Elon Musk: Tesla Motors CEO, Stanford GSB 2013 Entrepreneurial Company of the Year

Elon Musk: Tesla Motors CEO, Stanford GSB 2013 Entrepreneurial Company of the Year

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[SOUND].>>Good evening and, Welcome to the
Stanford Graduate School of Business. I’m Garth Saloner. I’m the dean here, at the GSB and it’s my
privilege to welcome you all, To this wonderful event, 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 and
each of the award is given… To an entre, entrepreneurial company that
embodies the spirit, innovation and unique culture of the companies that
we’re familiar with in in Silicon Valley. And so let me be the first to congratulate
Tesla and Elon Musk for. The award this evening. [SOUND] I’m going, be brief before handing you over to, 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 and I’m very quickly gonna 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
multi-disciplinary teams from across the university and they work on projects
together and this year. As a harbinger of technology to come we have for the first time flipped the
classroom to Stephanos 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 to work together on the projects and I think that’s very much
a sign of the times and, and the future. The second is many of you will be familiar
with a program that we offered here at Stanford in the summer and during the year
which we used to called the Summer Institute for
Entrepreneurship. We now call it Stanford Ignite. This is a, a program that at Stanford was
aimed at graduate students at Stanford not in the business schools so it’s students
and engineering medicine, and life sciences,
and so on who. Might be starting a company or be working
for companies that were innovating. And we’d give them a general management
education. With an entrepreneurial spin. And this year we started to take that 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 their called
Politechnique. And that program too, makes heavy use of
technology. Most of the classes are actually, faculty
being from the Snite Management Center… To those locations. The final thing I wanna, I wanna reference
is again, many of you are familiar with SIIDE which is the
Stanford Institute for Innovatiion and Developing Economies, an institution
that we launched here at the business school about two years ago, 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 and
it’s a, it’s a regional, a regional hub and a regional program with participants from, 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 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 and help us in a, in a whole variety
of ways and, and we’re extremely grateful. And and delighted to have you all with us
this evening, thank you very much. [SOUND]
[COUGH]. I’m Geoff Yang. And I have the privilege of chairing the
Stanford ENCORE Award Committee. So, you may ask, you know, how do we pick
a particular company to win the award. And 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. I look 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 who’ve, or whose founders are
interesting personalities. So you might say, well how’d you get
Tesla, then? It isn’t quite. So. So the story of Tesla, you know, the so,
you look how it stacks up. And you say well Tesla was started by two
engineers, Martin Eberhard and Marc Tarpenning who believed that
electric vehicles could change the world. Okay, check. Tesla has succeeded in an industry where
start-ups aren’t supposed to succeed by incorporating novel design
approaches to little things like concept design, and battery design,
and body design, and drivetrain design, and manufacturing
design, supply chain management, mass production. Tesla is attempting to disrupt, disrupt an
industry in which its competitors have massive scale
and long histories. Okay check. Elan Musk, this is a company series, they
are lead investor and now and chairman continues as its CEO
and product architect, check. And finally an interesting story, will
test those practically gone out of business, my
understanding is a couple times and is now runaway success
of the market cap of over $23 billion. It’s CEO was the inspiration for Tony
Stark in the Iron Man series according to it’s
director. Check, check kind of an interesting
personality. You get the picture. Tesla was the first US auto company to go
public since Ford Auto 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. It’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 a PhD in physics. He started Zip2, a software provider,
which was sold to Compaq, he co-founded X.com which was later renamed to something
called PayPal which was 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. He’s also the founder and chairman of
Solar City 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. But most importantly for the purposes of tonight’s program he’s CEO of Tesla
Motors. Tonight Telsa, I mean sorry, tonight Elan
will be interviewed by my friend and fellow Standford encore award committee
colleague, Steve Jervison, managing director of Draper
Fisher Jervison. Please join me welcoming Steve Jervison
and Elan Musk. [NOISE].>>Someone will yell if we got this wrong. I think they told us five times he sits there I sit here, and that just
[INAUDIBLE] So before we start we’re going to try to
keep this a little casual and interesting as well as trying to get into
the mind of musk a little tonight. It’s a marvelous place to delve. You all have a chance to ask some
questions later. So, you can start thinking about that now,
I’ll start with a few. But, as a warm-up. And, I think this might be something you
wanna, might like to see, About a year and a half ago, about Model-S
ships, I remember him saying, sort of with a gleam in his eye, that he relishes
the day that he’ll be driving around somewhere around in Silicon Valley
and see the Model-S on the road that’s not. Like an employee car that’s in testing,
but like a real customer, like, that he
doesn’t know. And so as a quick survey of hands, how many people saw a Tesla driving around
Silicon Valley. And I don’t mean the one sitting out there, that means you’ve seen multiple
Teslas, right? I saw ten, I counted today, just. Now I have a short community, so that
dream has become a reality, but what Tesla has done has
become a marvel to watch.>>So I think a lot of folks here, you know business students,
students, 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 people kinds of questions, but starting with
design, 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 gonna fix it. And I’m gonna commit to do it. Even if I don’t know how to get there.>>sure. So, let’s see.>>Is that on?>>Yeah. It seems, seems to be good.>>[UNKNOWN]
when I was in college [UNKNOWN]
in a positive way. So,. But the three areas where, where I was
quite sure we we’re positive were sustainable energy,
internet, and making life multiplanetary. And then there were a couple other areas
where there’s maybe a question mark, like the A.I. and
writing genetics. [UNKNOWN]
lesson?>>Yeah, rewriting genetics.>>Rewriting genetics. [UNKNOWN] [CROSSTALK].>>Potentially negative consequences,
hopefully positive. Something could go wrong. [CROSSTALK].>>Top three and a couple contenders, or
were they always kinda jumbling around? Speaker 1: Waiting for the right moment. Speaker 2: No, I just thought that,
looking ahead, 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, you know. Speaker 1: So there’ this moment of
epiphany that you held onto for awhile because you
didn’t pursue those right away, because this was
an early vision that you then got opportunities to
execute on.>>Yeah.>>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 cash ev should be better than internal combustion engines, just in general I’ll
commit. I’ll believe that should be done.>>I didn’t really get into any of the
swift with the expectation of success. Or at least… Yeah, I started out thinking okay, when I do something in the electrical vehicle
space, and that’s why I originally came to Stanford was to
work on advanced energy storage technologies
and take ultra capacitors. So that was continuing on research that
I’d done as an intern in Silicon Valley the summer
prior. so, so that’s, that’s why I originally
came out in ’95. And then during that summer I read some
internet software and I thought okay, I can either work on electric vehicle
technology, or, or I could sup, support on internet stuff. try, try to do something with the
internet. I thought the internet would be something
that would. Dramatically affect the future of humanity
be like, like acquiring a nervous system. And whereas previously, communication
would have to occur almost by osmosis, you know, 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. So human collective know, 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’ sort of
information but, with everything digitized and accessed anywhere you can be in a
jungle in South America and. And if you had just narrow that link
somehow, you could, you’d have access to all of
humanities information. So it actually, effectively create a super
organism and, and fundamentally change the nature
of humanity itself. So I was kind of, just wanna be kind of
part of that,>>Is that the path to AI that you might
see?>>It’s, its actually not exactly AI, its,
some sort of.>>human machine collective intelligence,
so different, different from AI, although AI may not turn out to be exactly what,
hopefully not. Its not exactly what’s, you know, like, described in Terminator or something, you
know.>>No.>>[LAUGH]>>Quick pause for those who haven’t been
to Space 6. The data center has got to be the coolest
thing you’ve ever seen. It’s, you know, SkyNode on the door, Cyberdyne systems branding and what have
you. [LAUGH] The most badass set of lights coming from all the little blinking
servers. So these are the own it.>>Exactly.>>Yeah.>>Our FEA and CFD clusters is, is called
Cyberdyne Systems.>>[LAUGH]>>We’ll get back to influences, later on,
but I wanna try to see if I understand what you were saying about
this, this you see the long arc of. And what’s important is 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. The governments screwed or behind it,
right? You have this incredible, sort of scope of ambition, right, planetary scope,
interplanetary scope, right? A little more than just changing the
world. Let’s change some other worlds too, right,
and this is big stuff. Was that always in your mind or did that,
did you become more involved in it over time that
this is available. We can do these things. It definitely emboldened over time. I mean, at the, you know, when, when I
started the first, internet company. It was ’02, with my brother and an,
another person, Gregg Curry. The, it wasn’t really with the thought of
being wealthy. It, you know, I’ve got nothing against
being wealthy, but, [LAUGH] [LAUGH]>>We’ll get back to that later, too. [LAUGH].>>[LAUGH] But, but it’s just, it, it was
just from the standpoint of been wanting to be a part of
the, the internet. And I, I, I figured if we could make
enough money to just get by, it will be, that’ll
be okay. and, and, and when we started off, we had,
we had, we actually only had, like, one computer, and so it’ll be our web server during the day, and our code at
night. And we, we just got a, a small office in
Palo Alto back when rent was not insane. and. it, it costs us like $450 a month. It was cheaper than an apartment, so we
actually just slept in the office and then showe, and then
showered at the YMCA. [UNKNOWN] So we’d walk over there and, and
shower and and that was actually I think that was when I fir, we
fir, I first met you by the way. And so, [UNKNOWN] probably not many people
know this, but we actually pitched Steve in like January 96 on the,
the zip 2 business plan. And actually I thought, Steve was actually
one of the most up to speed on, on, on what was actually was
in our business plan. Most, most people we met did not actually
read our business plan. In fact, a lot of people [UNKNOWN] time,
didn’t even know what the internet was. They had never used it, [CROSSTALK] they
didn’t think it would amount to anything.>>I’m sure, I’m not sure if they still
do. [LAUGH].>>Yeah, right. Yeah, I’m sorta like you know, sort of
like well known people in San Hill. I was like wow, okay. But at, at the time nobody made any, any
money on the internet so I guess that’s you know there wasn’t any
clear evidence that there, there was, was a
business. And yeah,>>Those were fun times, I remember
Kemball and you coming in. Very young looking guys. [LAUGH] I think I was on my first four
months on the job too.>>Yeah, yeah, exactly, so
>>So, let’s just [UNKNOWN] for a second. I’ve 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. But, just must be like 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 crap can in December 2008, so let’s take on a new CEO gig, [CROSSTALK] and same for
Steve coming back to Apple.>>No, def, definitely it was not my
intention to be CEO of two companies. I mean [INAUDIBLE] there are certain
things that I kind of wanted to, that I thought were important to happen,
and I thought it was important that. That there was. The, the, an electric vehicle happened. That there was success in the electric
vehicle arena. Because the, it, the encumbered companies
were convinced that it was not possible to create a electric car
that looked good. That had a good range and 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, tho,
those things, that was the Tesla Roadster. And if you created, if, if you made such a
thing, people would buy it. And so that, that’s what we, we tried to
do with, with, with NASA. In, in fact I should try to say, one minor
sort of correction on the introduction. I’m not a, I’m not co-founder of Solar
City, but I am a co-founder of Tesla. [LAUGH].>>It’s okay, that’s a good point. And [CROSSTALK] of many of it’s key
features.>>Yeah.>>Very much like Jobs. Both handled some of the detail as well as the long arc of what’s important for the
company.>>Right.>>[UNKNOWN] CEO is, 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 can not
expect more than half your time at most. It’s sort of naturally forces a delegation
upon you and an expectation that you have to rise up for partial
awareness at best, right?>>Yes.>>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.>>That probably does, yeah, I think I
probably do, yeah, I mean [UNKNOWN] the things that
I do, at each company and constantly think about
what is the most useful thing that I, that I could
do. But even with that it still actually does
take an enormous amount of time for a while there I was just doing
constant 100 hour weeks. And that’s, that’s definitely weary. And, and now I’m kind of the in the 80 to
90 which is more manageable. but, but you know that if you divide that
by two, it’s only like, you know like 45 hours per company which is not, is not
much if you with a lot of things going on.>>You’re like a slacker. I mean. [LAUGH].>>Yeah.>>So you know, it is interesting also how you have a love for certain aspects of the
product, so at space X, the whole concept and the
vision of going to mars, and back into features
and stuff. It’s a wonderful thing to see. I think what should obviously strike the
folks in the room as remarkable is the diversity of
industries that you’ve tackled, right, from
commercial banking to, industrial complex to the automotive industry these
are heavily regulated industries. The general investor [INAUDIBLE]. So, there might not be a, an obvious
pattern in which industry you tend to strive in
but I wonder if there’s a pattern 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 have [INAUDIBLE]. Even on solar city going up against
regulated utilities. These are places that you’d normally find
entrepreneurs?>>yeah, like I said, it was not from the
stand point of like what’s the best risk adjusted rate of
return or you know, what I think if things could be
successful. Just like I think these things need to
happen. Try to make them happen, and so then when
we started space X which has the. I, I thought that the probability of
success was less than the property percent, They were probably up
there, but less than, a few percent. In the case that’s on the study, I thought
the probability of success was probably greater than 50%, but it wasn’t clear what
lying true to success would be, you know.>>Mm-hm.>>It could just be small, And, Yeah, but, but it was I mean just thought
these were things that needed to get done. And even if the money’s lost, okay, it’s a
little worth trying>>See conviction, but it didn’t mean
certainty. Right?>>You knew that all vehicles would be
electric in your heart,>>Ultimately, ultimately yes.>>but not that the [UNKNOWN] necessarily
succeed.>>I mean I think there’s a fundamental
good that Tesla. What can accomplish is acceleration of the, of the inevitable, which is
electrotransportation.>>Mm-hm.>>But I think there’s, there’s a lot of value to, to accelerating, even though
I think it’s somewhat inevitable, there’s value to
accelerating to minimize the environmental and economic damage that
would otherwise occur.>>Mm-hm.>>So. You know, it’s better if, if we transit, transition to sustainable
transport ten years or wha, what may be 20 years sooner than
might otherwise be the case. And I think the Tesla’s effect has been
much greater than the cars made, that’s been made internally because when
we announced that Tesla roadster, then above
lights. Who’s [UNKNOWN] leader of GM at the time. So, are press released, I said, if a small
company in California can do it, then, and so can
GM. They took it to his engineers who told him that, that you couldn’t build electric
car. And, told them that they need to get
going. That’s what got the boat rolling. And that in turn got Nissan to believe. And, and so, it’s, kind of, got the, got,
got things going. and, and ultimately it’s like it’s what we
induce other companies to do that will have a greater impact on the
cars we make ourselves.>>You know, it’s an interesting point I’m
gonna come back to later this idea that Tesla’s founding missioners as
[INAUDIBLE] particularly 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 at some part will help
others in that shift as well. Which is remarkable from. And so.>>Yeah.>>We supply power trains to Toyota and to
Mercedes and that type of thing.>>So what could you give to your biggest
competitors one day. Eh, you know.>>Yeah. Absolutely I can accelerate that.>>Before we get to that sort of purpose
driven mission I do wanna ask, or at least make sure the audience realizes how cool
this car is, and so [UNKNOWN] 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. It’s a bit unperson the reviews received
is saying it’s the best car they’ve ever tested, [INAUDIBLE] saying
it’s the most important car in America’s
history. Um,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 it something
particularly unique about the EV design space that let it be possible to
build the best car?>>Well I like to think it plays some roll
here. But I think we, I think electric vehicles
have a fundamental [INAUDIBLE] advantage. If, if one designs an electrical from the ground up, and takes advantage of, of
what’s possible. Like if you just were to convert a
gasoline car, you would not you would not achieve
these advantages. But if it’s properly done you can
actually. Package the battery pack in a full pan and
achieve a low center of mass and, and have a very compact motor
and, and a motor and cable box so that the actual useable
space in the car is significantly greater than a gassing car of the same
overlook ex, excel dimensions. and. And then if you do a few other things, we try [UNKNOWN] necessarily specifically
related to an electric car like using aluminum body and chest is helpful
because you can absorb more energy per unit mass
essentially in a crash.>>Like a [UNKNOWN]
>>Yeah exactly. well, so it, yeah, quite part of it is
related to [UNKNOWN] and part of it is related to other technical decisions
that,that we made in the design of the model S. And so, yeah, that’s what leads to sort of
having a high safety is, I mean I don’t want to go into too much because it
might take up too much time, but.>>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. For example, either the product
dimensions, like it will have all these great features, like, like at the get go
did they all gel? And the second thing, am also curious when
did you first know that all vehicles would be
electric? Like, was that early?>>That was probably 22 years ago,
something like that.>>Before you met Tesla?>>Before there was Tesla.>>Before there was, way before there was
Tesla. Oh yeah. Well like I said, You know, when I
originally came out. When I, I mean when I was studying physics
and That’s probably when I, I thought it was
the case. Or maybe, no sooner than that. Probably when I was in my. Sophomore year in college.>>Did you have certainty in your heart?>>Yeah, absolutely. It’s super obvious.>>Yes! Yes! [LAUGH] Now, yes, now it is. [UNKNOWN]
>>I think it was super obvious then, but>>Yeah, 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. What were the others’ point of view? But we want to make the transition yet,
but we realize that this is a ridiculous debate
to be having.>>Yeah.>>You were along voice of sorts back
then, probably amongst your cohort and friends, and you
know, social factions [CROSSTALK].>>Yeah I used to talk to, like dates
about electric cars.>>How did that go?>>It wasn’t, wasn’t helpful. [LAUGH].>>It got better?>>[LAUGH]
yes [UNKNOWN] and [UNKNOWN]. And she said no, I don’t. [LAUGH] So yeah, that’s a while back. I mean, it’s pretty, i mean almost
everything is electric that we have in our daily
lives.>>Well, from the physics of it, the heat
loss of an internal combustion engine. Pretty amazing, it’s pretty amazing.>>Yeah.>>So. I want to share a little story that leads
to a question along a different angle. I don’t think you’ve heard this before,
but I find it fascinating. I was at a lunch at a Google event, and out of the blue, with no expectation that
this would be a topic, and Larry Page turned to me,
knowing a little bit about our connection and
said, you know…>>How much money do I have and 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.>>Really?>>Yeah.>>He said that? [SOUND].>>Yeah. And so I’m like, paper, pen. Please get this down on. Yes, so he likes zingers.>>I love that actually. He’s a good friend of mine.>>Context is important.>>I met Larry before he got venture funding. So that’s like 90.>>Back in the [INAUDIBLE] days?>>Yeah. 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. 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 non profit and a lot less would
get done than a cooperation that’s pursuing things that
are directly aligned with things I care about. Like, getting of, of oil and colonizing
other planets. He believes in those missions. And thinks. That a corporation with endowed with the
right to do that as its business purpose is the best vehicle out there and he 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 their first
part of their career then do good for the second
half. And then the sad story of others who never
got to the second half of their life.>>Right.>>Like, like Steve Jobs. I mean not in a joking way I mean
seriously and, and it was a very deep moment so you’ve heard already
that [UNKNOWN]. [CROSSTALK].>>[UNKNOWN] in fact, I [UNKNOWN]. And then I, I got a little bit of, some of the board members to question that
segment [LAUGH]. And I was like, well it’s true, you know.>>You mean like, for now or like just,
just like we are growing. But no, it’s just not the priority. which I think in a business school really
a good point to dwell on for a moment. [LAUGH].>>Yeah, it’s not that, that I think
they’re unimportant or anything. It’s just not the primary goal.>>Sure.>>And actually I’ve told that to people
[UNKNOWN]. And so it’s not like new information, or
at least you know, if you’re, if you’re people who watch the [UNKNOWN] information
and yeah and actually amazing the stock went up
after that. [LAUGH] [INAUDIBLE]>>I th, I think there’s a profound
reason. I mean, you, you see the benefits on being
focused on something that’s a higher calling as
your primary motivation. Your employees love it, the customers love
it, [CROSSTALK] others love it, and you feel better about
your job. The interesting thing, irony perhaps, is
that at least within our portfolio, the companies that
have that kind of a founding principal actually make more
profit and grow their revenue more quickly than the
ones that don’t. And now there’s this little sample set,
but the handful that had taken this bowl to the 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 widely profitable, the
auto industry wouldn’t follow you. In other words, this whole mission of
catalyzing a shift to new electric vehicle isn’t gonna work if the business model’s worse than the current business
model. And so,.>>Yeah.>>You know, it’s, it’s the obvious
byproduct of what you’re focusing on. They’re not obvious, but it occurs to me
that it’s a byproduct. It wasn’t obvious at first at all. [LAUGH] But and I’m curious that that
thought occurred to you, that oh yeah, the other profits will
come, or eh.>>Yeah. well, we have to generate flows of cash
flow, or, or we have to generate enough cash flow to fund future developments, which requires having a good
gross margin. and, and so I guess one could just say
okay, well we’re gonna stop developing your product
and then you’d be really profitable. So at any given point, you could sort of
say we’ll, we could be profitable you know at this point
in, in a significant way but, but we’ve got these great things
that we wanna develop for the future and they’re a good
investment and that’s what we’re doing. And similarly, at Spacex the, you know,
the founding vision was to colonize Mars.>>Yeah.>>indirectly. Again, interestingly catalyzing others to
move.>>Yeah.>>And then you realize hey, I’ve gotta
actually lead this charge.>>Yeah, well, I mean when Spacex,
originally, I started off just thinking, well, how do I,
increase NASA’s budget? Actually, that was my goal.>>[LAUGH].>>so, it was, it was like, 2001 I was
just, just talking to a friend of mine, and the guy asked me, he asked me
what I was gonna do after Paypal, and I thought well, you know, I was wondering like, I’d like to get
involved in space, but I, I just didn’t think there’s anything I could do as an
individual. And, but I was curious as to when we, when
we, NASA would be sending a, a team to Mars, ‘cuz that was always gonna
be the thing to do after the moon. I figured that, that there’d be some plan
and I’d just go to the website and I could read, you know,
the schedule [LAUGH] and then [CROSSTALK]. Oh yeah, it’s like okay, 2017 good, okay,
[LAUGH] but it, but actually there wasn’t actually
on, on the website and [LAUGH] at least I thought
like, can I not find it, like what’s going on in
here. And is a secret, I don’t know. so, but it turned out that that NASA had
done a study on what it would cost to send, to do a manned
Mars mission and I, this was under Bush the first and I, he
in his, 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. [CROSSTALK].>>[INAUDIBLE].>>That’s when $500 billion was serious
money [LAUGH] for the government. So so, 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 and anyway, so I, I, but I thought well, if I can do something that would galvanize public interest,
that, and and then that public interest would translate to,
additional appropriations for NASA, increase their, their budget,
then, then maybe they could do it. So the fir, so actually, what I sort of
thinking I, I would do is send out a small greenhouse to
the surface of Mars with seeds and dehydrated gel and then up,
upon landing, hydrate the gel and grow the plants, and the public test
respond to precedence and superlatives. So this would be the furthest that life’s
ever traveled. The first life on Mars, and you’re gonna
have this great shot of green plants on a red background and I thought
okay maybe that would get [INAUDIBLE].>>The money shot.>>That would be the money shot, yeah. I, I’m never quite sure if that’s a sort
of a word you can use or not.>>[LAUGH].>>Yeah, I, I, I don’t, I don’t know it’s origins until somebody pointed it out
to me, but. [LAUGH] so. [LAUGH].>>Okay, moving back to that green house
on Mars. Yes, the photo is out there, and it is.>>Yeah, see the photo is out there.>>Yes, loved it. It was a great photo. and, and Okay, we’ll make this happen and
it will be good. At best, they’ll get the money and we
could do the, they could sort of send a, a team to Mars and it
would be great. So I try, try and 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, the spacecraft down and the communications
and, and, and the little greenhouse and
everything. But the one thing I couldn’t compress was
the cost to launch. ‘Cuz here’re 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, the biggest ICBM in the Russian
nuclear fleet. [LAUGH].>>That’s where I’d start, yeah.>>Yeah.>>Go big or go home.>>That was I mean, okay, [LAUGH] you
know. The, the, it was, it was there was some
strange trips that’s for sure. [LAUGH] But you know, there’s like
virtually, like you buy any, it’s a very capitalist society
[LAUGH] in some ways. So, so I actually did negotiate a deal to [LAUGH] to buy two of the ICBMs minus the
nukes. And [LAUGH] but, but I came to the
conclusion that that third trip that it, it wouldn’t
really matter. Like, if we, if we, I actually came to the conclusion that my initial premise
was, was, was wrong.>>Hm.>>Because I actually think there’s,
there’s tremendous amount of will in, in the American population
particularly to explore United States you know maybe more than any
other country is a distillation of the human
spirit of exploration. And it’s really fundamental to psyche so,
if he will think there’s a way, I think we’d actually get a
lot of support.>>Mm-hm.>>but, but, then it, 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 where I said okay, well, is
there some way to affect the cost of space
transport? And and, is going and, and so I, I, I got
together with a group of people over a series of Saturdays just to, just trying
out [UNKNOWN] there’s something super, ex, fundamentally super expensive about
rockets? Or, or, can the class be, substantially
improved? and, I had, we had a bunch of those at our brainstorming sessions and I
couldn’t see, I couldn’t see any fundamental obstacles to
improving the cost of rockets, so, that, that’s when I
started SpaceX.>>I think I’ll just build ’em myself. [CROSSTALK].>>Yeah.>>And then, all [CROSSTALK].>>But I’d said, at that point I would say the, the probability of success was
definitely less than 40%. I thought it would most likely not
succeed. But was worth a try.>>But it’s fascinating the, the parallels
are, are so many between these companies. As again, probability is low.>>Yeah.>>Certainty that it needs to be done,
>>Yeah. Certainty that it could be done by
[INAUDIBLE] 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 1 as a proof point to a larger design.>>Yeah.>>You know as I look at the falcon 9, and, it looks like the product of a
software engineer.>>[LAUGH] right.>>Modular reuse, like let’s build one
engine and step and repeat. And building all kinds of elegance into the system design to obstruct away, you
know, almost from the hardware into the
software, into the design, the beauty of the system. And, and I wonder if that’s why incumbents
don’t see that sort of re-engineering of the, of the car or the
rocket or the what have you. The hyper loop 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?>>Yeah.>>Or you didn’t have some other ulterior
motive. Interesting. Interesting. Looking at the time, I wanna give a, I’m
gonna ask one last question, but I give a heads up on if there’s mics to
start getting them ready for the audience. Cuz I don’t wanna monopolize, people’s
time here. Actually there’s so many questions I wanna
ask. But, but I’ll, what I’ll start with
[INAUDIBLE] and here for at least [UNKNOWN] some of the quirky
one about influences. So you [INAUDIBLE] we’ve heard about the,
the iron man reference and your childhood interest in comic books
and [UNKNOWN] the galaxy and [INAUDIBLE], but there’s all kinds of
things woven into like Cymbeline systems that, that SpaceX that we heard
and then some Easter eggs. So, Some of us noticed that the story goes
to 11.>>Right. Yeah.>>On the, on the Tesla. This is a Spinal type reference for those
who know [UNKNOWN]. This one goes to 11 and we just, just one
more.>>It’s louder than loud.>>That’s right.>>Exactly.>>That’s right. But noone seems to have noticed the
product line-ups. You got the Model-S. You got the Model-X.>>Oh yeah.>>You’ve just trademarked the Model-E.>>Yeah.>>No one’s been in that. [CROSSTALK].>>Well what do you.>>And the model, and the model
[CROSSTALK] Y.>>Yeah.>>Now, what’s behind this?>>[LAUGH] I know, exactly. Well this, I guess there’s a lot of humor
in trademark, the trademark law, you know? [LAUGH] ‘cuz yeah, obviously we just
trademarked “sexy”. So and, and then we’re having this, this
discussion with the, like Ford, ‘cuz they the fourth council, they also
didn’t get it. Like, ‘cuz, ‘cuz, they’re, they’re sort of
slightly opposing us using model E.>>Mmh.>>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, it was just a joke. [LAUGH].>>Right, we don’t do that. [LAUGH].>>We’re like, what is this bell? Come on. [LAUGH].>>Fantastic. Well do we, I’ll keep going if we don’t,
but do we have microphones for folks if they
wanna ask questions? Okay, let’s do a quick see if anyone. Oh my gosh, yes. We have some, why don’t we that? Let’s take a couple of questions from the
audience. [BLANK_AUDIO] And I’ll let you guys figure out how to do
the allocations.>>[COUGH] thank you very much. I have heard you talk about, supersonic
aircraft. [COUGH] you guys have done some beautiful
work at Space-X on [UNKNOWN] clearly Tesla is, is
focused on electric. Have you thought about the, the synergies
of electric MVTOL and aircraft for solving
the 405 challenge? [LAUGH].>>For solving the 405 foam, well I mean,
I do think there’s, there’s a [CROSSTALK].>>And VTOL, Vertical Take Off and
Landing.>>Yeah, right, sorry. Vertical take off and landing is VTOL. And yeah, I do think there’s, there’s a
really, like the, I think the optimal sort of air transport solution is
a, a VTOL, electric, supersonic plane. and, and actually works together quite
well for a bunch of reasons. You in, in particular, the higher you go,
the, the better the electric. The more efficient the electric aircraft
is. Whereas if you have a combustion aircraft
as you, as you get higher it gets, it tends to get
worse. ‘Cuz you have kind of a fixed aperture and
air scoop.>>Yeah.>>The, the engine is the hull and the
front of the engine is, is, is, is a thick size and so you
have to pick a particular cruising altitude and so you’ve
gotta 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 know, you see having to slow the
air down and it ends up being not, not that
efficient. But an electric aircraft would just get
better and better as, as it got higher. And the electric motors have a higher part
of weight ratio than a combustion engine. So you’re gonna have, you can actually
have the power to do the vertical take off and landing part
with a fairly small motor. Compared to combustion. And then you could get rid of the elevator
and and rudder. So you, you don’t need the rear control
services if you gimballed in, if you gimbal the
motor.>>Gotcha. So it starts to look podcraft, like a.>>Yeah.>>Oblivion or something.>>[LAUGH] Right. And it’s it’s yeah. It’s not something, not quite, the, 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 2 questions on
that front I think. [LAUGH] But they’re, they’re tricky. They’re certainly tricky.>>Don’t underestimate those two
questions. [LAUGH]
>>[LAUGH]>>Great, let’s go to the next one or
whoever has a mic however we’re doing the
allocation fairly and efficiently. Can we give him a hand? Okay no, we have someone, great.>>Hi, yan kua jsv94. Hi Steve [LAUGH] long time no see. One question, are you, is Tesla going to
expand worldwide? And i think jsv is going to ho, host China
2.0 tomorrow, and do you have any plans to go into the
biggest car market today? But I know you were a little concerned
through another friend of mine. I actually asked you indirectly a few
years ago, that you were concerned about the the secret and the parroting in
the Chinese market. Are you still concerned about that or you
have a strategy?>>yeah, so, so Tesla’s definitely gonna
shift world wide, in fact the Tesla roadster is like in 31 countries
right now and we, we expect to, to ship the, the Model S to, to China
starting next year, as well as to Japan and Hong Kong and, and
Singapore and, and Australia. So, sp really it’s gonna be quite widely
distributed next year. And certainly China is an extremely
important market. In fact, for premium Sedans, it China’s
bought half of the world market, for, for premium
Sedans. so. [CROSSTALK].>>And growing.>>Yeah. Take some of that Mercedes S Class. But last year 54% of Mercedes’ S class’
were sold in China. So pretty important market. and, so, so, we’re gonna definitely do a
major portion in, in, in China. And then actually some of the most
enthusiastic potential customers we’ve seen are people
from China. So we, so we actually wanna make sure that
the car actually has features which are specific to the
Chinese market and, and make sure that it’s not just, you know, taking
an American product and you know just sort of sending it to China
without any, any changes. So we wanna make sure it’s tailored to the
market. And Japan as well. I don’t wanna [UNKNOWN] you know, a lot,
not many American cars sell in Japan but I think that would be
[COUGH] like, we [CROSSTALK].>>Good symbolism. Yeah, I mean like, 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. [COUGH] 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, and I think the, the new government is taking, taking intellectual property a lot more
seriously. So I’m actually starting to feel more and more confident about the, the, the
technology not, actually not being copied in Ch, China, or at least you know, it, it getting much
better. and, and I don’t think it’s going to be
too much of an issue until we want to
establish local production. And, that, that’s where we need to make
sure that we do it right, and it’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.>>Do we have another one? Oh, yeah. Up here. The students are largely upstairs. Is that right?>>Yap.>>Yeah, up here.>>Hi, Allan [LAUGH]. This is [INAUDIBLE], a NVA student. First of all, thank you. This is very inspiring, to hear an experience about actually, you know,
changing the world. Using our, an organizational pulse. The, the organizations that you created. hopefully, we’ll inspire. I know, already, I remember the movie as
well. And, I was wondering if you can tell us
more about your experience about, like, you know, how
to balance, you know? The trade-off 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, or for the humanity rather than
just make profits in the short term.>>What was the question. I’m not sure if I got?>>How, how do, how do you balance?>>Okay, how do you balance. Right.>>Well, Yeah well I mean first of all I should say
you know with with, with, with all of the
companies but, but I think particularly space x and Tesla
although they’re in a, in a good position today they, they went
through some super tough times And, and in fact, for SpaceX, I reserved a
capital to do, to have three launch failures, or to withstand two
launch failures, and have the third one be a success. 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, Steve knows,
we, we got the Teslar planeting round done on the last
hour of the last day. It was like 6 pm, December 24, 2008. If we hadn’t gotten it done then, the
county would have gone bankrupt a few days after
Christmas. So, these are, this, this.>>What he’s not mentioning is, the only
reason that happened is he wrote a check for the remainder of his
wealth to save the company [UNKNOWN] the car had a negative gross
margin, and its not pretty. Oh and you had, you know, your large issue
owners.>>That we pissed off, and you know, going
AWOL. You know.>>Yeah. This is ugly.>>Yeah. [LAUGH] It was a stressful period.>>[LAUGH] And that was just at work.>>Yeah. So, so, so for awhile there really wasn’t
a question of profit or non-profit. [LAUGH] It was like, we need to live. How do we live? I always look for the main challenge. and, and, and now I mean, now we’re at
this stage where we can say okay, we, we can
shut the dial between, we, we could make, let’s
say at this point a medium amount of profit or a
small amount. So, we chose to make a small amount,
because we can reinvest the cash flow into future
products. So, you know, right now we’re reinvesting
the cash flow into developing the Model X which is an
SUV, and into increasing the production capacity of the
factory, and doing a little bit of advance planning on the
third-generation vehicle that’ll be. A mass market a, it’s a reportable
compelling electric car, so, so that’s, that’s really I guess what, what’s
meant by, in, in this case, not, not, concerning, we’re not trying to
maximize profit at this point, because it, it, it would constrain the business,
the growth of the business and. Constrain the overall objective of transitioning the world towards electric
cars. so, I got nothing against profit in, 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, if one were to take net present value
of future cash flows, I think maximizing profit at this stage is
actually not the smart move.>>Mm-hm.>>You know, and it’s interesting, because
earlier I said we would get back to it.>>You mentioned that, your goal was not
to start a company that has a, you know, the chance of making the most
money for you the quickest.>>Yeah.>>And that the wealth personally is almost a byproduct, of these activities of
passion. And by analogy like in the investment
field in capital. You know, you could look for the thing that will make the most money the
quickest, right? Like a new ad network for social media. But who cares?>>[LAUGH]>>I mean, it really just doesn’t help the
world in any meaningful, and there are much, over the 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 gonna make me the most money this year, or this five
year period, but over 20 years. Folks don’t know, 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 the same purpose driven, kind of, almost
messianic zeal. So, though the balance question most
implies a dichotomy that may not be opposed, but may be aligned if you
orchestrate it right.>>Yeah, maybe of a short time of a short
term versus a long term approach.>>Yep exactly. Great, we have, we have a hand up here?>>Up here?>>Another one up here? Sure.>>Up here. This will be the last question.>>Oh, is this the last question? Okay.>>yes, from your current car marketing
strategy you could say that your cars are directed towards the
luxury car market place, 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, may be in the $25 to $35,000
range?>>yeah, absolutely.>>Keep pushing it, huh?>>In fact, the, the fi, first blog piece
I wrote it has, was the test master plan, is to
start off with an expensive, low volume vehicle,
then go to a mid priced, mid volume, and then sort of low
price, high volume. So we’re kind of in phase two. And without their generation vehicle, we
expect to be somewhere in the $30-$35,000 range for
the car. Which when you take into the account from
the savings from the use of electricity
instead of gasoline, is more like comparing it in the U.S. to
about a $28,000 car, or in Europe to a $22,000
car.>>And the maintenance is much less, the
fuel costs are much lower?>>Yeah, absolutely. Well great. I want to thank you very much for this. And transition to the second closing
segment of our minion.>>Thank you. [SOUND] Well 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 Cup of
the Year.>>Thanks, thank you very much [SOUND]. [MUSIC]

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