You can first say that battery packs for electric cars will always be expensive because they have always been expensive. From a physics standpoint, you can break the batteries down into the materials they are made of, and then ask what the value is of those materials on the commodity market. You will now realize the material is not as expensive as the final battery pack, so you just have to come up with a way to improve the manufacturing process.324,354 “Data informs the instinct,” Elon said. “Generally, I wait until the data and my instincts are in alignment. And if either the data or my instincts are out of alignment, then I sort of keep working the issue until they are in alignment, either positive or negative.”22
When you have found a solution to a problem, the next step is to create a company. In a creative company, it’s important to allow a certain amount of chaos. In most organizations, failures are severely punished and successes are moderately rewarded, and that’s not a good idea if you want to be innovative. Innovations originates from many attempts that haven’t worked. “Because when you try new things, you try this idea, that idea,” Elon said. “Well, a large number of them are not gonna work, and that has to be okay. If every time somebody comes up with an idea it has to be successful, you’re not gonna get people coming up with ideas.”354
To nurture creativity in their company, Google came up with the “20 percent time,” where employees can work with what they want for one day each week. “I think Google has been pretty good at this by allowing people to take Friday every week to work on some crazy project,” Elon said. “I think that’s a good idea, I think we will probably implement something like that at SpaceX and Tesla. Lots of employees have great ideas, and if they can simply get the resources to implement them.”360
Like when Elon believed in a small government, he’s neither a fan of big companies, partly because of his own experience from an internship. “They didn’t have just one coffeemaker there, they had a special coffeemaker for the executives. An executive coffeemaker,” he said.263
While Steve Jobs wanted his Macintosh-group to act like pirates, Elon want his companies to act like the special forces. SpaceX is like Top Gun and Tesla Motors is like Delta Force. “We do the missions that others think are impossible,” Elon said. “We have goals that are absurdly ambitious by any reasonable standard, but we’re going to make them happen.”24 In comparison, NASA is like a navy and General Motors is like an army. “It’s better to be a pirate than to join the navy,” Jobs said.3
General Motors argued that as Tesla grows, it would be difficult to act like small organizations. You can’t organize an entire army in the same way as you organize Navy Seals. “Inevitably, Tesla will discover that the only way to succeed on the scale we have is to be exactly like us,” they said. “The total of all Tesla cars ever produced since 2006 [to 2012], from the initial announcement of the electric Roadster to the current Model S sedan, amounts to a couple of hours of GM’s global production. The company’s earnings from that effort likely amount to a similarly minute fraction of GM’s business.”59,376
Since the special forces are recruiting only the best, Elon’s companies are also recruiting only the best. “I have never worked for another aerospace company,” Elon said. “However, based on stories I’ve heard, some of them sound like a Dilbert cartoon in real life. My approach is simply to seek out very talented people, ensure that the environment at SpaceX [and Tesla] is as motivating and enjoyable as possible, and establish clear and measurable objectives.”285
What Elon is looking for is the Michael Jordans of engineering. The employees need to have a positive attitude, they have to be easy to work with, and the other employees have to enjoy working with them. There’s a no-asshole-attitude, so C or D employees are not tolerated on a scale where A employees are the best. He will fire C or D players, but not without first giving a warning. What Elon want is happy employees. If an employee is not happy, then he or she can no longer work for the company.354 “If you are not happy, get a divorce,” Elon said, probably as a reference to his two failed marriages.
But A players within certain fields are not always easy to find. “There’s certain special skills, especially in advanced engineering, that are the limiting factor in creating new companies; we send these people home after training them in our graduate schools,” Elon said. “One of the toughest things I’ve found is to recruit top-notch manufacturing talent. That’s where I’ve had to go overseas. For a few decades, it just wasn’t where the smartest kids in the class in America went. We had far too many smart people in the US go into finance and law.”316
Being the best doesn’t just mean that you were the best in school. What you need is real experience. Elon recalled how he interviewed fresh graduates without any experience. “So you get all the arrogance and attitude without any of the capability, or the willingness to admit mistakes, adapt and learn,” Elon said. “They need to go spend a few years at a Fortune 500 company, where everybody is like them, they have no status whatsoever and they’re treated like dirt. They get seasoned and humbled. Then you can work with them.”167
End of the Beginning
The French emperor Napoleon Bonaparte met with his advisers who recommended him a new general to lead a new military campaign. The advisers told Napoleon that the prospective general was good with the men, he was smart, and he had excellent tactics. Napoleon looked at his advisers and asked “Yes, but is he lucky?” For entrepreneurs, luck is important, but so is good tactics, and you need to be good with the men and women in the organization.
Elon answered the question if you create a successful company it’s more about the external environment than any skill the entrepreneur has. “I’m just very lucky,” Elon replied. “Definitely luck plays a role in anything. I do think you’ve got to have perseverance. You’ve got to stick it out, and the team that you’re working with does, too. That allows you to get through a series of issues. It took us four flights to get to orbit at SpaceX. That was kind of grueling.”57
Because all rocket launches after the first three flights have been successful, it looks like SpaceX might have passed the first stage where a new company has to fight for its survival. SolarCity had some minor troubles in the beginning, but has been fine since then. “Solar City is doing super well,” Elon said. “They’re growing at 50 percent to 100 percent a year with positive cash flow, which is pretty incredible. I just show up at the board meetings to hear the good news. It’s really great.”351 The third company, Tesla Motors, had as we now know a few ups and downs but is today also on the right track. “It feels good in retrospect, but it was extremely difficult and stressful at the time,” Elon said. “It’s really this year [2013] I’ve felt really secured about Tesla. Tesla is now ten years old, so the first nine years were quite insecure.”445
When Elon co-founded Tesla, he had a vision: “I would like to be able to look back and say: Tesla accelerated the transition from hydrocarbons to sustainable electric transport by at least five to ten years.” This vision is now a reality. “We’re still very little, and so while the big automakers won’t be afraid of us, they should be afraid of their competitors imitating us,” Elon said. “Our success will make Toyota worry about what BMW will do, and GM worry about Honda – will create a concern about being late for the party. So our role is as a guiding light, helping bring these cars to market five or ten years faster than they would have otherwise – which could make an important difference for saving the species.”59