How Elon Musk does it:

The Fal­con Heavy’s cre­ator is try­ing to change more worlds than one

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The Fal­con Heavy's cre­ator is try­ing to change more worlds than one

It was not, in the end, the much an­tic­i­pated take-off that took your breath away. It was the land­ings. Eight min­utes after they had lifted the first SpaceX Fal­con Heavy off its pad at Cape Canaveral on Fe­bru­ary 6th, two of its three boost­ers re­turned. Pre­ceded by the flames of their rock­ets, fol­lowed by their sonic booms, the slen­der tow­ers touched down on neigh­bour­ing land­ing pads a frac­tion of a sec­ond apart. After such power, such del­i­cacy.

Up above the at­mos­phere, the rocket’s sec­ond stage opened its fair­ing to re­veal its cargo: a red road­ster made by Tesla, a com­pany which, like SpaceX, is run by Elon Musk. The dummy sit­ting at its wheel wore a SpaceX space­suit, David Bowie played on the stereo, the motto from “The Hitch­hiker’s Guide to the Galaxy”—“Don’t panic!”—was dis­played proudly on the dash­board. In the back­ground, the great blue disk of the Earth re­ceded. Down be­low, a mil­lion geeks swooned.

Top­ping off an ex­tra­or­di­nary tech­ni­cal achieve­ment with flam­boy­ance and a touch of silli­ness is typ­i­cal of Mr. Musk. It should not be mistaken for a lack of se­ri­ous­ness. Mr. Musk does not sim­ply want to have fun build­ing rock­ets and fast cars. Nor is he run­ning two multi-bil­lion-dol­lar com­pa­nies just to be­come rich, or to beat ri­vals. He wants to open up fun­da­men­tal op­por­tu­ni­ties with which he thinks the mar­ket would not trou­ble it­self. The pur­pose of SpaceX is to make hu­man­ity an in­ter­plan­e­tary species, and thus safe from global catas­tro­phe, by pro­vid­ing it with the means to build a civil­i­sa­tion on Mars. The pur­pose of Tesla, em­bla­zoned on the wall of its fac­tory in Fre­mont, Cal­i­for­nia, is: “To ac­cel­er­ate the world’s tran­si­tion to sus­tain­able en­ergy”.

Cre­at­ing ei­ther of these com­pa­nies would be a sig­nal achieve­ment. That the same per­son should have built and run them in par­al­lel is re­mark­able. It shows that Mr. Musk has spe­cial tal­ents as a strategist, man­ager and source of in­spi­ra­tion, as well as lofty am­bi­tions.

Started in 2002, and with its first suc­cess­ful launch in 2008, SpaceX has come to dom­i­nate the com­mer­cial-launch mar­ket (see chart). In 2017 it launched 18 rock­ets—more than the rest of Amer­ica and Europe com­bined. Its Fal­con 9 is eas­ily the cheap­est big launcher on the mar­ket, in part be­cause it is the only one that can fly its boost­ers back to Earth for re­use. (Even at SpaceX there are glitches: the third of the

Fal­con Heavy’s boost­ers hit the sea at 500km an hour, rather than touch­ing down gen­tly on the barge pro­vided for it.)

Tesla, mean­while, showed that an elec­tric car could be ev­ery bit as good as the best petrol car—better, ac­cord­ing to many own­ers—and, in so do­ing, very quickly es­tab­lished a pre­mium brand. Tesla’s Model S, which sells for $70,000 and up, has been the best­selling elec­tric car in Amer­ica for the past three years. There have been more than half a mil­lion or­ders for its new Model 3, an at­tempt to cap­ture the mass mar­ket that sells at half the price of the Model S.

Both com­pa­nies beat the in­cum­bents in their in­dus­tries by com­bin­ing a clear view of how tech­nol­ogy was chang­ing the scope of the pos­si­ble with a fierce de­vo­tion to push­ing that tech­nol­ogy even fur­ther. That is fa­mil­iar from other Sil­i­con Val­ley suc­cess sto­ries. But the fact that the firms’ goals go be­yond prod­ucts and profit set the two com­pa­nies apart from, say, Jeff Be­zos’s Ama­zon or Larry Page’s Al­pha­bet. In “The Com­pla­cent Class”, which laments lost en­tre­pre­neur­ial vigour, Tyler Cowen, an econ­o­mist, cites Mr. Musk as a counter-ex­am­ple, to­day’s “most vis­i­ble and ob­vi­ous rep­re­sen­ta­tive of the idea of ma­jor progress in the phys­i­cal world.” The head of one of the big­gest pri­va­tee­quity funds in the en­ergy in­dus­try says that no­body else is driv­ing ei­ther clean tech­nolo­gies or new busi­ness models for­ward as much as Mr. Musk: “The world needs Elon Musk!”

But the achieve­ments, the world-his­tor­i­cal am­bi­tions and the adu­la­tion they have brought do not mean that Mr. Musk can count his high-torque pho­to­voltaic astro-chick­ens just yet. The very next words out of that fund man­ager’s mouth were “Short Tesla.” Pro­duc­tion of the cru­cial Model 3 re­mains badly be­hind sched­ule, and the com­pany’s fi­nances look stretched. Chris­tian Hoff­mann of Thorn­burg, an in­vest­ment firm, calls buy­ing Tesla shares on the ba­sis that Mr. Musk will quickly solve its prob­lems a “James Bond trade”: “He needs to dodge the avalanche, avoid the gun­fire, ski off the cliff, pull the rip­cord and glide to safety so that he can save the world.”

Maybe he can. In 2008 both SpaceX and Tesla were within days of bank­ruptcy. Now they have a com­bined value of more than $80 bil­lion. But the chronic prob­lems at Tesla mean that this is Mr. Musk’s high­est-stakes year since then. To ap­pre­ci­ate the risk, look at what Mr. Musk has, and hasn’t, achieved so far, and at the qual­i­ties that have al­lowed him to do so.


Of the two goals, colonis­ing Mars and con­tribut­ing to the green­ing of the Earth, the sec­ond sounds more plau­si­ble, not least be­cause it is widely shared. But SpaceX is in much better shape than Tesla. The firm is pri­vately held (Mr. Musk, who has a con­trol­ling stake, says it will re­main so). In 2015 Google and Fi­delity in­vested $1bn, and sub­se­quent fil­ings put the firm’s value at over $21bn.

SpaceX has a com­mit­ment to mod­u­lar de­sign, ver­ti­cal in­te­gra­tion and con­tin­ual im­prove­ment not pre­vi­ously seen in the space busi­ness. The Fal­con Heavy, for ex­am­ple, used 28 Mer­lin en­gines, all of them built from scratch at the com­pany’s plant in Cal­i­for­nia, all of them much more pow­er­ful than the Mer­lins that pow­ered the first Fal­con 9 in 2012. The firm’s achieve­ments have es­tab­lished it as a satel­lite launcher and as a lo­gis­tics com­pany, with its re­us­able Dragon space­craft pro­vid­ing sup­plies to the In­ter­na­tional Space Sta­tion. This busi­ness will ex­pand when, prob­a­bly some time next year, the Dragon is cer­ti­fied to ferry as­tro­nauts up there, too.

The in­no­va­tion is con­tin­u­ing—which is just as well, be­cause within a few years it may face se­ri­ous com­pe­ti­tion from Blue Ori­gin, a rocket com­pany owned by Mr. Be­zos which is likely to prove more sprightly, and more am­bi­tious than those SpaceX has faced to date. Treat­ing the Fal­con rock­ets as cash cows, SpaceX is mov­ing its devel­op­ment ef­forts on to an even larger (and pos­si­bly also cheaper) launcher, known as the BFR, and a con­stel­la­tion of thou­sands of com­mu­ni­ca­tion satel­lites, an un­der­tak­ing that would ex­ploit its abil­ity to get things into space cheaply so as to pro­vide high-speed in­ter­net ac­cess all around the world. Mor­gan Stan­ley, an in­vest­ment bank, reck­ons that could bring the com­pany’s value up to $50bn—though it will re­quire mas­ter­ing a new man­u­fac­tur­ing chal­lenge and fac­ing new com­peti­tors.

Tesla is al­ready worth more than that: roughly $60bn. That is more or less the same value as GM, which makes 80 times as many cars. In 2004 Mr. Musk took a big stake in Tesla, founded the year be­fore, and be­came chair­man; in 2008, when the com­pany faced clo­sure, he be­came CEO. It went

pub­lic two years later and quickly be­came the world’s lead­ing elec­tric-car com­pany; last year it pro­duced over 100,000 ve­hi­cles. At the Model 3’s launch Mr. Musk claimed that, by the end of 2017, it would be churning out 5,000 a week.

It wasn’t. In fact it was nowhere near it. It made just un­der 2,500 Model 3s, half that promised week’s worth, in the en­tire fourth quar­ter of 2017. It now says it will hit 5,000 a week later this year; a pre­vi­ous claim that it would go on to 10,000 a week by the end of the year has been dropped. Mean­while, it faces ever stiffer com­pe­ti­tion. The world’s es­tab­lished car­mak­ers are get­ting into the elec­tric game. Other new en­trants in­clude Al­pha­bet, which owns Waymo, an au­ton­o­mous-car firm that be­gan as part of Google.

Given all this, many think Tesla’s valu­a­tion un­sus­tain­able. Mr. Musk some­times seems to see their point. “This mar­ket cap is higher than we have any right to de­serve,” he said when speak­ing to an au­di­ence of state gov­er­nors in July 2017, soon after the com­pany’s valu­a­tion first topped that of Ford. To re­as­sure share­hold­ers of Mr. Musk’s com­mit­ment, in Jan­uary Tesla pro­posed a new pay plan that ties all his earn­ings to strict mile­stones for rev­enues, an­nual prof­its (of which, so far, it has made none at all) and mar­ket cap­i­tal­i­sa­tion. The last of these sets a tar­get of $650bn by 2028. That is roughly the cur­rent value of the world’s largest ten car­mak­ers com­bined.

To ac­com­plish such rapid growth—all but un­heard of in a com­pany its size—Tesla has to be­come more than just the suc­cess­ful mass-mar­ket car com­pany it still isn’t. It has to be­come an in­dus­try in and of it­self, pro­vid­ing better, bat­tery-pow­ered al­ter­na­tives to the in­ter­nal-com­bus­tion en­gine wher­ever it is found, from lawn­mow­ers to jug­ger­nauts, and also sell­ing bat­tery-stor­age sys­tems to con­sumers and util­i­ties on a huge scale.

Why should any­one be­lieve such hubris? One ar­gu­ment is that elec­tric ve­hi­cles, de­signed and built the Tesla way, are both better and po­ten­tially much more prof­itable than the al­ter­na­tives. A re­cent tear-down anal­y­sis by McKin­sey, a con­sul­tancy, con­cluded that elec­tric cars de­signed from scratch are much better (for ex­am­ple, on range and in­te­rior room) than those that are mod­i­fied ver­sions of petrol-fired cars and still made on ex­ist­ing pro­duc­tion lines. And by keeping a great deal of its cars’ en­gi­neer­ing in-house, as SpaceX does with its rock­ets, Tesla may stand to be much more prof­itable than its cur­rent com­peti­tors. Jef­frey Os­borne of Cowen, an in­vest­ment bank, cal­cu­lates that 80% of the value of a Tesla is cre­ated in its man­u­fac­tur­ing plant in Fre­mont, some three to four times the share for a typ­i­cal pas­sen­ger car.

What is more, elec­tric-car fac­to­ries could be a lot more pro­duc­tive than those for in­ter­nal-com­bus­tion en­gines; whereas a con­ven­tional car has about 2,000 com­po­nents in its drive chain, a Model S has fewer than 20. Mr. Musk says that these ad­van­tages mean he can cre­ate a “ma­chine that makes ma­chines” qual­i­ta­tively better than any­one else’s. But the so­far-piti­ful pro­duc­tion of the Model 3 sug­gests that, at best, that ma­chine is prov­ing hard to bed in. It also means Tesla is not get­ting the rev­enues it based its spend­ing plans on.

The “gi­gafac­tory”, a bat­tery plant in which Tesla and Pana­sonic are in­vest­ing $5bn, also has its prob­lems. The in­vest­ment is based on the idea that Tesla needs economies of scale in its bat­tery busi­ness only achiev­able in a fac­tory that is highly au­to­mated and ut­terly huge. Mr. Musk says the gi­gafac­tory—near the town of Sparks, Ne­vada—will be, by foot­print, the big­gest build­ing in the world (see ar­ti­cle).

Romit Shah of No­mura/In­stinet, a bank, es­ti­mates that in late 2014, when the gi­gafac­tory was an­nounced, global bat­tery de­mand for elec­tric ve­hi­cles was about 12 gi­gawatthours a year. No­mura thinks the gi­gafac­tory alone will have 40GWh of ca­pac­ity by the end of this year. In 2016 Tesla bought So­larCity, a so­lar-power and home-en­ergy-stor­age firm that Mr. Musk had helped two of his cousins set up, for $2.6bn. One of the rea­sons was to soak up some of this huge sup­ply of bat­ter­ies. (An­other was that So­larCity was drown­ing in debt; the bail-out of the CEO’s side-gig was con­tro­ver­sial, but Tesla share­hold­ers ended up back­ing it by a large mar­gin.) Stor­age, not cars, may be the big­gest mar­ket for bat­ter­ies long-term: it was not an ac­ci­dent that the com­pany changed its name from Tesla Mo­tors to just Tesla last year.

Get­ting the gi­gafac­tory up to its promised speed and scale is vi­tal to Mr. Musk’s plans. It has proved frus­trat­ingly dif­fi­cult. A visit to Sparks late last year found J.B. Straubel, a co-founder of Tesla and now its chief tech­ni­cal of­fi­cer, com­pletely con­sumed with the au­toma­tion ef­forts: “Ramp­ing up such a com­pli­cated ma­chine,” he says, “on this un­prece­dented timescale, has never been done be­fore.” Last Oc­to­ber Mr. Musk tweeted that the pro­ject was in “Pro­duc­tion hell, ~8th cir­cle”.


While Mr. Straubel strug­gles in hell, Tesla burns money as the Fal­con Heavy burns kerosene. Bar­clays, a bank, reck­ons that Tesla will con­sume $4.2bn this year. With just $3.4bn in cash at the end of 2017 Mr. Musk will al­most cer­tainly need an­other in­jec­tion of funds by the mid­dle of the year— and maybe more later. Mr. Os­borne of Cowen reck­ons Tesla’s cap­i­tal ex­pen­di­tures will amount to $20bn-$25bn be­tween 2017 and 2020. Jim Chanos of Kynikos As­so­ciates, a prom­i­nent short-seller who pre­dicted the col­lapse of En­ron, re­cently de­nounced Tesla’s his­tory of miss­ing dead­lines and tar­gets as mean­ing that “the eq­uity is worth­less.”

As yet, though, the share­hold­ers do not seem to agree. Tesla’s stock price has held fairly steady; peo­ple might even buy more, if of­fered. They in­vest be­cause, as a SpaceX in­sider

puts it: “They be­lieve in Elon.” When he says, as he did on Fe­bru­ary 7th, “If we can send a road­ster to the as­ter­oid belt we can solve Model 3 pro­duc­tion,” many hap­pily ac­cept the non se­quitur.

His power to in­spire is not limited to the pub­lic and his in­vestors. It at­tracts bright peo­ple to his com­pa­nies, where they work with a pas­sion which matches his own (and may well feel his tem­per all the same). Mr. Straubel in­sists that “the mis­sion re­ally mat­ters—that’s why we’re work­ing so hard.” Gwynne Shotwell, SpaceX’s chief op­er­at­ing of­fi­cer, says Mr. Musk’s ex­treme goals for SpaceX are “in­cred­i­bly in­vig­o­rat­ing” and help her re­cruit the very best prospects: “We rarely lose a can­di­date.” Out­side ob­servers agree. Vinod Khosla, a Sil­i­con Val­ley ven­ture cap­i­tal­ist, says “Elon’s mis­sion is mo­ti­vat­ing so many peo­ple. This is com­mon at small so­cial en­ter­prises, but very rare at scale.”

But Mr. Musk’s com­pa­nies rely on more than just his ideas and al­lure. Two other at­tributes stand out: his ap­proach to risk and his em­brace of com­plex­ity.

His way with risk is un­like that of his Sil­i­con Val­ley peers, ac­cord­ing to Amy Wilkin­son of Stan­ford. She says en­trepreneurs rarely take big risks on an­other ven­ture after they have scored a stonk­ing suc­cess. The few that be­come se­rial en­trepreneurs typ­i­cally stay within the same in­dus­try.

Mr. Musk, hav­ing sold his first com­pany, Zip2, to Com­paq for $341m in 1999, ploughed the gains straight into, an on­line bank that later be­come Pay­Pal. Within 18 months of sell­ing that to eBay for $1.5bn he had in­vested al­most all his gains in Tesla and SpaceX. He takes on more risk with each new round of fi­nanc­ing.

A risk-tak­ing boss does not mean a cava­lier com­pany. Ms Shotwell points to a di­chotomy in at­ti­tudes to risk at SpaceX. It is in many ways a very uni­fied op­er­a­tion. Most of the man­agers and en­gi­neers have desks in the man­u­fac­tur­ing fa­cil­ity, in among pro­duc­tion ex­perts and line work­ers. Peo­ple cir­cu­late eas­ily, try­ing out new ideas and learn­ing from col­leagues who, in a more tra­di­tional struc­ture, they might never meet. But the de­sign­ers and en­gi­neers are en­cour­aged to be mav­er­icks, whereas the op­er­a­tions and man­u­fac­tur­ing teams are most def­i­nitely not. A for­mer se­nior ex­ec­u­tive says that Mr. Musk takes the risks he thinks he has to, but does not run ex­tra ones just to cut cor­ners. An­other in­sider de­scribes him as “a risk taker for him­self, but a risk mit­i­ga­tor for every­one around him”.

Looked at like that, his risk-tak­ing may fit with his greater pur­pose; a gam­ble, per­haps a self-sac­ri­fice, un­der­taken as part of his urge to fend off catas­tro­phe. His faith in tech­no­log­i­cal progress is, un­usu­ally for Sil­i­con Val­ley, ex­plic­itly tinged with dark­ness: he is a para­noid op­ti­mist. Thus Tesla

of­fers amaz­ing air fil­ters on the ba­sis that they will help pas­sen­gers “sur­vive a mil­i­tary grade bio at­tack”.

As be­fits a para­noid op­ti­mist, his broad hopes for the future are also tied up with fears. Some, such as cli­mate catas­tro­phe, are fairly wide­spread, some are more un­usual—the need for civil­i­sa­tion to be backed up to an­other planet, just in case. He has been one of the loud­est voices warn­ing Sil­i­con Val­ley and the world of the threats posed by out-of-con­trol ar­ti­fi­cial in­tel­li­gence (AI) and has set up a not-for-profit out­fit de­voted to less­en­ing it.

Mr. Musk’s sec­ond defin­ing char­ac­ter­is­tic is the will­ing em­brace of com­plex­ity. “Com­plex­ity will hap­pen in­side or out­side the or­gan­i­sa­tion,” says An­to­nio Gra­cias of Valor, a ven­ture cap­i­tal­ist who sits on the boards of both Tesla and SpaceX. “Elon’s view is that if you have it in­side, you can man­age it better…and can build faster, cheaper and to higher spec­i­fi­ca­tions.” His ap­proach echoes that of Andy Grove, a leg­endary for­mer boss of In­tel whose in­vest­ments in in­te­grated chip­mak­ing turned the firm into a global pow­er­house. It elim­i­nates the “mar­gin stack­ing” en­joyed by lay­ers of sup­pli­ers and al­lows a con­tin­u­ous im­prove­ment of what the com­pa­nies of­fer. Un­der­stand­ing all the link­ages and de­pen­den­cies in such a sys­tem is a huge chal­lenge; so far, Mr. Musk has met it.

This sys­tems think­ing can be strate­gic; you can see it in the way So­larCity has pro­vided more in-house de­mand for the gi­gafac­tory, or in SpaceX’s plans to use its launch ca­pa­bil­ity to cre­ate a vast new con­stel­la­tion of satel­lites. But it fig­ures in the small­est de­ci­sions as well as the big­gest. Spurn­ing the re­ceived opin­ion that mi­cro­man­age­ment is a bad trait in bosses, Mr. Musk prides him­self on be­ing a “nano-man­ager”. “Un­like other CEOs he’ll re­ally walk through the tech­nol­ogy with you,” says a vet­eran en­gi­neer at one of his firms. Mr. Gra­cias says he is the best zoom-in man­ager he has seen: “Elon can be at the macro, see ev­ery­thing that’s highly dis­rup­tive, and then can zoom all the way down to the mi­cro, down to the door han­dle.”

One worry is that such in­tense fo­cus, di­vided be­tween two com­pa­nies, can­not last—es­pe­cially as Mr. Musk end­lessly plays around with yet more ideas, such as ul­tra-high­speed in­ter­city travel (a scheme called “hy­per­loop” which he con­ceived of in 2013 and is now re­vis­it­ing), novel tun­nelling equip­ment to solve con­ges­tion on the streets (see ar­ti­cle) and mind-com­puter in­ter­faces to keep hu­mans—or at least cy­borgs—a step ahead of the AI men­ace (a startup called Neu­ralink). With Tesla seem­ing to need all the at­ten­tion it could pos­si­bly get, these tan­gents ap­pear self-in­dul­gent. At the same time, for many of the faith­ful the end­less flow of ideas fur­ther bur­nishes his im­age.


An­other worry is that Mr. Musk’s tech­no­log­i­cal in­sight might let him down. For ex­am­ple, he be­lieves that cam­eras and ever smarter soft­ware will be good enough to make Tes­las fully au­ton­o­mous. This puts a huge de­mand on the com­pany’s AI team, and goes firmly against the tech­no­log­i­cal grain. Other, cur­rently more ad­vanced, au­ton­o­mous car­mak­ers in­sist that li­dar sen­sor sys­tems are also vi­tal. If they are right, Tesla will for the first time find it­self on the tech­no­log­i­cal back foot, and might even come to look un­safe (which would surely gall Mr. Musk deeply).

And then there are the overly am­bi­tious tar­gets. Mr. Musk rou­tinely gets his teams to do things no one else can do, but they rarely pull it off by the date he orig­i­nally set. Do not ex­pect fleets of BFRs to head for Mars at any date he may sug­gest. Such dates are goads as much as tar­gets. They drive the en­thu­si­asts—and him—even harder. This has of­ten proved for­giv­able. “Even if he misses his dead­line, we are bet­ting that he will still get there first,” as one equities an­a­lyst puts it. The Fal­con Heavy is a case in point. When Mr. Musk un­veiled the de­sign in 2011, he said it would be on the pad in 2013. The task turned out to be a lot more dif­fi­cult than that, and con­tin­ual im­prove­ments to the Fal­con 9 made it rather less nec­es­sary. But SpaceX was mak­ing money. Tesla is not.

It may be that Mr. Musk’s ap­peal will keep the com­pany’s fi­nances to­gether. It may also be that, even in fail­ure, he achieves his goals. Now there is one gi­gafac­tory, others may see its mer­its and build more. Now there is a mar­ket for high­qual­ity elec­tric cars, others will ex­pand it. In­deed, if a truly big Sil­i­con Val­ley fish wanted to do so, and Tesla stum­bled badly, buy­ing it might be a good way in.

Asked about a new space race after the Fal­con Heavy launch, Mr. Musk was en­thu­si­as­tic: “Races are ex­cit­ing.” They also let pace­set­ters guide the field. If you start a race in the di­rec­tion you think peo­ple should be go­ing, it may not, in the end, mat­ter if you win.

And if Mr. Musk does not per­son­ally deal the death blow to the in­ter­nal-com­bus­tion en­gine, he will al­ways have a gor­geous car in space to con­sole him.

Up and above. Started in 2002, and with its first suc­cess­ful launch in 2008, SpaceX has come to dom­i­nate the com­mer­cial-launch mar­ket. In 2017 it launched 18 rock­ets—more than the rest of Amer­ica and Europe com­bined

Fun­da­men­tal op­por­tu­ni­ties. The pur­pose of SpaceX is to make hu­man­ity an in­ter­plan­e­tary species, and thus safe from global catas­tro­phe, by pro­vid­ing it with the means to build a civil­i­sa­tion on Mars

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