Over the Christmas period, I took the opportunity of some time-out to read Ashley Vance’s excellent biography of Elon Musk, the founder of Space X and Tesla motor vehicles.
It’s a riveting read for anyone with an interest in business, notably anyone starting out with a business idea. Mr. Musk made his first fortune thanks to his involvement with Paypal, and that in itself is a great story. Where his story becomes even more interesting is with Tesla and Space X.
Thanks to his divestment of his shareholding in Paypal, he enjoyed significant advantages over most business people. However, instead of investing his fortune and choosing to live a quiet life, he has bet the lot on his vision(s)- Cost-effective renewable energy in the form of electric cars and solar energy, and a Mars colony with 1 million people.
I’ll come to the visions later, for now, let’s consider the risks he has taken and continues to take. Most entrepreneurs start their business with nothing, or perhaps some hard-earned savings. Certainly, when they establish their business they are taking a risk – the percentages of first-year failures would make most people consider a career playing Las Vegas casinos rather than starting their own business. However, if you start the business with very little of your own funds, the only risk is your time and your reputation. If it fails you can always go and get a job or try again. Even if a business succeeds, most people can only dream of making the kind of fortune that Mr. Musk made at Paypal, and would be delighted and probably content if they did so.
Mr. Musk was not content. He bet his hard-won fortune on electric cars, solar panels, and building spaceships. Each of those industries represents an incredible challenge – and risk. He has ‘tripled down’.
Electric cars have always suffered from a poor reputation. Batteries have always represented a significant constraint – electric vehicles can’t travel very far and as a result car designs have always been compromised so that the car is even less desirable. Elon Musk determined to:
- Develop battery technology to make electric cars comparable with fossil-fuelled cars for the distance they can cover.
- Develop fast-charging so ‘re-fuelling’ stops are not overnight, but a coffee-break
- Develop a car that would be desirable in its own right, not simply because of its environmental credentials
Against incredible odds, and verging on bankruptcy more than once, he has succeeded. The Tesla Model S has been voted – by every notable motoring journal – one of the best cars in the world. Even the flag-bearers of petrol-heads, Top Gear, said “Arguably the biggest step forward for EVs since the Prius, Tesla shows cylinders may have had their day“. The Tesla 3, an affordable saloon car, is on the verge of mass production.
Rather than being wiped out by existing car manufacturers and their economies of scale, Tesla is now leading in the key area of battery technology. They already have supply / licensing agreements for battery technology with several leading global manufacturers.
US-based Solar City was founded by Elon Musk’s cousins and he is Chairman of the company. SolarCity was the leading residential solar installer in the U.S. Subsequently Tesla bought the business to realise the inherent synergies with Electric Cars.
At a time when solar panel manufacturing has been dominated by China, thanks to cheap manufacturing, the success of Solar City is also against the odds. Their focus on improving all aspects of solar panel technology has given them a huge lead over the competition.
Sound familiar? They now offer solar roof panels, which look like normal roof panels but are in fact solar. Coupled with their Powerwall electricity storage system, they are forecast to revolutionise de-centralised energy supply.
But where is the synergy with Tesla? Well, Powerwall has battery technology so there’s that. However, the real synergy became apparent with Tesla’s recent infrastructure announcement.
Critics of electric cars used to cite the short distances electric cars could travel between charges as a reason they would never become mainstream. Tesla has solved that problem. So now the critics say there aren’t enough charging points – you can’t drive from L.A. to New York. Not anymore. Tesla is building an infrastructure of charging stations across the USA. 45 minutes to charge your car, so stop and have a rest, coffee, lunch, pretty much the same as any other service station.
What about people who just want to ‘refuel’? Well, Tesla will offer a battery swap-out in the same time it would take to fill a conventional petroleum-fueled car, at around the same price. The choice is yours!
And the synergy? The charging stations will be powered by Solar Panels. No prizes for working out who will be supplying them.
This is where we really move into Science Fiction becoming Science Fact. The story of Space X and it’s development of space rockets is well worth a read of anybody’s time. As I write this piece, preparations are underway for the launch of the Falcon 9 rocket, which will be the largest in the world. Its payload includes Elon Musk’s own Tesla Roadster – one of the first Tesla’s ever built. If the launch is successful, the Tesla will be placed into orbit around Mars.
I’m not making this up! This is really happening, right now, 2018.
And the synergy? Well, when we get to Mars (not “if”) we’ll need power and transport. There are no oil refineries on Mars. What do you think we’ll be using for electricity and to get around?
I must confess I was a doubter for many years. I couldn’t see how a start-up company could build a mass-production electric car. Certainly not one based in the US with a high-cost base. Certainly not when all the major car manufacturers have huge economies of scale, vast development teams and unlimited budgets.
Similarly with solar. How to compete with the low-cost Chinese supply?
As for Space rockets, well that just seemed like a ‘do not pass go’ route to bankruptcy.
I’m not a doubter anymore. For sure he’s been lucky. But determination, vision and focus have won out. The world needs people like this. If we can get some Elon Musk’s into other fields, notably the environment and healthcare (and I see Jeff Bezos and Warren Buffet are starting to for the latter), there is real hope for the future of planet Earth and humanity.
If not, well thanks to Elon Musk we may well all have a fall-back plan.
Life on Mars.