Elon Musk at the Stanford GSB ENCORE Award
Questions on ElonsFAQ asked in this interview (3)
Transcript
0:05Garth Saloner (Dean)Good evening and welcome to the Stanford Graduate School of Business. I'm Garth Salona. I'm the dean here at the gsb. And it's my privilege to welcome you all to this wonderful event.
0:17Garth Saloner (Dean)I want to thank the award selection committee for this really fantastic selection, as well as all of the companies who have supported us by sponsoring the event. This is the 36th event of its kind, the 36th annual Encore Award Reception.
0:35Garth Saloner (Dean)And each year the award is given to an entrepreneurial company that embodies the spirit, innovation and unique culture of the companies that we're familiar with in Silicon Valley. And so let me be the first to congratulate Tesla and Elon Musk for the award this evening.
1:05Garth Saloner (Dean)I'm going to be brief before handing you over to Jeff, but I did want to just spend a few minutes saying a little bit about the things that we've been doing here at the Graduate School of Business in the area of entrepreneurship.
1:19Garth Saloner (Dean)And I'm very quickly going to reference three innovations this year. The first is we have an entrepreneurship course and have had for many years in which we put our students together in multidisciplinary teams from across the university and they work on projects together.
1:36Garth Saloner (Dean)And this year, as a harbinger of technology to come, we have for the first time, flipped the classroom. So Stefano Xenios, who teaches the class, recorded what would have been the lectures, and instead the students got to use the class time to be mentored and work together on the projects.
1:54Garth Saloner (Dean)And I think that's very much a sign of the times and the future. The second is many of you will be familiar with a program that we have offered here at Stanford in the summer and during the year, which we used to call the Summer Institute for Entrepreneurship.
2:08Garth Saloner (Dean)We now call it Stanford Ignite. This is a program that at Stanford was aimed at graduate students at Stanford, Stanford, not in the business school. So students in engineering and medicine and the life sciences and so on who might be starting a company or would be working for companies that were innovating.
2:28Garth Saloner (Dean)And we give them a general management education with an entrepreneurial and innovation spin. And this year we started to take that program globally. So we offered a version of it in Bangalore, India, this summer and are in the midst of teaching one in Paris right now in a partnership with the Cole Polytechnique.
2:51Garth Saloner (Dean)And that program, too, makes heavy use of technology. Most of the classes are actually our faculty beam from the Snipe Management center to those locations. The final thing I want to reference is, again, many of you are familiar with seed, which is the Stanford Institute for Innovation in Developing Economies, an institute that we launched here at the business school about two years ago.
3:18Garth Saloner (Dean)And it had a landmark event this summer when we opened our first innovation center in Accra, Ghana, where we have in the first cohort 29 local entrepreneurs who we are working with to help them to scale their businesses.
3:34Garth Saloner (Dean)And it's a regional hub and a regional program with participants from five neighboring countries. So lots going on at the gsb. While we're helping to make entrepreneurial awards, we're trying to do our bit to simulate the entrepreneurial ecosystem.
3:52Garth Saloner (Dean)And in that vein, let me just say that in everything we do, we rely very, very heavily on this community. You come into our classes to help teach and mentor our students and help us in a whole variety of ways.
4:06Garth Saloner (Dean)And we're extremely grateful and delighted to have you all with us this evening. Thank you very much.
4:21Jeff YangI'm Jeff Yang and I have the privilege of chairing the Stanford Encore Award committee. So you may ask, how do we pick a particular company to win the award?
4:31Jeff YangAnd I'll tell you. We look at four things. You know, the first is companies that embody the entrepreneurial spirit. We look for companies that are doing something big, bold, and important.
4:40Jeff YangLook for companies where the founder has or continues to play a very important role in the company's success. And we look at companies that have interesting stories or whose founders are interesting personalities.
4:52Jeff YangSo you might say, well, how'd you get Tesla then? It isn't quite so the story of Tesla, you know, so you look how it stacks up and you say, well, Tesla was started by two engineers, Martin Eberhard and Mark Tarpenning, who believed that electric vehicles could change the world.
5:11Jeff YangOkay, check. Tesla has succeeded in an industry where startups aren't supposed to succeed by incorporating novel design approaches to little things like concept design and battery design and body design and drive train design and manufacturing design, supply chain management, mass production.
5:29Jeff YangTesla's attempting to disrupt an industry in which its competitors have massive scale and long histories. Okay, check. Elon Musk, the company series A lead investor and now and chairman, continues as its CEO and product architect.
5:46Jeff YangCheck. And finally, an interesting story. Well, Tesla's practically gone out of business, my understanding is a couple times, and is now a runaway success with a market cap of over $23 billion.
5:58Jeff YangIts CEO is the inspiration for the character of Tony Stark in the Iron man series, according to its director. You know, check, check. Kind of an interesting personality. You know, you get the picture.
6:11Jeff YangTesla was the first U.S. auto company to go public since Ford Motor Company in 1956. And despite having approximately 1% of the revenues of GM and Ford and BMW, its market cap is roughly a third to a half of these venerable brands.
6:27Jeff YangIt's my pleasure to introduce Elon Musk. Elon was a native of South Africa and studied at Queens University, University of Pennsylvania, and ultimately Stanford. To pursue. To pursue a PhD in physics, he started Zip2, a software provider, which was sold to Compaq.
6:42Jeff YangHe co founded X.com, which was later renamed as something called PayPal, which is acquired by eBay. He founded his third company, SpaceX, in 2002 and continues as its CEO and CTO, which I hope he'll tell us a little bit about.
6:58Jeff YangHe's also the founder and chairman of SolarCity. And then in his spare time, earlier this year, he announced a proposal to form a new form of transportation he's working on called Hyperloop.
7:08Jeff YangBut most importantly, for the purposes of tonight's program, he's CEO of Tesla Motors. Tonight, Tesla. I mean, sorry. Tonight, Elon will be interviewed by my friend and fellow Stanford Encore Award committee colleague Steve Jurvetson, Managing director of Draper Fisher Jurvetson.
7:27Jeff YangPlease join me in welcoming Steve Jurvetson and Elon Musk.
7:46InterviewerSomeone will yell if we got this wrong. I think they told us five times. I sit here, he sits there. And I just, as we came up, he's like, which one do I do now?
7:54InterviewerSo before we start, we're going to try to keep this a little casual and interesting as well as try to get into the mind of Musk a little tonight.
8:01InterviewerAnd it's a. It's a marvelous place to delve. You'll all have a chance to ask some questions later, so you can start thinking about that now. I'll start with, with a few, but as a warm up.
8:10InterviewerAnd I think this might be something Elon might like to say. About a year and a half ago, before Model S shipped, I remember him saying with sort of a gleam in his eye that he relishes the day that he'll be driving around somewhere in Silicon Valley and see a Model S on the road that's not like an employee car that's in testing, but like a real customer, like that.
8:28InterviewerHe doesn't know. And so as a quick survey of hands, how many people here today saw Tesla driving around Silicon Valley? And I don't mean the one out there, because that means you've all seen multiple Teslas, right?
8:39InterviewerI saw 10. I counted today just then. I have a short commute so you know, that dream has become reality and what Tesla has done has been a marvel to watch.
8:47InterviewerSo I think a lot of folks here, you know, business students, students, you know, friends of the firm, are really curious on how this all works. And so if we could start with some design questions and then some organizational and people kinds of questions.
8:59InterviewerBut starting with design, you know, as you think about the big problems in the world that you are addressing, do you start with a particular product in mind? Like there could be this Model S, there could be this Falcon 9 and then think how do I get there?
9:13InterviewerOr do you start with saying there's something broken in the world and I'm going to fix it and I'm going to commit to do it even if I don't know how I get there?
9:19Garth Saloner (Dean)Sure.
9:20Elon MuskSo let's see, is that on? Yeah, it seems to be good in the case of Tesla, SpaceX and SolarCity and actually also the PayPal and the Zip 2 before that.
9:32Elon MuskIt really stemmed from when I was in college, I was trying to think what would most affect the future
9:38Audience Memberin
9:38Elon Muska very likely to be a positive way. So the three areas where I was quite sure would be positive were sustainable energy, Internet and making life multi planetary. And then there were a couple other areas where maybe a question mark like AI and writing.
9:58Elon MuskGenetics.
9:58InterviewerAnd what was the lesson?
10:00Elon MuskYeah, yeah, rewriting genetics.
10:01InterviewerRewriting genetics.
10:03Elon MuskSo this is happening. Big impact.
10:06InterviewerGood to know where phase three and four might come.
10:08Elon MuskYeah, you know, potentially negative consequences, hopefully positive, but something could go wrong. So do you have to make movies
10:15Interviewerharder like the top three and a couple contenders, or were they all kind of jumbling around waiting for the right moment?
10:21Elon MuskYou know, if you look ahead and say what's really going to have an important effect on the future of humanity as a whole? Those were the five areas that I could come up with standing in the shower, basically.
10:36InterviewerSo there's this moment of epiphany that you held for a while because you didn't pursue those right away. This was sort of an early vision that you then got opportunities to execute on.
10:47InterviewerSo when you maybe if we pick an example like Tesla going towards the Model S or SpaceX going towards the Falcon 9, do you commit the team, yourself, your resources to that endeavor?
10:57InterviewerYou know, now a little farther along, when you have the end point in mind or just let's say the, the cost of goods analysis for the rocket or the gosh, EV should be better than internal combustion engines, just in general, I'll commit, I'll believe that that should Be done.
11:12Elon MuskYeah, I didn't. I mean, I didn't really get into any of this with. With the expectation of success or at least. Yeah, I started out with thinking, okay, when I do something in the electric vehicle space, and that's why I originally came to Stanford, was to work on advanced energy storage technologies, in particular ultracapacitors.
11:36Elon MuskSo that was continuing on research that I'd done as an intern in Silicon Valley in summer prior. So that's why I originally came out in 95. And then during that summer, I wrote some Internet software.
11:47Elon MuskAnd I thought, okay, I can either work on electric vehicle technology or I could sort of work on Internet stuff, try to do something with the Internet. And I thought the Internet would be something that would dramatically affect the future of humanity.
12:02Elon MuskIt would be like acquiring a nervous system. And whereas previously communication would have to occur almost by osmosis from one person to another or slowly through telephone or mail or something like that, but now if you have a nervous system, any part of the human collective can know about any other part instantly.
12:26Elon MuskAnd previously you'd have to be at the Library of Congress even to have the Library of Congress, this sort of information, but with everything digitized and access anywhere. You could be in a jungle in South America, and if you had just an Internet link, somehow you'd have access to all of humanity's information.
12:45Elon MuskSo it would actually effectively create a superorganism and fundamentally change the nature of humanity itself. So I just wanted to be kind of part of that.
12:55InterviewerIs that the path to AI that you might see?
12:58Elon MuskIt's actually not exactly AI. It's some sort of human machine collective intelligence. So different. Different from AI. Although I may not turn out to be exactly what. Hopefully it's not exactly what's, you know, like described in Terminator or something.
13:14Elon MuskNow, quick pause.
13:16InterviewerFor those that haven't been to SpaceX, the data center has got to be the coolest thing you've ever seen. It's, you know, Skynet on the door, Cyberdyne systems branding, and the most badass set of lights coming from a leaking server.
13:26InterviewerSo you don't own it.
13:26Elon MuskExactly. Our FBA and CFD cluster is called Cyberdyne System.
13:32InterviewerWe'll get back to influences later on, but I want to try to see if I understand what you were saying about this. You see the long arc of and what's important to humanity.
13:42InterviewerNot little problems, but huge problems that could be solved. A lot of us go around and we see something frustrating like Traffic on the 405. We just take it as well.
13:49InterviewerCrap. Government screwed. You know, what are we going to do, right? You have this incredible sort of scope of ambition, right? Planetary scope, interplanetary scope. A little more than just changing the world.
14:00InterviewerLet's change some other worlds too, right? And this is big stuff. Is that always in your mind or that you become more emboldened over time that this is available?
14:09InterviewerWe can do these things.
14:10Elon MuskIt definitely emboldened over time. I mean at the. When I started the first Internet company, Zip2 with my brother and another person, Greg Curry, it wasn't really with the thought of being wealthy.
14:26Elon MuskWe've got nothing against being wealthy, but we'll get back to that later too. But it was just from the standpoint of wanting to be part of the Internet. And I figured if we could make enough money to just get by, that would be ok.
14:43Elon MuskWhen we started off, we literally only had one computer and said it would be our web server during the day and I'd code at night. And we just got a small office in Palo Alto back when rent was not insane.
14:59Elon MuskAnd it cost us like $450 a month. It was cheaper than an apartment. So we actually just slept in the office and then showered at the YMCA pagemill El Camino.
15:10Elon MuskSo we'd walk over there and shower. And that was actually, I think that was when I first met you, by the way. And so I don't know how many people, probably not many people know this, but we actually pitched Steve in like January 96 on the Zip2 business plan.
15:32Elon MuskAnd actually Steve was actually one of the most up to speed on what actually was in our business plan. Most of the people we met did not actually read our business plan.
15:44Elon MuskIn fact, a lot of people, a lot of venture capitalists we met at the time didn't even know what the Internet was. They've never used.
15:51InterviewerWe still do.
15:53Elon MuskYeah, I'm talking like sort of well known people in San Hill. I was like, wow, okay. But at the time nobody had made any money on the Internet. So I guess that's, you know, there wasn't really clear evidence that there was a business and yeah, those are fun times.
16:12InterviewerI remember Kimball and you coming in.
16:14Elon MuskRight.
16:15InterviewerVery young looking guys. I think I was in my first four months on the job too.
16:20Elon MuskYeah, yeah, exactly.
16:21InterviewerSo let's shift gears for a sec. I've also had the great honor to work with Steve Jobs briefly, but enough and as a business school student to study him with as much scrutiny as I could during that period.
16:35InterviewerAnd there's some obvious parallels. And so let's start with the most obvious but just must be like the elephant in the room. Is the secret to your success to be the CEO of two companies at the same time?
16:46Elon MuskNo, I think it's.
16:48InterviewerLook at the correlation.
16:49Elon MuskYeah.
16:50InterviewerStruggling companies, everything's in the crap can in December 2008. So let's take on a new CEO gig.
16:55Elon MuskYeah.
16:55InterviewerAnd same for Steve. Coming back to Apple.
16:57Elon MuskNo, definitely it was not my intention to be CEO of two companies the after. I mean there are certain things that I kind of wanted to, I thought were important to happen and I thought it was important that there was.
17:12Elon MuskThat an electric vehicle happened. That there was a success in the electric vehicle arena because the incumbent companies were convinced that it was not possible to create an electric car that looked good, had a good range before performance and so forth.
17:29Elon MuskAnd that even if you did make such a car it would not sell because people had this love of gasoline. And so we had to show that it was possible to create a compelling electric car.
17:42Elon MuskLong range, good looking, you know, all those things. That was a Tesla Roadster and if you created, if you made such a thing, people would buy it. And so that's what we try to do with Tesla.
17:56Elon MuskBy the way, I should say one minor sort of correction on the introduction. I'm not a co founder of SolarCity but I am a co founder of Tesla. That's a good point.
18:08InterviewerAnd product architect. Many of its key features very much like Jobs. Both a hand in some of the detail as well as the long arc of what's important for the company.
18:19InterviewerThe quip though about being co CEO is more than just a joke in that I wonder if in ways that are hard to predict and you wouldn't set out for this amount of work.
18:27InterviewerIt seems insane but inevitably both companies cannot expect more than half your time at most. It sort of naturally forces a delegation upon you and an expectation they have to rise up for partial awareness at best.
18:40InterviewerRight. And I just wonder if that helps drive prioritization and really focusing on what's important a bit more than you otherwise might have to.
18:47Elon MuskIt probably does, yeah. I think I'd probably do. Yeah. I mean because I have to triage the things that I do at each company and constantly think about what is the most useful thing that I could, that I could do.
19:00Elon MuskBut even with that it still actually does take an enormous amount of time and for a while there I was just doing constant hundred hour weeks and that's definitely worrying.
19:12Elon MuskAnd now I'm kind of in the 80 to 90 which is more manageable. But if you divide that by 2, it's only like maybe 45 hours per company, which is not much when there's a lot of things going on like a slacker.
19:29Elon MuskYeah.
19:31InterviewerSo it is interesting also how you have a love for certain aspects of the product. So at SpaceX, the whole concept and the vision of going to Mars, backing into features and stuff, it's, it's a wonderful thing to see.
19:45InterviewerI think what, what obviously should strike folks in the room as remarkable is the diversity of industries that you've tackled.
19:52Jeff YangRight.
19:52InterviewerFrom commercial banking to the military industrial complex to the automotive industry. These are heavily regulated industries that generally investors flee from and startups routinely fail in. And they haven't seen much change for good reason over decades.
20:05InterviewerSo there might not be an obvious pattern in which industry you take tend to thrive in. But I wonder if there's a pattern perhaps in process. Like, do you approach each of these perhaps the way a software architect might, to think of a different way to bring innovation, a different way to reset, you know, from first principles, perhaps instead of iterating from the past, a breakthrough.
20:26InterviewerAnd is there a reason you end up in these otherwise really tough industries? I mean, I don't know if that's ever occurred to you that you don't. Even with SolarCity going up against the regulated utilities, none of these are places that you would normally find entrepreneurs.
20:40Elon MuskYeah, like I said, it was not from the standpoint of like what's the best risk, adjusted rate of return, or you know, where I think things could be successful.
20:48Elon MuskIt's just like I think these things need to happen, try to make them happen. And certainly when we started SpaceX or Tesla, I thought the probability of success was less than 50%, you know, probably a fair bit less than 50%.
21:04Elon MuskIn the case of SolarCity, I thought the probability of success was probably greater than 50%, but it wasn't clear what the magnitude of success would be. It could just be small, but it was.
21:18Elon MuskI mean, I just thought these were things that needed to get done and even if the money's lost, okay, it's still worth trying.
21:25InterviewerSo you had conviction, but it didn't mean certainty. Right. You knew that all vehicles would be electric in your heart.
21:33Elon MuskBut ultimately, I mean, I think the sort of fundamental good that Tesla can accomplish is acceleration of, of the inevitable, which is electric transportation. I think there's a lot of value to accelerating, even though I think it's somewhat inevitable, it's this value to accelerating it to minimize the environmental and economic damage that would otherwise occur.
21:58Elon MuskSo, you know, it's better if we transition to sustainable transport 10 years or maybe 20 years sooner than might otherwise be the case. And I think the Tesla's effect has been much greater than the cars that it's made internally.
22:15Elon MuskBecause when we announced the Tesla Roadster, then Bob Lutz, who was bystander GM at the time, saw a press release and said, if a small company in California can do it, then so can gm.
22:27Elon MuskAnd he took it to his engineers who told him that you couldn't build an electric car and told them that they needed to get going. And that's what got the vault rolling.
22:34Elon MuskAnd that in turn got Nissan to do the Leaf. And so it's kind of got the got things going. And ultimately it's what we induce other companies to do that will have a greater impact than the cars we make ourselves.
22:49InterviewerAnd it's an interesting point I'm going to come back to later. This idea that Tesla's founding mission is, as Elon has articulated from the very beginning through the most recent reports to the public, is to catalyze an industry shift that Tesla will be some part of, but to help others in that shift as well, which is remarkable.
23:07Elon MuskSo we supply powertrains to Toyota and to Mercedes to help what could be
23:11Interviewerviewed as your biggest competitors one day, you know, exactly. Accelerate that. Before we get to that sort of purpose driven mission, I do want to ask, or at least maybe make sure the audience realizes how cool this car is and so Elon doesn't have to do this.
23:24InterviewerIn case you haven't been as much of a fan as the two of us, it's a bit unprecedented the reviews it's received. Consumer Reports saying it's the best car they've ever tested, road and track saying it's the most important car in America's history.
23:39InterviewerThe safety testing shows the most safe car ever manufactured by far, including vans and SUVs. And so it's pretty remarkable to peg performance, desirability, safety and all these parameters.
23:52InterviewerSo is it luck or is there something particularly unique about the EV design space that let it be possible to build the best car?
24:01Elon MuskWell, I think, you know, luck does play some role here, but I think we, I think electric vehicles have a fundamental architectural advantage. If one designs an electric vehicle from the ground up and takes advantage of what's possible.
24:12Elon MuskLike if you just were to convert a gasoline car, you would not achieve these advantages, but if it's properly done, you can actually package the battery pack in the full pan and achieve a low center of mass and have a very compact motor and inverter and gearbox, so that the actual usable space in the car is significantly greater than a gasoline car of the same overall external dimensions.
24:44Elon MuskAnd then if you do a few other things which aren't necessarily specifically related to an electric car, like using an aluminum body and chassis is helpful because you can absorb more energy per unit mass, essentially, in a crash.
24:58InterviewerLike a crouple zone.
24:59Elon MuskYeah, exactly. Well, so the. Yeah, but part of it's related to the electric vehicle architecture, and part of it is related to other technical decisions that were made in the design of the Model S.
25:09Elon MuskAnd so, yeah, that's what leads to sort of having a high safety is. I mean, I don't want to sort of go into too much detail because it might take up too much time.
25:21Elon MuskBut like, I wrote a blog post.
25:24InterviewerDid you know some of those things at the get go, or did they unveil themselves as you went along? I'm just curious how the vision materializes. Like, either the product dimensions, like, it will have all these great features, like, at the get go, did it all gel?
25:39InterviewerAnd then secondly, I'm also curious. When did you first know that all vehicles would be electric? Was that early
25:48Elon Musk22 years ago, something like that.
25:51InterviewerBefore you met Tesla?
25:54Elon MuskBefore there was Tesla. Before there was. Way before there was Tesla. Oh, yeah. Well, like I said, wow. You know, when I originally came out, when, I mean, when I was studying physics, Penn, that's probably when I thought it was the case.
26:08Elon MuskOr maybe no sooner than that. Probably when I was in my sophomore
26:12Intervieweryear in college, did you have certainty in your heart?
26:15Elon MuskYeah, absolutely. It's super obvious.
26:17InterviewerYes, yes.
26:18Audience MemberNow.
26:18InterviewerYes, now it is. And there are certain things super obvious then, but this is a blow because even like three years ago, most people probably didn't agree with this point of view.
26:26InterviewerAnd if I could be confident of any prediction I could make, it's that within 10 years, all people will be of this point of view. But we won't have made the transition yet, but we'll realize that it's a ridiculous debate to be having.
26:37InterviewerYou were a lone voice of sorts back then, probably amongst your cohort and friends and, you know, social connections.
26:44Elon MuskActually, I used to talk to, like, dates about electric cars.
26:48InterviewerHow'd they go?
26:50Elon MuskIt wasn't. Wasn't helpful.
26:54InterviewerIt got better.
26:55Jeff YangYeah.
26:56Elon MuskSo actually, I ran into a girl I did briefly in Canada, Christy Nicholson. She's now, like, a writer for Scientific American. And she mentioned. Yeah, when we went on a date, I asked her do you ever think about electric cars?
27:08Elon MuskAnd she said, no, I don't. So yeah, it was a while back. I mean it's pretty. I mean almost everything's electric that we have in our daily lives.
27:21InterviewerSo it was from the physics of it.
27:23Elon MuskYeah.
27:23InterviewerThe heat loss of an internal combustion engine just. Yeah, it's pretty amazing. Pretty amazing. So I'm going to share a little story that leads to a question along a different angle.
27:32InterviewerI don't think you've heard this before, so. But I find it fascinating. I was at a lunch at a Google event and out of the blue, with no expectation this would be a topic, Larry Page turned to me, knowing a little bit about our connection, said, you know, how much money do I have?
27:47InterviewerAnd he mentioned a number. I thought that was cute that he was trying to recall that. He goes, you know, if I were to get hit by a bus today, I should leave all of it to Elon Musk.
27:57Elon MuskReally?
27:57Audience MemberYeah.
27:57Elon MuskHe said that?
27:59Jeff YangYeah.
28:00InterviewerAnd so I'm like, paper pen, can we please down on. Yes. So he likes zingers, he likes gfc.
28:09Elon MuskHe's like good friend of mine.
28:11InterviewerSo context is important.
28:13Elon MuskI met Larry before he got venture funding. Yeah. So that's like 90 back in the 90s thing. Yeah.
28:22InterviewerWow. Well, he's a remarkable guy, obviously also an underachiever and you know, has a company that wants to do good in the world.
28:28Audience MemberRight.
28:29InterviewerAnd I think he looks at you with a bit of envy because what he then proceeded to say was, you know, I could give my money to a non profit and a lot less would get done than a corporation that's pursuing things that are directly aligned with things I care about, like getting off of oil and colonizing other planets.
28:45InterviewerHe believes in those missions and thinks that a corporation with endowed with the right to do that as his business purpose is the best vehicle out there and wishes he could do more of that in his own life.
28:56InterviewerHe compared poignantly, I think, to some other software companies in the Pacific Northwest who might have executives who do evil for the first part of the career, then do good for the second half.
29:07InterviewerAnd then the sad story of others who never get to the second half of their life, like Steve Jobs. I mean, not in a joking way, I mean seriously.
29:15InterviewerAnd it was a very deep moment. So it raises the question of a purpose driven business. So you've heard already that Tesla is not just trying to make money.
29:21InterviewerThat is not the parody. In fact, if you read the most recent shareholder letter, profits.
29:26Elon MuskIn fact, I started off the shareholder letter saying the profits are not our primary goal. And then I got a little bit
29:34Jeff Yangof
29:36Elon Musksome of the board members who questioned that statement, and I was like, well, it's true, you know, for now,
29:45Intervieweror like, just while we're growing. But no, just not the priority. Which I think in a business school is a really good point to dwell on for a moment.
29:52Elon MuskYeah, it's not that I think they're unimportant or anything. It's just not. Not the primary goal. And actually, Toby will add an IPO as well. And so it's not like new information or at least, you know, if people had watched the ipo, it's not your information.
30:07Elon MuskAnd. Yeah, and actually amazing. The stock went up after that.
30:14InterviewerI think there's a profound reason. I mean, you. You see the benefits of being focused on something that's a higher calling as your primary motivation. Your employees love it, customers love it, partners love it, and you feel better about your job.
30:24InterviewerThe interesting thing, the irony perhaps, is that at least within our portfolio, the companies that have that kind of a founding principle actually make more profit and grow their revenue more quickly than the ones that don't announce this low sample set, but the handful that have taken this bold of a step to say, no, no, that we will not make that our number one priority actually do a great job.
30:43InterviewerAnd it occurred to me, and I don't know if this was conscious in your head at some point, that if you weren't wildly profitable, the auto industry wouldn't follow you.
30:51InterviewerIn other words, this whole mission of catalyzing a shift to new electric vehicle isn't going to work if the business model is worse than the current business model. And so it's the obvious byproduct of what you're focusing on.
31:02InterviewerWell, not obvious, but it occurs to me that it's a byproduct. It wasn't obvious at first, at all. But I'm curious if that thought occurred to you that, oh, yeah, the profits will come, or, yeah, well, we have
31:13Elon Muskto generate positive cash flow, or we have to generate enough cash flow to fund future developments, which requires having a good gross margin. And so I guess one could just say, okay, well, we're going to stop developing new products, and then you would be really profitable.
31:28Elon MuskSo at any given point, you could sort of say, we could be profitable at this point in a significant way, but we've got these great things that we want to develop for the future, and they're a good investment, and that's what we're doing.
31:41InterviewerAnd similarly, at SpaceX the founding vision was to colonize Mars indirectly, again, interestingly catalyzing others to move. And then you realize, hey, I gotta actually lead this charge, right?
31:53Elon MuskYeah, well, I mean, with SpaceX, originally I started off just thinking, well, how do I increase NASA's budget? Actually, that was my goal. So it was like 2001 with just toying a friend of mine and he asked me what I was going to do after PayPal.
32:11Elon MuskAnd I thought, well, you know, I was wondering, like, I'd like to get involved in space, but I just didn't think there was anything I could do as an individual.
32:19Elon MuskBut I was curious as to when NASA would be sending a team to Mars, because that was always going to be the thing to do after the moon. I figured that there'd be some plan and I'd just go to the website and I could read the schedule.
32:36InterviewerThen Mars goes, oh, yeah, it's like,
32:38Elon Muskokay, 2017, good, okay. But actually there wasn't anything on the website. And at least I thought, like, can I not find it? Like, what's going on here and is it secret?
32:49Elon MuskI don't know. But it turned out that NASA had done a study on what it would cost to send to do a manned Mars mission. And this was under Bush I.
33:02Elon MuskAnd in his post he asked for a 90 day study shortly after taking office. And NASA came back with a $500 billion price tag. And he said, okay, maybe not billions would be.
33:14Elon MuskThat's when $500 billion was serious money for the government. So then that got totally shelved and it was like you were not allowed to talk about any kind of crewed mission to Mars at NASA anyway, so.
33:31Elon MuskBut I thought, well, if I can do something that would galvanize public interest and then that public interest would translate to additional appropriations for NASA and increase their budget, then maybe they could do it.
33:46Elon MuskSo actually what I sort of thinking I would do is send a small greenhouse to the surface of Mars with seeds in dehydrated gel and then upon landing, hydrate the gel or grow the plants.
33:57Elon MuskAnd the public tends to respond to precedents and superlatives. So this would be the furthest that life's ever traveled. The first life on Mars. And you have this great shot of green plants on a red background.
34:08Elon MuskAnd I thought, okay, maybe that would
34:10Interviewerget the money shot.
34:11Elon MuskYou gotta be the money shot.
34:12Jeff YangYeah.
34:13Elon MuskI'm never quite sure whether that's sort of a word you can use or not.
34:20InterviewerNow I'm realizing maybe I should.
34:22Elon MuskYeah. I didn't know its origins until Somebody pointed out. Out to me, but
34:30Interviewerokay, moving back to that greenhouse on Mars. Yeah, so the photo is out there and it is. Yes.
34:36Elon MuskSo you've got this great photo. And I thought, okay, if we could make this happen, this would be cool and NASA would get the money and they could sort of send a team to Mars and be great.
34:49Elon MuskSo I tried to try to figure out how to do this with the proceeds that I had from, from PayPal. And I was able to figure out how to get the cost of the spacecraft down and the communications and the little greenhouse and everything.
35:03Elon MuskBut the one thing I couldn't compress was the cost launch, because there are only a few options and the US options are way too expensive. And so I ended up going to Russia three times to try to buy the biggest ICBM in the Russian nuclear fleet.
35:18InterviewerThat's where I start.
35:19Elon MuskYeah, yeah, Go, baby. I mean, okay,
35:26Elon MuskThere was some strange trips, that's for sure, but it's like virtually like you can buy any. It's a very capitalist society in some ways. So I actually did negotiate a deal to buy two of the ICBMs minus the nukes.
35:45Elon MuskBut I came to the conclusion after that third trip that it wouldn't really matter. I actually came to the conclusion that my initial premise was wrong because I actually think there's a tremendous amount of will in the American population, particularly to explore.
36:05Elon MuskThe United States, maybe more than any other country, is a distillation of the human spirit of exploration. And it's really fundamental to psyche. So if people think there's a way, I think it would actually get a lot of support.
36:19Elon MuskBut it can't be just banging your head against the wall. You gotta believe that this can be done without breaking the federal budget. So that's when I said, okay, well, is there some way to affect the cost of space transport?
36:33Garth Saloner (Dean)And
36:35Elon Muskso I got together with a group of people over a series of Saturdays just to just try to understand is there something super, fundamentally super expensive about rockets or can the cost be substantially improved?
36:50Elon MuskAnd we had a bunch of those kind of brainstorming sessions and I couldn't see any fundamental obstacle to improving the cost of rockets. So that's when I started SpaceX.
37:04InterviewerLike, I'll just build them myself.
37:06Elon MuskYeah.
37:06InterviewerAnd then.
37:07Elon MuskBut like I said, at that point I would say the probability of success was definitely less than 50%. I thought it would most likely not succeed, but it was worth a try.
37:16InterviewerThat's fascinating. The parallels are so many between these companies. Again, probability is low. Certainty that it needs to be done.
37:23Elon MuskYeah.
37:24InterviewerCertainty that it could be done by for physics and first principles, that it's success is an option. Right. It's one of the possibilities. And interestingly starting with a roadster and a Falcon one as a proof point to a larger design.
37:37InterviewerYou know, as I look at the Falcon 9 and it looks like the product of a software engineer modular reuse, like let's build one engine and step and repeat and building all kinds of elegance into the system design to abstract away almost from the hardware into the software, into the design, the beauty of the system and.
37:56InterviewerAnd I wonder if that's why incumbents don't see the sort of re engineering of the car or the rocket or the what have you. The hyperloop is this. They don't approach it in that kind of blank sheet of paper.
38:05InterviewerHow would you do this if you didn't have to create jobs across districts or you didn't have some other ulterior motive? Interesting, interesting. Looking at the time, I want to give a.
38:12InterviewerI'm going to ask one last question but I'll give a heads up on there's mics to start getting them ready for the audience because I don't want to monopolize people's time here.
38:20InterviewerActually there's so many questions I want to ask but I'll start with maybe I'll try end here for at least some of the quirky one about influences. So we've heard about the Iron man reference and your childhood interest in comic books and Hitchhiker's Guide the Galaxy and Asimov, but there's all kinds of things woven into like cyber 9 systems at SpaceX that we heard and then some Easter eggs.
38:44InterviewerSo some of us noticed that the stereo goes to 11 on the Tesla. This is a spinal correct reference. For those who know that this one goes to 11.
38:53InterviewerWe need just one model.
38:54Elon MuskIt's louder than loud.
38:55InterviewerThat's right.
38:55Elon MuskExactly.
38:56InterviewerThat's right. But no one seems to have noticed the product lineup. So you got the Model S, you got the Model X. Oh yeah, you've just trademarked the Model E.
39:04InterviewerYeah, no one's that anymore. And the model and the Model Y. Now what's behind this?
39:10Elon MuskI know exactly. I guess there's not a lot of humor in trademark trademark law, you know, because yeah, obviously we just trademarked sexy. And then we were having this discussion with like Ford because they, the Ford Council, they also didn't get it like because they're sort of slightly opposing us using Model E.
39:39Elon MuskAnd then they saw that we registered Model Y. And they said, oh, you're planning to use model Y instead of model E? Like, like. No, it was just a joke.
39:48Elon MuskWe don't do that. What does it spell? Come on.
39:53InterviewerFantastic. Well, do we. I'll keep going if we don't. But do we have microphones for folks if they want to ask questions? Okay, let's do a quick see if anyone.
40:01InterviewerOh, my gosh. Yes, we have some. Why don't we do that? Let's take a couple questions from the audience and I'll let you guys figure out how to do the allocations.
40:10InterviewerThank you very much.
40:12Elon MuskI heard you talk about supersonic aircraft.
40:17InterviewerYou guys have done some beautiful work at SpaceX on VTOL.
40:23Elon MuskClearly, Tesla is focused on electric.
40:26InterviewerHave you thought about the synergies of electric and VTOL and aircraft for solving the 405 challenge?
40:35Elon MuskSolving the 405 problem? Well, I mean, I do think there's
40:39Interviewera reason for vertical takeoff and landing.
40:41Elon MuskYes. Right, sorry. Vertical takeoff and landing is vtol. And yeah, I do think there's a really. I think the optimal sort of air transport solution is a VTOL electric supersonic plane.
40:57Elon MuskAnd it actually works together quite well for a bunch of reasons. In particular, the higher you go, the better the electric, the more efficient the electric aircraft is. Whereas if you have a combustion aircraft, as you get higher, it tends to get worse because you have kind of a fixed aperture and air scoop.
41:19Elon MuskYeah. The hole in the front of the engine is a fixed size, and so you have to pick a particular cruising altitude. And so. So you've got to figure out how do you get the right amount of air at sea level all the way through really high altitude.
41:34Elon MuskAnd then you've got this issue of supersonic combustion that, you know, you see having to slow the air down and it ends up being not that efficient. But an electric aircraft would just get better and better as it got higher.
41:45Elon MuskAnd then electric motors have a higher power to weight ratio than a combustion engine. So you could actually have the power to do the vertical takeoff and landing part with a fairly small motor compared to combustion.
42:01Elon MuskAnd then you could get rid of the elevator and rudder, so you don't need the rear control services. If you gimbal the. If you gimbal the motor. Gotcha.
42:12InterviewerSo it starts to look like a pod craft, like in Oblivion or something.
42:18Jeff YangRight.
42:19Elon MuskSo it's. Yeah, something. The real trick of it is, like, how do you make it really long range and at least as safe as existing aircraft? Those are really the only two questions on that front.
42:33Elon MuskI Think. But they're tricky. They're certainly tricky.
42:37InterviewerDon't underestimate those two questions. Great, let's go to the next one or whoever has a mic. However, we're doing the allocation fairly and efficiently. Maybe give him a hand.
42:52InterviewerOkay. No, that we have someone.
42:53Audience MemberGreat. Hi, Yangu, GSV94. Hey, Steve, long time no see. One question. Are you. Is Tesla going to expand worldwide? And I think GSV is going to host China 2.0 tomorrow.
43:10Audience MemberAnd do you have any plans to go into the biggest car market today? But I know you are a little concerned through another friend of mine. I actually asked you indirectly a few years ago that you were concerned about the secret and the parroting in the Chinese market.
43:30Audience MemberAre you still concerned about that or you have a strategy?
43:34Elon MuskYes, Tesla is definitely going to ship worldwide. In fact, the Tesla roadster is in 31 countries right now. And we expect to ship the Model S to China starting next year, as well as to Japan and Hong Kong and Singapore and a number of other Australia.
43:55Elon MuskSo really it's going to be quite widely distributed next year. Certainly China is an extremely important market. In fact, for premium sedans, China is about half the world market for.
44:08Elon MuskFor premium sedans.
44:10InterviewerSo if you take and growing. Right?
44:12Elon MuskYeah, take something like the Mercedes S class. But last year 54% of Mercedes S classes were sold in China, so pretty important market. And so we're going to definitely do a major push in China and actually some of the most enthusiastic potential customers we've seen are people from China, so.
44:35Elon MuskSo we actually want to make sure that the car actually has features which are specific to the Chinese market and make sure that it's not just taking an American product and just sort of sending it to China without any changes.
44:48Elon MuskSo we want to make sure it's tailored to the market and Japan as well. I don't want to. Not many American cars sell in Japan, but I think that would be symbolism.
45:01Elon MuskYeah, I mean, I think we should take the Japanese market seriously and I think if we do things right, we should have reasonable sales there. So, yeah, so that's going to be next year.
45:16Elon MuskI mean, as far as copying stuff, I think that's certainly a risk. I think China's actually getting a lot better these days and I think the new government is taking intellectual property a lot more seriously.
45:30Elon MuskSo I'm actually starting to feel more and more confident about the technology actually not being copied in China or at least, you know, it getting much better. And I don't think it's going to be too Much of an issue until we want to establish local production.
45:47Elon MuskAnd that's where we need to make sure that we do it right. And there's not an incentive for the factory team that we established there to sort of go across the road and create a competing factory.
45:59Elon MuskBut that concern is a few years away. Great.
46:03InterviewerDo we have another one?
46:05Jeff YangOh, yeah, up here.
46:06InterviewerThe students are largely upstairs, is that right? Yes.
46:09Audience MemberHi, Alan, this is Gabriel Parra, MBA student. First of all, thank you. It is very inspiring to hear an experience about actually changing the world using organizations as the organization that you created.
46:23Audience MemberHopefully we will inspire another Iron man movie as well. And I was wondering if you can tell us more about the experience about like, you know, how to balance, you know, those trade off between your profits and, you know, following purpose that goes further than just make money.
46:39Audience MemberYou know, you are trying to change the world, you know, work for the humanity rather than just make profits in the short term.
46:48Jeff YangWhat was the question?
46:48InterviewerI'm not sure if I.
46:51Elon MuskHow do you balance?
46:51InterviewerOkay, how do you balance? Sorry?
46:54Elon MuskWell, yeah, well, I mean, first of all, I should say, you know, with all of the companies, but I think particularly SpaceX and Tesla, although they're in a good position today, they went through some super tough times.
47:15Elon MuskAnd in fact, for SpaceX, I reserved capital to do three, to have three launch failures, to withstand two launch failures and have the third one be a success, sort of three strikes.
47:28Elon MuskAnd actually we had three launch failures. We're just able to scrape enough money together for a fourth flight that succeeded in 2008. And also in 2008, as Steve knows, we got the Tesla financing round done on the last hour of the last day.
47:44Elon MuskIt was like 6pm Dec. 24, 2008. And if we hadn't gotten it done then the company would have gone bankrupt a few days after Christmas. So what?
47:55InterviewerHe's not mentioning very narrow. The only reason that happened is he wrote a check for the remainder of his wealth to save the company during payroll on Christmas when no one else would and could.
48:05InterviewerGoldman had just failed a private offering and the financial collapse was amongst us. There was no DOE loan, there was no Daimler deal. The car had a negative gross margin.
48:14InterviewerIt was not pretty. Oh, and you had your larger shareholder just completely pissed off and going awol. It was ugly.
48:23Jeff YangYep.
48:24Elon MuskIt was a stressful period
48:27Jeff Yangand that
48:28Interviewerwas just at work.
48:29Elon MuskYeah, so. So for a while there really wasn't a question of profit or nonprofit. It was like, we need to live. How do we live? That was the main challenge.
48:43Elon MuskAnd Now, I mean, now we're at the sort of the stage where we can say, okay, we can shift the dial between. We could make, let's say at this point a medium amount of profit or a small amount.
48:56Elon MuskWe've sort of chosen to make a small amount because we can reinvest the cash flow into future products. So now, you know, right now we're reinvesting the cash flow into developing the Model X which is an SUV, and to increasing the production capacity of the factory and doing a little bit of advanced planning on the third generation vehicle that'll be a mass market, sort of affordable, compelling electric car.
49:25Elon MuskSo that's really, I guess what's meant by in this case not pursuing. We're not trying to maximize profit at this point because it would constrain the business, the growth of the business and constrain the overall objective of transitioning the world towards electric cars.
49:43Elon MuskSo I got nothing against profit in general, but it's just, it's not, I mean, I actually don't think it's the smart move if one were to take net present value of future cash flows.
49:53Elon MuskI think maximizing profit at this stage is actually not the smart move. You know, and it's interesting because earlier
50:01InterviewerI said we get back to it. You mentioned that your goal was not to start a company that has the chance of making the most money for you the quickest and that the wealth personally is almost a byproduct of these activities of passion.
50:13InterviewerAnd by analogy, like in the investment field in venture capital, you know, you could look for the thing that will make the most money the quickest.
50:20Jeff YangRight.
50:20InterviewerLike a new ad network for social media. But who cares? It really just doesn't help the world in any meaningful way. And, and there are much over longer. If you take a longer term perspective, there are things you could do that don't answer the short term question of what's going to make me the most money this year or this five year period, but over 20 years focusing on those, ironically, he may make the most money.
50:39Elon MuskRight.
50:40InterviewerOf any entrepreneur or these companies might be more profitable than their cohort that doesn't follow that same purpose driven kind of almost messianic zeal. So balance question almost implies a dichotomy that may not be opposed but may be aligned if you orchestrate it.
50:56Elon MuskRight? Yeah. Maybe more of a short term versus long term approach.
50:59InterviewerYeah, exactly.
51:00Jeff YangGreat.
51:01InterviewerWe have a hand up here.
51:03Audience MemberUp here.
51:03InterviewerAnother one up here.
51:04Elon MuskSure, up here.
51:05Audience MemberThis will be the last question.
51:06InterviewerOh, is this the last question? Okay. Yes, from your current car marketing strategy, you could say that your car is directed towards the luxury car marketplace. So that's a fairly well defined market.
51:20InterviewerDo you have any plans for expanding it to the general marketplace to, say, make a car for the masses, which might be Maybe in the 25 to $35,000 range?
51:34Elon MuskYeah, absolutely.
51:35InterviewerGood question.
51:36Elon MuskIn fact, the first blog piece I wrote for Tesla was the Tesla Master Plan, which is to start off with an expensive low volume vehicle, then go to a mid price, mid volume, and then sort of low, low price, high volume.
51:54Elon MuskSo we're kind of in phase two and with our third generation vehicle, we expect to be somewhere in the 30, $35,000 range for the car, which when you take into account the savings from the use of electricity instead of gasoline, is more like comparing it in the US to about a $28,000 car, or in Europe to a 20, $22,000 car.
52:16InterviewerMaintenance is much less. The fuel costs are much lower.
52:19Elon MuskAbsolutely. That's right.
52:20InterviewerWell, great. Well, I want to thank you very much for this and transition to the closing segment of our evening. Thank you.
52:40Jeff YangWell, Elon, congratulations. On behalf of the Stanford Graduate School of Business and the Stanford Alumni Association. Business School Alumni Association, Dean Sloan would like to present you with this year's Entrepreneurial Company of the Year.
52:56Elon MuskThanks.