defined there they have in their head um i guess the concept and like what's in or out you know what you know is attached to the brand and it's um like it underpins all strategic decisions for the whole entirety of this company.
00:38:13
Speaker
You know, the shoes of the person that come into not only, know, I've got to you know, I've got to take this to a new level of revenue. I've got to find some new success in the business and deliver on this strategy. I've also got to help take a company from founder led to, you know, are they led under me?
00:38:32
Speaker
how does that relationship work with the original founder CEO sitting on the board? Like it's it's ah it's a lot it's a lot to sit in that role and push you through.
00:38:44
Speaker
Yeah, ah a hundred percent. the you know There's all of these other people in the company that have will have been there for some large part of the journey. And this person is gonna kind of have to navigate and somehow harness that like institutional knowledge while trying to make changes to it.
00:39:04
Speaker
Yeah. um Without the like history and trust and stuff that's built up, which is going to be incredibly difficult. And then there's also that dynamic with that executive chairman role. yeah I referenced the idea of ah Disney before where they made this transition. The CEO went to executive chairman And this new CEO got promoted from within and within like a year or so was was fired and the executive chairman came back in. There was a lot of reports in the background of like the executive chairman, Bob Iger, not being happy with some of the decisions, not agreeing with some of the approaches and kind of undermining or kind of watching, kind of micromanaging the new CEO.
00:39:43
Speaker
TUI kind of has to make the decision of like, there's a lot of thought I'd imagine going into what's the best way to manage this transition. And you have to find, you have to be really confident in the decision.
00:39:55
Speaker
And then I think you have to ah point every part of the organization to that person, followed follow that vision and kind of keep empowering that new CEO. Yeah.
00:40:07
Speaker
yeah Because the second people feel like they can get a different answer by going to the executive chairman, then like it's all fucking chaos. I've no doubt they'll do it the right way. It'll be fascinating to see who's the appointment. Like you'd think the odds are in favor it's going to be someone longstanding within the company so that it's not such They're doing an external search.
00:40:28
Speaker
Really? Yeah. Wow. Okay. Well, different tack then. it It'll be, it is going to be a lot of work too. you know, maybe it is the Disney play thing.
00:40:39
Speaker
you know he's going to be sitting over and watching what they do. you Like two years, though, is not a long time to really play out a strategy, especially if you're looking to, you know, shift to quite a large product or a bunch of products, you know two years to sort of convert that and prove that it's on the right trajectory. Not that that's, you know, the timeline, just using the Disney as an example, but You think you have to do that at people. I think the Disney thing, the Disney, the stories around Disney were like, it was kind of, it was kind of cooked pretty early on because there was just some like, what happens, right? You, you make this transition. Everyone's like, boy, there's like the first 90 day plan or a hundred day plan.
00:41:18
Speaker
And then things kind of get back to, you somewhat normal. you've got like this window to make change and then just shit goes wrong. Like product timelines blow out revenue targets kind of get hit or missed.
00:41:32
Speaker
And then, then it's like, does the exec, does Tui and the CEO have different opinions on it? And then how does Tui kind of like balance the feeling of like, this is my legacy. This is my company.
00:41:44
Speaker
can see a way to fix this versus this person has to be empowered to fix it themselves. yeah um And what happened, I think the stories at least point to in the Disney scenario that the executive chairman got increasingly like involved, which kind of undermines.
00:41:59
Speaker
And then once I think once that starts, it's a one way door to that person's not going to be there for very long. And it might take two years to play out, but it's not it's not going to it's not going to end well.
00:42:10
Speaker
It'll be interesting to see. But yeah, once again, massive, you know incredibly challenging thing to walk into to take over the boots of the founder CEO for a company like that with that sort of longstanding history. What was it, 22 years? 23 years, i think.
00:42:27
Speaker
crazy yeah yeah definitely Well, that is all the time that we have, mate. Thank you very much for stepping in as a very, very, very capable co-host, mate. I hope you had fun.
00:42:44
Speaker
Yeah, it was good. Thanks thanks for having me. Don't cut my hot take about the 100 meter deep. I think there's a good chance you might get the call up for for round two next week as well. So folks can can look forward to having Sam back.
00:43:00
Speaker
Thank you very much, everyone, for listening. If you enjoyed listening to this episode, please think about liking or subscribing. And thank you very much. Have a lovely week.