Formula 1

Introduction

0:00I was just listening to the F1 theme song to get pumped up. Me too. Were you really? 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. Amazing. All right. Let's do this. Let's do this.

Welcome to Acquired

0:30Welcome to the spring 2026 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert. I'm David Rosenthal. 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

1:03sport 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 U.S. company that has owned the Atlanta Braves, Sirius XM, and Live Nation.

1:35That 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 One, the world's premier motorsport series. 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 at home.

2:05No way. From our Google series. Throwback. That's awesome.

Three Sports in One

2:09Well, listeners, really what we're doing here today with Formula One, 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 One 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.

2:40And 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.

Sport Details

2:59It is a grid of 20 drivers competing at over 200 miles per hour 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 777s 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.

3:31And 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.

Episode Preview

3:53Listeners, starting in just five 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 U.S. in Apple TV. And while 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

4:28of 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 slash email. 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 slash email.

Sponsor Introduction

4:57Chat about this afterwards with us, with the whole Acquired community in the Slack, acquired.fm slash Slack. And before we dive in, we want to thank our presenting sponsor, JPMorgan Payments. Yes. And just like how we say every company has a story, every company's story is powered by payments. And JPMorgan Payments is a part of so many of their journeys from seed to IPO and beyond. So with that, this show is non-investment advice. David and I may have investments in the companies we discuss. And this show is for informational and entertainment purposes only.

Disclaimer

5:27David Rosenthal, where do we dive in? Well, first off, we owe a huge thank you to Joshua Robinson and Jonathan Clegg, who are the sports editors over at the Wall Street Journal and just recently published, I think the best business history book of Formula One 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 One, as we know it, really started after World War II in 1950.

5:59But 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 things. Racing things. Yeah. I mean, after all, like people raced horses. Why wouldn't they race cars too?

6:30Yep. 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, L-E-M-A-N-S.

7:02And 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 Le Mans, 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

7:38of France. You had Monza pop up in Italy, the Monte Carlo race in Monaco, you had the Nürburgring in Germany, et cetera, et cetera, et cetera. You 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

8:15One. 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

8:45know 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. Yeah. 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 driver's championship.

9:15And so in 1949, the FIA announces the inaugural Grand Prix World Championship for Formula One Drivers, a global driver's 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.

Early Era of F1

9:461950. 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,

10:22a 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

10:52the right set of circumstances for this all to come together. 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

11:23area 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

11:58of 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

12:32in a set of empty stables in North London. Even then, 25 British pounds was not enough to build a car capable of racing an 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.

13:03He enters his first car in Formula One 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 Constructors' Championship when it first

13:34got 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 Constructors' Championship, called the Constructors' 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.

14:05So 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 viewpoint 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 streets. 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

14:39racetracks 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

15:10color 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 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

15:41companies. Yes. And this was illegal for a long time. The FIA did not allow you to have sponsorship. And then they realized, OK, 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. OK, 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 sports historical greats like Ayrton Senna or Michael Schumacher or Alan

16:14Pross. 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.

16:45Unfortunately, his story has a sort of strange and sad ending. Did you find this, Ben? Oh, yes. 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

17:16embezzling $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 L.A. 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. Yeah. With a dream. Through all of this, though, the cowboy nature of the teams, the individual iconoclastic owner

17:52slash mechanic slash designer slash 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

18:24anything 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

18:57Prince Rainier III of Monaco, as we talked about at great length in our Hermes 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

19:28and Taylor at 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

20:00Cannes 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, et cetera, et cetera. 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

20:33of on the French Riviera in that area, you might think, wait, but it's like cliffside 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. Yeah, but there is also no chance that they would ever get rid of Monaco. This is what brings luxury into the sport.

21:05And 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

21:35Ferrari. Ferrari, Enzo actually founded the company before World War II purely as a racing company. It wasn't a 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. And 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

22:08back to the beginning. There's a funny thing here where you might think, oh, Formula One, 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 One legitimizes the series. Ferrari, if they ever decided to stop racing in Formula One, would make people go, oh, so what is the big racing series? Yes, totally. Formula One is actually the marriage of two separate things, the teams and the racetracks.

22:42Unlike 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, Lumenfield in Seattle. So what Formula One, 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

23:15Prix. 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

23:50by 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.

24:21Right. Because as he's participating in F1, Enzo's also hand-making 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 legitimizing soul of Hermes, 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.

24:55Oh, 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

25:29racing 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 One and auto racing. But while they were racing one of their cars in Le Mans, it actually crashed and killed

26:0182 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 One for another 40 years. That accident was so devastating that four of the remaining Grands Prix were canceled. 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

26:35days. 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.

27:05But the first three decades, you were on about a one to two death per year rate. So that's five to 10 percent 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. It's unbelievable. 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.

27:40He'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 One is Ferrari and Ferrari is Formula One. 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. Hmm. Oh, it's Bernie. Yep. It was the person who quite literally would replace Enzo in that quote.

28:15Bernie Eccleston, 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 was never once employed in Marinello.

28:46Yep. And that will be our protagonist today. But before we begin Bernie's tale, now is a great time to thank our presenting partner, J.P. Morgan Payments. Yes. The modern sports fan experience extends far beyond just attending an event. The entire customer journey from tickets to concessions and merch, practically every touchpoint involves a payment. And when they're fast and frictionless, it makes the entire experience better for fans and the business behind it. As you've heard us talk about, J.P. Morgan is always investing in the latest technology and hardware for seamless transactions.

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29:53They just earned best-in-class honors for it. And David and I know that having the most cutting-edge payments technology like biometrics might not be a top priority for your business today. But it doesn't have to be. And that's the point. Exactly. J.P. Morgan is thinking about all this and investing ahead so you don't have to. Whether you're looking for next-generation hardware, payments APIs, or you simply want more payment flexibility and security, their all-in-one global payments infrastructure is what sets them apart. They help companies of all sizes thrive in today's fast-changing digital economy.

30:24You get what you need now with the ability to scale as your business grows and technology advances. So if you want to learn about how J.P. Morgan Payments powers seamless experiences for fans and businesses across all industries, check out jpmorgan.com slash acquired to discover what solutions can help accelerate growth for your business. Okay, so David, enter Bernie Eccleston. Bernie Eccleston. So Bernie was born in 1930, and he was a hardscrabble kid.

30:55He grew up in Suffolk, which is to the northeast 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 with 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.

31:26He 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 celebrity's 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.

31:57It's like calling someone else's puzzle-dial 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. 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 longstanding 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.

32:37This is like one of the most famous train robberies in history. Bernie loved this speculation. And 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 video when asked about it. There wasn't enough money on that train for me to be involved. I could have done something bigger.

33:00You 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 jump 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.

33:35And 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 One.

34:10So 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 Rint, to leave Lotus and buy a team together for themselves.

34:44They're going to become not just the talent. You know, 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. And 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 Rint and Chapman were constantly fighting about the safety of the Lotuses that he was driving. Rint was so far ahead of the pack in the standings when he was killed that he would actually win the Drivers' Championship that year.

35:18Oh, he still won, right? Yeah, posthumously. He's the only driver ever to win a championship posthumously. 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 Rint'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,

35:52which would be about $2.3 million today. Today, I think every single F1 team is worth at least $1.5 billion, I think, is the floor. That's exactly right.

36:05Uh, Bernie doesn't make that much money on the Brabham team, as we will see, but... He sells it for, what, $5 million later? $5 million a couple years later, yeah. So, you know, a nice return. But definitely the fact that team valuations go from 100,000 pounds to a floor of $1.5 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,

36:40Formula One Constructors Association. Now, this is a very loose organization. Organization is being generous here. of all the team owners that Colin Chapman has 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.

37:12I 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 One 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.

37:41So 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,

38:11and 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. 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 One

38:43is 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, Tyrell, 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.

39:16All 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's,

39:46each with their own race promoters and organizers. There are 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?

40:19Right. 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? 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.

40:51The 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's hadn't gotten to television. I mean, we're talking about the mid-70s.

41:22If 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 there. I think 1961 was their first national broadcast deal. I mean, they'd already launched Monday Night Football in 1970. It's not like there wasn't a playbook for this out there.

41:42F1, 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.

42:13The 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 One and the NFL and Bernie and Pete Rizal, because these are sort of happening at the same time. But Bernie is like the anti-Pete Rizal. You know, Pete Rizal was this consummate manager,

42:44professional 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 Rizal'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.

43:15Let's centralize our negotiating and our media rights so that we can all grow the pie and share the spoils evenly. Bernie's MO doesn't league first. It's me first.

43:26He does centralize things, but it's not like Formula One 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.

43:57And, 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 up front

44:28that you're going to get paid at least as much as you're making now. Hmm. 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, like, we got to fix the sport. And Bernie 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.

44:59But 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

45:30that 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. And sustainable, totally. Every single team would go bankrupt except Ferrari otherwise.

46:01Yep. 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 $150,000 per race.

46:33And then by the end of the decade, he's gotten it up to $200,000. 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 $200,000 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,

47:05Bernie 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.

47:29Yes. 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

48:00with being a Grand Prix part of Formula One. Hmm. 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 Eccleston guy. He thinks he's running F1.

48:31Yep. 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 Concord 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 Concord Agreements? I do. That is the physical location

49:02in 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, 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.

49:35And so the FIA also regulates, like, rally sports, endurance racing, et cetera, et cetera. It's not just Formula One. It's just that Formula One is the pinnacle of racing. It's a standards body. Yeah, exactly. So in this first Concord 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

50:05over 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 two, Bernie and the Constructors Association

50:36will control all rights and income from any future televising of F1 races for the next five seasons. Banana. Banana. 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

51:07actually 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? Gray area. Okay.