Clean Tech Summit 2011 - IPO Spotlight with Elon Musk

some people were just born to be who they'll be from an early age Elon Musk demonstrated that same insatiable curiosity and entrepreneurial spirit that we see today at the age of 12 Elon made his first sale $500 for blastaar a computer space game and with that sale an entrepreneur was born Elon went on to study business and physics at Wharton and the University of Pennsylvania upon graduation he entered a graduate program and applied physics in materials science at Stanford and Elon did what we all think about doing he stayed exactly two days entrepreneurship couldn't wait he went on to found zip to PayPal SpaceX and Tesla and a lot of us juggle multiple priorities and try and be high achievers Elon has truly taken it to a next level he's currently the CEO and product architect of Tesla Motors the CEO and CTO of SpaceX and the non-executive chairman and principal shareholder of Solar City at SpaceX he's the chief designer overseeing development of rockets and spacecraft for missions to Earth orbit and ultimately to other planets at Tesla he's overseen product development design from the beginning include the roadster that you see outside and the Model S sedan transitioning to a sustainable energy economy in which electric vehicles do play a pivotal role that's been one of the central interests for 20 years stemming from his time as a physics student working on Ultra ultra capacitors in Silicon Valley now the awards for Elon are truly too numerous to name I will touch on a few of them in 2007 Elon was recognized for his work by research and development magazine receiving the innovator of the Year award he received the 2007 and eight American Institute of Aeronautics and Astronautics Award for the greatest contribution to the field of space transportation in 2008 Elon net was named as one of seventy-five most influential people in the 21st century by Esquire magazine he received the Aviation Week 2008 laureate for the most significant achievement worldwide in the space industry 2009 the National Space Society awarded musk the Von Braun trophy given for leadership of the most significant achievement in space and in 2010 Elon was the youngest recipient of the Otto executive of the Year innovator award for his work at Tesla and most recently named the time 100 for 2010 I can tell you is a Tesla board member I've watched Elon provided not only the vision for the company but provide intensely focused execution of the company's business plan and recruitment of the best and brightest people I've seen an extraordinary leader who demands not only the best from his team but backs it up by being the hardest guy working guy at the company now Elon has a number of titles a serial entrepreneur founder CEO product architect CTO chief designer and many more what I'm most privileged to call Elon is my friend I know how difficult it was for him to be here today managing two companies I want to personally thank Elon for the effort here to talk about entrepreneurship what it means to prove naysayers wrong here to talk about Tesla's amazing ride an IPO and talking about the clean text most prominent IPO my friend Elon Musk I'll give you maybe a bit of background on why Tesla in a white-wine solar city and some of the other things that I've done and I certainly never expected to talk to see the level of success that that's occurred because I'm actually an engineer and but I discovered that in order to do the engineering that I want to do I have to have my own company otherwise somebody makes me do something I don't want to do so the the thing that kind of unites the companies that I've started is was when I was in college I thought about what would most affect the future of humanity and the three things that I could come up with were the Internet the transition to sustainable energy both the production and consumption of energy in a sustainable manner and the third was space exploration in particular making life multiplanetary and I did not expect ever to be involved in space space side of things those were simply what I thought were most important in the abstract but fortunately via some capital I was able to acquire from selling some Internet companies that allowed me to enter the space arena so in fact I originally came out to Silicon Valley as I mentioned to do with with the intent of doing a PhD at Stanford in Applied Physics and material science but really with with a fairly pragmatic goal which was to try to solve the energy storage problem for electric cars and that I was going to pursue high energy density capacitors and if anyone's looking for an idea that's worth maybe worth pursuing I don't know where the success is one of the possible outcomes but but here's the idea which is to use advanced chip making equipment and leverage the tens of billions of dollars that goes into advanced chip making equipment to create a solid-state ultra high-energy density capacitor if you could do that that would supersede all batteries but again I'm not sure success is one of the possible outcomes that remains to be seen and and so that was my intent I was gonna basically I really care about the degree actually I really just needed their labs so I knew I could get sort of free labs if I was a student so so that that's actually why I was doing the doing the grad program and then in the summer of 95 it became evident to me that the internet was going to be something very significant it was and that I had the choice of either spending several years as a grad student and watching the internet happen or taking part in it and then circling back to electric vehicles later so I thought well I can pursue a PhD and something where success may not be one of the possible outcomes or I can participate the internet which seems like a much higher likelihood of being able to do something significant and that's what prompted me to start Zipp to with with a couple of the people and and then XCOM which later became PayPal fortunately those turned out to be quite good again I didn't expect them to be they could I expect I actually expected them to fail in fact when I put my studies at Stanford on deferment I called the chair of the department and said I I'm sure I'll be back in about three months and he said this is probably the last conversation we'll have he was correct so after selling PayPal to eat we initially took the eBay public or PayPal public in February companies just as last year was a fairly dark time full full can I carry or almost any company but I think I actually do believe the market can recognize fundamentals and so so we took PayPal public in early 2002 and then sold to eBay in mid-2002 and since I was a large shareholder in the company that gave me the capital needed to start SpaceX and an Tesla although not a lot of capital by those in the standards of those industries all today after taxes I had about maybe a hundred and eighty million dollars and as it turns out I I ended up investing all of that in SpaceX Tesla and SolarCity actually got to the point where I actually literally had to borrow money from friends to pay the bills it's a bit awkward but that that situation is is thankfully corrected itself and with with the Tesla IPO and whatnot so so let's see so the story of Tesla since this was a clean tech forum it's sort of an interesting one I initially thought that there wouldn't really be a need for a new company to come in and do electric vehicles because if people recall there was the ev1 there was the the rav4 evie and it looked like there was momentum in the direction of electric vehicles so that's cool so there's there's no need for some new entrant to to enter the game and then in a remarkable turn of events GM and Toyota recalled the vehicles and GM crushed them in a lot somewhere if people have seen who killed the electric car you know what I'm talking about I think well in retrospect that was an unwise move for General Motors and you know if you've seen the movie it's a good movie you call doctor car the customers that had the ev1 were extremely I mean they loved the car they loved the car to the degree that that they actually tracked down where the the the wrecking yard which and was going to crush the cars and held a candlelight vigil like it was a capital murder or you know sooner he was putting being put to death and I think companies ought to take note when customers hold candlelight vigils for their products you know it's that's unusual particularly for a General Motors product so you know I think that says maybe you should do it Evie - and that sort of thing anyway so so much was made by that when I lived that there was a small company in Southern California called AC Propulsion that had done a prototype just a very sort of rough prototype of an electric car called the the T zero that got a test drive in a car was it clearly showed that the timing was right to create a compelling electric car the advent of lithium-ion really being the key enabling technology and so I didn't initially want one to run Tesla because I was running SpaceX and so I thought well you know what I'm just going to apply 20% of my time work on the product design and then and find some other partners to run the company that didn't work out unfortunately and IRAs aware of both of the the difficult issues we went through with with the company coming very close to death on on many occasions and I mean a car company is not an easy thing to create at the best of times and the last few years were certainly not the best of times particularly for car companies and this was an environment where General Motors went bankrupt you know I think people first time General Motors ever gone bankrupt and for if if that environment can sort of lay low a company like General Motors you can imagine that it's pretty tough sledding if you're a new car company that nobody has ever heard of and you're trying to sell this electric car which sounds like kind of crazy technology and it's a high-end two-seater sports car so that it was definitely some going there and I can still have mental scar tissue actually from that period but we managed to get through it and as narrowly and managed to get some some good partners on our side that were really key and certainly immensely grateful to them Daimler being the first and the Daimler made a key investment in in Tesla in early 2009 and and also agreed to buy battery packs from us for their electric smart car and that that relationship is has actually continued to grow with Amla making some incremental investments into caesarian to Tesla and and increasing the business as well so now we're doing the battery pack and charger for the Mercedes a-class and then last year a Toyota invested in Tesla and we'll be doing the whole powertrain for the electric rav4 which is coming out in 2012 so that's I think we're very excited about that and it's I think it's a powerful symbolism it's sort of the the resurrection of the the rav4 Eevee and I think is gonna be a really really compelling mass-market electric car and then as for our internal development we have the the Model S which is I think really going to be a great car I'll go with the Model S is to make well our aspiration is to make the best car on the road so it's a car that is superlative and it almost every dimension and a car that you would buy even if it wasn't electric I mean that's the bank that's a very important distinction you want people to buy the card not you don't want people to have to accept a bunch of negative things in order to be environmental you want to create the best product and such that even if somebody doesn't care about the environment that they would slow by it and that's really our goal with with the Model S to be superlative in safety and right and handling fit and finish performance aesthetics and since we're going quite quite well the Audi aah which is also an aluminium car as made in Germany is considered kind of I think technologically the leader in vehicle engineering but we think there are good arguments to say that the the Model S is actually superior in vehicle engineering to the Audi a8 and if you look at the objective metrics such as torsional rigidity stiffness to weight strength to weight the joining techniques the usable internal volume it I think I think one can reasonably argue that it is it is going to be the most advanced car in the world even aside excluding that the electric powertrain element so like I said we want this to be the best car even if it wasn't electric and I think a lot of people in room almost probably most people in of are American and I think it's you know that I think Tesla is a an American car company you can you can sort of refer to I think will think of as hey this is this is a car company that you can really be proud of you know as an American just just this we're very proud of you know the apples and Google's and and whatnot Intel let's go this is a car company where for the first time in a long time the United States is the leader in automotive technology and it's it's just interesting to note that if you got Daimler the company that invented in the internal combustion engine car that's coming to Tesla and having us supply them with electric powertrain components got to adore the largest car company in the world and the leader in hybrids also coming to Tesla to supply them with with electric powertrain I think people would have had a hard time imagining that such a thing would occur several years ago so yeah so I encourage everyone to to buy a Model S I gotta sell cars and I think you will not regret it so I think with that I can maybe go ahead by 2020 what's your imagination about the size and weight of the battery well you have to say size and weight of the battery for given energy density or given energy content I guess great strides have already been made and that the Roadster it has about a fifty six kilowatt hour battery and yields a combined highway city range for about 245 miles in fact there's some customers that have driven our car over 300 miles recently a customer actually set the record and drove a roadster for 347 miles on a single charge and then the Model S will actually have up to a 90 kilowatt hour battery so it's a big increase but we've improved the volumetric energy density by almost 50% compared with roads and the gravimetric energy density by about 3035 percent so pretty big strides in interrupts with short period of time and whereas the Roadster uses and it's almost I've modified laptop cell in 18 650 cell with the Model S we've worked closely with Panasonic to create a dedicated automotive self-same form factor so it can still make use of the economies of scale used to produce 18 650 cells but the internals are different it's it's really well optimized for for automotive in 2020 I think it's going to be G's is going to be really just they're cheap to have a long-range battery and I mean I think all transportation is actually going to go electric Planes Trains automobiles everything with with ironically one exception being rockets and unfortunately you just there's no way to avoid Newton's third law and you need to expel a high-pressure gas at high velocity in order to escape Earth's gravity but apart from that everything is going to be pure electric not not hybrid pure electric a prediction that I've been making for a while is that and and II feel very comfortable in making these predictions so excited think it'll actually will occur sooner that's why I've actually been willing to that take if somebody wants to bet me on this I'm happy to bet them which is that by 2030 a majority of all old new cars manufactured in the United States will be pure electric so you're just under 20 years and 20 years after that so by a mid century the vast majority of cars on the road will be pure electric it will take it it takes always takes time to replace the install base and the legacy legacy products but that that's what I expect and the fundamental good that I hope Tesla we will look back and say the Tesla achieved was that Tesla served as a catalyst to accelerate that transition and I think we've done some good in that regard which the Chevy Volt is directly inspired by Tesla and Bob Lutz that GM was kind of to credit Tesla whether with that in fact when we unveiled the Tesla Roadster he took the press release to his developer team instead of a little company in California can make an electric car why can't we and then that led to the East on leaf and a bunch of other electric car programs yeah grow as a tier 1 supplier to dom latoya and maybe others but also as you build a broader line of cars that compete how are you going to manage your business model of both of those well I don't think one has to create I think I think would be a false dichotomy to say that one cannot be a power train supplier and and a car producer will continue to sell power trains as long as there are companies that want to buy power trains from us at a reasonable price I mean the overarching goal of Tesla is to serve as a catalyst to accelerate the electric car revolution so we're not trying to hold our technology close to our best we're really trying to get get it out there and do whatever we can to catalyze the transition to electric vehicles and so not they may come a point where there aren't deals that people are willing to do that that make sense or we're not competitive in supplying power trains or whether or with what the other car companies just want to do it all in-house or something like that in which case we would we wouldn't be able to do deals that make sense and we wouldn't therefore do deals we will always be a car company though and I feel very confident that that will continue to make great cars and and continue to add add to the the innovation or with each successive model at the end of this year we'll be unveiling our Model X which is kind of an SUV but our goal will be to make something that is cooler than any SUV but has more functionality than any minivan so that that would be a tricky thing but I think we've got a shot at doing that parenthetically if you want to avoid borrowing money from your friends in the future and happy to buy you a beer and talk about financial planning thank you that's that's a free offer but it all sir is this I'm even had a remarkable career and will probably extend this career for quite some time what the other than you know becoming a multi-millionaire and doubling down and your deals again what advice would you give to an entrepreneur and also to investors you know how you approach creating value and being successful what does it take and what would you advise well I think it's important to have a very to apply critical thinking to this may sound trite but to apply critical critical thinking to what what one is doing and by that I mean just the fundamentals of logic you know of do you have the right axioms are there relevant and are you making the right conclusions based on those on those axioms that that's the essence of critical thinking and yet it is amazing how often people fail to do that I think wishful thinking is innate in the human brain you you want things to be the way you you wish them to be n so you tend to filter information that you shouldn't filter that's the most common flaw that I see and then I also can see that that people instead of reasoning from first principles they tend they will tend to act in a man they will fill do things because others are doing them because there is a trend or you know they just see everyone going that direction so they think that must be a good direction to go which is sometimes correct but then sometimes you know you're you're going to run off the cliff or something so it's much better to really look at things from you know as more sane physics from a first principle standpoint what are the fundamental truths or the most fundamental truths in an arena and what can you any conclusions logic that you come you must be derived from those fundamental truths I want to just can you expand that for one minute because to me the inspiration of Tesla and you is about the fortitude you had during tough times you referenced it earlier but you know as you know the clean tech sector is that ups had downs now this is a room full of entrepreneurship in various forms and you know the fortitude that you personally showed to get the Tesla through that period and people can reference the success you've had today but talking about that fortitude and not letting those naysayers get you or Tesla down I think would be an important message to just talk a little bit more about well I hate to say it but the naysayers to get me down but yeah I think absolutely persistence is extremely important you should not give up if there is if there's unless you're forced to give up you know just does not no other choice now that that that that principle can be miss applied if you happen to be trying to penetrate a brick wall with your head you know so you have to be cautious in always saying one should always persist and never give up because there actually are times when you should give up because you're doing something in error but if you're convinced that what you're doing is correct then you should never give up there's a friend of mine who's got a good saying about starting companies which i think is is true you know starting companies is like eating glass and staring into the abyss of death if that sounds appealing be an entrepreneur could you talk about job creation at Tesla and specifically at the new me plant in Fremont and how many of the jobs that were lost from GM and Toyota when that plant shut down think you'll be able to replace and building the model last there sure well so Tesla's a little over a thousand people now we actually doubled in size over the last year we'll probably come close to doubling in size again this year maybe eighty percent or something like that a lot of those people will be at our headquarters in Palo Alto but but but but the biggest area of growth will be at the Fremont factory what a cool new MIMO which is called the Fremont factory and you know initially with the Model S and Model X I mean I think we'll be employing maybe on the order of a thousand people at NUMMI of the free market actory and but a long term aspiration is to to actually employ as many if not more people than were employed there there were about 5,000 people that were employed at the plant and maybe another 5,000 in suppliers around the Bay Area and generally in California so I would certainly aspire it long term to to employ even more than that and it's just going to be a function of how fast we can grow the business without overreaching but I'm hopeful that by the time we get to our third generation product which would be the mass-market car so the Model S is about 50 to $100,000 it's kind of like a BMW 5-series or outie a6 a8 Mercedes e-class that kind of thing but out there generation car which would be on the order of a $30,000 it obviously much more of a mass-market car and we want to get to that that vehicle as soon as possible but it's probably about at least four years away and that's really when we start to get to the full employment at Fremont certainly now you're part of the electric car industry and we've had a examples of the infrastructure required to charge and of course the change in electric power in the sector if by 2030 we have 50% of new cars or electric there's gonna be a substantial need to have a different distribution system for electric power presumably do you attest do a Tesla are the broader electric car industry see some control in that or do you leave that to the electric power industry and then part 2 we had a fairly impassioned plea from both the investors and the government agencies who wield budgets as well as influence over policy that the clean tech sector is absent in Washington influencing policy visiting senators visit and so forth so the question is what's the role for Tesla both in the electricity electrification part and then also in the political process and policy process to bridge that gap and get them both involved well to answer your second question first the Tesla certainly doing everything it can to generate awareness and enthusiasm for electric vehicles in DC in fact I'm headed to DC tonight and will be meeting with a number of senators and congressmen tomorrow and then next month tez will be opening up its DC showroom and again we're going to have a lot of senators and congressmen to to that event also people from the White House so we're really doing everything we can I agree it's something that's very important and and and and so we're doing whatever is within our power to do in that regard and then with respect to the infrastructure in the short term I think there's very little need for infrastructure electricity is so widespread and what we're seeing is that for the for the roads almost all charging occurs at home and at night so it Maps well in fact the peak of when people charge corresponds almost exactly to the trough of grid usage and so there's there's actually tremendous amount of capacity and the grid to charge electric cars provided people continue to charge their cars at home now as we get to you know the point where we've got half of all the cars on the road or more being electric there's certainly going to be a need for Grid upgrades charging stations and increasing need for that but it's not something that I think is very pressing and say the next year or two but we do recognize that as an important long-term thing and we are developing a high-speed charger which is capable of recharging the battery pack in about 40 minutes or so and we're gonna we're gonna offer that for free to our customers we're going to just pick locations along the major interstates every 100 miles or so with this a decent amount of traffic and just install them for free if they start to see significant usage then we might put a card reader on them or something but that that I do think that's an important thing to address so we can address it we're also happy to sell that those fast charges to others if they won't install them in in places the other thing we've done with the Model S is we've designed a battery pack such that it can be swapped out in under a minute this isn't a floor plan of the car I'm not sure how many people will actually make use of that but we wanted to have it in there just to preserve the optionality worst case it makes it very easy to service very easy to install the pack in the factory and that kind of thing so yeah between those essentially those two things plus offering a 300 mile range car I think we've gone a long way towards addressing people's range concerns hi I wanted to just I was intrigued what you said about about first principles and sort of using critical thinking my philosophy majors heart was warmed the we spend a lot of time those of us who've been to the entrepreneur into the investor cycle spend a lot of time trying to get people with great ideas to reduce them to to think to things like that I'm wearing to have any suggestions reading educational materials replace people who are struggling with how to make their big idea or at least evaluate whether they can get it done to sort of construct from the ground up a path at least as as you said success as one of the possible outcomes yeah well actually that's where physics is really helpful except in unexplored areas of physics or difficult to explore is physics is very helpful for figuring out whether you're violating wanted to say that the fundamental laws like why are you conserving momentum and energy if you're not then you're probably are not going to be successful or if you think you're not so yeah but I think I think one thing try to get to a use useful prototype as soon as possible with the least amount of money I think that's the best usually a good idea and everything works on PowerPoint and so people are somewhat skeptical if they see a PowerPoint presentation or a website or something but if they see the actual hardware and it's working that is much much more convincing that's why the the first thing we did with Tesla was to create a prototype roads that was the first order of business to show people that it was real and it actually did work and even though it was somewhat of a hack it was it's located people the the feeling of what it could be much I think generally that that's a good move it also will help identify if what you're trying to do is impossible or extremely difficult or something like that as an entrepreneur I'm sure you value working at a fast paced dynamic and challenging environment but sometimes that doesn't scale very well and now that both Tesla and SpaceX are well over 500 employees each I'm curious we can speak to the challenges of making that transition and how you preserve that fun environment if you do it all absolutely you try certainly try yeah it's a good question and I'm just something that I don't necessarily have a great answer for I think it as the companies get bigger it's harder and harder to maintain a sort of a fun dynamic feeling and to avoid being sort of a you know a soul destroying sort of corporation and so you know I think I think it's important to allow for a certain amount of chaos in an organization if you try to impose too much structure or if you if you don't allow failure you know if there's a lot of companies particularly a bigger tend to have a risk/reward asymmetry failures is severely punished success is moderately rewarded that's not a good and that's not a good idea if you want to be innovative because vibrates by its very nature innovation will result in many attempts that don't work so you know I think Google's been pretty good at this by allowing people to like take you know Friday every week and work on some crazy project I think that's a good idea I think we're probably gonna implement something like that at SpaceX and then later at Tesla because I think it's there's a lot a lot of employees have great ideas if they can simply get the resources to to implement them and if they aren't filtered through their manager so and I think just generally just you know trying to be a little bit irreverent to encourage people to do you know eclectic odd things and that that's okay it's not going to be some sort of conformist please that it comes chasing you down if for example when we just did the launch of thought line we're not the normal launch of our Dragon spacecraft we had a secret payload on board it was in fact a stamped top secret on the outside it was a wheel of Brie Archie's you know if you don't know if anybody's heard the Monty Python cheese shop sketch but it's sort of a tribute to Marty Python in this case so hello hello yeah just uh one quick question um um earlier in your talk you described three big trends that you observed in the 90s around the internet around space around the energy system has any of that changed would you add that list or do you think you're still in the right place no I think I think those are the three big areas that will most affect the future of humanity and there there are many others and and other people may come up with a different list those just a list that I came up with I mean I do think there's a great little innovation that's going to occur in biotech particularly with you know with with rapid low-cost perfect decoding of DNA I think and that's going to be really revolutionary as far as you know diseases and potentially you know accelerated evolution in some way well that's a touchy subject but but that's that's certainly the potential for full force for a huge change there on the DNA side but I think overall for the 21st century the biggest single problem that humanity faces is sustainable production and consumption of energy and and and there's so much I mean that's such a huge problem that there's there's so much that can be done in that arena that I mean it's really more than enough to absorb I think any number of startups and again companies because it's such a tough problem and it's such a big problem you know it's there's so many uses of energy that need to be sustainable think Tesla's working on cars but there's boats there's planes there's you know all those of other transport things and then production of energy is also going to be a tough one we obviously can't keep using hydrocarbons to generate electricity that's not sustainable whatever one may think about the climate debate I think it's probably not a good idea to run the experiment of seeing how much co2 the atmosphere can hold because even if it's 99% likely to be ok that's you know still not good Tesla is not just an automotive company it is also a vehicle distribution company right so far you've retained ownership of your entire distribution channel yes you grow into the rest of the world is that intended to be something you hold to or something you diversify no our current plan is to to do sales and service within Tesla as company and stores because I think the the car buying experience and servicing experience is generally not not great in fact most people would probably rank going to buy a car as their worst retail experience so it's really important that I think we fix that situation and we've got some ideas that I think are going to make it a lot more appealing and pleasant to in a car and we want to implement those ideas and you know I think the way that Apple has done those doors is a really really good way in fact the guy that really led the charge on Apple stores George Blankenship is our head of sales and we're still a long way from perfecting the the buying and servicing experience but I think you're going to see some dramatic improvements in the coming years that are not like any other car buying or servicing experience last question as an entrepreneur when you get up in the morning what excites you and when you go to bed at night what keeps you up well you know like it certainly be me I'm really primarily an engineer so I enjoy engineering that's that's what I derived the most intrinsic satisfaction or happiness from so in fact I happen to be up till 5 a.m. this morning working on an engineering problem - for an improvement to the rocket which I think I think will be good hopefully otherwise there's a lot of wasted sleeve so I really like ya working under sharing problems particularly with with the my engineering teams and coming up with with innovative ideas and and making them a reality that's my what I enjoy the most thank you I can tell you that Elon staying up till 5:00 a.m. is not a unique thing he really is the hardest-working guy not just the company but that we work with I'd say at least probably half of my conversations and there have been many over the many years have been after midnight with Elon he is truly eaten glass I've seen it firsthand he has stared death in the face and I this is not from me but Time magazine and others describe them and I think you can see why it's perhaps one of the greatest entrepreneurs of our 21st century Thank You Ellen you

Channel: IBF - International Business Forum

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Keywords: Clean, Tech, Summit, 2011, Chairman, investor, elon, musk, finace, technology, green, business, state, of, the, industry, pwc, ibf, conferences, international, forum, clean, edge, solar, wind, power, tesla, electric, cars, vehicles, spacex, paypal, rockets, space, travel

Id: hTBZGWEzR_E

Length: 44min 35sec (2675 seconds)

Published: Thu Feb 03 2011