Elon Musk Is An Interesting Dude

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Elon Musk is a very interesting character. We know that. But after just finishing his biography it really fresh. He is, quite arguably, the most successful and important entrepreneur in the world. There was a time when electric cars and private space flights seemed silly.  Now they are becoming normal.

At first, this biography by technology journalist Ashlee Vance wasn’t supposed to happen. Before this book Musk rejected all demands for a biography, including this one. But Ashlee did his homework. He told Musk that he talked to over 200 people associated with him over time and they have a story, and not all nice things. In the end Musk collaborated and gave his side of the story.

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After reading the book, Musk reminded me of Steve Jobs and other people that would do everything and anything to get their vision accomplished. Some say he is a nicer version of Steve Jobs and a more refine version of Bill Gates. The reality is that Elon is Elon. There’s nobody else like him at the moment.

Musk was an early Internet millionaire when he made his first millions with Zip2 (think Yelp meets Google Maps but in 1995) when it was bought by Compaq Computer (netting Musk $22 million). Then Musk became part of the “PayPal Mafia” which was sold to Ebay. His share of the sale was $180 million after taxes. He used his money to mostly fund SpaceX, Tesla, and Solar City.

The book covers Musk’s crazy life story. From is youth in South Africa to his current stardom. But it’s not a cheer-leading book. Of course there’s a lot of that because of what he has accomplished but the book goes deep at figuring out Musk. There’s a lot of criticism. He didn’t get to where he is now without making enemies along the way. Others admire the guy but sees a flawed man.

Among the recurrent criticism in the book is: Elon is extremely difficult to work for, mostly because he is passionate. He can be impatient. He can be unrealistic. He’s a very demanding person. What he has been saying publicly about his products doesn’t match what’s going on internally, driving the engineers nuts. He can be hard to the point of mean and come off as capricious. In an infamous episode, Elon Musk reportedly scolded a Tesla employee for missing a work for the birth child (apparently there’s an email). Elon strongly denies it happened and support pregnancy leave. Musk comes across as an obsessive workaholic who thinks about electric cars and very little else. Taking credit for ­others’ accomplishments. And that’s some of it. Of course nobody expects him to be perfect.

For the folks that got to know him, you can’t take it personally. Musk raison d’être is to save humanity. To have a backup plan, like a colony on Mars. If you are not contributing to that mission, well you are in the way.

Iron Man

The ‘Musk is Iron Man’ story is not some PR stunt. Robert Downy Jr., who played Iron Man/Tony Stark, was inspired by Elon Musk. Downey visited SpaceX and his mind were blown. The movie set hammered out did have parallels to the SpaceX factory. During production, Downey asked for a Tesla Roadster in Tony Stark’s workshop. The car was to be placed as the nearest object to Stark’s desk so that it formed something of a bond between the actor, the character, and Musk. In Iron Man 2, parts were shot inside and outside SpaceX. Today it seems that Elon and Downey/Iron Man feeds off each other. Elon likes the idea of being a modern day Iron Man and Downey uses Musk for inspiration.

SpaceX (Currently Private)

Musk loves space. With his PayPal buyout money he was able to focus on his passion. In 2002 he launched SpaceX, a private company focused on shaking up the moribund space industry. SpaceX aimed to drastically reduce the costs of space travel and, eventually, transport humans to Mars.

Musk has ambitions to colonize Mars. To be a interplanetary specie is his raison d’être. The point is to maximize the probable lifespan of humanity. Musk has decided that’s man survival depends on setting up another colony on another planet.

Going to space is extremely expensive. Well it was. Musk has reduced the cost of reaching the ISS by a staggering 90 per cent, from $1 billion per mission to a mere $60 million, with more savings to follow. SpaceX claims that 70 to 80 per cent of its product is made here, under one roof, by its local US workforce.

Why and how did he managed to lower cost so much? First it’s Musk’s money. His money that he is spending. His competitors, Boeing and Lockheed Martin, benefits from generous government contracts. Bureaucracy, inefficiency, and the feeling of complacency doesn’t lead to improvements. If the current model makes you a lot of money, why change it? The book is full of examples where he tells his employees to find a $5,000 solution to an item that was quoted for $100,000, and they get it done. That’s how you get the savings.

For the moment SpaceX is a private company. I want to share the email that Musk wrote to his SpaceX employees about going public. I have posted the letter here. My favorite part is this:

Some at SpaceX who have not been through a public company experience may think that being public is desirable. This is not so. Public company stocks, particularly if big step changes in technology are involved, go through extreme volatility, both for reasons of internal execution and for reasons that have nothing to do with anything except the economy. This causes people to be distracted by the manic-depressive nature of the stock instead of creating great products. (Underlined by me)

I suggest you read it. The letter really catches the essence of having your company publicly traded. The part about the nature of the stock market is really spot on. The letter is from 2013 and states that the valuation is around $4 to $5 billion. Recent valuation peg SpaceX around $12 billion.

Tesla Motors

Tesla Motors, the well known start-up car manufacturer that aimed to produce all-electric production cars, something mainstream manufacturers had tried to do and failed miserably.

His peers in the auto industry never gave Tesla a chance. The Model S was viewed as a gimmick or a fad. Now the sentiment is more akin to panic. They were caught unaware. But you can’t blame them. For years Tesla looked like an utter disaster incapable of doing much of anything right. It took until early 2009 for Tesla to really hit its stride with the Roadster. Tesla did have several near death experiences, but thanks to generous capital markets and hard work, it’s looking at disrupting turning the auto industry upside down. Today, although some still believes that Tesla will fail, they can’t ignore him anymore.  The auto industry was complacent and Tesla Motors has stunned them. Now they are playing catch up in the electric vehicle segment. GM, Ford, Toyota, BMW, Porches etc.. are all going electric.

A distinguish feature of Tesla Motors is the experience of buying and owning a car. You don’t go to a dealership and haggle with a pushy salesman. Tesla sells directly through its own stores and website. The salespeople are not compensated on commission and didn’t have to try to talk you into buying a suite of extras. Whether you bought the car online or in a store, it would be delivered in a concierge fashion. Tesla would bring it to your home, office or anywhere else you wanted.

You can argue that luck played a big role in Tesla’s success. It got this massive $465 million government loan. He was able to buy this very cheap factory in Fremont for almost nothing (a $1 billion investment from GM-Toyota that closed during the Financial Crisis). And a very favorable capital market allows Tesla to raise money every time it runs dry. As long as capital markets are good, Tesla will be fine. Tesla is a popular stock to short because of its high valuation, balance sheet, and manufacturing issues. However it’s very dangerous to short a momentum stock. Also it didn’t make anybody rich to bet against Elon.

To conclude, the world needs more Elon Musk. We need more people that chase wild crazy dreams. People that wants to accomplish things that look impossible. It’s with a vision and a mad drive that we get things done and advance civilization. By any rational assessment, Musk’s projects were preposterous and doomed to fail. Today SpaceX is contracted by NASA and the military. Tesla’s first all-electric family car, the Model S saloon, hit US streets with the highest ratings ever conferred by either the National Highway Traffic Safety Administration or and went on to win several significant awards.  While Musk has many flaws, I’m convinced that Musk will succeed in his quests.

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