HomemoneyElon Musk to SXSW: Rockets and electric cars ‘dumbest’ possible business ventures ,
March 13, 2018
Elon Musk to SXSW: Rockets and electric cars ‘dumbest’ possible business ventures ,
Elon Musk seems to have never met a business idea he didn’t like, the wackier the better.
Send rockets to Mars? He’s in! Drill tunnels under major cities? Give him a shovel. Build a mass-market electric car? Duh!
But if there’s a method fueling Musk’s madness, it’s identifying society’s long-term needs and hoping that being ahead of your time eventually yields a financial windfall.
In fact, the SpaceX and Tesla CEO flat out called investing in rockets and mass-market EVs “the dumbest things to do,” when he popped up unexpectedly at SXSW Interactive Sunday in Austin.
The surprise appearance on a panel focused on HBO’s Westworld, a sci-fi thriller about sentient robots, was apt since Musk is a perpetual Cassandra who warns that artificial intelligence could be “worse than nukes” for humanity. Musk said he hunts for “things that don’t seem to be working that are important for our life and for the future to be good.”
He added bluntly: “If you were to do a risk-adjusted rate of return estimate on various industry opportunities, I would put building rockets and cars pretty much at the bottom of the list.”
Take the decision to start rocket company SpaceX, pairing a childhood fascination with science fiction and a businessman’s intuition that private companies could pick up where government agencies such as NASA had dropped out.
“I just kept wondering why we were not making progress towards sending people to Mars. Why we didn’t have a base on the moon? Where are the space hotels that were promised in the movie (2001: A Space Odyssey)?,” he said. “Year after year, it was getting me down. … The genesis of SpaceX was not to create a company but really how do we get NASA’s budget to be bigger.”
After a series of initial rocket failures, SpaceX has successfully launched a variety of payload-carrying missiles into orbit, including the recent blastoff of Falcon Heavy which, in an out-of-this-world marketing coup, carried on its nose Musk’s own Tesla Roadster sports car.
By securing government contracts at rates that undercut traditional government suppliers such as the United Space Alliance, a joint venture between Boeing and Lockheed Martin, SpaceX is able to fund Musk’s evolving mission to Mars.
Musk said he “gave basically both SpaceX and Tesla from the beginning probably less than 10% of (being) likely to succeed.” In the early days, he wouldn’t even let friends invest in SpaceXbecause he figured they would lose their money.
“We almost did die at SpaceX,” he recalls.
Musk had about $180 million from being a co-founder of PayPal and thought he could allocate half that sum to SpaceX, Tesla and another of his company ventures. He eventually realized that he had to put pretty much all of his money in “or the companies are going to die.”
That period around 2008 was a rough patch for Musk. He borrowed rent money from friends, had gotten divorced, SpaceX had the third consecutive failure of its Falcon rocket, and Tesla almost went bankrupt. “We closed our financing 6 p.m. Christmas Eve 2008, the last hour of the last day that it was possible.”
His experience largely explains why others haven’t followed his path.
“What’s your pain threshold?” he asked. “SpaceX is alive by the skin of its teeth. So is Tesla. If things had just gone a little bit the other way, both companies would be dead.”
Tesla isn’t out of the woods. While it has successfully marketed a pair of $100,000 electric vehicles, the Model S and X, to a niche audience, the launch of the company’s first entry-level ($35,000 and up) Model 3 has hit snags.
Musk has promised to eventually ramp up production to 500,000 units a year, a five-fold increase over pre-Model 3 numbers, but so far his self-described “production hell” issues resulted in just 1,550 Model 3s being delivered by in the last quarter of 2017.
On a call with investors in early February following Tesla’s earnings report, Musk said Tesla remains on track to produce 5,000 weekly units by the end of the second quarter. No word yet on when the company could hit its projected output of 10,000 cars a week, or roughly 500,000 units a year.
Despite Tesla’s net loss of nearly $2 billion for 2017, investors are keeping the faith. Perhaps in part due to fourth-quarter revenue totaling $3.29 billion, up 43.9% from a year earlier, Tesla shares remain high at $345, up from $246 a year ago.
Boring Co urban loop system would have 1000’s of small stations the size of a single parking space that take you very close to your destination & blend seamlessly into the fabric of a city, rather than a small number of big stations like a subway
Lest we imagine that Musk always approaches his business ventures with a clear mission and strategy, there’s the case of The Boring Company.
His archly named new venture aims to drill tunnels beneath big citiesto pave the way for a series of underground pedestrian-focused shuttles that seem a lot like a newfangled subway system.
The business might be serious, but the idea “kind of started more as a joke because I thought that would be a funny name for a company,” Musk said. “After four or five years of begging people to build tunnels, and still no tunnels, it was like, `OK, I’m going to build a tunnel.’”