May 21, 2024

Trevor Milton sold a promise—a zero-emissions semi truck that could revolutionize the trucking industry. He also sold himself as the visionary founder capable of delivering on that promise. In this episode, we take you back to Trevor’s early years as an entrepreneur, and you’ll hear from some of the people who helped him build the businesses that came before Nikola.

Ben Foldy is the host of this season of Bad Bets. Bad Bets is a production of The Wall Street Journal. This season is produced with Jigsaw Productions, in collaboration with Story Force Entertainment.

This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Trevor Milton: Oh, that thing is so awesome. Oh, we've been waiting so long to show this the world. You have no idea. It's hard to even contained my emotion about this.
Ben Foldy: I was watching this video recently sitting in a courtroom in Manhattan. It was being presented as evidence in one of the biggest white collar fraud trials in recent years. The video's from 2016. The man, Trevor Milton. He's young, fit, gelled up hair. And the thing he's getting so emotional about in front of hundreds of people is a semi-truck. It sits behind him on the stage, white and gleaming. The company's name, Nikola, shining from its grill. It looks like it drove off the set of a sci-fi movie.
Trevor Milton: And this truck will come to market. I can promise you that. For every doubter out there that said that, there's no way this is true. How can that be possible? We've done it. It's my pleasure to actually let you guys enjoy the night. See the truck, know it's real, touch it, feel how sturdy it is. You're going to see that this is a real truck. This is not a pusher. Thank you so much, everyone. I appreciate it. Thank you.
Ben Foldy: I've washed these clips so many times that I can't remember what it was like just to see them without obsessively dissecting them. Because federal prosecutors, they say almost every word you just heard this man say was a lie. And while this is a story about that man on stage, Trevor Milton, about what he did and why, before I tell you about him, I need you to understand the promise he was making. Because the promise was a big one, much bigger than just the truck on stage behind him. Trevor was saying that these trucks were going to change the world. He said they ran on hydrogen, using a fuel cell technology that creates electricity to power the trucks. And he promised they would do nothing less than clean America's air and help slow climate change. Think about the last time you were stuck in traffic, surrounded by smoke-spewing semis on the interstate. Now imagine if these trucks ran almost silently and produced no exhaust. Imagine they emitted nothing more than clean, pure water. Trevor Milton had founded a company called Nikola that he said would crank out these new hydrogen trucks by the thousands, changing the world while making a huge amount of money. That was the promise, and according to Trevor, he'd already fulfilled it.
Speaker 3: We've already changed the world of transportation with the hydrogen truck.
Trevor Milton: This truck is by far the most state of the art truck ever built in history.
Speaker 4: We've got the holy grail, and that's what Nikola is. That's what we've done.
Ben Foldy: The reporting behind what you're about to hear, we sent to Trevor Milton's PR rep and lawyers and asked for Trevor's side. They didn't answer our questions. In court, his lawyers have called the case "a prosecution by distortion". They say Trevor "never intended to deceive anyone." And was making statements "because it was part of the company's marketing plan and it was totally innocent." As I sat in the courtroom watching, prosecutors went on to play video after video of Trevor, going over them in minute detail. Sometimes they zoom in on a frame to show the jury closeups of the truck, comparing what the prosecutors say was never a functioning vehicle to what Trevor said about it. Like in this video, where he is being interviewed inside the cab of the truck.
Speaker 5: Hey, everyone. I am here with Trevor Milton. He is the CEO of a Nikola Motor Company. And we're in a very, very special truck that Nikola won, America's first or probably the world's first hydrogen electric semi-truck.
Trevor Milton: Yeah, it's really the first electric truck in the whole world that can go more than 200 miles.
Ben Foldy: Trevor gestures towards the screens in the truck's console.
Trevor Milton: Is a fully functioning vehicle, which is really incredible. You can go through, we can change out pretty much everything we want, all the temperatures. I mean, this is a fully functioning vehicle. It's not just a pusher. That's what they call it in the automotive world, the vehicle that they just push and it doesn't move.
Ben Foldy: And not only was Trevor saying he had this fully functioning hydrogen truck, he was saying he would sell an entire hydrogen ecosystem around it. Companies would lease these trucks from Nikola, which would be pumped full of Nikola-produced hydrogen at Nikola-owned stations that were built across America's highways. It was as if the next Ford Motor Company would also be the next Exxon Mobil.
Trevor Milton: My goal was literally to revolutionize the trucking industry. We don't just sell a truck we're really a tech energy company is what we are. We actually sell all the energy for the truck to the consumer at the same time. Sit back and watch what happens over the next five years, you're going to see Nikola become one of the most valuable brands in the world.
Ben Foldy: And as Trevor Milton sold these stories, Nikola grew, raising more than a billion dollars. A lot of people bought into his vision, from tens of thousands of retail traders to Wall Street banks and big, big names in corporate America, General Motors, Bosch, Anheuser-Busch. At one point, Nikola was valued even higher than Ford. Trevor Milton became a billionaire. He seemed unstoppable. This is the story of how that changed. How a group of characters from the margins of Trevor's life, not Wall Street bankers, not the big name companies he was doing deals with, how these outsiders started tugging at the loose threads of Trevor's stories. Wow. This is just a garage of documents.
Mike Shrout: There was so much information and clues out there.
Miranda Shrout: I've got white boards and thumb drives and files and pictures.
Speaker 8: He didn't want anybody to take pictures or videos. I took some when he wasn't watching.
Mike Shrout: I got in this mode where like, "Dude, the six finger man, he ain't getting away this time." Right?
Ben Foldy: How these outsiders teamed up with professional short sellers who hunt companies for sport and profit.
Speaker 9: Here's a guy who's taking a company public with like a 3 billion market valuation and a few years ago, he was selling alarm system door-to-door.
Speaker 10: The same truck that he was showing at the presentation barreling through the hills of the Utah desert. The truck was rolling down the hill.
Speaker 11: This is nuts. This is unlike any public company I've ever dealt with. I've never seen anything like it.
Ben Foldy: And how the puzzle they pieced together would lead to billions of dollars in stock market losses.
Speaker 12: Nikola shares are tumbling after a short seller called the company, "An intricate fraud built on dozens of lies."
Ben Foldy: Would lead to an emphatic denunciation by Trevor Milton of his critics.
Trevor Milton: Listen for my language (beep) people. They're shitty people. All this was lies and it was slander against Nikola.
Ben Foldy: And finally, to the government indicting Trevor on four counts of fraud.
Speaker 13: Billionaire tycoon who promised to revolutionize the trucking industry with electric vehicles now indicted for fraud.
Speaker 14: Prosecutors say Trevor Milton, "Lied about nearly every aspect of that business."
Ben Foldy: Trevor Milton now faces years in prison if convicted. He's denied all the allegations. My name is Ben Foldy. I'm a financial investigative reporter at the Wall Street Journal. Before that, I covered the auto industry. And that's where two years ago I first started digging into Trevor Milton's story. And it's a wild one, which I'm going to tell you over the next six episodes of our series, Bad Bets. We'll Meet the actor who pretended to drive a motorless truck is it was rolled down a hill.
Speaker 15: I did the audition and it was just a couple of lines about driving a truck or something.
Ben Foldy: We'll talk to a woman who was infuriated after watching Trevor's unusual uses for investor capital.
Miranda Shrout: We go into this warehouse and I'm just seeing dollar signs everywhere, the clothing, the advertising, the cases of silly string.
Ben Foldy: And a private eye, playing spy games in the heart of New York City.
Speaker 16: There's two fake whistle-blowers, our fake whistleblower and their fake whistleblower. The goal was to get everyone's faces to identify them later.
Ben Foldy: And finally, we'll look to answer the real mystery underneath all this. What was it about Trevor Milton or the world he found himself in that let him get so far, so much money and so much attention with so little to show, but a promise?
Trevor Milton: This truck will come to market. I can promise you that. For every doubter out there that said that there's no way this is true. How can that be possible? We've done it.
Ben Foldy: After the break, we go back to the beginning, where it all started. This past July's incredible, my editor, Struthy Pinamani, and I drove to the southwestern tip of Utah, a city called St George. It's where Trevor Milton was living in his early 20s, and it's where he got his start as a businessman. It's also where I'm finding out he first began a pattern that he would repeat throughout his career. A big idea, a hype filled pitch, and then seemingly a crash into disputes and litigation. That's why we're going there, to see in person where this began. Some small kind of community-ish college. While driving through the desert, I see elements of stories that Trevor Milton told about his life. The raw materials of the mythology that he spun for himself, as a founder on his path to becoming a billionaire. He grew up in this region, moving between small Utah towns in Las Vegas. His mother died of cancer when he was young and his dad raised him. Trevor says he wasn't much for book learning. He dropped out of community college after one semester. But he said his dad understood that he was different from other kids and encouraged him to become an entrepreneur.
Struthy Pinamani: We're actually not even that far.
Ben Foldy: And driving through this desert landscape, it was almost like a dorky vacation, just to see some of the details of stories that Trevor's told. At one point, we spot a train heading in the other direction. I believe that that is a Union Pacific train and it is. I can see the logo. I remember how Trevor would tell a story over and over as part of his pitch for Nikola.
Trevor Milton: My dad inspired me with trains. He was the manager of Union Pacific Railroad in Las Vegas. I grew up around trains. I grew up on the rail yards.
Ben Foldy: Trevor says he learned, as a young kid on those rail yards, that diesel locomotives are actually moved by electricity. The diesel generates power for electric motors. They're almost like giant hybrid electric vehicles. And Trevor says one day, it was driving his dad nuts at the yard. That led to the idea that would change his life.
Trevor Milton: Occasionally, when I would frustrate him enough, he would send me out with the conductors and let me look at the inside of a train. The conductor, which is the guy who drives the train, would say, "One day they'll be smart enough to build a locomotive semi-truck. I was six years old around that age. That's when the light bulb went off. I wasn't anyone special at the time, nor was he. We weren't the first people to think about it. I don't lay claim on it. But what it did is it was a seed. It was a seed that cultivated over my life. It was a seed of desire to build something, a desire to create something.
Ben Foldy: Trevor said he knew that he wanted to make a truck like that, a locomotive semi-truck. The train passed us by and we kept driving into the desert. This is the Virgin River Valley, I believe. After a really beautiful stretch of road through the Virgin River Gorge, we crossed from Arizona into Utah.
Struthy Pinamani: It's stunning. Look at that. What?
Ben Foldy: Insane. We're entering a desert valley, where members of the church of Jesus Christ of Latter Day Saints, people often say LDS or Mormons, settled here back in the 1800s. There was religious persecution. Trevor, who grew up LDS, spent years here and a lot of his family's still here.
Struthy Pinamani: I think that's St. George. Just we're coming from on high and entering the…
Ben Foldy: Into the valley. For Trevor Milton, who had an uncanny ability to raise money, this community was sort of the first pond that he fished. And here, he would find not only investors, but also talent. Tinkerers, self-taught mechanics, who'd be able to translate Trevor's dreams into reality. People who will be instrumental to his rise and some later, will have a role to play in his downfall. Confused. We are going to Epic Motor Sports, which is a custom motorcycle, an ATV and car spot that is owned by a friend of Trevor Milton. Once we get there, we step around a crashed Corvette and several jet skis roasting in the sun, and we walk inside, into a dark storefront surrounded by piles of parts and tires. Scooters and jet skis.
Tyler Satterfield: Yeah, suspension. Yeah, that was the fork on the Yamaha R6 motorcycle, had customer bring it in. Just doing a rework on his front suspension.
Ben Foldy: Very cool. That's Tyler Satterfield, the friend of Trevor's who owns this place. They met many years ago, connecting right away over a love that they shared, a love of engines. And how did you guys meet?
Tyler Satterfield: He was somebody that I met as a customer. He came in looking to do some work to, I think it was a Yamaha R1 that he needed to have some work done.
Ben Foldy: He comes in with a real fast motorcycle, sounds like.
Tyler Satterfield: Yeah.
Ben Foldy: Okay. And Trevor, he likes fast things. Is that fair to say?
Tyler Satterfield: I would say that he enjoys toys. In general, he enjoys nice things to play with.
Ben Foldy: Toys, cars, dirt bikes, anything with an engine. Nearly everyone we spoke to who crossed paths with Trevor Milton in St. George, they love toys. I've covered cars at the journal, but I'm not really a car guy myself. When I got hired, I was told that I didn't need to love cars, but I did need to understand why people did. And I do. For a lot of people, cars are an extension of their personality. They're a shared language. And for some people, it's like speed itself is almost a personality type, or at least something to bond over. Tyler Satterfield told me this story about how he and Trevor connected over a go-kart. And it seemed to me a good example of Trevor's ability to take something ordinary and push it into something new.
Tyler Satterfield: I was selling these off-road go-karts. They had these 150 cc motors. And they weren't real fast. They looked really awesome, but you get in them and you're like, "Ah, I just want to go faster. Just, if it was just as a little bit better."
Ben Foldy: And so Trevor asked him.
Tyler Satterfield: He's like, "How would you make this better?" "Well, what you got to do is you got to make it breathe better. We got to put a different intake, we got to do a different exhaust. And there's nitrous. We could throw nitrous on it and you'd have a baby go gas button and for a minute, you'd be able to go real fast."
Ben Foldy: So they did it. Tyler Satterfield modified the go-kart, put all these custom parts on it, added nitrous, engagers. And then, Trevor takes it on a drive.
Tyler Satterfield: He takes it around the corner and he hits the gas, he holds it to it. And he was just going so fast, his face was all lit up. He's like, "Yeah." And he's like putting his head down. He's like, "I'm going Mach 3." No helmet or nothing on him. I could see he's just, he's all lit up. "Yeah, go." The thing that had a top speed of 25, 28 miles an hour, and he was probably doing 50. And then he blows the motor, the head gasket. You had that distinct pah. And then just that gray, blue, black smoke just followed it and then whimpered away. And just… And then he was like, "Ah, can you fix it?" That's like, that was his first word, I think is out of his mouth. "Can you fix it?" "Yep. Yeah, we can fix it."
Ben Foldy: Tyler's face, it lights up as he remembers this moment, and he remembers his friend. My editor, Struthy, asked if there were a lot of folks like Trevor around here.
Mike Shrout: Are there a lot of people around here like Trevor?
Tyler Satterfield: No, no, no. Trevor's a one only. He's a one of a kind. Yeah. I've never met anybody, doubt I ever will. Trevor was somebody I felt like nothing's impossible with Trevor. Whatever it is he wanted to do, as long as we put our minds to it, it was possible. We could do it.
Ben Foldy: I heard this from a lot of people in St. George. There was something about Trevor Milton. He had this ability to convince people to see themselves and his ideas, to see the version of the future that he saw. But there was another side to working with Trevor. And the main reason we've come all the way to St. George is to meet the person who can talk about that. We are pulling up to the house of Mike Shrout in our rented Kia. According to the internal car thermometer, it is 103 degrees outside. Mike Shrout lives on a quiet suburban cul-de-sac. Lots of one-story ranch homes. We walk up as short driveway, past an old Firebird and an Acura and a two- door garage. Hey, Mike.
Mike Shrout: Hey, guys.
Ben Foldy: How are you?
Mike Shrout: Going crazy. How are you guys?
Ben Foldy: Good. Mike looks a little frazzled. He's got his glasses sitting on the back of his neck, pointing backwards. Looks like he's in the middle of a big project.
Mike Shrout: All right. Walk into my world right now.
Ben Foldy: Doing some adjusting?
Mike Shrout: Taking off, a lot of life adjusting right now.
Ben Foldy: The house is in total renovation mode. Floors are ripped up. There's plastic lining everywhere. And then, whiteboards covered in drawings, notes, and even scraps of scripture. Mike's also LDS.
Mike Shrout: This is what I'm trying to do with the rest of the house.
Ben Foldy: Mike tells me he's a self-taught engineer, someone who loves to take things apart and figure out how to make them better. He's also somewhat of an archivist, a meticulous documenter of basically everything.
Mike Shrout: Figure things however you like.
Struthy Pinamani: You may need a different chair.
Ben Foldy: We sit down and we start to talk about how a person like Mike ended up enmeshed in a multi-billion dollar mess.
Mike Shrout: Sounds right here.
Struthy Pinamani: Sounds great.
Ben Foldy: It started with him meeting Trevor Milton in 2004, when Mike Shrout was selling protective linings for pickup truck beds. A brand called Rhino Linings from a storefront in St. George. Trevor was 10 years younger, an energetic 22 year old salesman, opening an alarm shop a couple doors down.
Mike Shrout: He's a fast talker, pretty awesome. He had this '90 something Chevy jacked up. It was yellow, bright yellow. He called it Big Bird. It was actually pretty funny. I thought it was a good name for his truck.
Ben Foldy: Mike says Trevor soon asked him to work on Big Bird, to spray down a liner.
Mike Shrout: I think that was probably the first thing I did for him. But after that, it's like, "Hey buddy. Oh, will this work on an office counter?" "Yeah, I guess so." "All right. Awesome." He brings it down. He takes the counter out over his business and brings it down. "Yeah, just spray it gray." And so I did, sprayed it.
Ben Foldy: Again, Trevor Milton had this way of taking an idea and pushing it further and finding new applications or combinations for it.
Mike Shrout: Then another one's like, "Hey, buddy." Oh, he had this little scooter. Yeah, he had a little putt-putt scooter. Right? I sprayed that yellow for him.
Ben Foldy: Mike Shrout says he did a lot of these little jobs for Trevor Milton, but he was not charmed by him. In his recollection, even in the early days, Trevor was annoying. Squeezing him for nickels and dimes from the beginning.
Mike Shrout: "Hey, Buddy. What's the best deal you can give me? What's just the best deal?" He was always talking me down like, Ah. I didn't have very good margin already, so I was probably making 30 bucks every time I did it. I guess my main point is just that Trevor never paid retail. He always got the buddy deal. And he got the buddy, buddy, buddy, buddy deal, not the regular buddy deal. Anyways.
Ben Foldy: How could He do that though? Because he had…
Mike Shrout: He was just really persistent. Helped me out. We're buddies, we're friends.
Ben Foldy: We're you friends?
Mike Shrout: I don't know. I was his buddy. He always called me buddy.
Ben Foldy: Mike showed us photos and receipts to back up his version of events. And the portrait he painted of a young Trevor Milton was if somebody already adept at the art of the deal. And though Trevor was young, he'd had years of experience already persuading strangers. He'd gotten that experience the way a lot of young LDS folks do. Before he opened his home alarm business next door to Mike Shrout's shop, Trevor had traveled extensively. He'd done a missionary stint in Brazil, then sold alarms door-to-door in Puerto Rico. This transition from pitching religion to getting a door-to-door sales job, it's its own unofficial right of passage for a lot of people in these parts. They call it a summer sales job, selling home alarms, solar panels, pest control, you name it. And they come out of these stints, widely regarded as some of the best sales people in the country. In the case of Trevor Milton though, Mike Shrout felt like his salesmanship went too far. He remembers one time that Trevor offered to sell him an alarm for his shop.
Mike Shrout: "Hey, man, you need an alarm down here." "Yeah, I probably do." He's like, "No, man. Well, let me hook you up, man. We get this awesome deal right now it's only $99 install." "99 bucks. That's not too bad." It's like, "Yeah, dude. Yeah, it's still like we're in a special right now." And so I'm like, "Yeah, okay, that sounds good."
Ben Foldy: Not long after, one of Trevor's installers is in Mike's office, putting in the alarm system, and Mike says to the installer.
Mike Shrout: I'm like, "Yeah, dude, it is a pretty dang good deal, man. 99 bucks for installing." "What?" "Yeah, Trevor's only charged me 99." "It's like it's free install, dude." "What are you talking about?" "Yeah, dude, they're free." Like, "Oh." Yeah. Anyways, that's what happened with that. He charged me 99 bucks for a free alarm install.
Ben Foldy: You got the buddy, the buddy buddy.
Mike Shrout: I got the buddy deal that time.
Ben Foldy: Yeah. Did you confront him about it?
Mike Shrout: I don't remember. I don't think I did. I just, I didn't have time for that crap.
Ben Foldy: And at that time, Mike Shrout could not have predicted that the guy separating him from his $99 would end up at the helm of a billion dollar business, or that Mike Shrout would be mixed up with that business. It felt unfathomable, but that would be a few years later. In the meantime, Trevor Milton soon sold the alarm company around 2006. The man he sold it to, Glen Pilz, told the Wall Street Journal in 2020 that Trevor had misrepresented the quality of the business when he sold it. For example, Glen told us that a $30,000 contract, represented as a done deal, turned out to just be a bid. He said that many employees didn't have the right licenses. And that when he went to collect on unpaid accounts, the customers said they'd already paid Trevor Milton. The business went under within a few years, but people didn't know all this at the time. All they knew was that Trevor Milton had had a successful exit. And fresh off that exit, he founded a new company. This time, a company that sold classified ads online. Trevor said it would be a competitor to Craigslist and eBay within a few years. Mike Shrout didn't see much of Trevor those days. He had bigger problems to deal with. It's 2009. St. George had briefly stopped growing as the country was deep in the financial crisis. Mike's home builder clientele had dried up and he closed his truck liner business. Finances were tight. He needed something new to meet the moment. And then he noticed that there was an actual problem in town that he could solve and maybe make a small business out of.
Mike Shrout: Economy is going crazy. Fuel prices are going high. Wow. Déjà vu. And in Utah, Utah had been trying to promote natural gas, because there's good supply of it here. It's cleaner than gas and diesel.
Ben Foldy: Natural gas was a lot cheaper than…
Mike Shrout: It was 67 cents when diesel was four bucks. Yeah. I mean, the ratio was ridiculous.
Ben Foldy: Converting your car to run on natural gas instead of gasoline can make driving way more affordable. It's called a CNG conversion. CNG stands for Compressed Natural Gas. And Mike Shrout, ever the tinkerer, started doing these conversions for people he knew. His wife, Miranda Shrout, is also an entrepreneur, and she remembers the moment.
Miranda Shrout: Mike said, "Hey, I can put a conversion kit on our car." I'm like, "Well, that's really cool." He started putting conversion kits on our car and then a couple friends' cars. And then, before I knew it, he came home one day and he said that he ran into an old buddy at the gym, and this guy wanted a conversion kit on his truck.
Ben Foldy: The buddy at the gym, it was Trevor Milton.
Mike Shrout: I'm there one day. And all of a sudden, I see across the room, Trevor just walks in in street clothes. He's even got a coat on. He picks up a dumb bell and is flexing it. And then all of a sudden, turns around, "Oh, hey, buddy. Hey, buddy. What have you been up to, man?" "Oh, well, yeah, Rhino got really tough. People stopped coming in, and I pivoted to doing natural gas conversion for like…" "Oh, hey. Yeah, wow. I've been thinking about doing that on my truck. Whoa. Yeah, man. Dude, you need to give me a bid on my truck." I'm just rolling my eyes in my head. Like, "Ah, I don't want to do a Trevor deal." I'm just going to get killed on this deal, but I'm desperate. I don't have a job right now.
Ben Foldy: He does it. He puts a system on Trevor Milton's diesel Dodge pickup, and Mike didn't know it, but it was the first small step towards changing both of their lives. According to Mike Shrout, when Trevor Milton drove his newly converted pickup, he got very excited. Because Trevor noticed that besides the cost savings, the conversions offer another advantage. Power.
Mike Shrout: Since it's a turbocharged diesel, you can just make a dump truckload of power if it's set up just right.
Ben Foldy: And it took a bit of adjusting to get it set up just right. But once it worked, Trevor Milton had something bigger and faster than his souped up go-kart.
Mike Shrout: Was like, "Oh, dude, it's awesome." And so he was ecstatic. I mean it's a rocket.
Ben Foldy: Trevor Milton would ask Mike Shrout a question that Mike himself had been batting around. What if you could take this natural gas conversion and instead of putting it on a pickup, what if you put it on a semi-truck? This question of whether a cleaner, cheaper semi was possible would start Trevor down the path towards a hydrogen truck. But at first, the focus was on natural gas. Mike Shrout says that right away, Trevor Milton started pitching him on going into business together.
Mike Shrout: He shows up at the house and comes in. And "Hey, dude, we need to be in business, man." And my wife's there this time, and so she's sitting in with us. "We need to go in business, 50/50 partners. My dad's friends with the governor of Nevada, and I've got all his money connections and all this kind of stuff."
Ben Foldy: Miranda Shrout says she remembers her husband being apprehensive, but she also remembers that Trevor knew all the right things to say. Again, it was 2009 and folks were struggling to get by.
Miranda Shrout: Trevor knew that we were in a crunch. Newlyweds, the economy is tanking. We just bought a house and he knew that we were in a tight spot financially. He starts throwing numbers around.
Ben Foldy: Miranda Shrout says Trevor Milton talked business and the bottom line. And gave big projections about how much they could all make with this venture. But he also talked about a higher calling.
Miranda Shrout: And the religious stuff is subtle, but Trevor throws in little things like, "I prayed about it." Or, "I have a really good spiritual feeling about this." But one of the things I remember is Trevor standing in our kitchen and looking at Mike, leaning on one of our kitchen stools. Saying, "Dude, we're doing this 50/50 and I'm going to take care of you." If I'm being fully honest, I did look at Trevor and I had a lot of hope. I had a lot of hope. In that moment was he had said everything that we wanted to hear. And when Trevor said 50/50, in the moment, I had no reason to not believe that this was going to be everything that Trevor said it was, and it was going to be wonderful. And then they shook on it. But I was so naive, it never occurred to me to get a lawyer and go over the paperwork. I had worked in plenty of handshake relationships before, and they had worked out well.
Ben Foldy: Is St George a handshake place?
Miranda Shrout: It used to be.
Mike Shrout: Yeah. That wasn't completely gone. I mean, yeah, it wasn't unusual to just take somebody's word for it.
Ben Foldy: According to Mike and Miranda Shrout, they shake on it. Two guys in a kitchen in St. George, one witness present, a 50/50 partnership. The business they formed would be called dHybrid Inc. And this was the business that in some ways, in many ways laid the groundwork for Nikola. Trevor Milton would go on to sell the world on the promise of a transformative technology, a new way to move goods all over the country in a new truck. And dHybrid would be the beginning of that, a step towards the dream that Trevor had said he'd had since he was six. The dream of a locomotive semi and the fortune to be made along with it. And so the idea becomes natural gas hybrid conversions for diesel semi-trucks.
Mike Shrout: Yeah.
Ben Foldy: Had that been done by anybody else?
Mike Shrout: I had been trying to do it, but I just hadn't been at it long enough to get my hands on a big rig to do it.
Ben Foldy: Mike Shrout needed a semi. Trevor Milton took care of that. In late 2009, Trevor used his connections to get a meeting with Swift Transportation, one of the biggest trucking outfits in the country. He drove his Dodge pickup, the one that Mike Shrout converted to run on natural gas, to Swift's headquarters in Phoenix. And Mike says that after that meeting with Swift, Trevor called him.
Mike Shrout: "Hey, I just got back. Just went to Swift and we just let him drive the truck. And they're super impressed. And they were going to send us a semi." Like, "Holy crap. Wow." I was really amazed at how quickly doors opened, I was. And it isn't long before there's a semi parked in my driveway and I'm going nuts on it, trying to do the same thing with it.
Ben Foldy: This is the driveway in this apartment?
Mike Shrout: In his house right here. Got pictures of it out front.
Ben Foldy: It's not a very big driveway, is it?
Mike Shrout: No, it just barely fit.
Ben Foldy: Mike shows me a picture, a big semi-truck as tall as his house. It's just barely poking into the street from his driveway. You're right. It truly barely fit. The picture really drives home for me something that I find fascinating about Trevor Milton. The enormous semi in the tiny driveway is such a perfect metaphor for a man, who several people told us, was never deterred by the scale of his ambitions relative to his surroundings. Trevor had a knack for finding some pretty amazing people. Often garage savants, who would do the work to try to make his dreams real. He'd do it later at Nikola, but it started here in St. George. Mike Shrout was the first of many. Mike says all of a sudden, his job is trying to adapt his home brew natural gas conversions to this much larger engine. He needs to prove to the suits at Swift that he can save them lots of money on diesel with natural gas conversions.And he has just eight weeks to do it. To be clear, no one else is doing this. There's barely an online community. There's no how-to guide. Mike Shrout needs to figure it out himself. He starts cobbling together new parts. Teaching himself to code.
Mike Shrout: It's actually the first song I've ever done this, but it's figure it out. Just keep trying and tear the internet apart, looking for answers. And find all these parts that I can whip together and make something that actually works.
Ben Foldy: The stakes were high, but it would be worth it. If Mike Shrout could pull it off, dHybrid could win a contract with a massive company.
Mike Shrout: I was doing this on my kitchen table at night, all day and all night.
Ben Foldy: You what?
Mike Shrout: I have all these pictures. No, I built it on my kitchen table.
Ben Foldy: Swift is a multi-billion dollar company at this point.
Mike Shrout: No, they are the largest trucking outfit in the entire United States within an enormous fleet.
Ben Foldy: You're building a transformative technology for them on your kitchen table.
Mike Shrout: Yeah, no, this is totally whack. Yeah.
Ben Foldy: Okay. Just to be clear here, I mean, and this isn't an indictment of your talent or your ability, but you're not an engineer. You're not…
Mike Shrout: I have to self learn this stuff.
Ben Foldy: Got it. Does Swift know that they are giving a semi to a guy in a cul-de-sac in suburban St. George? Or do you-
Mike Shrout: I don't know. I don't know. But it's an interesting question, isn't it?
Ben Foldy: We've reached out to Swift Transportation, which declined to comment. But Mike Shrout, he really did have a bunch of photos and documents to back him up. And he said, while he was building the prototype, Trevor wasn't adding much technical knowhow, but he was a master of salesmanship.
Mike Shrout: He's really good at figuring out all the cool words to use and really good at paint a picture and using awesome words. I call them awesome words when he uses them. And he gets fluent in the awesome words, and he gets a lot done. Well, he gets doors opened, let's put it that way.
Ben Foldy: March 2010. Three men from Swift arrive in St. George for the big test. After a few weeks of Mike Shrout working day and night to rig the semi to run on natural gas, Swift wants to see it in action. They want to test the efficiency of this new system. And they don't just want to see it on the truck. They want to see how it pulls a trailer with tens of thousands of pounds in it. That's a lot more than the naked semi that Mike's been nervously testing by driving around his church parking lot. Mike Shrout says he hops in the cab with Trevor Milton, a driver from Swift, and the Swift executives responsible for increasing efficiency. They set out for a test drive to Beaver, Utah, 100 miles up the highway.
Mike Shrout: We go up the road. I'm in the back of the cab. I've got a laptop hooked to the system. What I call a system. And it won't link up. It won't do anything. I can't get it to connect. I'm freaking out. I'm calm. But inside I'm like, "Oh crap. We're screwed. This is terrible. I don't know what to do." And finally, just honestly, I just said a quiet prayer. "I feel like I have done everything that I can. Please help me get the rest of the way." And this is not my imagination. The truck just started to just run smooth and just beautifully.
Ben Foldy: Mike Shrout couldn't believe it. He'd never seen anything like it. He sat mostly in silence, while outside the truck the mountains went by. After the drives, they hopped down from the cab and one of the Swift executives starts figuring out how much fuel they saved. It's a simple test done by pen and paper, just comparing how much fuel they had left in the tank with and without the system.
Mike Shrout: And they measured the fuel savings after the two runs. And I've got the whole page, I'll show it to you. It's all his notes from the trip and figuring in the price and the cost per mile savings. He wrote 61% on that piece of paper. And we're all just, "Oh, wow." That, I wasn't expecting that at all. I thought it was going to be like 5%. Everybody was freaking out. They're like, "Wow."
Ben Foldy: 61% is huge. Fuel is one of Swift's highest expenses, and cutting that by 61% could mean a big boost to profits. Mike Shrout says they returned to St. George triumphant.
Mike Shrout: We went out to lunch after that. Everybody's buddies now. And I don't know if it's still there, but it was a Mexican restaurant and they let you write on the ceiling for some reason. Anyways, Trevor gets up on the table and stands up there, and he writes 61% cost per mile savings. Needless to say, we're in a new zone now. We're at the table.
Ben Foldy: Did they buy you lunch?
Mike Shrout: Oh, yeah. Yeah. They totally did.
Ben Foldy: The brand new company, dHybrid, still operating out of Mike Shrout's driveway, had just passed its first big test. And it was an important test. It would lead to a contract with Swift, a name that carried with it, an enormous amount of clout as one of the biggest trucking firms in the country. And when Trevor made a deal, the next one wasn't far behind. On the next episode of Bad Bets, money.
Speaker 21: Late one night, he goes, "We've got to have some investment capital." And, "What are you talking?" He goes, "As much as you've got."
Ben Foldy: How Trevor convinces the people in his community to give him millions of dollars and what he does with those millions.
Miranda Shrout: Mike brings home this, it was like a printed flyer to come to the world's largest silly string event.
Mike Shrout: It gets to the point where, "Hey, buddy. Yeah, there's no more money and there's no money to pay you."
Ben Foldy: And what happens when people start to ask questions.
Speaker 22: I actually ended up calling Trevor and I have that audio recording.
Ben Foldy: Oh, now our eyes light up. That episode will be available in The Bad Bets feed, October 14th. Bad Bets is a production of the Wall Street Journal. This season is produced with Jigsaw Productions in collaboration with Story Force Entertainment. This episode of Bad Bets is hosted by me, Ben Foldy. The series is directed by Sruthi Pinamanani. Scott Salaway is the supervising producer. Ken Brown is WSJ'S Financial Enterprise Editor. Shane McKeean, Frank Matt and Garrett Grammar are the Producers. Editorial consulting by PJ Vote. Fact Checking by Elizabeth Moss. Sound Design, original composition, and mixing by Armon Bazarin. For the Wall Street Journal, Daniel Rosen is the co-executive producer of WSJ Studios. Ben Weltman is the senior executive producer for Jigsaw Productions. Stacey Offman and Richard Paralo are executive producers. For Story Force Entertainment, Bly Pagan Fast and Corey Shepherd Stern are executive producers. Special thanks as well to WSJ's, Charles Farrell, Jamie Heller, Brent Kendall, Christina Rogers, Corey Ramey, James Finale, Rick Brooks, Emma Moody, and Jessica Fenton. One more thing. We originally planned to release two episodes this week, but Trevor Milton's trial is wrapping up and we're expecting a verdict soon. That's why we're holding episode two until next week. Thanks for listening. See you then.


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