Business Week (13/09/12)
On Fridays, Elon Musk gathers his engineers in an old hangar in Los Angeles. The building, next to a municipal airport a couple miles south of the Hollywood Park race track and casino, is now a research and development facility for Musk’s electric car company, Tesla Motors (TSLA). Musk uses these meetings to check the team’s progress and give straightforward, often withering, design critiques. During one such session in July, versions of the Model S sedan and the skeletal frame of a forthcoming sport-utility vehicle, the Model X, sit in a corner. Drivetrain prototypes lay on the concrete floor next to interior cabin mock-ups.
Musk’s staff huddles around him as he zeroes in on a sun visor. He hates it. He examines the seam and, noticing how it pushes up the fabric, declares it “fish-lipped.” The screws on the hinges feel like knives stabbing him in the eye. He announces he wants to find the best sun visor in the world, and then make a better one.
The session continues in the parking lot, where a number of competitors’ vehicles—some hybrids, some conventional—await judgment. Musk squeezes his six-foot-two, broad-shouldered frame into the back seat of a luxury sedan from Hyundai and then into an Acura SUV. He scoffs at the cramped third-row seats in the Acura. “That’s like a midget cave,” he says, and the group chuckles on cue. “It’s good to get a sense for just how bad the other cars are.”
Last year alone, Acura’s parent company, Honda Motor (HMC), sold 200,000 hybrids. Toyota Motor (TM) sold 629,000. In nine years, Tesla has built a total of 2,450 vehicles. The auto industry may have had a rough time of late, but Tesla has had buckets of delays, quality issues, and near-death financial crises. That Musk feels no shame dismissing the efforts of vastly larger competitors would not surprise his friends and colleagues, who describe him as Steve Jobs, John D. Rockefeller, and Howard Hughes rolled into one. “He’s a throwback to when people were doing less incrementalist things,” says Peter Thiel, the tech investor who co-founded PayPal with Musk. “The companies he’s started are executing against a vision measured not in years but in decades.” Bruce Leak, a veteran Silicon Valley entrepreneur who once worked with Musk at a video game company, says, “He has that Bill Gates energy where his foot bounces and he’s wiggling just because he’s so smart.” Jon Favreau, a friend and the director of the Iron Man movies, has called Musk the basis for his version of comic book hero Tony Stark, the playboy inventor who builds a flying weaponized suit.
Musk has been having a year good enough for another movie. In May, his Space Exploration Technologies, better known as SpaceX, successfully launched a 227-foot-tall rocket from a platform in Cape Canaveral, docking one of its Dragon capsules with the International Space Station, orbiting 220 miles above the earth—a feat NASA called “absolutely incredible.” Tesla, which went public in 2010, started shipping the all-electric Model S luxury sedan in June and will soon unveil a nationwide network of charging stations. SolarCity, where Musk is chairman of the board, is a player in the residential and commercial solar markets, with more than 28,000 customers, and is expected to go public imminently at a value of about $1.5 billion. Musk is chief executive officer of Tesla and SpaceX, and is the largest shareholder in all three companies. Following the SolarCity IPO, his net worth could be well north of $3 billion.
If they survive, they’ll continue to be improbable and inspiring businesses. “The next six months will be about really proving things for Tesla,” Musk says. “We need to get in excess of 20,000 units a year and in excess of 25 percent gross margins, which would be close to the highest in the car business.” SpaceX has a backlog of about $3 billion booked from spaceflight customers through 2017, but still has to successfully execute all those launches using equipment it hasn’t finished developing. Musk’s goals go well beyond cash-flow statements, however. “We don’t have sustainable energy production solved,” he says, “and we are not a multiplanetary species.”
Musk, 41, grew up in Pretoria, South Africa, during the last decades of apartheid. He was the oldest of three siblings. His father ran his own construction engineering firm, handling government and commercial projects. His mother was a dietician.
Musk’s parents divorced when he was about 9 years old. Along with Kimbal, his younger brother, he enjoyed an unusual amount of independence. They once tried to ride their bikes the 50 miles or so to Johannesburg. “We thought we knew how to get there, but nobody actually had a map,” says Elon. “We got lost halfway and ended up going through some super-dangerous areas.” He also liked to create homemade explosives and rockets. “It is remarkable how many things you can explode. I’m lucky I have all my fingers.” Musk led his brother and cousins in a number of ventures, such as selling Easter eggs in the neighborhood and starting a video game arcade.
Young Elon was a big reader. “He would go through two books in one day,” says Kimbal. In his early teens, Elon had something of an existential crisis and devoured a mountain of philosophical and religious texts. Asked if any work in particular gave him solace, he cites The Hitchhiker’s Guide to the Galaxy, the comic science fiction novel. “It taught me that the tough thing is figuring out what questions to ask, but that once you do that, the rest is really easy,” Musk says, referring to the novel’s revelation that the answer to the ultimate question of “life, the universe, and everything” is 42. “I came to the conclusion that we should aspire to increase the scope and scale of human consciousness in order to better understand what questions to ask. Really, the only thing that makes sense is to strive for greater collective enlightenment.”
At age 15, Musk decided that the path to self-actualization traveled through the U.S. His mother was born in Canada, which was close enough. Musk got a Canadian passport, bought a plane ticket, and arrived in Montreal with little money and no home. He spent the year showing up unannounced on the doorsteps of distant Canadian relatives and doing stints on farms, tending vegetable patches, and shoveling grain. The low point was cleaning out boilers at a lumber mill. “You had to put on this hazmat suit and shimmy through this little tunnel,” Musk recalls. “Then you take this steaming goop and shovel it back into the hole you just came through and wait for someone else to put it into a wheelbarrow.”
Musk eventually made his way to Queen’s University in Ontario for two years and then to the University of Pennsylvania, where he got degrees in economics and physics. Musk put himself through Penn by throwing massive parties at a house he lived in with Adeo Ressi, another student. Ressi created day-glo artworks to give the house the feel of a club; Musk managed the finances. Ressi remembers Musk converting one of his works of art into a desk. “I’m like, ‘Dude, that’s like installation art in our party house.’ It wasn’t a desk. It was a work of art. The argument about this went on and on, and maybe today in his infinite wisdom he’ll admit that, ‘Adeo, that was art.’ ” When asked about this, Musk says, “It was a desk.”
As an undergraduate, Musk wrote business plans for an electronic book-scanning service and an “ultra-capacitor” energy storage venture. He bored dates with monologues on the wonders of electric cars. To get any of his grand projects started, he needed a lot of money. So in 1995 he bailed out of a graduate program in applied physics at Stanford and, with Kimbal, started an Internet map and directory venture called Zip2. Four years later, they sold Zip2 to Compaq Computer for more than $300 million.
Musk took his winnings and plowed them into another startup called X.com. This was basically an online bank and would later become PayPal. Musk was the largest shareholder—and, for a time, CEO—until EBay (EBAY) acquired it for $1.5 billion in 2002. He made $180 million.
Musk poured that fortune into SpaceX, Tesla, and SolarCity, and funded a data-center software company called Everdream, among other ventures. He palled around with Hollywood types, which is how he got to know Favreau. Musk executive-produced the satirical 2005 movie Thank You for Smoking.
Tesla almost collapsed in 2008 under the weight of delays and cost overruns, then struggled to raise a new round of venture capital while Musk was pilloried as a dilettante getting his comeuppance. Auto industry blog The Truth About Cars had a running feature called “Tesla Death Watch.” Musk put his last $3 million into Tesla and began borrowing money from friends. His marriage to his college sweetheart Justine unraveled, and they both blogged their takes on the divorce settlement negotiations. “I was just getting pistol-whipped,” Musk says. He sold off his McLaren F1, at the time the most expensive car in the world. “I was like, ‘I’m f—ed. What am I going to do?’ ” And then the rich guy’s deus ex machina arrived when Dell (DELL) acquired Everdream, of which Musk was the major shareholder, for $120 million. “That money arrived in early 2009 and replenished the coffers,” he says. “Thank goodness, man.”
At Tesla’s factory in Fremont, Calif., the largest building is a half-mile long and a quarter-mile wide. The facility used to build 1,452 vehicles a day for Toyota, a mix of Corollas, Tacomas, and other cars. Musk bought it for $42 million when Toyota shuttered the plant in 2010. At the moment it’s producing six Model S’s each day. Huge sheets of aluminum come in, get cut up into smaller chunks, and are bent and folded by tremendous stamping machines into the Model S’s chassis and body. In other parts of the building, workers assemble lithium ion battery packs. Swiveling red-and-black robots fasten parts with a delicate touch. Some of the robots pick up entire vehicles and hang them from an aerial conveyor.
Each finished car goes through a gantlet of tests, including being sprayed with high-pressure water to check for leaks and being driven across surfaces with different textures to see if anything shakes loose. Musk inspects each Model S before it’s shipped. Tesla expects to produce as many as 100 cars per day by the end of the year, says Gilbert Passin, Tesla’s vice president for manufacturing.
Like many of the employees at Tesla and SpaceX, Passin was hired away from an established rival—Toyota in his case. As workers assemble cars with Sweet Child O’ Mineplaying on a radio, Passin explains that Tesla offered him a chance to do something bold and new. “We started here with nothing, and now have a chance to show what we can do,” he says.
The Model S starts at about $50,000— after federal tax credits—and is an engineering marvel. It’s a sedan that can hold seven people, get from zero to 60 in 4.4 seconds, and go 300 miles on a charge. With the battery pack forming the base of the vehicle, and the motor about the size of a watermelon, the Model S has far more space than cars with gasoline engines. There’s a trunk, of course, and also what the company calls a frunk—a large compartment in the front where the engine usually goes. Since there’s no gear-shift console between the front seats, there’s extra storage space up front and room for a 17-inch touchscreen.
Tesla doesn’t have conventional dealerships with lots of models on display. It has a chain of small, minimalist retail stores in high-end shopping centers like the ritzy Santana Row in San Jose. Tesla’s outlets resemble Apple stores, which is no accident. In 2010, Musk hired George Blankenship, who came up with Apple’s (AAPL) retail strategy, to oversee Tesla’s stores. At the San Jose location, a red Model S sits in the middle with velvet ropes around it. Nearby, a frame with no body shows off the battery pack, motor, and custom drivetrain. On the walls, touchscreen displays allow prospective customers to gauge how much money they might save by going electric and try out different configurations for their car. Once they settle on a design, they swipe their finger across the screen, and their personalized car appears on a huge screen in the middle of the store.
The salespeople aren’t on commission. “The typical dealer wants to sell you a car on the spot to clear inventory off his lot,” Blankenship says. “The goal here is to develop a relationship with Tesla and with electric vehicles.” As Apple did with the iPod and iPhone, Tesla wants to turn its vehicles into a statement as much as a tool. “We have thousands of reservations for the Model S,” Blankenship says. And that’s without test-drives. Tesla has 24 stores worldwide and plans to add 10 more this year.
Blankenship, who used to work a few doors down from Jobs, credits Musk with hiring experts and letting them work without too much oversight. “This is the first place I’ve worked that’s going to change the world,” he says.
On July 12, Musk turns up late to a screening at the William Morris Endeavor talent agency in Beverly Hills. Musk and his friend, actress Olivia Wilde, executive-produced the evening’s film, Baseball in the Time of Cholera, a 30-minute documentary about a cholera epidemic in Haiti. Rainn Wilson, the actor and star of The Office, emcees the post-screening discussion.
Afterwards, Musk and a couple dozen people head to Mr. Chow, the favorite Chinese restaurant of the Hollywood elite, for a little celebration. Musk is in a chatty mood and lingers on the street outside. He mentions the time NASA officials sat star-struck when Robert Downey Jr. popped in to visit the SpaceX offices. I suggest that he doesn’t come across as Tony Stark, drinking scotch in the back of a Humvee in Afghanistan, so much as a Diet Coke-chugging workaholic nerd. Musk retorts, “Hey, I went to Haiti last Christmas and visited some pretty dangerous parts. I got wasted too, on some drink they call the Zombie.”
Bryn Mooser, co-director of Baseball in the Time of Cholera, confirms the trip to Haiti. Musk showed up with 450 toys and 35 MacBook Airs for an orphanage. He taught the kids how to fire rockets into the sky during a barbecue, and then set off into the country to visit a village. Did Musk bring all of those presents on his private jet? “Yes, but we don’t mention that,” Mooser says with a wink.
Across town from Beverly Hills, and next door to the Tesla R&D center, is SpaceX’s compound. Musk leased it after Boeing (BA) scaled back production of its 747 fuselages and left the facility. The front section of the SpaceX headquarters looks like your typical technology company office. There are rows of desks arranged in an open floor plan with Musk sitting among the crew in an extra-large corner cubicle. One hundred feet or so beyond, things get unusual. First, there’s an assembly area where people in blue SpaceX lab coats surrounded by oscilloscopes and soldering irons build the company’s custom circuit boards. Further in, the building opens up into a 300,000-square-foot assembly floor. Here, SpaceX makes 80 percent of the parts that go into its spacecraft.
Hundreds of people move about the floor, tending to machinery custom built by SpaceX, amid the din of machines exhaling as they release pressurized air and drill into metal. Merlin engines and Dragon capsules dot the floor; the latter are about 14 feet tall and designed to carry about 13,000 pounds of cargo. One day, Musk hopes they will ferry as many as seven people at a time into space.
One group of workers is assembling the protective casing that will go around a satellite for a potential customer—the governments of both Canada and Thailand are interested, Musk says. Next year, SpaceX looks to launch eight flights, and as many as 16 the following year. If it hits those goals, SpaceX would be handling the majority of the world’s commercial spaceflights. (Companies like Virgin Galactic are offering trips for tourists.) In three years, SpaceX intends to send people to the space station for $20 million each, rather than the $63 million charged today. SpaceX may be Musk’s most solid performer—it already turns a profit as it works through its backlog of orders.
Steve Jurvetson, a SpaceX board member and early investor in everything from Tesla to HotMail to Synthetic Genomics, says Musk has unusual intuition about what will work in space. Jurvetson builds and fires rockets as a hobby and has an office full of space memorabilia—much of which he bought directly from former astronauts. “You can’t finesse your way around this stuff,” he says. “There’s not a lot of room for artistry because the physics will bite you in the ass.” Musk has come up with modular designs for mixing and matching engine configurations depending on the payload, says Jurvetson. He thinks Musk has built the safest, most cost-effective spacecraft yet, which is why SpaceX has ended up as America’s only real answer to date for sending goods and people to and from the space station and perhaps beyond. “We’re not Moon people,” says Gwynne Shotwell, the president of SpaceX, “but we’re definitely Mars people.”
Musk is not easy to work with. Former employees, none of whom would speak on the record, describe him as autocratic and blunt to the point of offensive. Musk had a long-running feud with Martin Eberhard, co-founder and former CEO of Tesla. Eberhard resigned under contentious circumstances and later sued Musk for libel. For a time, Eberhard kept a blog documenting Musk’s alleged poor treatment of employees. Eventually, the two sides reached an agreement to stop disparaging each other publicly. “Like Jobs, Elon does not tolerate C or D players,” says Jurvetson. “But I’d say he’s nicer than Jobs and a bit more refined than Bill Gates.”
The employees who stick with him seem to love him. The SpaceX staff pulled all-nighters during the recent mission to the space station, and their factory never closes. When the Model S sedans began rolling off the factory lines, Tesla employees waved American flags and shed actual tears of joy.
Musk splits his time between the factories in Los Angeles and Fremont, spending a few days in each location every week. When he’s in Silicon Valley, he crashes at friends’ houses rather than staying at hotels. “We play video games together and eat some food,” says Bill Lee, an early investor in SpaceX and Tesla who hosts Musk at his home.
Freeing mankind from the scourge of carbon, not to mention its terrestrial shackles, has taken a toll on Musk’s personal life. In August he finalized his divorce from his second wife, the actress Talulah Riley. He’s had one vacation in four years. This summer he took his five boys—twins and triplets—to Maui with Kimbal and his family. “I think the time allocated to the businesses and the kids is going fine,” says Musk. “I would like to allocate more time to dating, though. I need to find a girlfriend. How much time does a woman want a week? Maybe 10 hours?”
On the assumption that people will be living on earth for some time, Musk is cooking up plans for something he calls the Hyperloop. He won’t share specifics but says it’s some sort of tube capable of taking someone from downtown San Francisco to Los Angeles in 30 minutes. He calls it a “fifth mode of transportation”—the previous four being train, plane, automobile, and boat. “What you want is something that never crashes, that’s at least twice as fast as a plane, that’s solar powered and that leaves right when you arrive, so there is no waiting for a specific departure time,” Musk says. His friends claim he’s had a Hyperloop technological breakthrough over the summer. “I’d like to talk to the governor and president about it,” Musk continues. “Because the $60 billion bullet train they’re proposing in California would be the slowest bullet train in the world at the highest cost per mile. They’re going for records in all the wrong ways.” The cost of the SF-LA Hyperloop would be in the $6 billion range, he says.
Musk is also planning to develop a new kind of airplane: “Boeing just took $20 billion and 10 years to improve the efficiency of their planes by 10 percent. That’s pretty lame. I have a design in mind for a vertical liftoff supersonic jet that would be a really big improvement.”
After a few hours with Musk, hypersonic tubes and jets that take off like rockets start to seem imminent. But interplanetary travel? Really? Musk says he’s on target to get a spacecraft to the red planet in 10 to 15 years, perhaps with him on board. “I would like to die on Mars,” he says. “Just not on impact.”