We Study Billionaires - The Investor’s Podcast Network - TIP 052 : Billionaire Elon Musk - Tesla and SpaceX (Investing Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 52 of The Investors Podcast. Broadcasting from Bel Air Maryland. This is the Investors Podcast. They'll read the books and summarize the lessons. They'll test the waters and tell you when it's cold. They'll give you actionable investing strategies. Your host, Preston Pish, and Sting Broderson. Hey, how's everybody doing out there?

Starting point is 00:00:30 This is Preston Pish, and I'm your host. host for The Investors podcast. And as usual, I'm accompanied by Stig Broderson out in Denmark. And I'll tell you what, folks, we've got another fun one for you. And we're going to be talking about Elon Musk today. We read this book by Ashley Vance. And the name of the book is Elon Musk. And the subtitle is Tesla, SpaceX, and The Quest for a Fantastic Future.

Starting point is 00:00:53 And this was a very, very interesting read. I didn't know really that much about Elon Musk. I'm curious to know your initial thought, Stig, when you were the first. open this up. Yeah, I actually didn't know too much about Elon. I think I kept hearing about him, actually from the very first book, Preston, that we had, Peter Till's from zero to one. And Elon Musk was always, you know, that other dude.

Starting point is 00:01:16 But really, you know, the more I heard about Elon Musk, you know, from different articles and other people, the more interested I got in him. Yeah, so he's really an interesting character. And we'll get to that here in just a second. Before we start talking about the book, we just wanted to have a really quick. conversation about the current market conditions because right now it's 3 September in 2015 and the current market conditions are fairly volatile, not to say the least. And we've just going to open up each one of our shows for the next couple episodes to talk about the market.

Starting point is 00:01:49 So I don't really have too many things to discuss and too many changes to what we've talked about in the past because it's really just kind of all over the place. And it's kind of what we expect In fact, that's exactly what we talked about. We said because you started seeing this meltdown in China, you see the dollar getting stronger, you see oil really low. And we talked about all these different forces and kind of the impact that they're going to have on the market. Our general conclusion was it's going to continue to be volatile and continue to be all over the place until you start to see maybe a significant pullback. And so that's, you know, in my opinion, that's what we've seen. We've seen the market come off of its high, about 10%.

Starting point is 00:02:29 It got up as high as 18,300 on the Dow. It's around 16,000 now. And it's every day on the market is a 300 point day on the Dow. It's a two to three to even higher 4% change, either up or down. And that's exactly what we were talking about. When we sent out the message two, three weeks ago and said, hey, watch out. There's going to be a lot of volatility coming. And that's exactly what we're seeing.

Starting point is 00:02:58 We actually saw the VIX hit a higher number. The VIX is a volatility, just in case people don't know, VIX is a volatility measure where it goes and it looks at options contracts on the open market. And when there's enormous spreads in those options contracts, that's how they measure how much higher the VIX number is. Well, the VIX number is higher than it was in 2008, I believe. it actually hit a higher number last week than it was in 2008. So that's a pretty good significant indicator that you're upon some interesting times. So like we've been saying, we have no idea how long this volatility could last.

Starting point is 00:03:39 And I think that's the key thing that I think a lot of people got to be prepared for. There's people out there putting on shorts and doing all sorts of crazy things. The thing you've got to realize about putting on a short in these kind of market conditions is the volatility will eat you a lot. absolutely eat you alive. So you've got to make sure that you are absolutely 100% right if you're going to do something like that. We're not recommending that. So when I look at the volatility, I think about one thing first, and that is that we really can put too much emphasis on the fundamentals right now, at least not in the short run. I might still have the impression that the stock market is overvalued. But when you look at a market like this, it's really driven by psychology. So no one is

Starting point is 00:04:22 really looking at what is the overall PE or what's the debt or, you know, that's not what people thinking about. It's like, hey, the Dow went up 2% yesterday. Perhaps it'll do the same today, or people might think it has to drop another 2% because it went up yesterday or whatever it may be. I mean, that's what we're seeing right now. We're not seeing the big fundamental playing out, especially as Preston is saying in the short run. So one of the things that I've been thinking about a lot is really the fundamentals, international fundamentals. So I think a lot of people in the U.S. are focused very closely on what are the fundamentals in the U.S. What are those default rates that we keep talking about? Because that's the thing

Starting point is 00:05:03 that really makes the money or the credit dry up is when you have defaults. And we're really not seen a lot of those in the U.S. And so that's why I think you have a lot of people that are actively involved in the market and still thinking that there might be some bull cases for it going higher. But the thing that I would challenge is what do the defaults look like over in China? What do the defaults look internationally, especially in the emerging markets? As this dollar's getting stronger, you got all this international debt that's denominated in dollars. So whenever the dollar goes higher, it's harder than the pay back that debt. That's my big concern. And I think that that might be the spot where a lot of people are missing the boat on how this is all interconnected

Starting point is 00:05:45 and how that's actually going to culminate and come back to U.S. markets in the long run as those conditions continue to develop. Preston, I'm curious to hear your thoughts about a catalyst because I kind of got that. There were some of the things you were also considering. When we're looking at how this will play out, and I'm not really just talking about the short-term volatility, which type of catalyst do you think can really trigger a crash if that is indeed what we are looking at? I think that's a really hard question.

Starting point is 00:06:17 I think you're not going to have a crash, okay, like a hardcore crash without some major fundamental element being present. And I don't see that yet. You know, I don't see what that element is. I do think that it's going to be related to the strong dollar. I think it's going to be related to the third quarter U.S. I don't know how the U.S. is going to come up with some really strong numbers on their earnings for the third quarter.

Starting point is 00:06:44 I think that's going to contribute to this drag, if you will. As far as a catalyst, I don't know if I'm going to say it's a catalyst, but I think it's going to add to the drag and maybe pull equities down potentially further in the third quarter. Because, man, it's going to be hard. And we've talked about it. I mean, a very significant number of the top line and the bottom line of these major companies comes from international purchase orders and things like that. So that's going to have a very significant impact, I think, here moving into the third quarter.

Starting point is 00:07:14 So all those things kind of add up. And then I think when you start to see volatility at the way that it is, that volatility breaks things. When you see oil jump 20% in three days and then come back down another 8% the following day. That is not normal. That is so abrupt and dislodging to the system that I think it's just is not going to have a good impact over the long haul. So where that and where that actual break point. is where you start to see the defaults and you start to see these spreads. One thing that we haven't talked about on the show is that, you know, everyone's scared

Starting point is 00:07:52 in the junk bond market because everyone's talking about how the junk bond market is, you know, a scary place to be right now. So you have everyone selling out of that, which makes the yield go up. So when you have that junk bond yield, go through the roof and go really high, that's really, really bad if you're like an oil producer that isn't making any money right now. And guess what? You have to go borrow some money in the market for borrowing money. If you're in a bad condition like that on the high yield market, you're going to pay a high yield. You're going to pay a high percent interest on that money. And that's really bad as these

Starting point is 00:08:31 debts mature and you have to reissue debts. So that's, I think, a very big concern here is these credit spreads, especially in the high yield, are starting to separate from the rest of the good debt, that's something that I think a lot of people got to be concerned with, too, and that could potentially be the catalyst. So I don't know which one it's going to be. I know it's going to be all interrelated to those factors, and you just kind of got to sit tight and wait for it to materialize. But I'm definitely not a bull at this point.

Starting point is 00:09:02 I think that there's definitely more bare. I think people buying into this right now maybe might not understand the bigger market forces. And we recorded that in-between episode with. the Ray Dalio talking about how he thinks that the bigger 75-year cycle is really starting to take over at this point and that the Fed is kind of missing the boat on the fact that they're reacting to a seven-year cycle or a business cycle. And that's a concern. All right. So really, that's all we have for the current market conditions. So going forward, just expecting more volatility,

Starting point is 00:09:34 really kind of keep your eye on those key factors that we just discussed. And protect your principal, folks. I mean, that's been our investment advice since February at 2015. Protect your principle. Don't get greedy in these markets. This is the time to be fearful as you're kind of looking around and making sure that you can kind of protect your principle. The time to be greedy is, I think approaching. I don't know if it's going to be this year, but, you know, I kind of feel like it's going to be, but maybe it's not. Maybe it's next year. I don't know. With all that said, let's go ahead and move into the book with Elon Musk. So I thoroughly enjoy. this book. It was very entertaining and I think that that's something that a lot of people

Starting point is 00:10:15 were going to really enjoy about the book is this is one that you're not going to really want to put down. Like any biography, it really kind of starts off with talking about his roots and a little bit about his family. It starts off with talking about his grandfather who originally lived in Canada and then he moved to South Africa, which everyone attributes to where Elon Musk is is from. But his grandfather was this crazy adventurer who would hop in a plane and fly to Australia on a private plane and do kind of odd things like that. They were kind of all over the place. There's some really interesting stories about kind of the lineage. And what the author really takes away from that discussion is that he really gets his roots for high risk and taking on

Starting point is 00:11:04 these enormous challenges really from those roots of his family. Something else that was mentioned was his father. So I guess his father is a very, very talented engineer, but has a very difficult personality to get along with. In fact, Elon doesn't even recommend people to meet his father because he thinks that he's just kind of a mean person. So that was kind of an interesting discussion as well. And I found some of the aspects of that being ironic as you look at the way Elon is with maybe some of his employees and his, his hardcore work ethic and how some of those traits, I guess, have come out in his own personality, even though he might not really realize that. So I found that a little ironic and quite interesting

Starting point is 00:11:52 as you kind of look at both of their characters and their personalities. Yeah, I don't know, because we listened to quite a few books about billionaires. And one thing I hear again and again is that they have this really rough childhood. And to be honest, I'm not talking about like Elon Musk in particular, but I don't know always if that's really the case. I also kind of think that we want to be a part of this story where, you know, this is a guy who came from the toughest neighborhood and now he's a billionaire and that is through hard work and passion. I kind of felt like the author was trying to put that ankle on the story and like it's tributary a lot this to his childhood. I don't know how you, if you sought the same way, Preston.

Starting point is 00:12:38 Yeah, maybe a little bit. Some of the stories were interesting, though. Like, whenever he was in elementary school or like high school, the kids picked on him a lot. Actually, in high school, he got beat up a few times where, you know, he had a bloody nose. They tell some of those kind of stories. So I don't really know how much of that was pontificated or how much of it was maybe under-emphasized. It's a little hard to say, but he does tell stories like that. The one thing that I thought was really neat about some of the childhood stories was he went back and talked to some of the kids that went to school with him and all of them were very surprised and kind of flabbergasted that Musk became the person that he did. They are all like, well, he was exceptionally

Starting point is 00:13:21 smart, very smart kid, but we never saw him being, you know, this emerging, you know, global technology giant in the future. They just didn't see it coming. But he definitely had a quirky personality. One thing I found really interesting was that he was only 17 when he just traveled to Canada. I think he had some relatives up there that weren't there, by the way, but he was like 17 and he just got on a plane and he wanted to discover the world. And I guess that really said something about him as a person already at the age 17. He really didn't have any money.

Starting point is 00:13:57 He really didn't have any plan. So I kind of like that whole immigrant story fighting against. the arts and everything. One of the key points that I felt was really important to highlight about his childhood was his desire to read. They talk about in the book how he had pretty much gone to the local public library and almost had read every single book inside of that library. They described his character as if you saw Elon Musk at any given point in time,

Starting point is 00:14:27 he probably had a book in his hand and he was reading it. And I think that that's really important for people to understand and to know, that a guy like Elon Musk doesn't become as intelligent as he is, and we'll get into some of the stuff later on in the discussion here. But the one takeaway that I had is this guy is brilliant. He is absolutely a wicked smart dude. And I attribute most of that to the fact that he is a total learning machine. And that's such a common thread that we've found with all these billionaires that we study. They are total learning machines. They are learning something every single day. they're learning something new. They're studying things that might not even seem like they're correlated. And we definitely got that at a very extreme level with Elon Musk. And I find that to be extremely important for people to understand. So let's go ahead and transition the discussion to after. So we'll quickly discuss his college. So he went to two years at Queens University up in Canada after he came to Canada. After that, he got a scholarship to go to the University of Pennsylvania.

Starting point is 00:15:32 Pennsylvania and go to the Wharton Business School in order to get a degree in economics. And then he also had a dual major in physics. So early on, right there then and there, you can see that he had this interest in science. And he also, which is really neat, has this business background, which you really don't see with people that also have this hard science interest. So he went four years to Wharton, and then after he was done at Warden, he then applied to Stanford, got into Stanford, and only spent what, like a month or something really short period of time, and he stopped his studies at Stanford to start his first business. There was a lot of controversy for people that might know Elon Musk really well and maybe have read a lot about him. There's a lot of controversy around his time at Stanford and the timing of his Wharton degree. And people say that, you know, some of what he says is a farce.

Starting point is 00:16:29 And the author does a fantastic job. And one of the appendixes and the back of the book to dispel and to really kind of get to the ground truth of what went on there. And I felt like he did a really great job. And I think that when you read that, you'll be less suspect as to calling it a farce. because he lays out all the timelines and actually had a personal conversation with Elon Musk about it. So that was, I thought, really good for him to clear the air with that. After he left Stanford, which he was literally just there for probably a couple weeks, he started this business called Zip 2.

Starting point is 00:17:09 This was a GPS application that you could use on the internet over a web browser back when the internet was just first up and coming. And one of the important things I understand is whenever Elon was at Wharton, he felt that the internet was going to be one of these huge forces in the future that could be used to capitalize on. So he had a total interest from back whenever he was in college to really come in and do something big in the realm of the internet to create a business. And so this was his first idea, which was zip two. Something else that was discussed in the appendix of the book was how he got.

Starting point is 00:17:47 got his idea for Zip 2 and there's a lot of controversy over him potentially stealing this idea from another gentleman. Zip 2 is kind of like Google Maps where you have turn by turn navigation with like advertisements and local businesses that can advertise based off of where you're located at. That's kind of what Zip 2 was all about. And he was one of the hardcore initial programmers of this company. So he wasn't just a guy like comes up, comes up with the idea, hires a bunch of programmers and then man. them. He was actually down in the weeds programming and writing a lot of this code. And they talk about the crazy hours, like 20 hours a day where he was just writing code day in and day out.

Starting point is 00:18:32 He would be running code for 20 hours. Then he would be sleeping in his chair. And then whenever he woke up, he would just continue programming. And I don't know how he gets you to do it. It was a lot of fun to listen to. Yeah, it said that he would tell the employees that whenever they'd come in in the morning to just kind of bump him on the leg and get him out of the chair where he had fallen asleep so he could keep writing code. So I think it really speaks to how passionate Elon Musk is about the stuff that he does. He is totally ingrained into whatever his new focus is. He just goes in full force, doesn't hold back. And I think he has a really hard time focusing on.

Starting point is 00:19:16 anything else other than what he's trying to create at the present moment. So in the end, Elon sold Zip 2 to another company, and I believe his cut of what he came out with was around $22 million. So a really great first venture. I want to say he was around the age of what would you say Stig, like 26, 27 at this point? Yeah, he was not that old. Yeah, he was in his 20s. And so after that, he had this idea to start an internet.

Starting point is 00:19:46 payment company and he really wanted to disrupt banks. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear

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Starting point is 00:23:53 That's Shopify.com slash WSB. All right. Back to the show. Last week, we read the book about my Cuban. And I just found this really, really interesting because MacCuban said that after he sold his first company, he was just looking to party and have a good time and enjoy his money. Now that didn't end up to be whatever he chose to do, he did something else. But that was not the story of Elon Musk.

Starting point is 00:24:23 It's not like MacCuba didn't have a lot of drive. But I think that when you see someone like MacCuban hear his story, you got kind of the impression that this is a guy who likes to have a good time. And the good times is definitely one of the most important part about what he is. Whereas someone like Elon Musk, you really got the impression that he wants to change the world. The money that he has accumulated, that's kind of a byproduct of what he's doing. Whereas for someone like MacCuban, it probably has been one of the goals along the way just to have a more convenient lifestyle. And I think some of that changed.

Starting point is 00:24:58 Whenever he was running Zip 2, it talked a lot about the fight over the equity, the fight over really kind of like how he was capturing funding. And I think for him early on in his early 20s or mid-20s, really, he gained this appreciation for how easy it is to go out and find good funding and find millions of dollars if you have good ideas and you are creating, you know, initial products. I think he found that to be easy. And so I also feel like because he had that opinion, he really felt like he could maybe take large risks. always be able to find himself back on his feet again because he was able to find funding and create new products, new services, new businesses in the future. And so he's this huge risk taker. And he was willing to take this, you know, $22 million that he just got from the sale of his first company and throw it, you know, a lot of it right back into the next company, which was X.com. And this was this internet online payment company. company, his goal was to change the banking industry. That's what he wanted to do. He wanted

Starting point is 00:26:09 an internet bank. He felt like there was so much frictional cost in traditional banking. And we've got to remember, he has an economics degree from Wharton. So he understands banking really well. And this was his attempt to go ahead and change that. Now, the other thing that was happening at the time was a company called PayPal. So both of them were creating a very similar product. So Peter Thiel was the PayPal guy. Then you got Elon Musk who was X.com. Both of these companies were very similar in nature. And so they're going toe to toe with each other and basically fighting for market share. And they realized, hey, if we team up, we're not going to devour each other. And so they merged together. And that's where Peter Thiel and Elon Musk and Reed Hoffman and

Starting point is 00:26:55 all these guys kind of formed together and became the PayPal Mafia. So that business does really well. Well, it was really interesting to hear some of the insider discussions on how Musk was basically taken out of the CEO position. And Peter Thiel kind of came in, took the X.com name out, pretty much used the PayPal name. They had the thing going on with eBay at the time. And that whole discussion of how all that took place was really fascinating. I think for people that are interested in knowing how all that went down, I think the author did a fantastic job laying that out. Yeah, I would really recommend if anyone's interesting in what happened with PayPal to read both from zero to one and also the Elon Musk book, because even though you might be thinking it should be the same story, that's told this is definitely not the same story. And I think that's really, really interesting. And also, if you look at someone like Peter Thiel, as well as Elon Musk, you kind of also got the impression that for those two to be working together for a long time, with the visions they're having and the way they run the company, that was probably bound to go wrong at some point in time. Now, I do want to say that I think it was a

Starting point is 00:28:07 good thing that they actually merged because basically they were just cannibalizing each other instead of improving each other. And I think that would be too bad. But I think it's really, really interesting to hear both sides in what happened. After they sold that off to eBay, he got a very large chunk of money from that. What was it? Stegger, over 100 million, I know, like 200 million or something like that? Yeah, something like that. It was around 200 million, I want to say. From the sale of PayPal off to eBay based on the equity that he owned, he had a very large

Starting point is 00:28:42 chunk of money at this point. He moves to Los Angeles and he really wants to get into the space industry. And he has this idea to start his own space company. There's some time in between here where he's living in L.A. and really trying to figure out what is it that I really want to do in space and he's in these different Mars societies. And he's donating money to these research stations and things like that. But in the end, he decides that he wants to start his own base rocket company and really go into the private space industry.

Starting point is 00:29:13 Now, where I think the story was really awesome in the book, he talks about how he wants to go over to Russia and buy some of their rockets in order to start his own space company. So he goes over to Russia and he just, you know, has a really bad visit with them. and they really don't take them seriously because he's like 29 years old. He's still in his 20s at this point. Yeah. Yeah. He's like 29 years old. He goes over to Russia and he's like, yeah, I want to buy some of your rockets.

Starting point is 00:29:44 And they look at him like he's absolutely crazy and weren't really, you know, playing ball really with him. So on the flight back, he went over there with some of his close friends that he was wanting to start this space business with. And on the way back, he pulls out his lap. computer and has like all the components listed for basically building his own rocket. And he looks at his his friends and he says, we don't need to buy this rocket from Russia. Let's just do our own. Let's just make our own. And I think his buddies were looking at him like, this guy's going off the deep end.

Starting point is 00:30:19 He's in these Mars society wanting to, you know, the initial thought was let's put a plant on Mars so we can say that we put life on Mars. and just this discussion in the book was absolutely fascinating. I think anybody who would read this part would really get a kick out of it. But anyway, Elon was not in the least bit deterred by how crazy it might be to start his own rocket company and create his own space company from the ground up. I mean, literally from the ground up and not be buying any of the components from anybody. He's just like, we'll make it all and we'll just do it. I think it was just so much fun because what people don't realize if they listen to the book is that he has a very detailed plan of how to colonize Mars.

Starting point is 00:31:04 Like in this year there should be so many inhabitants and this year we should fly this out to Mars. And if this came from anyone else, then Elon Musk, I don't know. FBI will probably arrest that guy because he thought he was crazy. Someone that would harm other people. I don't know. because he just sounds so crazy. But the interesting thing is that all of these things, and we were talking about Tesla later on,

Starting point is 00:31:30 but all these things that he said would happen actually happened. I mean, I can see why people would think he would be crazy with his plans about building a rocket because no one does it. Usually you have countries doing this and would take decades for countries to do it. But he just flies out to Russia with some friend of his to buy some rockets. And when they say no, he would just build his. own. And it just seems like so unrealistic that it's even possible.

Starting point is 00:31:58 You know, the thing I didn't know before reading this book is I just thought the mission at SpaceX was really to pump all these private satellites in the space and be profitable and bid on government work and stuff like that. But that wasn't it. The mission of SpaceX is to colonize Mars. And I mean, they say that in a very straight face manner. Like, that's the thing that I think is so crazy. When I read that in the book, and I heard that for the first time, I was pretty much flabberg-assed, like, oh, that was probably not right. And then it keeps coming back up and keeps coming up. And I'm telling you, folks, the mission of SpaceX is to colonize Mars, is to put human beings in colonies on Mars.

Starting point is 00:32:42 That's what Elon is wanting to do. In fact, that mission statement is so strong for him that he will not take the company. public until that mission is pretty much assured he will not take the company public. So that's just totally, I find that to be total insanity. Okay. I really do. I find that to be totally nuts because I just don't think that you would find too many people in this world that would want to do that.

Starting point is 00:33:14 Maybe I'm wrong. Maybe I'm out in left field. But I don't think you'd find too many people that would want to do that, let alone would have the money to pay to go do that and live in those kind of conditions. I just think that'd be really dismal. But what are your thoughts on that? Is he out to lunch? I don't know.

Starting point is 00:33:31 I mean, as a value investor, I guess this is probably one of the worst investment I can think of. But I think the interesting thing here is that there are really no business model. There really no sustainable business model when it comes to colonizing Mars. I mean, right now he's making his money because, He has the government and contract and he's helping them with a lot of things. But it's not like he has signed contract with people that wants to go to Mars. I mean, he doesn't have like, well, he has a very detailed plan of how to colonize Mars, but he has no detail plan as far as I know in terms of how to finance that

Starting point is 00:34:08 and whoever wants to pay for it, I guess. But again, if someone will ever succeed in this, I can think of no one else than Elon Musk. Yeah, I'm highly skeptical of that whole mission. Now, here's the thing that he is doing right. So on that side of the fence, I think he's absolutely nuts and out of his mind. On the other side of the coin here, he has created this company, SpaceX, and he has absolutely revolutionized the cost to get into space. So if you're launching a private satellite and you want to get into space, hands down, the cheapest route is through SpaceX. He has just crushed companies like Lockheed Martin, Boeing, all these people, just crush them on the cost to get into space.

Starting point is 00:34:55 And so that's where his, you know, is he profitable? Yeah, I think that this is a company that's going to do fairly well into the future simply because he has a fantastic model. Everything that he has designed has been to eliminate costs, to increase efficiencies, and to make a fantastic company from the ground up. And I think his competitors have been lulled into government spending, government contracts, really don't have efficiencies built into their model where he has taken that, flipped it on its head, and really created an amazing business that I think is going to do very well into the future because they have a, I mean, think about how many companies want to drop these micro satellites and everything else up into orbit. He's the guy. I mean, he has created a company that can do that and do it well.

Starting point is 00:35:43 So great business model there for him, but just really suspect of the underlying mission statement, which I think is out in left field. So just a quick funny note on the whole SpaceX thing and just how Elon Musk think about things. One of the things I really like is that he's saying to his employee, if he finds that someone they're doing is too expensive, they would say, go invent something that's cheaper. You have three days. and that's it. Like no instructions or anything. I love that. Yeah, no, I agree.

Starting point is 00:36:17 I see so many similarities between his approach and Steve Jobs approach. I don't know if people have read the Steve Jobs books by Walter Isaacson, but in that book you really get a lot of the same queuing in the personality between Steve Jobs and Elon Musk with this time element of like, this is going to be the best thing we're ever going to make and you're going to do it in two days. And the person's just looking at it. I'm like, uh, sure. You know, and then it takes them a month to do it. And that was, I don't know if he really believes it can be done in two days and,

Starting point is 00:36:48 or he's just that optimistic on, you know, timelines and times to produce. It was an interesting discussion in the book where they were talking about how a lot of the subcontractors that work for SpaceX and Tesla, Elon would be promising these deliverable dates that were just grossly optimistic and how that would be just really kind of bad for the business and not in the realm of reality. So that was kind of an interesting discussion. Yeah, so I think there's a lot of reasons for this. I think one of the reasons is that Elon Musk is so much is his own head, that he kind of thinks that people can produce at the same pace as himself. I think that's one of the other thing. Another thing is clearly that he

Starting point is 00:37:30 wants to put pressure on other people to deliver, but also think that Elon has an urge to get this done really, really fast because he has these ambitious goals. I mean, he's know that his time on on this planet is not indefinite. So he's actually, in the last part of the book, he's actually talking a lot of these very philosophical things like life and death, reproducing yourself where he wants to die. That's Mars, by the way. And I kind of think that that's kind of like the underlying principle. Like he had this vision, this dream from when he was a kid. And for that to be, for that to happen in real life, people around him just has to work really, really hard to make this happen. So I think that those three parts are the reason why he is pushing people

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Starting point is 00:41:43 All right. Back to the show. So the next discussion we're going to move into is whenever he founded Tesla, the electric car company, and I'm sure a lot of people in the U.S. specifically are familiar with Tesla. He's really taken this electric car thing and run with it. He's one of the first people to actually do this to, and I'm talking specifically a hundred, 100% electric vehicle. Now, Chevy came out with a vehicle. The Chevy Volt. I think the thing did absolutely horrible for Chevy.

Starting point is 00:42:16 But Musk seems to have a really good equation here and a good product for Tesla. And I haven't really read too many bad things about these Tesla cars. Have you seen anything bad about them, Stig, at all? No, there might be a bit too expensive for most people, but I guess that's the same thing. We'll all disrupt the technology. Yeah. And I think that was part of his model. initially was, hey, I've got to come in at a higher end market and then, you know, slowly work

Starting point is 00:42:41 my way down into a broader context. But what's really fascinating with all this is how all of this is fitting into a bigger picture from Musk and the way that he's generating these companies that are all interconnected. And that's where I think a lot of people might not see that right now, but I think in 10 or 15 years from now, they're really going to see how this is all interconnected. it. Musk also started a company called Solar City. So Solar City, did he start at Stigger? Did he just own a large portion of the equity? I don't really know. I actually think it was his cousins from South Africa who started it. And he was a really early investor. Okay. So he's a very large equity holder in Solar City. So what Solar City does, just to kind of give you some context

Starting point is 00:43:30 and how this relates back to Tesla. Solar City goes out and they basically get contracts in order to install solar panels and basically create autonomous electrical power for people's homes. So if you have a house and you want to put solar panels up on the roof and generate your own electricity, you can do that through Solar City. And what they thought was, hey, let's not build solar panels. Let's just basically install them and get a contract to install them and then finance it for people so that they can put the solar panels on house and there's no upfront cost and then it's just kind of the way that it's structured,

Starting point is 00:44:04 the way that it's paid in the future. So really brilliant model, really smart way to go about it. And so with them and the solar business, Musk is creating these charging stations where people can recharge their electric vehicle for free. If you go out to California, Nevada, a couple other locations throughout the United States. He's now starting to put in these charging stations that are run on solar power. They're basically charging a big battery cell at the location. And then if a person pulls up in the car, they can plug in. And how fast can, you know, how fast it can recharge the car? It's like a half hour or something, maybe 20 minutes. Yeah, it's really, really fast. I was quite impressed when I, when I read that. So the car can get a 200 or 300 mile charge on one of these charging stations

Starting point is 00:44:55 within a 20-minute window, and it's completely free. And so I think that that's something that's really fascinating. One of the other things that they talked about in the book, the way that they were going to design the car, is that the battery cell, which is a big, large battery cell on the bottom of the vehicle, broken into numerous cells inside of that overall battery pack that's attached to the car, there's an idea that you could go into these charging stations, and there would be a machine that you'd pull up underneath this machine, and the machine would remove the battery cell from the car and replace it with a newly charged battery cell. And the cost to do that would be equivalent

Starting point is 00:45:34 to a tank of gas. So what he's trying to get to is this idea of, do I want to pay because I need it now, or do I want free energy put into my car in order to continue my commute? And just an amazing discussion and approach. And this is what I really like about Musk is he just takes common knowledge of, well, you've got to have a gas in a car. That's pretty much the only way you can commute across the country. And he's flipped this on its head. He's like, no, that's not how, that's not the only way you can do. In fact, you could go from coast to coast in America for free. That's how big, and we just did the book on the magic of thinking big. That's how big this guy thinks. He will, take something and say, oh, well, not only could I reduce the cost, but I could make it completely

Starting point is 00:46:26 free. That's how big he thinks. And I think that that's awesome. I think that more people need to think like that and to go after these big ideas and take it to the extreme because if he shoots for that and he ends up, you know, it only costs 100 bucks to go across the country. Well, that's leaps and bounds from where we're at right now. Yeah, I think the best way of thinking about this is when Elon is saying, when people think about a phone, they think about something like a smartphone, they're not thinking about something hanging on a wall like used to. And he says that I want people to alter the view about what a car is. We all have a view of what a car is, that's something runs on gasoline. But Musk is saying that's not a car necessarily. I can

Starting point is 00:47:14 just come up with something completely new. And that will be a lot. car. We need to rethink everything that we do in our daily lives. And I think that was something that really, really struck with me after reading the book. He was just thinking so much out of the box. He's definitely an ultra-optimist optimizer, I guess. Probably that's a awkward way to say that. But he is constantly thinking, how can I make this better? You could show him something that you would argue is perfect and can't be improved any further. And he would probably tell you it's the worst thing that's ever happened and that there is not only one way to improve it, but there's a thousand ways to improve it. And I think that when you have people

Starting point is 00:47:57 like that have some backing and have some money and then can actually go out and produce and follow up their discussion with action, you get a guy like Musk. That's really what we're getting at here. So pretty amazing things that he's doing and just amazing thoughts. The one thing that I do want to highlight, and I think it's really important that we discuss this, is at the end of the, I want to say around 2008, right, during the last market crash, Musk was literally on the cusp of bankruptcy. Both of these companies, Tesla and SpaceX, were right on the cusp of total bankruptcy. And they talked a little bit about some of those discussions where he's dealing with venture capital firms

Starting point is 00:48:39 that were just totally trying to mess with him in the final hours of getting more funding to keep the companies alive. the discussions were really fascinating. It was really fun. If you enjoy business stories like that, I think you'd really get a good kick out of it. But I think it shows you, here's a guy who in his mid-20s, late 20s had over $200 million sitting in his pocket. And because he took on such huge risks, maybe overextended himself because he's building these behemoth companies simultaneously. He's traveling from L.A. up to the San Francisco area every week back and forth. He's got his hands in Solar City and all these other things. He wanted to accomplish a lot and he was trying to do it all at the same time. And it was almost his Achilles heel and he almost lost it all. And let me tell you, it'd probably be a little hard to come back from that and get funding in the future when people know that your mission was to put humans on Mars because most people, I think, probably think that's absolutely nuts. And I know if the guy did go bankrupt and then he went more funding and I was a venture capitalist,

Starting point is 00:49:49 I'd probably be a little hesitant to give him more money in the future. But he came out of this and he came out of it in a big way because his current net worth is around $10 billion. So he has turned it around in a very short amount of time. And I think the glide path at this point, sorry to use the aviator term there, the direction now for the business is a very good one. And I think that he has a lot of upside potential. I think that his Tesla company is way overpriced with the market capitalization, but as an investor speaking, but I do think that the company has a lot of promise.

Starting point is 00:50:22 I don't think that I would be too surprised if Elon Musk lost all his money. And I don't want to seem like arrogant, a brass, anything. That's really not my intention. But if you read the book, you will see that he has been very close to bankruptcy several times. He was almost broke like most people when he started his first company. That's no surprise. But when he saw that, I think it was for $22 million. He was almost broke before he started PayPal.

Starting point is 00:50:50 I mean, he invested so much and they didn't make any money. And then all the money he got from PayPal when he invested in Tesla and invest in SpaceX. And he almost got broke. He raised some money. And he almost got broke again. So like when you hear that his net worth is like $10 billion, I would say yes. it's probably true. But as Preston is also saying, a lot of those assets, they're tied into a company that he

Starting point is 00:51:14 doesn't want to sell. Just like when he owned a huge share in PayPal, when he owned a started out in Tesla, and on paper, he would be really rich, but he would cast poor. And he is not the one who's thinking about kicking back. I mean, he is saying to his wife at some part of time in the book, I would rather move in in my in-law's basement than saying. sell Tesla or SpaceX. I just want to mention that because that really shows his drive and how much risk he's willing to take. And I think that like a risk aversion that will either

Starting point is 00:51:50 allow him to do great things, even greater things that he has accomplished so far. But there's also the risk that he might lose all of it because he always seems to be on the edge of doing either a giant breakthrough or a complete bust. Yeah, and he doesn't care about the money. I really don't think based off of reading the book that he really cares about money at all. I think the thing he cares about is changing the direction of mankind is really what he's after. He wants to make big changes in a drastic way. And that's really what gets him excited. It's not the money piece of it at all. The one thing I wanted to really throw out there with the discussion of when he almost went through bankruptcy was how close he is to Larry Page and Google. So he had a pre-negotiated

Starting point is 00:52:38 contract that if things did go down and he basically lost control because it went through bankruptcy, that there was some type of precondition that he would sell in the final hours to Larry Page at a pre-discussed price and whatever of Tesla off to Google. So I think that there's very close ties to both of these companies to Google. And I think that's something that people can really pay close attention to because Google is just flush with cash. So they're able to, you know, acquire something like this. And the reason Musk really wanted that is because he was going to be able to still keep the mission statement in place for the companies if that would actually happen. And he'd be able to stay on as the CEO and run the business. Just a very quick anecdote on this, Preston.

Starting point is 00:53:23 I seem to love that apparently the author interview Larry Page. And then Larry Page says, yeah, so Elon is kind of a funny guy. Sometimes he would call me up and say, I'm not really sure have a place to crash tonight? Can I just drop by like in a few hours? I mean, I don't know if any other billionaires would call him. I don't know. His billionaire friend will I repeat to say, can I crash with you? I don't have any place to stay. Yeah, they said he, I don't know if this is true, but it implied like he had no place to stay whenever he would come up to San Francisco to work up at Tesla and he would just stay at friends' house each time he'd come up. So, yeah, some really interesting, you're going to love the book. I thoroughly enjoyed this. This is one of

Starting point is 00:54:05 the better books that we've read this year, I'd say, because the stories are fantastic. They're really fun and interesting stories. And Elon Musk is a very interesting cat, to say the least. So that's really the book. The name of the book is Elon Musk. There's a couple different books on Elon Musk out there. The one that we read was by Ashley Vance. He's a very accomplished writer, probably one of the better books on Elon Musk. I'm willing to bet just because of the publisher and the writer. He's an accomplished guy. So that's the one we read. And if you guys want to go check it out, we'll have it in our show notes. A link to the book if you guys are interested. So if you guys enjoyed the summary that we just did of Elon Musk, go to our website. You can

Starting point is 00:54:46 sign up on our subscription list. And what Stig and I do is we send out an executive summary of every book that we read, the executive summary that we typed up for the Elon Musk books around five pages. So something else that we've done is we've coordinated with Amazon to give everyone in our show a very special deal where you can download a free audio book if you use the link through our show notes or through our website. This is through a company called Audibles, which is owned by Amazon. So if you go to Amazon.com and you see all the different books that they have listed on Amazon, I think there's, what, over 180,000 titles, Stig. Yeah, basically all the books that you can think of. So every audio book out there you can purchase on Amazon. Well, what they have is an app called Audible so you can get it downloaded onto your smartphone.

Starting point is 00:55:33 So we worked with Amazon for everyone in our show. If you sign up through our link, you get the first book for free. So that's like $15 or $20 value if you go through the link. And you can download any book. So if you want to download like Guy Spears book or whoever, you can click on that link and download it for free. And that's on every one of our pages on the website. So we'll be talking about that probably every time we do it. a book just to kind of remind people. But that is an offer for everyone in our audience. We're really

Starting point is 00:55:59 excited to be able to offer that to people so they can download their very first book. But at this time, we're going to go ahead and take a question from our audience. And this question comes from David Finkbinner. Hey, Preston, Stick. My name is David. I'm from Detroit, Michigan. I'm a huge fan of the show. I'm in my mid-20s and fortunate enough for I'm able to make monthly contributions to both a company Roth 401k and also a personal Roth IRA. I'm interested in knowing what is the better allocation strategy for the two accounts. Option one. Do I view the accounts of separate vehicles and mimic the investments and pick the same mutual

Starting point is 00:56:36 funds in ETFs? Or option two, do I view the accounts as one vehicle and select different mutual funds in ETFs to create one overall balanced retirement portfolio? Once again, thanks for all the health. and great work you do for us investors. All right, David. Fantastic question. Stig's going to go ahead and kick this one off.

Starting point is 00:56:58 So, David, I think that the first thing to say is that clearly there's a lot of tax issue and all these tax issues might be independent. You can contribute a smart way or you can withdraw your funds a smart way due to tax purposes. But when it comes to selecting stocks, I don't think the situation is that different. Like sometimes you hear people say that you should include growth stocks in your Roth IRA because you can take that off tax free because you're using after tax dollars. To me, that really doesn't make any sense. You would always try to maximize your return. You always want to find the best stocks or the best ETFs as you're saying.

Starting point is 00:57:40 Whether or not you have to pay tax on that or if you're using after tax dollars, I kind of feel like the situation is somewhat the same. same. Just to really sum this up really fast, I would consider it as one vehicle. I don't say that you had to mimic that, but I'm just saying that I look at my retirement as one portfolio. And it's the same with the funds I have a side of my retirement. Yeah, I think at the end of the day, everything that I invest in, I'm trying to mitigate the tax piece of it and hold it as long as I possibly can. So when you look at that, whether it's a tax account like an IRA or it's or it's just a regular account, it really doesn't make that much of a difference to me because I'm just trying to minimize the turnover as much as possible on

Starting point is 00:58:24 either one of those accounts. So that's why I'd say maybe you just treat them exactly the same. But if for whatever reason, if you'd have an investment that you really think is maybe a short duration investment, then, you know, maybe you put it in one or the other depending on where you could benefit the most from. Great question, David. We're going to go ahead and send you a free-signed copy of the Warren Buffett Accounting book. And for anybody else out there, if you want to get your question played on the show, go to AskTheInvesters.com and you can record your question there. And if it gets played on the show, we'll send you a free sign copy of our book.

Starting point is 00:58:55 Thank you so much, everybody, for joining us and we'll see you guys next week. Thanks for listening to The Investors Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www. www.theinvesterspodcast.com. Submit your questions or request a guest appearance to the Investors podcast by going to www.

Starting point is 00:59:16 www. www. ask the investors. If your question is answered during the show, you will receive a

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We Study Billionaires - The Investor’s Podcast Network - TIP 052 : Billionaire Elon Musk - Tesla and SpaceX (Investing Podcast)

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