Exponential technology allows us to scale business like never before. A team of passionate innovators can alter the lives of a billion people in an eyeblink. Our brains evolved to process a simpler world, where everything we encountered was local and linear. Yet the man described here has pushed through the limitations of linear thinking, and understanding his strategies for thinking at scale can help us do the same. (Excerpt is from one of my favorite books ‘Bold’ by Peter H. Diamandis & Steven Kotler).
Real-Life Iron Man
In the early days of Iron Man, director Jon Favreau had a plausibility problem. His main protagonist, billionaire-genius-superhero Tony Stark, was larger than life. Too much larger than life. “I had no idea how to make him seem real,” Favreau told Time. “Then Robert Downey Jr. said, ‘We need to sit down with Elon Musk.’ He was right.”
While Musk has yet to fabricate an Iron Man suit, he has revolutionized industries and built four multibillion-dollar companies: PayPal (banking), SpaceX (aerospace/defense), Tesla Motors (automotive), and SolarCity (power generation). As you might expect, with this kind of résumé, his passion for entrepreneurship emerged early.
Born in Pretoria, South Africa, Musk was programming computers by age nine. At twelve, he made five hundred dollars selling the code for a video game called Blastar. He entered college at seventeen, spending two years at Queen’s University in Ontario, Canada, before transferring to Wharton to study business and physics. Next Musk moved on to Stanford to pursue his Ph.D. in applied physics. That pursuit didn’t last long. He left the program after just two days—itching to jump into the exploding world of the Internet.
Starting of Zip2 and X.com
“My initial goal wasn’t to start a company,” he explains. “I actually tried to get a job at Netscape—which seemed to be the only interesting Internet company at the time. I sent them my résumé, even hung out in the lobby, but I was too shy to talk to anyone and they never offered me a job. Eventually I said the hell with it, began coding myself, and started Zip2.”
Zip2 was an application that allowed companies to post content—maps, directory listings, etc.— online. Back then, this was a neat enough trick that Musk’s start-up was bought by Compaq for $307 million—which was then the biggest sum ever paid for an Internet company. Musk cleared his first $28 million.
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Next came X.com, an online financial services company that would eventually change its name to PayPal. Only three years later PayPal was sold to eBay for $1.5 billion in stock. Musk, the largest shareholder, walked away with his first $100 million. Now the question was, what next?
Space Exploration
“In early 2001, my old college roommate, Adeo Ressi, asked what I was going to do after PayPal. I remember telling him that there were certain things I thought were important for humanity’s future—the Internet, sustainable energy, and space. At that time, after PayPal, I was very interested in space—which I believed was something clearly in the domain of governments—but that conversation with Adeo got me wondering when NASA was planning to send humans to Mars. I went looking, but couldn’t find an answer on their website. At first I thought NASA just had a badly designed website. Why else couldn’t you find this critical piece of information that would obviously be the first thing you’d want to know when you go to NASA.gov?
But, it turned out, NASA had no plans for Mars. In fact, they had a crazy policy that didn’t even let them talk about sending humans to Mars. Maybe, I thought, what was needed was a philanthropically funded mission to Mars to galvanize the world’s attention. So I partnered with Adeo and we came up with two ideas. The first was to send a mouse on a one-way trip around Mars. Since it was too cruel to send a mouse on a suicide mission to Mars, they pursued their second idea: sending a greenhouse instead. The Mars Oasis project was born.
The project’s goal was to help increase NASA’s budget for Mars exploration by galvanizing public interest. Their plan was straightforward: Send a small greenhouse, stocked with seeds and dehydrated nutrient gel, to the surface of the red planet. After landing, the gel would rehydrate the seeds, the seeds would germinate, and—by seeing a photograph of the resulting plants—the world would be spurred into action. “Imagine the money shot,” says Musk. “Green plants against a red Martian background.”
Starting of SpaceX
When Musk started looking into buying a ride to Mars, he quickly learned that launch technology had gone downhill since Apollo—that was the beginning of his epiphany. “It changed the whole plan,” said Musk. “Unless something was done to reverse this degradation, a greenhouse on Mars wouldn’t matter.”
So why not try to reverse the degradation? Sure, space was the domain of big governments, but banking had been the domain of legacy financial institutions. So in 2002, Musk founded SpaceX, which first developed the Falcon 1 launcher, then the much more powerful Falcon 9 rocket, and the reusable Dragon capsule. In May 2012, the SpaceX Dragon vehicle docked with the ISS, making history as the first commercial company to launch and dock a vehicle with the International Space Station. While that greenhouse still hasn’t made it to Mars, Musk recently announced that within the next fifteen years he believes he’ll be able to send humans on a red planet round-trip mission for about $500,000 per person.
Relentless Musk
This is one of the first things one learns from Musk’s example—he is relentless in his pursuit of the bold and, the bigger point, totally unfazed by scale. When he couldn’t get a job, he started a company. When Internet commerce stalled, he reinvented banking. And when he couldn’t find decent launch services for his Martian greenhouse, he went into the rocket business. And as a kicker, because he never lost interest in the problem of energy, he started both an electric car and a solar energy company. It is also worth pointing out that Tesla is the first successful car company started in America in five decades and that SolarCity has become one of the nation’s largest residential solar providers. All told, in slightly less than a dozen years, Musk’s appetite for bold has created an empire worth about $30 billion.
The Secret
What’s his secret? Musk has a few, but none are more important to him than passion and purpose. “I didn’t go into the rocket business, the car business, or the solar business thinking this is a great opportunity. I just thought, in order to make a difference, something needed to be done. I wanted to have an impact. I wanted to create something substantially better than what came before.”
Musk is driven by passion and purpose. Why? Passion and purpose scale—always have, always will. Every movement, every revolution, is proof of this fact. Plus, doing anything big and bold is difficult, and at two in the morning for the fifth night in a row, when you need to keep going, you’re only going to fuel yourself from deep within. You’re not going to push ahead when it’s someone else’s mission. It needs to be yours.
But having passion and purpose is merely the first step. “The usual life cycle of starting a company begins with a lot of optimism and enthusiasm,” says Musk. “This lasts for about six months, and then reality sets in. That’s when you learn a lot of your assumptions were false, and that the finish line is much farther away than you thought. It’s during this period that most companies die rather than scale up.”
This is also where Musk urges direct and blunt feedback from close friends. “It’s not going to be easy, but it’s really important to solicit negative feedback from friends. In particular, feedback that helps you recognize as fast as possible what you’re doing wrong and adjust course. That’s usually what people don’t do. They don’t adjust course fast enough and adapt to the reality of the situation.”
First Principle Strategy
There are a number of strategies that Musk has adopted during this journey. We’ll start with first principles, which is a lesson he borrowed from physics. “Physics training is a good framework for reasoning,” explains Musk. “It forces you to boil things down to their most fundamental truths and then connect those truths in a way that lets you understand reality. This gives you a way to attack the counterintuitive, a way of figuring out things that aren’t obvious. When you’re trying to create a new product or service, I think it’s critical to use this framework for reasoning. It takes a lot of mental energy, but it’s still the right way to do it.”
In describing how this all plays out, in a 2012 interview with Kevin Rose’s Foundation, Musk talked about how first principles gave him a huge edge when developing new batteries, a key component for both Tesla and SolarCity. “So, first principles . . . What are the material constituents of the batteries? What is the spot market value of the material constituents? It has carbon, nickel, aluminium, and some polymers for separation, and a steel can. [But] if we bought that on a London metal exchange, what would each of these things cost? Oh geez . . . It’s $80 per kilowatt-hour. Clearly, you need to think of clever ways to take those materials and combine them into the shape of a battery cell, but [by relying on first principles] you can have batteries that are much cheaper than anyone realizes.”
The first principle thinking works so well because it gives us a proven strategy for editing out complexity, while also allowing entrepreneurs to sidestep the tide of popular opinion. “[People] will do things because others are doing them,” Musk explains, “because there is a trend, because they see everyone moving in one direction and decide that’s the best direction to go. Sometimes this is correct, but sometimes this will take you right off a cliff. Thinking in first principles protects you from these errors.”
Probability & Importance Strategy
Musk consistently strives to broaden his view by thinking in probabilities. “Outcomes are usually not deterministic,” he says, “they’re probabilistic. But we don’t think that way. The popular definition of insanity—doing the same thing over and over and expecting a different result—that’s only true in a highly deterministic situation. If you have a probabilistic situation, which most situations are, then if you do the same thing twice, it can be quite reasonable to expect a different result.”
How Musk chooses which streams to explore depends on the relationship between those probabilities and the importance of his objective. “Even if the probability for success is fairly low, if the objective is really important, it’s still worth doing. Conversely, if the objective is less important, then the probability needs to be much greater. How I decide which projects to take on depends on probability multiplied by the importance of the objective.”
SpaceX and Tesla are great examples. When Musk started both companies, he thought their probability of success was less than 50 percent—probably a fair bit less than 50 percent—“but,” he says, “I also thought these were things that needed to get done. So even if the money was lost, it was still worth trying.”
Words & Deeds
Passion, probabilities, and first principles aren’t just watchwords for Musk. He also backs up his words with deeds: “Between 2007 and 2009, I was in a world of hurt. Everything was going wrong. In 2008, we had the third sequential failure of the Falcon 1 rocket, Tesla couldn’t raise financing because of the financial market meltdown, and Morgan Stanley couldn’t honor the deal they had with SolarCity, since they were running out of money as well. There was a time when it looked like all three companies could fail. Then, on top of all of that, I was going through a divorce. That sucked. I spent my last dollar saving Tesla in 2008, and I actually went negative. I had to borrow money to pay rent.”
Things turned around for Musk in late 2008. The fourth launch of Falcon 1 worked, the financial markets rebounded, SpaceX won a $1.6 billion NASA contract. And is there a lesson here as well? “The lesson I would pass on to others,” he says, “the one rule I would have for entrepreneurs is, Don’t leave any dollars in reserve, you can always feed yourself, but don’t leave money on the table. I spent it all.”
