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Elon Musk Thinking
Interview Of Elon Musk 11 Years Ago!!!
00:43:29
Interview Of Elon Musk 11 Years Ago!!! #ElonMusk Follow me on X https://x.com/Astronautman627?t=RFQEunSF2NwRkCOBc6PkkQ&s=09
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- [00:00]
A
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? Or 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? Sure.
- [00:20]
B
So let's see, is that on? Yeah, it seems to be good in a case of Tesla, SpaceX and SolarCity and actually also PayPal and the Zip 2 before that. It really stemmed from when I was in college just trying to think what would most affect the future in a 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 genetics. And what was the last one? Yeah, rewriting genetics.
- [01:02]
A
Rewriting genetics.
- [01:06]
B
Big impact.
- [01:07]
A
It's good to know we're faith three and four might come.
- [01:08]
B
Yeah. You know, potentially negative consequences, hopefully positive, but something could go wrong.
- [01:14]
A
So did you have movies like was like Top three and a couple contenders or were they all kind of jumbling around waiting for the right moment?
- [01:21]
B
I thought, you 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.
- [01:35]
A
You know, so there's this moment of epiphany that you held for a while because you didn't pursue those right away. Right. These were, this was sort of an early vision that you then got opportunities to execute on.
- [01:47]
B
Yeah.
- [01:47]
A
So 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? You know, now a little farther along when you have the end point in mind or just let's say 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.
- [02:13]
B
Yeah, I didn't, I mean I didn't really get into any of this with the expectation of success or at least. Yeah, I mean I started out with thinking, okay, I'm going to 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. So that was continuing on research that I 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. And 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. It'd be like. 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. And previously you'd have to be at the sort of Library of Congress even to have the Library of Congress as 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. So 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.
- [03:55]
A
Is that the path to AI that you might see?
- [03:59]
B
It's actually not exactly AI. It's some sort of human machine collective intelligence. So different. Different from AI. Although AI may not turn out to be exactly what, hopefully it's not exactly what's described in Terminator or something.
- [04:14]
A
Now, quick pause. For those who haven't been to SpaceX, the data center has got to be the coolest thing you've ever seen. It's Skynet on the door, Cyber9 systems branding, and the most badass set of lights coming from all the servers. So you don't own it.
- [04:27]
B
Exactly. Ye. Our FVA and CFD cluster is called Cyberdyne Systems.
- [04:33]
A
We'll get back to influences later on, but I wanna try to see if I understand what you were saying about this. You see the long arc of. And what's important to humanity. Not 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 and we just take it as well. Crap. Government screwed. You know, what are we gonna do, right? You have this incredible sort of scope of ambition, right? Planetary scope, interplanetary scope. A little more than just changing the world. Let'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. We can do these things.
- [05:11]
B
It definitely emboldened over time. I mean at the. When I started the first Internet companies of two with my brother and. And another person, Greg Curry, it wasn't really with the thought of being wealthy. We've got nothing against being wealthy, but.
- [05:30]
A
We'Ll get back to that later too.
- [05:32]
B
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. When we started off, we literally only had one computer and so 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. And 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 at Pagemala El Camino. So 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. And actually I thought 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. In fact, a lot of people, a lot of venture capitalists we met at the time didn't even know what the Internet was. They'd never used the Internet.
- [06:51]
A
We still do.
- [06:54]
B
Yeah. Sort of well known people in San Hill. It was like, wow, okay. But at the time nobody had made any money on the Internet. So I guess that's. It wasn't really clear evidence that there was a business. And yeah, those are fun times.
- [07:13]
A
I remember Kimball and you coming in.
- [07:14]
B
Right.
- [07:15]
A
Very young looking guys. I think I was in my first four months on the job too.
- [07:20]
B
Yeah, yeah, exactly.
- [07:21]
A
So let's jump scares 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. And there's some obvious parallels. And so let's start with the most obvious. That 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? No, I think it's because look at the correlation. Yeah, Struggling companies, everything's in the kraft can in December 2008. So let's take on a new CEO gig. And same for Steve coming back to Apple.
- [07:58]
B
No, definitely it was not my intention to be CEO of two companies. 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. That 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. And 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, long 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. By 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.
- [09:07]
A
That's a good point. And 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. The 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. It 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. Right. 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.
- [09:48]
B
It probably does, yeah. I think it 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 do. But 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 wearing. And 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.
- [10:27]
A
You're like a slacker.
- [10:29]
B
Yeah.
- [10:31]
A
So 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 to features and stuff. It's, it's a wonderful thing to see. I think what, what obviously should strike folks in the room as remarkable is the diversity of industries that you've tackled, right? From 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. So there might not be an obvious pattern in which industry you 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. And 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 know SolarCity going up against the regulated utilities. None of these are places that you would normally find entrepreneurs.
- [11:40]
B
Yeah, 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. It'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%, probably a fair bit less than 50%. In 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. I 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.
- [12:26]
A
So you had conviction, but it didn't mean certainty. Right. You knew that all vehicles would be electric in your heart.
- [12:33]
B
But ultimately, I mean, I think the sort of fundamental good that Tesla can accomplish is acceleration of, of the inevitable, which is electric transportation. But I think there's a lot of value to accelerating, even though I think it's somewhat inevitable, it's about this value to accelerating it to minimize the environmental and economic damage that would otherwise occur. So, 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, because when we announced the Tesla Roadster, then Bob Lutz, who was vice chairman of GM at the time saw a press release and said, if a small company in California can do it, then so can gm. And 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. That's what got the vault rolling. And that in turn got Nissan to do the leaf. And so it's kind of 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.
- [13:49]
A
And 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.
- [14:07]
B
So we supply powertrains to Toyota and to Mercedes to help what could be.
- [14:11]
A
Viewed as your biggest competitors one day, you know, absolutely accelerate that. Before we get to that sort of purpose driven mission, I do want to ask one though, or at least maybe make sure the audience realizes how cool this car is. So Elon doesn't have to do this. In 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. The safety testing shows it's 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. So is it luck or is there something particularly unique about the EV design space that let it be possible to build the best car?
- [15:01]
B
Well, 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. Like 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 floor 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. And 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.
- [15:58]
A
Like a crouple zone.
- [15:59]
B
Yeah, exactly. Well, so the. Yeah, but part of it's related to electric vehicle architecture, and part of it is related to other technical decisions that were made in the design of the Model S. And so, yeah, that's what leads to sort of having 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, but, like, I wrote a blog post.
- [16:24]
A
Did 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 they all gel? And then secondly, I'm also curious. When did you first know that all vehicles would be electric? Was that early?
- [16:47]
B
Probably 22 years ago or something like that.
- [16:51]
A
Before you met Tesla?
- [16:55]
B
Before 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. Maybe no sooner than that. Probably when I was in my sophomore year in college.
- [17:13]
A
Did you have certainty in your heart?
- [17:15]
B
Yeah, absolutely. It's super obvious.
- [17:17]
A
Yes, yes. Now. Yes, now it is.
- [17:20]
B
And there are some things super obvious.
- [17:21]
A
Then, but this is what blows my mind because even like three years ago, most people probably didn't agree with this point of view. And 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. You were a lone voice of sorts back then, probably amongst your cohort and friends and, you know, social.
- [17:44]
B
Actually, I used to talk to, like, dates about electric cars.
- [17:48]
A
How'd they go?
- [17:50]
B
It wasn't. Wasn't helpful.
- [17:54]
A
It got better.
- [17:56]
B
Yeah. So actually, I ran into a girl I dated 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? And 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.
- [18:22]
A
It was from the physics of it. Yeah. The heat loss of an internal combustion engine just. Yeah, it's pretty amazing. Pretty amazing. So I'm gonna. I wanna share a little story that leads to a question along a different angle. I 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? And he mentioned the 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.
- [18:57]
B
Really? Yeah. He said that?
- [18:59]
A
Yeah. And so I'm like, paper pen, can we please get this down on? Yes. So he likes zingers.
- [19:08]
B
He likes. Actually he's a good friend of mine.
- [19:11]
A
So context is important.
- [19:14]
B
I met Larry before he got venture funding. Yeah. So like 90.
- [19:20]
A
Back in the 90s. Yeah.
- [19:21]
B
Yeah.
- [19:22]
A
Wow. Well, he's a remarkable guy, obviously also an underachiever and, you know, has a company that wants to do good in the world.
- [19:29]
B
Right.
- [19:29]
A
And 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 nonprofit and a lot less would get done than a corporation that's pursuing things that are directly aligned with things I care. Getting off of oil and colonizing other planets. He believes in those missions and thinks that a corporation, if 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. He 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. And then the sad story of others who never get to the second, second half of their life, like Steve Jobs. I mean, not in a joking way. I mean, seriously. And 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. That is not the parity. In fact, if you read the most recent shareholder letter, profits.
- [20:27]
B
In fact, I started off the shareholder letter saying the profits are not our primary goal. And then I got a little bit.
- [20:34]
A
Of.
- [20:36]
B
Some of the board members who questioned that statement. And I was like, well, it's true.
- [20:43]
A
You know, for now, or 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.
- [20:53]
B
Yeah. It's not that I think they're unimportant or anything, it's just not the primary goal. And actually Toby will that on IPO as well. And so it's not like new information or these, you know, if people had watched the ipo, it's not your information. And yeah, and actually amazing. The stock went up after that.
- [21:14]
A
I 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, the customers love it. Right. And you feel better about your job. The 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, no, that we will not make that our number one priority actually do a great job. And 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. In 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. Well, 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.
- [22:14]
B
To 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. So 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.
- [22:41]
A
And 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?
- [22:54]
B
Yeah, 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 touring a friend of mine and he asked me what I was going to do after PayPal and I thought, well, I was wondering, I'd like to get involved in space. But I just didn't think there was anything I could do as an individual. But 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.
- [23:37]
A
Then Mars.
- [23:37]
B
Oh Yeah, it's like OK, 2017, good. OK. But actually there wasn't anything on the website and. Or at least I thought like, can I not find it? Like, what's going on in here and is it secret? I 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 the first. And in his first, 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. That'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. But I thought, well, if I could do something that would galvanize public interest and then that public interest would translate to additional appropriations for NASA, increase their budget, then maybe they could do it. So 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. And the public tends to respond to precedents and superlatives. So this would be the furthest that life's ever traveled. The first, first life on Mars. And you have this great shot of green plants on a red background. And I thought, ok, maybe that would.
- [25:10]
A
Get the money shot. You had a beam.
- [25:12]
B
It could be the money shot. Yeah, I'm never quite sure whether that's sort of a word you can use or not.
- [25:20]
A
Now I'm realizing maybe I should.
- [25:23]
B
Yeah, I didn't know its origins until somebody pointed it out to me. But.
- [25:30]
A
So, okay, moving back to that greenhouse on Mars.
- [25:33]
C
Yeah.
- [25:34]
A
So the photo is out there and it inspires us.
- [25:36]
B
So you have 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 it'd be great. So I Tried to figure out how to do this with the proceeds that I had 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. But 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.
- [26:18]
A
That's where I'd start.
- [26:20]
B
Go back. I mean, okay, there were some strange trips, that's for sure, but it was 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. But 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. The 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'll actually get a lot of support. But 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? And so 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? And 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.
- [28:04]
A
It's like I'll just build them myself.
- [28:06]
B
Yeah.
- [28:06]
A
And then.
- [28:07]
B
But 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.
- [28:16]
A
But it's fascinating, the parallels are so many between these companies. It's again, probability is low. Certainty that it needs to be done. Yeah, certainty that it could be done by physics and first principles, that it's success is an option. Right. It's one of the possibilities. It. And interestingly, starting with a roadster and a Falcon one as a proof point to a larger design. You 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 I wonder if that's why incumbents don't see this 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. How 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. I'm going to ask one last question, but I'll give a heads up on if there's mics to start getting them ready for the audience because I don't want to monopolize people's time here. Actually, there's so many questions I want to ask, but I'll start with maybe I'll end here for at least some of the quirky one about influences. So you. We've heard about the. 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 Cyber9 systems that at SpaceX that we heard and then some Easter eggs. So some of us noticed that the stereo goes to 11 right on the, on the Tesla. This is a spinal tactic reference for those who know that this one goes to 11 and you just need one more.
- [29:54]
B
It's louder than loud.
- [29:55]
A
That's right.
- [29:56]
B
Exactly.
- [29:56]
A
That'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. Yeah. No one's. Yeah, you got to add some. And the Model Y. Now what's behind this?
- [30:11]
B
I know exactly. I guess there's not a lot of humor in trademark trademark law because yeah, obviously we just trademarked sexy. And then we were having this discussion with Ford because Ford's council, they also didn't get it because they're sort of slightly opposing us using Model E. And then they saw that we registered Model Y and they said, oh, you're planning to use Model Y instead of Model E? Like, no. Was just a joke.
- [30:49]
A
We don't do that.
- [30:50]
B
What does it spell? Come on.
- [30:54]
A
Fantastic. 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. Oh, 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.
- [31:10]
D
Thank you very much. I heard you talk about supersonic aircraft. You guys have done some beautiful work at SpaceX on VTOL. Clearly, Tesla is focused on electric. Have you thought about the synergies of electric and VTOL and aircraft for solving the 405 challenge?
- [31:35]
B
For solving the 405 problem? Well, I mean, I do think there's.
- [31:40]
A
A reason for vertical takeoff and landing.
- [31:41]
B
Yeah, 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. And 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. Yeah, the engine is. The hole in the front of the engine is a fixed size. And so you have to pick a particular cruising altitude. And 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. And then you've got this issue of supersonic combustion that 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. And 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. And then you could get rid of the elevator and rudder so you don't need the rear control surfaces. If you gimbal the motor. Gotcha.
- [33:13]
A
So it starts to look like a pod craft, like in Oblivion or something.
- [33:18]
B
Right. So it's. Yeah, something not equally. 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, I think. But they're tricky. They're certainly tricky.
- [33:38]
A
Don'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. Okay. No, that we have someone. Great.
- [33:53]
E
Hi, Yangu. GSB94. Hey, Steve. Long time no See, one question.
- [34:00]
B
Are you.
- [34:01]
E
Is Tesla going to expand the worldwide? And I think GSB is going to host China 2.0 tomorrow. And 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. Are you still concerned about that or you have a strategy?
- [34:34]
B
Yes, Tesla's 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. So 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 premium sedans.
- [35:11]
A
So if you take something and growing.
- [35:13]
B
Yeah, 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. So 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. So 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 good symbolism. Yeah, 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. I 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. So I'm actually starting to feel more and more confident about the technology actually not being copied in China or at least 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. And 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. But that concern is a few years away.
- [37:03]
A
Great. Do we have another one? Oh, yeah. Up here, the students are largely upstairs. Is that right? Yes.
- [37:09]
F
Hi Alan, this is Gaudi El 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. Hopefully 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 offs between your profits and you know, following purpose that goes further than just make money. You know, you are trying to change the world, you know, work for the humanity rather than just make profits in the short term.
- [37:48]
A
What was the question? I'm sure if I.
- [37:51]
B
How do you balance?
- [37:52]
A
Okay, how do you balance? Sorry?
- [37:54]
B
Well, 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. And 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 success, sort of three strikes. And actually we had three launch failures. We were 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. It 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.
- [38:55]
A
So what he'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 Goldman had just failed the private offering and the financial collapse was amongst. There was no DOE loan, there was no Daimler deal. The car had a negative gross margin. It was not pretty. Oh, and you had your larger shareholder just completely pissed off and going awol. It was ugly, it was a stressful period and that was just at work.
- [39:29]
B
Yeah. 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. And 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. We've sort of chosen to make a small amount because we can reinvest the cash flow into future products. So now, right now we're reinvesting 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. So 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. So nothing against profit in general, but it's just, 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. I think maximize your profit at this stage is actually not the smart move.
- [41:00]
A
And it's interesting because earlier I 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. And by analogy in the investment field, in venture capital, you could look for the thing that will make the most money the quickest, 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 right. Of 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 the balance question almost implies a dichotomy that may not be opposed, but maybe aligned if you orchestrate it. Right?
- [41:57]
B
Yeah. Maybe more of a short term versus long term approach.
- [42:00]
A
Yeah, exactly. Great. We have one hand up here. Up here. Another one up here. Sure.
- [42:05]
B
Up here.
- [42:05]
A
This will be the last question. Oh, is this the last question? Okay. Yes.
- [42:10]
C
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. Do 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?
- [42:34]
B
Yeah, absolutely.
- [42:35]
A
Good question then.
- [42:37]
B
In 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 price, high volume. So 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.
- [43:16]
A
And the maintenance is much less. The fuel costs are much lower.
- [43:19]
B
Absolutely.
- [43:20]
A
That's right. Well, great. Well, I want to thank you very much for this and transition to the closing segment of our evening. Thank you.
- [43:27]
B
All right.