Tesla, SpaceX and the Quest for a Fantastic Future
BY ASHLEE VANCE
On January 7, 2021, Musk was named the richest person in the world with a net worth of $188.5 billion. Remarkably, Musk not only topped Jeff Bezos, but accrued $150 billion of that net worth in the prior 12 months alone. Experts described it as the fastest bout of wealth creation in history,
In Elon Musk, the South Africa-born inventor opens up to writer and reporter Ashlee Vance about the rocky road he traveled to become America’s most innovative modern industrialist.
TOP 20 INSIGHTS
Musk has always been a man with a mission and a higher calling. In college, he became convinced there were three areas that would change the future of the world for good: the internet, sustainable energy and the ability to live outside our planet. Musk came to see man’s fate in the universe as a personal obligation. If that meant man should pursue cleaner energy technology or build spaceships to extend the human species’ reach, then so be it. Musk had a deep commitment to explore Mars and he would find a way to make it happen.
Vance believes Musk will leave an indelible mark on the world through his transformative work. Vance asserts that Musk has what so many in Silicon Valley lack – a meaningful world view. “He is less a CEO chasing riches than a general marshaling troops to secure victory. Where Mark Zuckerberg wants to help you share baby photos, Musk wants to [...] save the human race from self-imposed or accidental annihilation,” Vance writes.
When the dot-com bubble burst in 2007, it left behind a slew of empty-handed investors and mediocre companies. Silicon Valley sank into a deep depression. Although Google emerged and began to thrive in 2002, and Apple soared when it launched the iPhone in 2007, these startups were anomalies. And the hottest new things – Facebook and Twitter – looked nothing like their predecessors Intel, Hewlett-Packard or Sun Microsystems, all of which employed thousands of people to make physical products. Silicon Valley had morphed into a play-it-safe haven as countless entrepreneurs and dot-com strivers chased easier money and churned out simple apps and advertisements.
By all accounts, Musk should have been part of the malaise that washed over Silicon Valley. Instead, he founded his first startup in 1995, Zip2, bought by Compaq in 1999 for $307 million. He took the $22 million he made on the deal and invested all of it in his next start-up, X.com, which eventually morphed into PayPal.
As the largest shareholder in PayPal, Musk became enormously wealthy, when eBay bought PayPal for $1.5 billion in 2002. Musk headed for Los Angeles and threw $100 million into SpaceX, $70 million into Tesla and $10 million into SolarCity. Musk had become a business titan who, in one fell swoop, brought about the most significant advances the aerospace, automotive and energy industries had seen in decades.
Musk and other Silicon Valley influencers at the time shared the belief that innovation had come to a hard stop after the bubble burst. Jonathan Huebner, a physicist at the Pentagon’s Naval Air Warfare Center, used a tree metaphor to describe what he saw as the state of innovation. Man has already climbed past the trunk of the tree and gone out on its major limbs to mine most of the really big, game-changing ideas – the wheel, electricity, the airplane, the telephone and the transistor. We now dangle at the end of the branches at the top of the tree, left only to refine past inventions.
PayPal, the first blockbuster initial public offering after the 9/11 attacks, came to represent one of the greatest assemblages of engineering and business talent in Silicon Valley history. The founders of startups such as YouTube, Yelp, and Palantir Technologies all worked at PayPal. Its employees pioneered techniques in online fraud that have formed the basis of software used by the FBI and CIA to track terrorists and of software used by the largest banks to combat crime. This group of super-talented employees became known as the PayPal Mafia, or essentially the “ruling class” of Silicon Valley, with Musk as its most famous and successful member.
Musk’s willingness to tackle the impossible has earned him the respect and reverence shown to the greats like Steve Jobs, Howard Hughes and Google founder Larry Page. Only Steve Jobs could claim similar achievements in two completely different industries, such as when he launched an Apple product and a new Pixar movie when he ran the two large industry behemoths simultaneously. The difference between Musk and his innovative peers is that Musk wants to build something far grander than anything Hughes or Jobs produced. Musk’s mission has always been to rethink conventional norms in the aerospace, automotive, and solar industries and then make as much as possible from scratch in his own startups.
Musk’s software skills and ability to apply them to machines would drive his success. Famed software engineer Edward Jung marveled at Musk’s gift of integration – the ability to harmoniously meld software, electronics, advanced materials and computing horsepower. Musk also is a self-taught coder with a natural ability to master complex physics concepts in business planning and conceptualize a path from a scientific concept to a for-profit enterprise. Musk is determined to pave the way toward an age of awe-inspiring machines and sci-fi dreams come true.
Musk always managed to find bright, ambitious people. He snagged the best talents in the aerospace industry and the same could be said for Tesla, where engineers got to work on things not typically done in U.S. auto companies. Musk would personally reach out to the aerospace departments of top universities to inquire about the students who had finished with the highest exam grades. It was not unusual for Musk to call students in their dorm rooms and recruit them over the phone.
It was not until Vance walked through the doors of SpaceX that he realized the magnitude of what Musk had done. “Musk had built an honest-to-God rocket factory in the middle of Los Angeles. And this factory was not making one rocket at a time. It was making many rockets – from scratch,” Vance writes.
Musk wanted SpaceX to build the workhorse for a new era in space and establish the U.S. as the world leader that can take cargo and humans to space. It’s a threat Musk believes has earned him a great number of fierce enemies.
SpaceX represented America’s attempt for a fresh start in the rocket business, which Musk believed had not evolved over the past 50 years. If SpaceX could make rockets cheaper than what the Russians offered at the time, SpaceX would have the technology needed for his mission to establish life on Mars for at least a million people over the next century.
The aerospace companies built a “Ferrari” for every launch when a simpler car could do the job just as well. Instead, Musk would apply start-up techniques from Silicon Valley to run SpaceX fast and lean and capitalize on the advances in computing power and materials that had occurred over the past two decades. SpaceX would operate as an independent company and avoid the waste and cost overruns often associated with government contractors.
Tesla defied all odds for success in the auto industry. Its automotive expertise amounted to two guys who loved cars with one who created a series of science fair projects based on technology the auto industry considered to be ridiculous. But Tesla did what start-ups do. They hired a bunch of young, hungry engineers who figured things out as they went. Never mind that the Bay Area had no real history that this model would work for something like a car, or that building a complex, physical object had little in common with software application writing.
Tesla revealed that each electric car it built would cost $90,000 and had a range of $250 per charge. Thirty technology billionaires had committed to buy a Roadster in 2006. Musk promised that a cheaper car – a four-seat, four-door model under $50,000 would follow in a few years.
By the middle of 2007, Tesla had grown to 260 employees and did the impossible. It had produced the fastest electric car the world had ever seen. All it had to do was build a lot of the cars – a process that would nearly bankrupt the company. The greatest mistake Tesla’s engineers made in the early days were assumptions about the Roadster’s transmission. The issue forced Tesla to delay its November 2007 launch of the Roadster and begin developing a new transmission in early 2008.
Tesla consumes a huge portion of the world’s lithium-ion battery supply and will need far more batteries in the future to meet the needs of its businesses. This is why in 2014, Musk announced plans to build what he called a Gigafactory, or the world’s largest lithium-ion manufacturing facility. Each Gigafactory would employ about 6,500 people and help Tesla meet a variety of goals.
Musk helped his cousins, Lyndon and Peter Rive, develop SolarCity’s business model and became the company’s chairman and its largest shareholder. Unlike other companies, SolarCity would not manufacture their own solar panels. Instead, they would buy them and then do just about everything else in-house. They built software to analyze a customer’s current energy bill, the position of their house and the amount of sunlight it typically received, and built up their own teams to install the solar panels.
When Vance asked Musk one final question for the book: Just how much will you put on the line? His response was: “Everything that other people hold dear. I would like to die on Mars.”
By 2012, Musk’s companies had done such unprecedented things and disrupted so much industry that even his greatest critics couldn’t help but recognize all he had accomplished. SpaceX flew a supply capsule to the International Space Station and returned it safely to Earth, Tesla produced an alluring all-electric car that took the auto industry by surprise, and as the largest shareholder of SolarCity, Musk created a successful solar energy company ripe for an initial public offering.
UNIFIED FIELD THEORY
The simple way Musk manages his businesses and decides business strategy to start is embedded in his Unified Field Theory. Each of Musk’s businesses is interconnected in the short term and long term. This operating theory reduces workload and helps all of his companies provide mutual external support to each other so they grow and prosper by. For instance, Tesla makes battery packs that SolarCity can then sell to end customers. SolarCity supplies Tesla’s charging stations with solar panels, which helps Tesla to provide free recharging to its drivers. SpaceX launches satellites for Tesla, which allow Tesla to provide user navigation services, and SpaceX uses batteries manufactured by Tesla to power their system. They exchange knowledge around materials, manufacturing techniques and the intricacies of operating factories that build so many things from the ground up.
To this day, Musk manages his companies through a business model of full integration and support, and if he encounters obstacles he cannot solve, he starts a whole company on it.
Musk has always believed that the very idea of America was intertwined with humanity’s desire to explore. However, his fears that mankind had abandoned all gumption to push technology boundaries were confirmed when he visited NASA’s website, where he found nothing, not even a mention, of any future plans to explore Mars. Dumfounded, he headed to Russia to see if he could buy a rocket himself. The Russians pushed Musk around with ridiculous prices and other skullduggeries, which strengthened his commitment even more. Elon studied intensely how rockets are built and declared he would build the rocket himself from a spreadsheet that detailed exactly how to do it. That is how SpaceX was born in 2002.
SpaceX tested reusable rockets that could deliver payloads to space and return to their launch pads on Earth with precision. If the company can perfect this technology, drastically reduce the price per launch and perform launches on a regular schedule, SpaceX would deal a devastating blow to its industry competitors. These innovations could potentially cripple industry giants of the U.S. military industrial complex such as Lockheed Martin and Boeing. Musk also competed with nations, most notably Russia and China, in the space race.
SpaceX made a name for itself as a low-cost supplier in the industry. But that alone was not enough to win in the space business. Musk also had to navigate the politics, favoritism and protectionism that undermined the fundamentals of capitalism. Steve Jobs faced similar challenges when he took on the music recording industry to bring iTunes and the iPod to market. However, compared to Musk’s foes who built weapons and countries for a living, Jobs's challenges may well have been a “walk in the park.”
Vance captured the following key milestones that SpaceX, Tesla and SolarCity had achieved at the time of this writing:
SPACEX KEY MILESTONES
September 2008: The Falcon 1 rocket was the first privately funded liquid-propellant rocket to reach orbit. This launch paved the way for the development of the Falcon 9 rocket.
December 2008: NASA awarded SpaceX a $1.6 billion contract for commercial resupply services to the International Space Station.
July 2009: The Falcon 9 Flight 5 made history as the very first privately developed liquid fuel rocket to deliver a commercial satellite to Earth's orbit.
With Tesla Motors, Musk has tried to transform the way cars are made and sold, as he built out a worldwide fuel distribution network worldwide. When Musk started up Tesla, he was well aware that Chrysler was the last successful startup in the U.S., founded in 1925. To design and build a car from the ground up is wrought with challenges, but the ability to get money and know-how to build cars by the thousands is what stunted efforts to get any new company going.
Elon had always seen a future of all-electric cars. So, when Martin Eberhard and Marc Tarpenning approached Musk to become the first investor in a company called Tesla, Elon was all in. He wanted the car to be a luxurious representation of a sustainable future.
As Tesla began to fulfill its first round of pre-ordered Model S cars, things were shaky. Parts for the car were way too expensive and everything was behind schedule. Musk was not happy and called for the board to replace CEO Martin Eberhard as CEO. They agreed and the original founder of the company was gone.
When Musk took over in 2008, the future of Tesla and SpaceX hung in the balance. By Musk’s calculations, he only had enough money to save one company. Rather than panic, Elon was able to keep his cool long enough for SpaceX to win a contract to become NASA’s official supplier for the International Space Station. Another “Tesla might go out of business” occurred again in 2013. It was so bad that Elon had a handshake deal with Google for them to buy and save Tesla. That scenario never materialized because Tesla’s sales team was able to beat projections, which sent the stock through the roof.
Instead of hybrids, which in Musk speak are suboptimal compromises, Tesla aims to make all-electric cars people lust after, which push the limits of technology. Teslas would not be sold through dealers but rather through Apple-like stores at high-end shopping centers. Unlike traditional car dealers, Tesla does not expect to make a lot of money on service for its vehicles, since electric cars do not require the oil changes and other maintenance of traditional cars. Tesla’s solar-powered recharging stations now run along many major freeways in the U.S., Europe and Asia, which reenergize a Tesla in about 20 minutes. Tesla owners also pay nothing to refuel.
As much of America’s infrastructure crumbles, Musk’s goal is to is build an end-to-end transportation system that enables the U.S. to eclipse the rest of the world. His vision and execution have been described as a blend of the best of Henry Ford and John D. Rockefeller.
TESLA KEY MILESTONES
2010: Tesla goes public, raised $226 million in its IPO.
2012: Tesla delivered an electric car that goes over 200 miles, goes from 0–60 mph in under four seconds, and looks great. Tesla achieved that target with the Roadster, and then again with the Model S.
2013: Tesla posts its first quarterly profit.
2014: Tesla announces its Nevada Gigafactory, where the company will manufacture the batteries for all its products.
2015: The company enters the solar power market and announced a line of products to power homes and businesses based on a combination of solar panels and batteries.
Musk’s cousins, Lyndon and Peter Rive started up SolarCity with a $10 million investment from Musk, who became its chairman and largest shareholder. They developed a plan to drive down solar costs by controlling the experience from sale to installation (while third-party manufacturers provided the panels). They hired 150 employees, the majority of the construction workers, and by the next year, the company had installed about 70 solar systems per month around Northern California. The business began to grow, and the company eventually expanded to more than a dozen states. Musk was not involved much beyond the board level so he could take time to grow Tesla and SpaceX.
Six years later, SolarCity had become the largest installer of solar panels in the country. The company had lived up to its initial goals and made panel installation painless. Rivals rushed to mimic its business model. SolarCity had benefited along the way from a collapse in the price of solar panels, which occurred after Chinese panel manufacturers flooded the market with products. It had also expanded its business from consumers to businesses with companies like Intel, Walgreens, and Wal-Mart who signed up for large installations. In 2012, SolarCity went public and its shares soared higher in the months that followed. By 2014, SolarCity was valued at close to $7 billion.
SOLARCITY KEY MILESTONES
2012: SolarCity went public and its shares soared in the months that followed.
2014: SolarCity was valued at $7 billion.
2016: Tesla acquired SolarCity $2.6 billion to make the company a truly integrated sustainable energy company that could develop, produce, sell, install and service these products in the most seamless way possible.
Vance’s up-close look at Musk’s life in order to write the book convinced him that Musk’s relentless commitment to his mission and his indomitable spirit will leave an indelible mark on the world. “Because of Musk, Americans could wake up 10 years from now with the world’s most advanced transit system run by thousands of solar-powered stations and traversed by electric cars,” said Vance. “By that time, SpaceX may well be sending up rockets every day, taking people and things to dozens of habitats and preparing for longer treks to Mars. These advances are simultaneously difficult to fathom and seemingly inevitable if Musk can simply buy enough time to make them work.”