USA TODAY International Edition
Musk calls rockets, electric cars ‘dumbest’ ventures
Yet SpaceX, Tesla CEO is at forefront of both
Elon Musk seems to have never met a business idea he didn’t like. The wackier the better.
Send rockets to Mars? He’s in! Drill tunnels under major cities? Give him a shovel. Build a mass-market electric car? Duh!
In fact, the SpaceX and Tesla CEO called investing in rockets and massmarket electric vehicles “the dumbest things to do” when he spoke to crowds at SXSW Interactive in Austin.
If there’s a method fueling Musk’s madness, it’s identifying society’s long-term needs and hoping that being ahead of your time eventually yields a financial windfall.
Musk told festivalgoers he hunts for “things that don’t seem to be working that are important for our life and for the future to be good.”
He added bluntly: “If you were to do a risk-adjusted rate of return estimate on various industry opportunities, I would put building rockets and cars pretty much at the bottom of the list.”
Take the decision to start rocket company SpaceX, pairing a childhood fascination with science fiction and a businessman’s intuition that private companies could pick up where government agencies had dropped out.
“I just kept wondering why we were not making progress towards sending people to Mars. Why we didn’t have a base on the moon. Where are the space hotels that were promised in the movie
(2001: A Space Odyssey)?” he said. “Year after year, it was getting me down . ... The genesis of SpaceX was not to create a company but really how do we get NASA’s budget to be bigger.”
After a series of initial rocket failures,
“If you were to do a risk-adjusted rate of return estimate on various industry opportunities, I would put building rockets and cars pretty much at the bottom of the list.”
Elon Musk
SpaceX has successfully launched a variety of payload-carrying missiles into orbit, including Falcon Heavy.
By securing government contracts at rates that undercut traditional government suppliers such as the United Space Alliance, a joint venture between Boeing and Lockheed Martin, SpaceX is able to fund Musk’s mission to Mars.
SpaceX has had no problem securing funding, making it one of the most highly valued start-ups, capital it needs for some ambitious goals — such as getting Mars spaceships in orbit by the first half of next year.
Musk said he “gave basically both SpaceX and Tesla from the beginning probably less than 10% of (being) likely to succeed.” In the early days, he wouldn’t even let friends invest in SpaceX because he figured they would lose their money. “We almost did die at SpaceX,” he recalls.
Musk had about $180 million from being a co-founder of PayPal and thought he could allocate half that sum to SpaceX, Tesla and another of his ventures. He eventually realized he had to put pretty much all of his money in “or the companies are going to die.”
That period around 2008 was a rough patch for Musk. He borrowed rent money from friends, had gotten divorced, SpaceX had a third consecutive failure of its Falcon rocket, and Tesla almost went bankrupt. “We closed our financing 6 p.m. Christmas Eve 2008, the last hour of the last day that it was possible.”
His experience largely explains why others haven’t followed his path.
“What’s your pain threshold?” he asked. “SpaceX is alive by the skin of its teeth. So is Tesla. If things had just gone a little bit the other way, both companies would be dead.”
Tesla isn’t out of the woods. While it has successfully marketed a pair of $100,000 electric vehicles, the Model S and X, to a niche audience, the launch of its first entry-level ($35,000 and up) Model 3 has hit snags.
Despite Tesla’s net loss of nearly $2 billion for 2017, investors are keeping the faith. Perhaps in part due to fourthquarter revenue totaling $3.29 billion, Tesla shares remain high at around $342, up from $246 a year ago.
Lest we imagine Musk always approaches his business ventures with a clear mission and strategy, there’s the case of The Boring Company. His new venture aims to drill tunnels beneath big cities to pave the way for a series of underground pedestrian-focused shuttles.
The business might be serious, but the idea “kind of started more as a joke because I thought that would be a funny name for a company,” Musk said. “After four or five years of begging people to build tunnels, and still no tunnels, it was like, ‘OK, I’m going to build a tunnel.’ ”