We Study Billionaires - The Investor’s Podcast Network - TIP593: Elon Musk by Walter Isaacson

Episode Date: December 17, 2023

On today’s episode, Clay shares the lessons he learned from reading Elon Musk by Walter Isaacson.  As our audience knows, Elon is, financially speaking, one of the world’s most successful individuals as Forbes has his net worth estimated at $248 billion, making him the richest individual on the planet. 25 years ago, Elon was making his mark in Silicon Valley in the early days of PayPal, and today he is launching dozens of rockets into orbit, taking the lead in the world’s transition to electric vehicles, actively working to stay on top of the world of AI, and has taken over one of the world’s largest social networks in Twitter, now known as X. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro. 03:48 - The highlights of Elon Musk’s childhood and upbringing in South Africa. 07:03 - The key themes Clay found in Elon’s life. 07:40 - Peter Theil’s key insight in working with Elon. 10:01 - How Elon and Kimbal made their way to the United States. 13:34 - The three fields Musk found in college that he decided he wanted to commit his life to. 15:25 - The early businesses that Elon and Kimbal Musk started in the 90s. 16:58 - What led Elon to join forces with Peter Thiel and create PayPal. 22:29 - The beginnings of SpaceX. 24:26 - The early key decisions within Tesla. 29:35 - Business tactics Elon Musk used that were similar to Steve Jobs. 29:57 - Elon’s master plan for Tesla. 32:44 - What made the great financial crisis one of the most troubling periods of Elon’s career. 53:14 - How Elon got interested in artificial intelligence. 58:58 - How Tesla made it through what Musk called “Production Hell.” 01:11:33 - The backstory of the Cybertruck, Starlink, & Optimus. 01:30:04 - The story of Elon’s takeover of Twitter.  Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Check out Elon Musk by Walter Isaacson. Book Mentioned: The Hitchhiker’s Guide to the Galaxy. Learn more about Tesla’s developments in artificial intelligence. Learn more about the Berkshire Summit by clicking here or emailing Clay at [e-mail]. Related Episode: TIP417: The Incredible Story of the PayPal Mafia w/ Jimmy Soni or watch the video. Check out all the books mentioned and discussed in our podcast episodes here. NEW TO THE SHOW? Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: River Shopify Vanta Alto NetSuite AlphaSense Toyota American Express Business Gold Card Babbel Percent Salesforce Monetary Metals Efani Ka’Chava Wise Glengoyne Whisky HELP US OUT! Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. On today's episode, I'm going to be doing a deep dive into Walter Isaacson's newest book covering the life of Elon Musk. As our audience knows, Elon is, financially speaking, one of the world's most successful individuals, as Forbes has his net worth listed at $248 billion, making him the richest individual on the planet. 25 years ago, Elon was making his mark in Silicon Valley in the early days of PayPal, and Now he is launching dozens of rockets into orbit, taking the lead in the world's transition

to electric vehicles, actively working to stay on top of the world of AI, and has taken over one of the world's largest social networks in Twitter, now known as X. During this episode, I will touch on the highlights of Elon Musk's childhood and upbringing in South Africa, how Elon and his brother made their way to the United States, the three fields Musk found in college that he decided he wanted to commit his life to, the early businesses that Elon started in the 90s. What led Elon to join forces with Peter Thiel and create PayPal? The early days of SpaceX and Tesla. What made the great financial crisis one of the most troubling periods of Elon's career? How Elon got interested in artificial intelligence,

how Tesla made it through what Elon called Production Hell, the backstory of the Cybertruck, Starlink, and Optimus, the story of Elon's takeover of Twitter and much more. I really enjoy diving into the life of Elon to date, and I absolutely loved Walter Isaacson's book covering his life to date. This episode touches on a lot, so without further delay, I hope you enjoy this episode covering Walter Isaacson's book, Elon Musk. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Now, to kick off this episode, I'll just mention that this book is over 600 pages long,

and I very rarely read a book this long or even find books these long. So there's no way I'm going to be able to hit on all the high points here, but we'll get started, dive right in, and see where this leads us. Now, I really enjoyed reading this book. Walter Isaacson is just a wonderful author, wonderful biographer. I actually went to a live book event that Isaacson did in Kansas City, and he had said that he spent two years following Elon Musk around to write this book. And after reading it, you can really tell he just put so much time and so much effort into

putting this book together. As everyone knows, Elon Musk is a very controversial figure. There's all the talk around electric cars, renewable energy, all the drama at Twitter. Everyone has their own opinion on that. And then everyone has their opinion on all these rockets he's building. They're getting launched. They're blowing up. They're failing.

But Elon really doesn't care what people think. And that's part of what people like about him. But I thought Isaacson did a really good job of keeping his own opinions out of it for the most part. And he shed light on just the reality of the situation as he saw it and tried not to be too biased about writing this book. And I really, really appreciated that about Isaacson and just, you know, trying to share the facts. Now, at the start of the book, Isaacson shares this quote from Elon. To anyone I've offended, I just want to say, I reinvented electric cars and I'm sending people to Mars and a rocket ship. Did you think I was going to be chill and a normal dude?

I love the point that Musk makes here, but I would say that people aren't going to Mars quite yet, and it actually might not happen until 2029 is when he plans on it. And after reading this book, you'll just understand to never underestimate Elon Musk. And this ties directly into the next wonderful quote that Isaacson has here from Steve Jobs. The people who are crazy enough to think that they can change the world are the ones who do. I'll briefly touch on Musk's childhood here and some of the high points. Musk was raised in South Africa, as many of you probably know. And this had a tremendous impact on him.

All throughout school growing up, Musk was bullied. There's one of these stories in the book where Elon, he got punched in the face, multiple times by multiple different people at school. And Kimball Musk, Elon's brother, had said that he couldn't even recognize Elon's face. And even decades later, I was reading about how he was getting corrective surgery to fix the tissues in his nose. And that was from that incident from when he was a child. And to make matters worse, Elon's dad even berated him after, you know, incidences like this.

And Elon's dad, I believe his name is Errol. He didn't feel bad for him at all. Oftentimes, he would call Elon an idiot and worthless, and he's someone who has mentioned a lot throughout this book. As Isaacson sort of refers to him as the demon from Elon's childhood, who just did some really, really terrible things to Elon. And then he also just did terrible thanks to Elon's mom and then the rest of his family. He was just a really, really bad person.

Errol had a degree in engineering, and he worked on building hotels, shopping centers, and factories. And then he married Maya Haldeman, who is now Maya Musk, Elon's mother. Musk was born in 1971, which makes him 52 years old today. And he has two siblings, Kimball and Toska. And when Elon was eight years old, his parents ended up getting a divorce. When speaking about Elon's childhood, in relation to his father, Elon stated, it was mental torture. He sure knew how to make anything terrible.

But I think there's also somewhat of a positive side to these terrible. experiences, Barack Obama once stated, Someone once said that every man is trying to live up to their father's expectations or make up for their father's mistakes, end quote. Elon also had Asperger's, which made it really difficult for him to work well in social situations and then pick up on social cues. So this sort of compounded the difficulty of him making friends, so he would really escape this sort of hell that he was living in

by thinking about different things internally. And this led him to just reading so many books as well. In school, he was known for just zoning out a lot and just getting in his own head. With all these brilliant people we study here on the show, we almost always find that very successful people tend to be voracious readers. And Elon is definitely no exception to this. There were many times in his childhood where he would stay up until dawn reading books and then he'd just go to school the next day just fine. Musk had said that ever since he was a kid, whenever he thought about something really hard, all of his sensory systems would turn off. So he wouldn't be able to see you. He wouldn't be

able to hear you. So it's easy to see why so many people just thought Elon was just like this crazy guy. When Elon's dad would call him an idiot or a moron, Elon would oftentimes just shut down emotionally and essentially lose sense of his emotions entirely. So his childhood was so torturous for him that rather than dealing with those emotions, it would be better to try and not feel them at all and go to just a totally different place mentally. Isaacson also talks about how Elon's childhood was just full of pain, full of chaos, so he's sort of been conditioned to think that this is the way life should be, that we should always be suffering in some way, shape, or form,

and not to be content with what's good in the world. And you'll find throughout this book that Elon essentially never becomes content in the operation of his businesses. Today, he's heavily involved in running six companies, which is practically unheard of, and he's wired much differently than even your typical entrepreneur. Elon also developed a very, very high tolerance for risk. Peter Thiel once said that Elon wants risk for its own sake. He seems to enjoy it and at times even be addicted to it.

And of course, you'll also find that this gets Elon into a lot of trouble at times, and it leads to outcomes that aren't very desirable. You can achieve great things when you take on a lot of risk and push really hard for things, but there's also value in having some conservatism and not taking too much risks in business oftentimes. Another common theme I found in this book is that most managers, they fall somewhere on a spectrum of either having high empathy for their employees or putting a heavy focus on a company's mission and what the company set out to achieve. So on the one end, you have managers with a high level of empathy. They tend to put a lot of focus on how an employee's feeling, giving them really good work life balance. giving them multiple chances before letting them go, giving them a ton of benefits such as ping pong in the office or a lot of vacation days.

Some of these, when they're taken too far, can come at the expense of what the company wants to achieve. So on the opposite end of the spectrum, you have Elon Musk. And he practically has no empathy for anyone he works with. His companies have a mission, and he wants to do whatever it takes to achieve that mission. He doesn't care about how you feel, what benefits you're getting. doesn't care about work-life balance, and he certainly doesn't want a ping-pong table in the office. As you'll learn later in this episode, when Elon bought Twitter, he laid off 80% of their workforce, and he completely transformed their corporate culture to fit how he manages a business.

Now, turning back to his childhood, Musk was not the best student, surprisingly. Whenever he thought something was meaningless, he would never put a lot of effort into it. He would rather be reading or playing video games and work hard to Acea class that he really didn't care for or think was very important. He became obsessed with science fiction, and then he became interested in space exploration and also dove into the work of Isaac Asimov, who wrote all about robots and is an author that we actually discussed on our episode with the former CEO of Snowflake, Bob Muglia, that was back on episode 575 of The We Study Billionaire Show.

One of the science fiction books that had the most impact on Musk was the Hitchhiker's Guide to the galaxy, he stated that this book helped him out of his existential depression. Then at the age of 17, in 1989, Musk decided that it was time to leave South Africa and make his way to the United States. He tried to convince both his father and his mother to move, but they didn't want to go along, so he decided that he would just have to go on his own. He had difficulty getting citizenship to the U.S., so he moved to Canada as a first step. Errol even told Elon that he's going to be back in South Africa in a few months and he was never going to be successful.

But on the other hand, he did support him a little bit. When he left South Africa, Errol ended up giving Elon $2,000 in Travelers checks and his mom did as well. Shortly after Elon's move, his mom actually did end up visiting him and then she wanted to move as well. And then in 1990, Elon enrolled at Queen's University. And once Kimball had moved to Canada, him and Elon developed this routine of reading the newspaper each day and then reaching out to the person that they found to be most interesting. Kimball would go out and cold call all of these people and just see if they wanted to grab lunch with him and Elon. And this is how they landed summer jobs at Scotia Bank. This experience at the bank ended up giving them insights into how the financial and the banking world worked.

And this would carry over into some of Elon's future businesses. as some in the audience know. One story I thought was super interesting here was that Musk saw that there were these bonds out of Latin America known as Brady Bonds, which were these packaged debt obligations. But anyways, Musk believed that they would always be worth 50 cents on the dollar. But some of these were training as low as 20 cents. Musk then realized that this was a no-lose proposition, but the bank ended up rejecting his idea. And then, you know, this brought Musk to realize that a lot of these bankers were just totally

irrational and totally insane, at least in his view. Peter Nicholson, who hired Musk at the bank, stated he came away with an impression that the bank was a lot dumber than it in fact was. But that was a good thing because it gave him a healthy disrespect for the financial industry and the audacity to eventually start what would become PayPal. Musk also learned from this experience that he certainly didn't like, nor was he good at working for other people. Then Elon transferred to the University of Pennsylvania, where he would finish. school and get a degree in physics and economics. Musk said that, I was concerned that if I didn't study business, I would be forced to work for someone who did. In college, Musk was already taking

a strong interest in electric vehicles, too. Once he went to a party with a girl, he asked her, do you ever think about electric cars? He had come to the conclusion that eventually society would have no other option but to focus on renewable power sources. He was concerned about climate change and also about fossil fuel reserves starting to dwindle over time. Next, in 1994, Musk made his way to Silicon Valley, where the tech scene was starting to explode. He had a couple of internships that year. One was with a small Palo Alto company called Rocket Science. They made video games where Musk really excelled with their business and he really impressed them, but ended up turning down a job offer because he wanted to work on something that had a much bigger impact on society.

Then in 1995, he had graduated from school, and then he moved to Silicon Valley permanently. He had thought long and hard about what problems he should commit his life to solving. He stated, I thought about the things that will truly affect humanity. I came up with three, the internet, sustainable energy, and space travel. Then Isaacson explains that since the internet was exploding at that time, Musk really needed to focus his attention there because that was the first wave he would ride. So in his final year at the University of Pennsylvania, he decided that he wanted to make an online version of Yellow Pages with his brother Kimball.

The name of this company would end up being Zip 2, and this would be Elon's first success in the world of business and entrepreneurship. Zip 2's goal was simple. To put a searchable directory of businesses online and then combine it with map software that would give users directions to them. Elon and Kimball rented a tiny office in Palo Alto. and it had room for two desks, two futons, and then for the first six months, they slept at the office and then showered at the YMCA. They would often eat at this restaurant called the Jack

in the Box across the street, and it was really cheap, and Elon had said that he could still tell you to this day every single menu item that was at that place. They managed to get a database of maps from another company, and Elon wrote a program that merged those maps with a listing of businesses in the area. And to the best of Elon and Kimball's knowledge, they were the very first people to have a cursor on a map where you could zoom in and zoom out on it. Once word had started to spread about Zip2, venture capitalists started to get interested. And then in early 1996, they got $3 million in funding. They celebrated with the success of now being funded, but Elon quickly realized the downsides of VC funding. They love to bring in what he calls adult supervision.

They did it with Apple, they did it with Google, and now they were doing this with Zip 2. Elon stated, great things will never happen with professional managers. They don't have the creativity or insight. One of the biggest early lessons that you'll see a few times in this book is that Elon doesn't want to be the CEO. He wants to focus on building the product, but he couldn't ever get the product exactly how he wanted it without being the CEO. And as many know, Musk is one of the hardest working CEOs out there. He would just drive himself relentlessly and work all day and many nights, took no vacations, and then he expects others to be just as driven as he is.

Isaacson writes, like Steve Jobs, he genuinely did not care if he offended or intimidated the people he worked with, as long as he drove them to accomplish feats they thought were impossible. Musk had once stated, it's not your job to make people on your team love you. In fact, that's counterproductive. By January of 1999, Elon and Kimball saw their chance to exit Zip 2. The business ended up being bought out for $307 million. And with Elon and Kimball combined, having a 12% stake in the business, Elon got $22 million out of the deal, and then Kimball got $15 million.

Elon recounts how astonished he was when that check. landed in his bank account as his account went from something like $5,000 to $22 million overnight. Now Musk no longer had to shower at the YMCA. He went out and bought a $3 million car, and now he was ready to start playing a new game of business. Next came X.com, which people now know of today as PayPal. Elon's experience as Scotia Bank had him thinking that the industry was right for disruption. So in March of 1999, he started X.com with a friend from that bank, Harris Fricker.

His vision for the company was for it to be a one-stop-everything store for all financial needs. You got banking, digital purchases, checking, credit cards, investments, loans, and then more as well. X.com, it's kind of funny because we now know Elon changed the name of Twitter to X, and then he also named one of his kids' X as well. Early on, Elon managed to get a major investment from Sequoia to help fuel their growth. And interestingly, Elon also envisioned X.com of not only being a banking service, but also being a social network, which I really find interesting given that he bought Twitter, and that's a whole another debacle that I'll get to at the end of this episode.

Musk was in competition with Peter Thiel, who also had a payments company. And as Elon explained, essentially the two were in a race to see who, would be able to just sustain their business and not run out of money first. Rather than rolling the dice to see whose business could last the longest, the two decided to merge together and form one company. And then Musk would be the new CEO of this company, which would be PayPal. Isakson then gets a bit into the PayPal Mafia, which obviously many in the audience know a lot about. You have Musk, you have Max Levchen, David Sachs, Reed Hoffman, Peter Thiel. All of these brilliant people that we know today all just happened to be involved in the early days of PayPal, which is also

really quite interesting as well. There were a lot of different battles internally within PayPal, given the way that Elon operated and how you really couldn't change who he was or you couldn't change how he thought. Elon ended up getting a lot of heat from Max Levchen, who today is the CEO of a firm, the Buy Now Pay Later company, while the board of PayPal decided to remove Elon as the CEO, which he surprisingly took pretty well. The board believed that Elon was driving the company to failure, and he was taking on way too much risk in the way that he was running the business. One thing that differentiated Musk from Peter Thiel was that Teal was this really calm, cool, calculated character, and he was just really calm in his decision-making.

While Musk, on the other hand, he was willing to take on way more risk and try this approach of move fast, break things, and innovate as fast as you possibly can. You have to think about risk entirely differently than everyone else to start a company like Tesla or start a company, you know, even SpaceX. Peter Thiel had once said, I think Elon understands something about risk that everybody else doesn't. So PayPal ended up going public in early 2002. And it was actually acquired by eBay, oddly enough, that January for $1.5 billion, and Elon's payout from that was $250 million. And then naturally, as any person would, after they get a payday that big, Elon turned his attention to rockets.

He was looking into what NASA was doing, and he was surprised to see that NASA had no plans of going to Mars. So Musk had went to Palo Alto, the public library, to learn all about rocket engineering. And then he started talking with these rocket experts to learn all about it and figure out how rockets worked, why NASA wasn't sending people to Mars. And he was just really confused why there was no innovation happening at NASA from his eyes at least. He then told his friends at PayPal that his mission in life was to make mankind a multi-planetary civilization. Reed Hoffman asked him, how in the world could he turn this into a business?

And he later realized the way he operated, he first creates a mission, and then later he figures out a business plan that can help him fulfill that mission. Max left Chinat said, one of Elon's greatest skills is the ability to pass off his vision as a mandate from heaven. Initially, Elon assumed that rockets were too expensive for an individual to get into launching them. And as with most things in life, he started with first-prudence. principles. Elon has this term that he calls the Idiot Index. And this essentially calculated

how much more a finished product would cost relative to its basic material. So if a product had a high Idiot Index, then its cost could essentially be reduced significantly by increasing the manufacturing of that product. Elon came to find out that Rockets had an extremely high Idiot Index. When he looked at the cost of all the parts it took to build, a rocket, he saw that the finished product with the current methods of manufacturing were at least 50 times more than what it cost to purchase the parts. So as must put it, if the ratio is too high, you're an idiot. Elon's friends thought he was totally insane, naturally, and they tried to convince him not to start SpaceX. But Elon told them that he already knew that there was a high

probability of failure, but he would rather try and live with that fact that humanity would remain stuck on Earth without him. But he was willing to live with that fact. Thus, SpaceX was incorporated in May of 2002. One of the core philosophies of how SpaceX and then eventually Tesla would operate is that the design, the engineering, and the manufacturing teams would all be clustered together. Elon hated it when he met an engineer that didn't understand how the manufacturing worked or didn't even have much face time with the manufacturing process.

Elon also had zero tolerance for negativity in working with people who weren't 100% bought into the mission. He was very good at motivating people and getting people to do things that they thought was impossible. The common theme throughout the book is that Musk leads a team through these spurts where they just push 110% towards a goal. Oftentimes he expected people to work throughout the night just to make sure they could hit the goal that they set out to achieve because that's what he did.

And if he sensed that you weren't bought into the mission, then he wasn't afraid to just fire you right there on the spot in front of everybody. He was incredibly intense. He had this maniacal sense of urgency. And when I reflect on this book, this term maniacal sense of urgency, it's just this key theme that pops into my head that's just so critical to the way Musk operates. Elon has said, a maniacal sense of urgency is our operating principle, end quote. SpaceX's first employee, Tom Mueller, stated, if you set an aggressive schedule that people think they might be able to make, they will try to put out the extra effort.

If you give them a schedule that's physically impossible, engineers are not stupid. You've demoralized them. It's Elon's biggest weakness, end quote. Many people were critical of Musk's insane schedules and timelines. Sometimes they weren't even close to what actually ended up happening. And this is a management tactic that Steve, also used, who Isaacson also wrote a biography about, and this is partially why companies like

Apple, SpaceX, Tesla, they've all achieved things that no other companies have been able to achieve. Now, since Musk was laser-focused on minimizing the cost to build a rocket, this led SpaceX to manufacturing many components in-house rather than purchasing them from suppliers. They were quoted to purchase one component for $120,000, which Musk obviously thought was totally ridiculous. So he went out, told one of his engineers to go and make it for 5,000. In 2003, SpaceX already got their first contract with NASA for $3.5 million. And then in 2004, NASA awarded a $227 million contract, but they awarded it to a different private company without any competitive bidding process. And Musk just said, that's not right. So he sued NASA. He ended up winning the dispute,

and then ended up also winning a significant portion of that contract. Musk believed that NASA was just a bloated organization and had a broken incentive structure built on what we're called cost plus contracts. If Boeing, for example, worked with NASA on a cost plus arrangement, then if the project ended up going over budget, then Boeing would likely end up getting paid more. So this would just totally stifle innovation as there was no incentive to lower costs and find new ways of doing things. Elon had stated, Boeing and Lockheed just want their cost-plus gravy trains.

You can't get to Mars with that system. They have an incentive to never finish, end quote. With an outcomes-based and fixed-price approach that SpaceX was contracted under, the company was now incentivized to innovate rather than waste time and money. Turning back to the early stages of Tesla, Jeffrey Straubel was having trouble getting funding to start an electric car company, and that was until he met, well, not. None other than Elon Musk. The night that Musk met Straubel, he was excited and surprised by how far battery technology had

come at that point, and he said to count him in right on the spot right when he started learning more about it. Early on, the electric vehicle visionaries, they wanted to build a cheaper, boxier, and slow electric vehicle. And Elon argued that the way to go was to start with a higher price car first because everyone thought electric cars were boring and terrible. You really needed to wow them with something special, something different, and not something that's cheap and ugly in the eyes of the consumer. It ended up being Martin Eberhard and Mark 10 Penning that started Tesla.

And years later, it would actually be agreed upon that there were five different co-founders after many different disputes that took place. Musk led the initial financing round at $6.4 million, and Musk would also become the chair of the board. Tarpinning had said what struck him about Elon was that he focused on the importance of the mission rather than the potential of the business itself. Tar Pending said he clearly had already come to the conclusion that to have a sustainable future, we had to electrify cars. Initially, Eberhard was the CEO. Tar Pinning was the president and Estrabble was the CTO.

But it was Elon who was the ultimate authority because he had most of the equity in the company and it wasn't really in his nature to try and defer these major decisions. One of the most important decisions that Elon made early on was making Tesla a vertically integrated business. Rather than piecing together a car from hundreds of components from different independent suppliers as the way it's traditionally done, Tesla would control its own destiny by producing as much as they could in-house and having more control over the quality, over the cost,

and then the supply chain as well. When they were in the early stages of developing the Roadster, Elon was becoming pretty frustrated as it wasn't turning out the way that he envisioned where he really wanted to wow people. So he just took it upon himself to know everything you needed to know to design a car that looks special. No detail was too small to escape how Musk wanted it to look, even though each modification they made would further complicate things. And this would also increase the price of producing the car, at least in the near term. It ended up that Musk would just drive Everhard totally crazy with all these modifications he wanted to make.

Eberhard argued that changing something like the door latches won't add a single unit of sales. Yet some of these changes that Musk made, they actually ended up being really cool features, the electric door latch being one of these examples. And these key features are what really set Tesla apart from everyone else. Then this also led to issues with the suppliers that they worked with. There was one called Lotus that Musk said he just drove him totally crazy as well, similar to Everhard, just drove him crazy with these modifications he wanted to make. Musk had stated, they kept asking me why I was being so hardcore about every little curve of

this car. And what I told them was because we have to make it beautiful. By May of 2006, Tesla had 70 employees, and it was in the works of doing a round of financing. They received $40 million from Vantage Point Capital. And then in July of 2006, Elon stole a page from Steve Jobs' playbook of unveiling the roaster and creating this buzz and doing a whole event around this unveiling. Elon took it upon himself to organize this event and during the presentation he stated, until today, all electric cars sucked.

Buying a roaster would help fund Tesla so that it can make a mass market vehicle. Tesla executives are not paid high salaries and we don't issue dividends. All free cash flow goes completely. into driving the technology to lower costs and make cars that are affordable." And then later, Musk published his master plan on Tesla's website. He talked about how the purpose of Tesla Motors, as it was called at the time, is to expedite the move from a mine and burn hydrocarbon economy towards a solar electric economy. Critical to making that happen is an electric car without compromises, which is why the

Tesla roaster is designed to beat a gasoline sports car and a head-to-head showdown race. The strategy of Tesla is really to enter at the high end of the market where you have higher prices, customers are paying a premium, and then you have lower volumes, of course. And then the strategy is really just to drive down the market as fast as possible and work your way down to the lower priced, higher volume vehicles with each model that you release. And with the benefit of hindsight, we can see that this really is the approach that Tesla has took ever since 2008 when they launched the Roadster. So the Roadster, that started being produced in 2008.

The Model S sedan, that was in 2012. Model X, SUV was produced in 2015. The Model 3 sedan, 2017. Model Y crossover, that was in 2020. And then they also unveiled the semi-truck in 2022. And then I just actually saw on Twitter X yesterday that Tesla is actually starting to deliver the cyber trucks, which is quite interesting as well. And isn't exactly going to the strategy.

but is beside my point. Musk often said that designing a car is easy. The difficult part is manufacturing it. And I've heard this from him countless times on different podcasts he's been on. He's said over and over again, the hard part isn't designing or making the car. It's making a factory that can essentially make turn out so many of these things at a low and affordable cost. As Isaacson puts it, building a machine isn't hard, but building the machine that makes, the machine is hard. So the targeted cost of the roadster had been around $50,000. They wanted to make it for $50,000 for each roadster they produced. But the actual cost actually ballooned to $110,000. And Tesla was actually weeks away from running out of cash. So this is when Musk brought in Antonio Gracias to fix the issues with manufacturing efficiency. Isaacson called Gracias a wizard at understanding factories. Elon also realized that he was he said,

he had a massive supply chain problem that really needed to be addressed. Tesla would be paying $15,000 to put together a battery pack, and then they'd be waiting nine months for the car to be sold, and then they'd get that cash investment back. Musk referred to these times in Tesla's history as a flat-out burning dumpster fire of stupidity. The great financial crisis was one of the most troubling times in Elon's career. He ended up ousting Martin Eberhard as the CEO of Tesla, and Elon tried a couple of other different CEOs temporarily to try and take his place. There was a lot of heated exchanges between Elon and Everhard that Isaacson dives into in the book. It still didn't last long before Elon just totally had enough with other people trying to run Tesla.

He's a control freak, as I mentioned. And when he has this strategic map that he has, it oftentimes isn't going to align with other CEOs. So one CEO that filled in, he wanted to outsource the assembly of cars. And Musk said that that was the stupidest thing he had ever heard. So Elon said, I'm just going to take over the role of CEO myself. So that's what he did in October of 2008. Then Elon turned his focus to figuring out how in the world they could turn out these cars profitably, which obviously required bringing that cost of production down.

This is definitely no easy task. At that point in history, only one American car company in the last century had managed to avoid bankruptcy, which was Ford. Tesla had created the roaster, but they still need to figure out how to produce a manufacturing facility that could produce these cars at a low cost. And this was in the midst of the global financial system being on the brink of a total meltdown with the great financial crisis happening. Musk referred to this time as the most painful period of his life, which, if you know Musk, that's a pretty big statement as essentially he is wired to seek out pain and seek out that hardship in so many ways. Initially, he kept Tesla alive by using the cash deposits that customers would put down for the roadsters

that hadn't even been built yet. The board pushed back on that decision, but Musk said, we either do this or we die. By the fall of 2008, Tesla desperately needed more cash, so Elon called on friends and family to help the company meet payroll. Elon, he managed to get Kimball to sell $375,000 in Apple stock. So Kimball pitched in, and then Elon got a number of other investors to keep the company afloat, including actually some of Tesla's employees pitched in their own money to keep the company going. Then Isaacson writes here, Musk's tolerance for stress is high, but 2008 almost pushed him past his limits. I was working every day, all day and night, in a situation that required me to

to pull a rabbit out of the hat, now do it again, he says, he gained a lot of weight and then suddenly lost it all and more. His posture became hunched and his toes stays stiff when he walked. But he became energized and hyper-focused. The threat of a hangman's noose concentrated his mind." Meanwhile, at SpaceX, the company was in the works of launching rockets into orbit with the hope of eventually securing more contracts with NASA. With someone like Musk, who has an extremely high risk tolerance, it should come as no surprise

that his first attempt at launching a rocket ended up not working very well. So he told his team that they had to figure this out within their first three attempts. And then the second attempt of a rocket launch was also a failure, and it didn't quite get into orbit. Then on the third rocket launch attempt, Musk had gone all in, and he said, if they can't get it done in three tries, then the company just deserved to die. But still, the third launch still ended up being a failure. Then Isaacson writes, Musk had run out of money, Tesla was hemorrhaging cash, and SpaceX had crashed

three rockets in a row. But he was not ready to give up. Instead, he would go for broke, literally. SpaceX will not skip a beat in execution going forward, he announced a few hours after the failure. There should be absolutely zero question that SpaceX will prevail in reaching orbit. I will never give up and I mean never, end quote. So Musk was just dead set on making it work this next time, even though he said that he needs to do it in three tries.

In the midst of all of this, many thought that Musk would have to choose between trying to save Tesla and trying to save SpaceX because both seemed nearly impossible given all of the cash needs they had and then the time commitment for Musk for both companies, the more people pressed Musk to choose one or the other, the more he resisted such pressures. Elon had said, for me emotionally, this was like you got two kids and you're running out of food. You can give half to each kid, in which case they both might die, or give all of the food to one kid and increase the chance that at least one of them survives. I couldn't bring myself to decide that one was going to die, so I decided I had to give my all to save both. So for SpaceX, Musk had budgeted

for just three launch attempts, and now both SpaceX and Tesla were on the verge of bankruptcy. Then a surprising group of people came to help Musk out, his co-founders at PayPal. Trey Lockerbie actually hosted an episode covering the PayPal Mafia back on episode 417 with Jimmy Sony, whose book goes really in depth into the story of PayPal. But when Musk was ousted from PayPal, he could have just said, I'm just going to burn these bridges with these guys, but luckily he ended up keeping his mouth shut, which came back to reward him during the great financial crisis. Peter Thiel invested $20 million into SpaceX, and that gave Musk room to try that fourth launch. Elon had stated, it was an interesting exercise in karma.

After I got assassinated by the PayPal Kube leaders like Caesar being stabbed in the Senate, I could have said, you guys suck, but I didn't. If I had done that, Founders Fund wouldn't have come through in 2008 and SpaceX would be dead. Elon also argued that if SpaceX failed, then Tesla would inevitably fail too because who would want to fund an electric car company led by a guy that just failed in launching rockets. So the fourth launch of the Falcon 1, it ended up being a success for SpaceX and this was just a huge moment for Elon in his career. Isaacson writes, Falcon 1 had made history as the first privately built rocket to launch from the ground and reach orbit. Musk and a small crew of just 500 employees, while Boeing's comparable division

had 50,000 employees, had designed a system from the ground up and done all the construction on its own. And funding had also been private, largely out of Musk's pocket, end quote. On December 22nd, 2008, Musk and Gwen Shotwell, who led the efforts at SpaceX, they secured a $1.6 billion contract with NASA to make 12 round trips to the International Space Station. So SpaceX now was in a much better position having secured that contract after that successful launch of the Falcon 1. Musk really didn't have much time to relax, celebrate, or have any fun, as Tesla was due to run out of money on Christmas Eve of 2008. So Elon managed to raise another 20 million from existing

investors to allow them to get by for just another few months. This alone was very difficult to do, and Elon was barely able to get more support from his investors because they just saw this company just consistently burning cash, not much progress being made, and then they were crossing these ethical boundaries by dipping into customer deposits. One criticism you oftentimes here nowadays with Tesla is that they've been bailed out or they've been subsidized by the government in 2009 at least. That year, General Motors, they received $18.4 billion in loans from the TARP government program, which was a stimulus package to bail out some of the car companies. But Tesla actually didn't receive anything from this. It was in June of 2009,

they did get a $465 million interest-bearing loan. That was from the Department of energy program, and then that loan was fully repaid three years later. It feels like there are like 10 moments where Musk says, if this doesn't happen, then Tesla or SpaceX or whatever else, it's going to die. 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,

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All right. Back to the show. Another of which was when the Daimler team invested $50 million in Tesla. That was in May of 2009. They visited Musk with interest in investing, and then they test drove the car, and they were just blown away that the car just bolted in an instant, right, when you hit the accelerator, and it reached 60 miles per hour in just four seconds. So on live, the test. Tesla and the SpaceX that we know today. This led Tesla to turn their focus to profitability, and it brought them to start designing the Model S.

And one theme you find so often in the book is that one of Musk's foundational principles of designing a product is that the design team and the engineers need to work together hand in hand. You can have a great design team, but if you can't mass manufacturer what you design at a low cost, then it might not be worth implementing. So Musk really put a big emphasis on having his teams be collaborative, working together, and really being integrated in creating the best possible economically viable product. Elon received a lot of pushback on wanting door handles that were flushed with the car

and they would pop out when they sensed you approaching. Some thought it was just ridiculous and unnecessary. And then today, like I mentioned, this is one of the key features in the design. design of the vehicle. And one of the things I like about Tesla's is the pure simplicity when you sit in one. I was just recently in one of my friends that has one, you get in the front seat, and there's nothing unnecessary included. You just feel the simplicity. You have the large touchscreen in front of you. You have the steering wheel. You have the Tesla logo on the steering wheel. And really, that's about it. Whereas the car I currently have, it's not a Tesla. And you just

have countless buttons, so many things going on, so many things blinking, flashing at you. I feel like it just really lacks that simplicity, and I just really appreciate that about Tesla. It almost feels like a modern day version of Apple just applied to vehicles. Another key foundation of the Tesla vehicles is that software is a critical component of it rather than it just being a hunk of metal that gets you from point A to point B. So someone can buy a Tesla today, and they receive all the benefits. of the software upgrades and the new functionalities that come in the future. So the car can fundamentally improve for years later after the day you purchase it.

So turning back to the manufacturing process here, Tesla, they needed to have their manufacturing in the U.S. for them to have a lot of that control. And then you look at other American car companies that shut down their factories. They've been offshoreed. This trend accelerated after the year 2000. the U.S. lost one-third of their manufacturing jobs from 2000 through 2010. Tesla's ended up buying a factory from Toyota that was located in Fremont, California. And that was actually just 30 minutes from Tesla's headquarters in Palo Alto.

So quite a convenient location for them to get that factory. And that factory had actually been worth $1 billion at one point in its time. And Tesla actually managed to buy it for $42 million. and then they also received a $50 million investment from Toyota. The month after Tesla bought the factory, they went public. That was June 29, 2010. And this made them the first American carmaker to go public ever since Ford all the way back in 1956.

And them going public provided them in additional financing. They got $266 million that they raised in going public. So another theme of the book is Elon's intent. One of my favorite words and concepts that I'm reading as I'm going through this is the word hardcore. He wanted the culture in all of his businesses to be hardcore. As Elon stated once in an email to Tesla employees, he said, please prepare yourself for a level of intensity that is greater than anything most of you have experienced before.

Revolutionizing Industries is not for the faint of heart, end quote. This hardcore approach led him to the idea of building a gigafactory. At the time, the Model S was using around 10% of the world's batteries. And the Model X, which was on the horizon for them, it was going to require 10x the number of batteries that the Model S's did. So Tesla really needed to get to work and start to create these batteries themselves. They worked with Panasonic to build a $5 billion factory. And Panasonic was actually a bit hesitant to work in this deal because it was really outside their comfort zone and it was, and it was really risky to work with a company like Tesla and a person like Elon.

But once they realized that Elon was just dead set on getting this done, Panasonic really didn't want to get left behind. And I think that's a key takeaway from Elon. He knows that failures are going to come, but he's dead set on doing whatever he can to just make it happen. And that belief can take you, I believe, so far in life in my mind. I just had that recent interview with Jim Quick. author of a book Limitless. And there's just so many of these limiting beliefs that we naturally

tend to have. You know, some of these are for good reasons. But Elon is just so good at just eliminating all of these beliefs that are outside the limits that physics puts on us, essentially. The only way you can really achieve big things that other people consider to be impossible is you have to have that unwavering belief in yourself. And Elon most definitely had that. Panasonic's president has said, We are too conservative. We're a 95-year-old company. We have to change. We have to use some of Elon's thinking, end quote.

Turning back to SpaceX here, there's a short chapter where they talk about the Falcon 9. This was a much bigger and far more complex rocket than the Falcon 1. It had a successful unmanned launch on its first try in 2010. And at this point, it was clear that after less than eight years after being founded, SpaceX had now become the most successful private. rocket company in the world. And then the next big test, which was scheduled for later in 2010, was to not just launch an undemand capsule into orbit, but also return it back to Earth safely, which no private company had ever done before. And it was only done by three governments in the world, which was the U.S., Russia, and China. And then SpaceX ended up being successful with that

launch as well in 2010, making them the first private company to do so. Now, one of the things I don't really want to get into for the purposes of this show is his personal affairs. It's easy to think that someone like Elon Musk has everything in life figured out and he doesn't have these major issues. And after reading this book, I realized that his life is pretty much full of chaos, both in business and outside of business. And his personal affairs are honestly a mess. To date, he has 11 children with three different women, and he's been married and divorced a number of times. And there are times in this book where there's some pretty terrifying things happening in his personal life where he would just totally retreat from it and just go work on rockets at SpaceX. And Isaacson kind of jokes that

rockets were easier for him to deal with than his family. And I think this is a key insight here where we live in this world of social media. We see the highlight reels. And it's so easy to that other people have everything figured out in life. And in reality, the people who are really good at projecting this perfect life, they're probably pretty dang good at covering up all the bad parts, covering up the insecurities, and covering up the parts that they don't want you to see, essentially. So there's plenty of chapters in this book that I just don't really touch on,

just for the purposes of this show. If you want to dive into that, I'd encourage you to go pick up Isaacson's book. Jumping to Chapter 40 here, Isaacson dives into artificial intelligence and open AI. It's been widely known that Musk has been openly cautious about the development of AI and its potential negative impacts on society. Peter Thiel puts together a conference each year with the leaders of companies financed by his founders fund. And at that conference in 2012, Musk met Demis Hussabas, who ended up being the founder of Deep Mind. which went out to try and design computer-based neural networks that could achieve artificial,

general intelligence. Or in other words, make machines that could learn how to think like humans. Elon learned about the possibility of AI becoming more intelligent than humans and eventually doing away with us. So Elon invested $5 million in DeepMind just to monitor kind of what was happening with the company. Then he was discussing AI and Deep Mind with Larry Page, who is the co-founder of Google, and he isn't near as concerned as Musk about the potential dangers of AI. Larry Page wanted to buy Deep Mind, and Elon certainly didn't want Page to be in charge of the future of AI, so he tried to stop the deal, but it ended up going through and happening anyway in January of 2014.

Elon stated, these Google guys have no intention of focusing on AI safety or doing anything that would limit their power." Thus, Elon and Sam Altman started a nonprofit AI research lab, and they named it OpenAI, which would make its software open source and try to counter Google's growing dominance in the field. Elon's thinking was to try to make Open AI truly open and allow as many people as possible to have AI to help prevent the misuse of it. And Elon also realized that success in the field of

AI, it was going to come down to having access to huge amounts of real world data that bots could learn from. And this is what makes Tesla's vehicles potentially really valuable with all the cameras they have on each vehicle and they're collecting millions of frames every single trip that they take. Elon believed that Tesla would have more real world data than any other company in the world. His interest in AI led him to start some other projects as well. You have Neurrelink, which aims to plant microchips in human brains, Optimus, the human-like robot,

which I believe is a project specifically within Tesla, and then Dojo, a supercomputer that is working to simulate a human brain. Since Musk realized the extreme importance of AI, this led him to focusing more on his own companies rather than OpenAI. And this sort of led to a falling out with Altman and Musk with OpenAI in 2018, and then Open AI transition to being a for-profit company. And then this also led Musk to making a big push to adding autopilot capability to Tesla vehicles to try and collect as much of that data as he could. And this was one of those projects where every year since 2015 or so,

Elon would go out and say that full self-driving was only one or two years away. And each year, he'd just say the same thing. And it really hasn't happened. On an earnings call in 2022, he actually admitted that the process has been much more difficult than he originally thought all the way back in 2016. Isaacson writes that each new modelesque must decided would be equipped with eight cameras and also 12 ultrasonic sensors and a forward-facing radar that was able to see through rain and fog.

And autopilot was obviously really, really tricky. There are countless sort of situations that you need to dream up and figure out how autopilot should react in these situations. Plus, you just get tremendous pushback from the public, the media, regulators. You can say that autopilot saves a tremendous amount of lives because it makes less mistakes in humans if it's doing a good job. But people don't really love the idea of leaving their lives up to autopilot. One person killed because of an autopilot system typically provokes a lot more horror than 100

deaths that are caused by human error. Now, I mentioned that Musk's most difficult task with Tesla was figuring out the production, which is expanded on Moore in Chapter 45. Isaacson explains that Musk went through periods when he would oscillate between depression and manic energy. And from the summer of 2017 through the fall of 2018, he described this as one of his most challenging periods of his life, both professionally and emotionally. Musk preferred to it as 18 months of unrelenting insanity.

It was mind-boggingly painful. In late 2017, before a Tesla earnings call, Wall Street analyst John McNeil, who was Tesla's president at the time, he found Musk lying on the floor of the conference room with the lights off. He told Musk that they have an earnings call they need to do, and Musk just told him he can't do it. He was just so totally exhausted and burnt out. The Model 3 started rolling off the production line in July of 2017, and that actually ended up meeting Musk's insane deadline he said, but he knew that the major challenge was to figure out how to build a huge number of them.

And at the Model 3 event that summer, he stayed in front of the audience. Frankly, we're going to be in production hell. And this is another big story in the book where they really had to figure out how in the heck they're going to start producing all these Model 3s. He had calculated that in order for Tesla to survive, they would need to start producing 5,000 Model 3s per week. And if they couldn't, then they'd just run out of money because it's just sort of a death loop. At the end of 2017, Tesla was only producing 2,500 per week. So they needed to double that production.

So Musk went out onto the floor himself to see how in the world he can make this happen. Pull this rabbit out of the hat. Writing at the Gigafactory in Nevada, where the batteries were made, a major employee there had told him that making 5,000 batteries per week was insane. And at most, they could maybe make 1,800. Musk started to question every single part of the process to make the battery. Some parts seem to be pretty irrelevant to Musk. So he would ask, who in the heck put this requirement in place?

And if no one had an answer, he would just say to take it out. So it points to Musk's desire to question everything. Question every requirement. If you're doing things you don't need to do, then why are you doing it? There are stories in the book where Elon became so upset as some of the engineers that he just fired him on the spot. Straubel, who was Musk's co-founder, said, in retrospect, it may seem like great war stories, but in the middle of it, it was absolutely horrific.

He was making us fire people who had been personal friends for a very long time, which was super painful, end quote. This was also when Musk realized that he had automated too much of the factory, which is sort of ironic given he's sort of a technology guy. And things were just not going as smoothly as he had hoped with all this automation he was trying to implement. So if an automated part was becoming too big of a bottleneck, then he would de-autimate the factory, for lack of a better term.

So it's interesting to think about when you have a factory and you have a thousand plus different things happening to put together the car. Really, your factory is only as fast as your slowest part because that slow part ends up being a bottleneck. And essentially, the car just doesn't get passed along to the next step in line once that, you know, that slow part starts chugging their pieces through. So must take away from this experience was to wait until the end of the design process after questioning all the requirements. deleting all the unnecessary parts before introducing the automation of it. There were some cases where Musk himself could perform a task faster than the robot, in which case he would just remove the robot, have a person complete the task, and that would increase the efficiency of the overall process.

So after relieving the bottlenecks at the Nevada factory, he turned his attention to the Fremont factory. In April of 2018, it was producing just 2,000 Model 3s per week, although he had previously promised Wall Street that it would be producing $5,000 by the end of June. So that's, you know, just two or three months he needed to increase production by 2.5x and it just didn't seem very likely. Isaacson writes, there seemed to be no way that the laws of physics would allow him to juice the plant's assembly lines into producing that magic number of $5,000 per week. End quote. At that time, Tesla stock was trading near its all-time high, making it more valuable

than General Motors. Even though General Motors had sold 10,000. million cars and made $12 billion in profits that previous year. Whereas Tesla, they had sold only 100,000 cars. So GM made 100 X the cars that Tesla did. And Tesla didn't make money. They actually lost $2.2 billion. And this led Tesla to end up being the most shorted stock on the market. And this absolutely infuriated Musk. He absolutely hates short sellers. And these short sellers were just brutal to Musk. You know, they'd publicly attack Tesla. They'd publicly attack Musk personally. Some even went so far to fly drones over the Tesla factories to get these real-time numbers on what was being produced. Musk has stated the degree of inside information they had was insane.

End quote. David Einhorn had stated that he thought Tesla's deception was about to catch up with them, and Jim Chanos publicly declared that Tesla stock was basically worthless. In the meantime, Tesla's board, Brandon Musk, what Isaacson refers to as the boldest pay package in American history, a package that would pay him nothing if the stock price didn't rise dramatically and had the potential to pay him $100 billion or more. And this was based on just super aggressive targets. This was related to production numbers, revenue, and then the stock price as well. On May 22, 2018, Musk had come up with an idea to set up.

a giant tent outside of the Fremont manufacturing facility. And that was with the intention of trying to produce more cars out there. So essentially creating like a separate factory outside of the Fremont facility. And in two weeks, a tented facility was created that was 1,000 feet long, 150 feet wide. And it started churning out these Model 3s with only people involved. And then just three weeks after Musk had come up with the idea, Model 3 started rolling out of this new tent that they set up. Musk had said related to this, if conventional thinking makes your mission impossible, then unconventional thinking is necessary. That's a quote to ponder,

in my opinion. On June 30th, which was the deadline which Musk had promised for reaching the goal of 5,000 cars per week, he woke up on the conference room couch and he looked at the monitor and it showed him how many cars were being produced. And that's when he realized that, that he was going to succeed in achieving that goal. He went on by celebrating, and he believed that Tesla had now officially become a real car company. Then Isaacson lists what he calls the algorithm. And this really encapsulates the lessons he learned from what he calls production hell. The five commandments, as Isaacson calls them, are first, question every requirement.

Second, delete any part or process you can. Third, simplify and optimize. Four, accelerate cycle time. And five, automate, which should always come last. This is the formula that Musk used over and over again to make the manufacturing process as simple as possible. And I think that the same approach can be applied to so many aspects of our lives or of our businesses. There's always some sort of process to performing your tasks that work. a process to hire somebody, a process to putting a podcast episode out.

And I think these steps could also be carried over to so many other things as well. There's a few other points here from Isaacson I wanted to mention as well that were lessons that Musk learned. He says, when hiring look for people with the right attitude. Skills can be taught. Attitude changes require a brain transplant. And I think that is so, so important here. Just to hire the right people. Look for the right attitudes because you can't really change the way some people think. The next one is, quote, a maniacal sense of urgency is our operating principle. And I know I already mentioned this quote, but I just think it's personally one of the biggest

takeaways I get from Musk is this tremendous urgency to continue to get things done. And then third, the only rules are the ones dictated by the laws of physics. Everything else is a recommendation, end quote. And this reminds me of the Steve Jobs quote that everything around you is made up by people no smarter than you. And it's a reminder that people can try to impose their reality on you or impose how they think or try and put their rules on you. But you don't have to adopt by those rules or the rules of others. The engineer out of Nevada probably thought that producing 5,000 batteries a week was impossible. But Musk really didn't think so.

This also reminds me of the book. I just mentioned Limitless by Jim Quick. He talks about the first step to achieving anything is to first believe that you can achieve it. If you don't believe that you can do it in the first place, then you're training your mind to make that not happen to a large extent. It's sort of just, you know, in order to achieve something big, you first have to believe that you can't achieve that thing. So belief is so, so critical and a big part of why Musk has gone as far as he has. And then in 2018, there was the whole fiasco around taking Tesla private. A group out of Saudi Arabia had accumulated 5% of Tesla's shares outstanding.

And Elon discussed with them the possibility of going private because he hated the value of the company being determined by speculators and short sellers. While he was in talks with them, he miraculously tweeted and considering taking Tesla private at $420, funding secured, end quote. And then the stock was up 7% on this news, and the SEC opened up an investigation on him. Next thing you know, the Saudis weren't sure that working with someone like Musk, who was totally unpredictable, was a great idea. And Musk made a statement that most existing shareholders believe Tesla is better off as a public company,

so sort of took back his statement on trying to go private. So due to misleading public investors, Elon opened himself up. to potentially not being able to run Tesla anymore because of the SEC filing a lawsuit against him. And they ended up settling on him remaining the CEO of Tesla, stepping down as a chairman, and then paying a fine of $40 million. I had mentioned that this period was really hard on Elon. There's one part where it's mentioned that Elon was working 120 hours a week in 2018, and he hadn't taken more than a week off of work since 2001 when he was actually sick with malaria. During this period, many of Musk's top executives had left the company.

John McNeil, who was Tesla's president, loved Elon to death, but told him he just couldn't handle being with the company anymore. It's just too much work, too much stress. He urged Elon to get psychological help, and this is amazing because we all see the success, we see the flying stock price, the lifestyle a guy like Musk can live. And then he's going on Joe Rogan, having a good time, and he's tweeting funny things. but we really don't see the dark side of what's happening. I mean, we know that he works long hours, but we don't really see the pain that he's enduring.

Straubel had also been with Elon for 16 years, and he was a co-founder of Tesla, and he ended up leaving the company as well. And Elon actually wasn't very sentimental when it came to people leaving. I think part of this is because he feared that people would be around for some time. They'd save a lot of money. They'd essentially become wealthy and they could become complacent. Isaacson had stated, he likes fresh blood. I thought that was kind of a funny way of putting it.

He likes people that are new, they're hungry, they're driven, and not too many rich people want to sleep on factory floors because they're working so much. And then in Tesla's June 2019 annual meeting, Elon was starting to reminisce with Straubles announced departure. and he had stated, I believed for sure we would fail. Back in 2003, people thought electric cars were the stupidest thing ever, bad in every way, something like a golf cart, end quote.

And Elon and Straubel, they ended up keeping in touch as Musk invited them to join Tesla's board in 2023. And then there's a short chapter here on chapter 50 that talks about Tesla's expansion into China. I thought this was probably worth mentioning. It took them a few years to get their footing. China due to regulatory issues and juggling managers to try and find the right person to lead the expansion efforts. Elon did find his guy when he hired Robin Wren. That was in early 2018.

They built the factory in China. And then by October of 2019, China would account for over half of Tesla's production of vehicles. So it's impossible to talk about the development of Tesla without talking about the development of the cyber truck, which I personally don't love the design of. if I had to express my own opinion here, but Elon knows way more than me when it comes to making vehicles. The idea of a Tesla pickup truck, it came around in early 2017. The Tesla team wanted something with the authority of a pickup truck and not something that looked too soft. Musk was inspired by the Lotus Esprit of the late 1970s, which had a pretty pointy design to it. And when I look up photos, it kind of resembles a cyber truck to some degree, except this is a car. And in determining

the material to use, Musk was enthralled by the possibility of making a rocket ship out of glistening stainless steel. And this made him want to do the same thing for the cyber truck, use stainless steel for the material that's used. This pointed to one of the benefits of being CEO of both SpaceX and Tesla is that the companies could sort of share their experiences, their engineering knowledge. Charles Kuman, I probably butchered that pronunciation. He was the VP of material engineering

for both Tesla and SpaceX. They had spent months trying to figure out the design of the vehicle and Musk was inspired by his son, Saxon, who had said, why doesn't the future look like the future? And it's funny that Musk would use this quote repeatedly

with his team. Why doesn't the future look like the future? Because he wants to make something that's new, it's special. doesn't want to keep the status quo and look like everybody else. In November of 2019, Tesla did their live presentation of the cyber truck in which the quote-unquote armor glass it cracked when they threw a metal ball at it. And then I'll jump to Chapter 52 here. This touches on Starlink. As you may recall, Musk started SpaceX in 2002 with the goal of taking humans to Mars. And this obviously costs serious money to try and do. And,

To make SpaceX a viable business, he began to start launching satellites to space on the behalf of governments and other companies. Then in late 2014, he turned his attention to providing internet service to customers. SpaceX essentially started to rebuild the internet in outer space with what would be Starlink. Musk stated that, quote, internet revenue is about $1 trillion a year. If we can serve 3%, that's $30 billion, which is more than NASA's budget. end quote. So in January of 2015, SpaceX announced the launch of Starlink, which is the new division based near Seattle. Isaacson stated that Starlink's goal was to create a mega constellation of 40,000 satellites. And I just looked up the number as of 2023, and it looks like they currently

have around 5,000 satellites in space now. And it was May of 2019, they launched their very first Starlink. Jumping to March of 2019, Isaacson again tells us, story of Musk having sleepless nights because he really needed to raise capital for Tesla yet again. This is a theme you see throughout the book on and on and on. Isaacson writes, he needed to come up with a grand idea that would turn the narrative around and convince investors that Tesla would become the world's most valuable car company. Elon's solution to create more buzz around Tesla brand was Autonomy Day, where investors would get a demonstration of how Tesla was going to build a car that could drive itself. If investors were led to believe that Tesla would

one day be massively profitable because of their vehicles being autonomous, then maybe this could ease Elon's worries about remaining solvent. During the presentation on Autonomy Day, a Tesla car would drive around the headquarters, go onto the highway, follow a path that requires various turns, and then return back to where it started. The vision in this presentation was that Tesla wanted to deploy to deploy millions of robotaxies that people could essentially just summon for rides at any time. So you're getting off work, go outside, pull up your Tesla app, and then a Tesla can just pull right on up with the autopilot. I wasn't able to find whether they ever received funding during this period.

So I was curious. Maybe I just didn't see it in the book. I didn't see it mentioned. But then he transitions to cover Gigatexas, which was the first Gigafactory, which would be located in Austin, Texas. And they started building this out in July of 2021. Isaacson stated that the Fremont California factory had become the most productive car making facility in America, and it was churning out more than 8,000 cars per week. Zooming out to today, Tesla has gigafactories in six locations globally.

This includes Fremont, California, Sparks, Nevada, Berlin, Germany, Shanghai, China, Austin, Texas, and Buffalo, New York. And it's pretty amazing just how big these factories are. It's hard to even comprehend. The one in Texas, Austin, Texas, for example, is 10 million square feet. And to give you a sense of just how massive 10 million square feet is, that's equivalent to essentially 173 American football fields. So that's 173 fields spanning out is how big this factory is. I mentioned that I wasn't going to dive too deep into his family life, but Musk, he did receive

some hatred from one of his children that was essentially a self-proclaimed communist, and they disliked Musk for how rich he was. The child repeatedly told Musk that she hates him and everything he stands for, and this was part of the reason that Musk ended up deciding selling all of his houses and the majority of his possessions, and this was partly to signal that he wasn't building his companies to Rich himself. Rather, the purpose of his companies was to fulfill the missions that they were created for in the first place. In Musk, up until this point, he really enjoyed sort of that billionaire lifestyle, you know, having the nice house, nice cars and everything. His primary residence in

L.A., he bought for $17 million in 2012, and it was 16,000 square feet. He personally saw nothing wrong with becoming wealthy by building companies and keeping the money he had from building them because he had this ownership and these businesses he created and built and produced value for society. And then it was in early 2020 that Musk sold almost all of his physical possessions. And another reason for doing so was because of the rising wealth inequality in the U.S. over the years, becoming a billionaire essentially had become pejorative and was generally viewed as a bad thing by the general public. Once Musk had sold his homes, he moved to Texas, spending much of his time in Austin, and then he rented a home that was owned by SpaceX that would be his primary residence.

Speaking of SpaceX, they made yet another achievement in 2020. For nearly the past decade, the U.S. hadn't been able to send anyone into space, and they were forced to rely on Russian rockets to get astronauts to the International Space Station. And it was in May of 2020, SpaceX changed that by sending two NASA astronauts to the space station in a Falcon 9. and this was the first ever launch of humans into orbit by a private company. Ten million people actually tuned in to watch it live, and on the Lex Freeman podcast, Musk had said, I'm not a religious person, but I nonetheless got on my knees and prayed for that mission. Let's take a quick break and hear from today's sponsors.

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slash income. This is a paid advertisement. All right. Back to the show. And here's another amazing stat I wanted to share related to SpaceX and Boeing. And I heard Isaacson share this at that Kansas City event I went to and I was just sort of blown away when he shared it. It was back in 2014, SpaceX and Boeing, they both received funding to build a rocket that would take astronauts to the space station. In Boeing, they ended up

receiving 40% more funding than SpaceX. And by the time SpaceX had succeeded in 2020, Boeing hadn't been able to even get an unmanned test flight to dock with the stations. And in that live event with Isaacson and Kansas City, he also stated that at the time, and it was October, for 2023, SpaceX had done 33 flights during the year of 2023, and Boeing still hadn't done a single test flight. And I think that really just points to the amazing innovation that is happening at SpaceX. It's really Musk's maniacal sense of urgency that prevents SpaceX and prevents Tesla from becoming too complacent, becoming too bloated, and too bureaucratic.

would constantly become worried whenever he saw people and his companies become complacent. And I think about this too from an employee standpoint. If you're someone who's motivated, you're hardworking and you're ready to make things happen. And if you found yourself at a company like Boeing or a company that's bureaucratic, too bloated, I have no idea what Boeing's culture is actually like. Think about the number of people who are driven, they're motivated, and they're in that position. Typically, they want to go to a company that's making things happen, like SpaceX, a company that's innovating. And you can just think about the downstream consequences of that, furthering the divide between a company like SpaceX and maybe a company like Boeing,

just as an example. Musk absolutely loved it when he interviewed someone and he saw the attitude of wanting to show up and have that maniacal sense of urgency, that really driven work ethic rather than seeing things like fancy credentials or an impressive resume. That's not something. something that really whows Musk. Turning back to the discussion on AI, Tesla, they were creating what they call Optimus in August of 2021. Musk believed that Tesla should really get serious about producing robots. And he was really impressed with the work that Boston Dynamics was doing.

More than anything, he wanted to help guide the direction of AI in a way that was beneficial to humanity overall. He didn't want Optimist to be intimidating or something that would look like it would hurt you. Later, he had said that he wants Optimus to look as human as possible, but then also add improvements to what humans can naturally do. One of the most difficult challenges for them was getting Optimus to walk, which is something that they did end up achieving. And once when Musk was testing out Optimus with a joystick, and he was able to have it pick up a box and hand it over to someone, then Musk, he gave Optimus a push to the chest to see if it would

fall over. And the stabilizers on it actually kept it on its feet. Musk, he took out his phone and started taking a video and a colleague had said that that's when you know that you really impressed him is when he starts filming what it is his companies have created. In the fall of 2022, Musk had stated, our goal is to make a useful humanoid robot as quickly as possible. Eventually, there would be millions of them. This means a future of abundance, a future where there is no poverty. We can afford to have universal basic income we give people. It really is a fundamental transformation of civilization, end quote. Now, Musk already had a ton on his plate, but like I mentioned, he was really, really concerned

about Larry Page and where he was taking the industry overall. And part of Musk's ultimate vision for optimists would be that it could learn by observing humans and it wouldn't technically need all these line-by-line instructions by the engineers. Similar to a human, it would be able to learn by just observing the world around it. They intentionally wanted to make it so it's really not that strong. And the initial real goal of it was to eliminate dangerous, repetitive, and boring tasks, which is a pretty amazing vision for what that can mean for society as a whole. I'll also mention that you can also learn more about Tesla's efforts around robotics and AI.

You can just go to Tesla.com slash AI, and they have some more information on their website there. And then people have also expressed concern around one of Elon's other companies, NeurLink, which essentially wants to insert chips into people's brains so that our brains can communicate directly with the internet without any of that lack time. You know, you stare at a phone, you have to type in to Google and all that. Neurrelink would just make all that happen so much faster. Neurlink was started in late 2016 with the vision that if humans work closely with technology, then they may be better positioned to protect themselves against the potential dangers of AI.

Neurlink is another classic example of Musk pushing people way beyond what they initially believed what was possible. Initially, the Neurlink products, they had four separate chips with each having a thousand threads, which would be implanted into different parts of the skull, and Musk just hated it. He said it was way too complex. He wanted just a single, elegant package, no wires, no connections, no router. He believed that there was no law of physics or no basic principle that prevented all of the functionality on just one device. As Isaacson writes here in Chapter 65, when the engineers tried to explain the need for the router, Musk's face turned stony.

Delete, delete, delete, delete. After they left a meeting, the engineers went through the usual stages of post-Musk distress disorder, baffled, then angry, then anxious. But then within a week, they got to the stage of being intrigued. They saw this new approach and they realized that it might actually work. Again, this reminds me of the interview I just had with Jim Quick, where so many of the limits, you know, we have these limits in our minds and we put these limits on ourselves. Musk only falls within the fundamental laws of physics and obey only those laws and those limits.

I'm not exactly sure why, but it seems that many people are wired to just sell themselves short a bit. At this point, we're at the 2021-2020 time period of Musk's life. And just for reference and expanding a bit on how the book is structured, I'm about two-thirds the way through it. The books of around 600 pages total in material and we're about 400 pages in. So a large part of the book is what's happened just in the past few years, 2021 through 2023. And much of that dives into Musk's purchase of Twitter, now known as X. One of the reasons Musk has become so popular in more recent years is because of Tesla's

rocketing stock price. And that actually led to Musk becoming the world's richest person. During the COVID crash in the market, Tesla's stock dropped to $25. And then it proceeded to rise by 10x by the beginning of 2021. That's less than a year later. And then on January 7th, 2021, he became worth $190 billion. That's when he surpassed Jeff Bezos in net worth. And then by October of 2021, Tesla became the sixth company in the U.S.

to be worth $1 trillion. Musk had hit those compensation targets I mentioned earlier that I believe were set in 2018 that had those super aggressive targets for revenue, profit, stock price. And yeah, the terms were originally set in February 2018 when Tesla was having those big issues with manufacturing that they definitely needed to overcome. In April of 2022, Tesla reported a net profit of $5 billion on revenue of $19 billion. And then Musk's payout from that 2018 compensation deal, it was around $56 billion in his net worth at the start of 2022 was a whopping $304 billion. In November of 2021, he had exercised some stock

options that were due to expire, and this led to him paying the single largest tax bill in American history, and that was $11 billion that he ended up paying in taxes. Generally, Musk hasn't had to pay too much capital gains taxes because he's had this huge ownership in these companies for so long, and then he's just continually deferring the taxes while his companies continue to grow and then the equity state grew with that. Before you get jealous of what Musk has achieved, Isaacson has a bit here about how Musk really wasn't that happy of a person in the fall of 2021. Musk had stated the following to Isaacson here that I'll quote, from 2007 onwards until maybe last year, it's been nonstop pain. There's a gun to your head,

make Tesla work. Pull a rabbit out of your hat, then pull another rabbit out of your hat. A Dream of rabbits flying through the air. If the next rabbit does not come out, you're dead. It takes a toll. You can't be in a constant fight for survival, always in adrenaline mode, and not have it hurt you. But there's something else I've found this year. It's that fighting to survive keeps you going for quite a while. When you are no longer in survivor die mode, it's not easy to get motivated every day, end quote.

Then Isaacson follows it up here, quote, this was an essential insight that Musk had about himself. When things were most dire, he got energized. It was the sage mentality from his South African childhood. But when he was not in Survivor Die mode, he felt unsettled. What should have been good times were unnerving for him. It prompted him to launch surges, stir up dramas, throw himself into battles he could have bypassed and bite off new endeavors, end quote. Brilliantly said there by Isaacson, I think most of us are sort of hardwired to eventually

become complacent, at least to some degree, when we hit some level of success or hit some number financially, Musk is just totally the opposite. Complacency is just what he's avoiding. And when he sees others become complacent, he just loses his mind. There's another interesting part here in chapter 69, which is a chapter on politics, which, you know, I'll be avoiding the politics side for purposes of this episode. But it also talks a little bit about his obsession with video games here. Video games, it helps sort of show his obsessive personality and his sort of tactical skill set and how he thinks about things super strategically in these super complex situations. Even at the age of 50, which was the age he was in 2021, he became obsessed with this multiplayer

strategy game on his iPhone called Polytopia. It's a 16-character game where players, they work to build an empire within that app. Musk became a came so good at this game that he was able to beat the game's developer from Sweden. Isaacson writes, what did his passion for the game say about him? And Musk said, I am just wired for war, basically, he answered. I just thought that was so, so fascinating, that response from Musk. He actually got so obsessed with this game that at times it even took priority over some of the meetings he had at Tesla.

He said it was the best game ever, and Elon and Kimball, they had put together some life lessons that they had learned from the game. The game taught Kimball that empathy isn't an asset if you want to achieve great things. And Elon knew that Kimball sort of fell short of what he could achieve because he had this empathy gene that Elon lacked. And Elon thought that it hurt Kimball in business. It's so much easier, I'm sure, to not exercise empathy when you're playing a game like Polytopia.

I love this other lesson they share here in the book. Do not fear losing. Musk had said, you will lose. and it will hurt the first 50 times. When you get used to losing, you will play each game with less emotion. This means that, you know, Musk operates in a way where he's just fearless, and he takes a lot of risks, and he knows that failure is okay. And in fact, failure is actually inevitable, at least at some parts of the journey.

Another lesson I'll share here is to double down. Throughout Musk's life, he's taken everything he's earned, and he's reinvested pretty much all of it back into the game of life. He had hundreds of millions from his sale of PayPal and essentially put all of that back into his new business ventures. And when you've reinvest and you compound the money, the time, the effort and you do that over decades, amazing things can start to happen. Elon, he ended up getting so addicted to Polytopia that he ended up having to delete it from his phone. And it consumed just so much of what he thought about. He was actually, he talks about how he is having dreams about it.

And it just consumed everything within his mind, which is sort of funny. given all that he has going on in life. Jumping to another topic, Isaacson tells this amazing story related to the Russia-Ukraine conflict. After Russia had invaded Ukraine, they had reached out to Musk asking him to provide Starlink stations so that they could get the connectivity that they needed the internet connection. And then two days later, 500 terminals had arrived in Ukraine, and this brought a lot of attention

and a lot of press to Starlink. One Ukrainian platoon stated that, if it weren't for Starlink, then they would have been losing the war. When you look at all that Starlink donated to Ukraine, Isaacson writes that it equated to around $80 million. Then jumping ahead to September of 2022, Ukraine was in the works of attempting a sneak attack on the Russian naval fleet, and they were sending six small drone submarines, and they were packed with explosives, and they were using Starlink to guide these drones and get them to that target. The problem in Elon's eyes is that there was a pretty reasonable chance that this was

going to spark the beginning of a nuclear war and just be a total disaster for the overall globe. And Elon had been told that if Ukraine had attacked the area that they were within Russia, then Russian law and doctrine would decrease such a response and to potentially open up the world to a nuclear war. So Elon determined that allowing the use of Starlink for the attack would just be a potentially be a total disaster. So he secretly told his engineers to turn off the coverage within 100 kilometers of the target. And thus the drones, they would get near to the Russian fleet and then they just lose connectivity and do no harm. Elon didn't want Starlink to be used for

offensive military purposes, really only defensive, which is why they ended up providing it to Ukraine. I just found that to be so incredibly fascinating how one man in the U.S. was able to send a text or send an email and completely changed the direction of where the world was heading by turning off the internet for a specific reason. And because of this enormous power, I believe that Musk went on and worked with the U.S. government. So there were sort of checks and balances between the two. And Musk is no longer able to make such a huge decision on his own, to the best of my knowledge, at least. At the beginning of 2023, more than 100,000 new satellite dishes were sent to Ukraine to aid them and expanding their internet service, which again is another amazing feat. Next, Isaacson turns to Elon's takeover of Twitter, which could be an entire episode in itself. I'll try and hit on some of the high points here.

As of early 2022, companies that Musk had initially funded and built up to this point, he had Tesla with around a $1 trillion market value. SpaceX around $100 billion, the boring company around $5.6 billion, and then Neurilink was around a $1 billion market value. And during this time, Musk had told Isaacson that he believed that Tesla was on his way to being the most valuable company in the world and on his way to making $1 trillion in profits every year. That's just sort of incomprehensible to even think about. At this point in his journey, he would typically create some sort of crisis at one of his own companies. Usually he didn't venture outside of his own companies unless something's going on with his family. He's stirring up drama. But this time, he decided to turn his attention outside of his business, which ended up being Twitter.

Elon had $10 billion in cash, and he was thinking about which products he liked, which products he enjoyed ewe. using, and for him, this was a pretty easy question to answer. He really liked Twitter. Plus, Elon was concerned with Twitter's use of censoring users and not being able to see what's going on with the algorithm and how things worked on the Twitter platform. He also believed that free speech is really essential to a functioning democracy. In Twitter in its form at the time, it wasn't rigorously adhering to that principle that Musk so strongly believed in. Elon had a meeting with Twitter executives to get a sense of what was happening

at the company. And after that meeting, he had said Twitter CEO Parag Agrawal, he's a nice guy, but what Twitter needs is a fire breathing dragon. And Parag is not that evidently. And then Musk, he worked his way onto the board of Twitter and he ended up acquiring roughly 9% of the company's shares. And he started throwing these various ideas to the Twitter board. And in any of he encouraged them to decrease the suppression of free speech. He wanted to charge users a small amount to get them verified, help keep the scammers and bots off the platform. And then just like his vision from over 20 years earlier, he wanted to turn Twitter into a payments platform where people could send money, hand out tips, and pay for exclusive content. And this is what he

actually envisioned for X.com early on in his career. Kimball was in Elon's ear essentially telling him that being on the board of Twitter isn't going to do anything. He's going to throw ideas out there in management. He just believed that was just going to ignore them and they're just going to do what they want. Elon had stated, I began to believe that Twitter was heading off a cliff and that I couldn't save it by just being a board member. So I thought, I should just buy it, take it private and fix it, end quote. Even though Twitter had announced that Elon was joining the board, Elon, he shot a text to Agrawal and said he wasn't joining the board. and he's going to be making an offer to buy Twitter instead because of him essentially changing his mind that being on the board wasn't going to do anything.

And then within a day, Musk's right-hand man, Jared Burchall, he was in talks with Morgan Stanley to figure out a price to pay for the company. And they came up with a proposed price of $54.20 per share. And that was a 54% premium above the price he originally paid when he started investing in Twitter and buying shares himself. In his offer letter, he stated, my offer is my best and final offer, and if it's not accepted, I would need to reconsider my position as a shareholder. Twitter has extraordinary potential, and I will unlock it, end quote.

Then Musk sent out the infamous tweet. All he said was, I made an offer. While the offer was out, Elon's friends were wondering what in the world was he doing. He was already plenty busy running all these companies, Tesla, SpaceX, and he told them that it would take five years to turn Twitter around. in the way that he envisioned doing so. His sort of vision for Twitter is that he wanted it to be a great platform for a user-generated content. This includes music, videos, stories, and he had put together a business case for why he believed

that Twitter could 5x its revenue to $26 billion by 2028, with the share from advertising decreasing from 90% down to 45%. And then he also wanted Twitter users to get paid for the content that they were creating on the platform. All of Musk's companies had an underlying mission that drove everything they did. Tesla's mission was to accelerate the world's transition to sustainable energy. SpaceX's mission was to make life multi-planetary. As for Twitter, he believed that preserving free speech was essential for preserving civilization.

And that sort of plays into SpaceX's mission because he wants to help preserve what we currently have on Earth so he can make life multi-planetary. As for Walter Isaacson opinion on the manner, he believed that Elon just simply wanted to own Twitter. It was fun for him. It was sort of like an amusement park. You know, he did have fun tweeting and he just wanted to own the whole thing for himself and preserve what he liked about it. Isaacson writes, I believe there was a psychological, personal yearning. Twitter was the ultimate playground.

As a kid, he was beaten and bullied on the playground. Never having been endowed with the emotional dexterity needed to thrive. on the rugged terrain. It instilled a deep pain and sometimes caused him to react to things far too emotionally, but it also is what girded him to be able to face the world and fight every battle fiercely. When he felt dinged up, cornered, bullied, it took him back to a place that was super painful, where he was dissed by his father and bullied by his classmates, but now he could own the playground, end quote.

Elon had lined up a number of investors to join him in investing in Twitter and owning it, And on April 25th, 2022, the Twitter board accepted his offer to buy the company. Jack Dorsey had sent Elon a text right after letting him know that Twitter was on the right path with him and he'll do whatever it takes to make it work. And then Elon realized that he might have overpaid for Twitter because he was getting a lot of red flags and how things like Twitter was assessing the number of users that were bots and not real people. And Elon's just like, how are you calculating this? he was questioning, Twitter didn't even know how many bots were really on the platform. They were sort of guessing and they have an incentive to underestimate it, just to underestimate the real number.

And that was really quite worrying to Elon. He had just purchased Twitter for a $44 billion valuation. And he actually almost didn't go through with the deal because he was almost certain that he overpaid, which was true in hindsight. And he was also realizing how big of a task he was actually taking on. He had said, quote, I've got a bad habit of biting off more than I can chew. Isaacson had said that this was one of the few times he had witnessed Elon being unsure of himself, but the deal did end up closing in October of 2022.

Then there's more here from 2022 on his personal family issues, which to be honest, I'd rather not get into. If you're interested, I'd encourage you to go out and purchase the book yourself. There's a bit here I found pretty humorous in Chapter 75. He was put into these extremely awkward situations, and Isaacson says that Musk's way of diffusing an awkward situation was to joke about it on Twitter. And as I'm pondering the way Musk operates, I'm also reminded of just how hard he is on himself and how hard he is on other people. He expects really a tremendous amount from his companies.

For example, for the Optimus Project within Tesla, he had told his team to just pretend that they're a startup and they're about to run out of money. I quote, all bad news should be given loudly and often. Good news can be said quietly and once, end quote. And people can get really motivated when they go out, go to work, and they see Musk out on the floor in the Tesla and SpaceX factories, you know, digging into the super fine details, understanding the most minute things in the rocket, questioning everything. Andy Krebs had related this to Napoleon. Napoleon's armies, they would do their best when Napoleon was out on the battlefield with the rest of the troops. Turning back to Twitter here, with Musk now owning the company, there was a big

clash of cultures. Twitter, they really prided themselves on being a friendly workplace and having high levels of empathy. And if you haven't caught on, Musk is sort of the opposite. Twitter, they had instituted a permanent work-from-home option in 2020, I believe, and they allowed for a mental day of rest each month. So Twitter had a culture of making their employees very comfortable, while Musk had the belief that being uncomfortable was a good thing. Upon Elon's purchase of the company, he immediately fired the CEO, and then he fired a few other of the top executives. One engineer at Twitter had said that they had been working on possible new features for years, but no one really acted on them, made the decision to implement

them. And then now all of a sudden, Elon buys the company, he comes in, and he's making these rapid changes practically overnight, just telling people to go implement things, launch it, move fast and break things is his approach to business. Elon had brought in three people close to him that Isaacson referred to as the Three Musketeers. And their job was to get rid of most of Twitter's software engineers. But they had to try and figure out who was the right fit for the culture Elon wanted, who wasn't the right fit. And they had all the code to sort through from 2,500 software engineers to try and assess who's worth keeping, who's not worth keeping. And Elon said a rule for them. So the Tesla autopilot team had 150,

engineers working on it. And then he said, you know, it's a pretty arbitrary number, but he said Twitter should come down to that number of 150. And I just mentioned they have 2,500. And it's not that Musk just wanted to get rid of engineers that weren't doing a good job. It's that he also had to cut costs significantly if he wanted to make Twitter a profitable business. So Elon was essentially demanding that like 90% of Twitter's employees need to be let go. And this really caused somewhat of an uproar around him because people essentially told him that Twitter wouldn't be able to operate if such drastic changes were made so suddenly. And it ended up being that the first bloodbath of layoffs, it resulted in about half the

company being let go. There's plenty in the book here about content moderation as well. Elon wanted to open up the platform and not perform as much censorship, but he couldn't allow hate speech on the platform because that would mean all advertisers just, want nothing to do with Twitter. And Twitter's ad revenue would essentially fall off a cliff if he opened up free speech too much. So when Musk took over around 90% of Twitter's revenue had come from advertising. And then according to the book, advertising was falling a lot. It fell by over 50% after Elon had took over. And that's partially due to just the overall ad market pulling back,

but then some advertisers pulled back their spend after Elon took over. And then to make matters worse, many of the Twitter executives that were well respected in the advertising industry, they either quit or they were fired. And many companies that were advertisers were just fleeing the platform as well. Around October of 2022, Isaacson stated that ad sales plummeted by 80% month over month, which is just like, you know, that's just a nightmare situation for Musk. To help counter this drop in advertising, Elon went ahead and launched what he called Twitter Blue. This is essentially a monthly fee that users paid for a blue check mark. And it helps Twitter with the bots and the scammers and also provide them a little bit of a revenue stream as well. And then once they

launched this, now Musk had to deal with this tsunami of fake accounts trying to game the verification and the blue check system. And there's so many impersonators on the platform, as I'm sure many Twitter users are aware of. Isaacson writes, while the Twitter blue rollout was turning into a Heidenberg level flame out, Musk went into crisis mode. That Wednesday and Thursday, he became dark, angry, resentful, and churlish, end quote. Looking ahead, Musk saw a cash shortfall of billions. So he went ahead and sold $4 billion in stock to fund the cash burn of Twitter, and he even sent an email to Twitter employees letting them know that they have to buckle down and they have to get the work. Otherwise, the whole business may need to shut down or declare

bankruptcy. And when Twitter was a public company, Jack Dorsey had announced that Twitter would be a work at home forever company. And Musk definitely quickly changed that. He said that everyone is required to be in the office for a minimum of 40 hours per week. And this just wasn't up for debate. If you're not willing to come to the office, then you can't work with Twitter. He said that your resignation is accepted if you don't show up. End of story. Just two weeks after making his purchase, Musk was at the point where it was pretty clear that he sort of regretted purchasing this company. He was vending to his Tesla Robo Taxi team saying, I don't know why I did it. However bad you think the Twitter culture is, multiply that by 10. And Elon was also interviewed

for a business summit that asked him, what his advice was for someone that wanted to be the next Elon Musk? And he responded, I'd be careful what you wish for. I'm not sure how many people would actually like to be me. The amount that I torture myself is next level, frankly. Now, Musk was pressuring his three musketeers that more job cuts were needed. He said that engineers that stuck around, they needed to have three things. They needed to be excellent. They needed to be trustworthy. And they had to be driven. So the first round of layoffs was to get rid of anyone that wasn't excellent. Then they sorted through all of Twitter's internal messages to filter out anyone that wasn't trustworthy. So as for finding those that were driven, they found that they

could make it more of a self-selection approach instead of sifting through every single employee and trying to figure out, okay, are they driven? Are they not driven? And he essentially sent a message to them saying that the old Twitter culture was gone. And now it was time to start making these drastic changes in the company, start working more hours. And they believed that if employees knew that they weren't going to adopt this all-in mindset that Elon had, then they would happily either step up to the challenge or be open about it and just say it's not for them. So that way, they didn't have to sift through every single person and then make this pure judgment call. Once Elon sent that email out on November 16th, 2022, explaining that hardcore

approach with long hours, it was just shy of 2,500 employees or 69% of the workforce that let them know that they wanted to be a part of it, which far exceeded many of their expectations. After it was all sudden done, around 75 to 80% of Twitter's workforce had been cut. They started around 8,000 employees and they dwindled it down to just over 2,000. And Muscat said that it was a miracle that Twitter even survived. They kept the platform running and that each morning he woke up and the app still seemed to be working for him, which is quite funny, I think, in my eyes. when I attended Isaacson's live event, Isaacson had said that he actually marvels that Twitter

hasn't crashed and burned. And it's amazing to me that Isaacson, who studied Elon more than anyone, he views this as such a big accomplishment for someone who has done all these things prior to even buying Twitter. And then there's also the whole Twitter files debacle where it was found that Twitter had worked with the government to suppress certain things. Not going to get into that. And I also wanted to mention this bit on Elon's two teenage sons. He had a chance to reconnect with them and his family over Christmas in 2022,

amidst all the madness at Twitter. There were these two twins Elon has that are around 16 years old. Their name's Damien and Kai. And Elon believed that these two kids were way too smart for high school. He had discussed with Kai the possibility of working at Twitter because he was just an outstanding programmer. than he could do the high school portion online. Damien was just as brilliant, but had a different interest than Kai.

Damien was working on quantum computing and cryptography, and he was doing this in an academic lab of a particle physicist. I'm not going to act like I know what that means. He had enrolled at one of the nation's top research universities, and Musk thought that Damien was even too smart for undergrad studies. This doesn't touch on all of the children that were mentioned here in Chapter 92, but it points to some of what his kids are up to. Then I wanted to talk a little bit about the future of Tesla.

Tesla is a classic example of a company that is somewhat misunderstood. And I'm saying this as someone who is nowhere near an expert on this company. I don't own shares in Tesla and don't have any attention to buy any. Oftentimes people would say that the stock is overvalued because they make X number of cars and all these other automakers make so many more cars and they actually make money. Tesla is actually profitable now, but historically they haven't been. But I think the point that's missing is that Tesla has the potential, and is currently, at least in my opinion, much, much more than a car company.

And they definitely have aspirations to do much more than just produce and sell cars. One example is how Musk was inspired by OpenAI, and he wanted Tesla vehicles to learn from how humans drove. So rather than Tesla themselves determining how autopilot was. would react in certain situations, maybe the autopilot could collect this data from millions of human drivers and then use that data to determine how these vehicles should be driven on full self-driving. And this is also known as machine learning, as many know.

And then Tesla, they're collecting all this vast amounts of data. And with their developments with Optimus, artificial intelligence, and various other things they're working on, I don't think it's outside the realm of possibility that Tesla will become the most valuable company in the world someday. You know, it's not a prediction. Certainly could happen. There's a story towards the end of the book where Musk is riding in a Tesla and he's testing out the full self-driving feature.

And the car took a 25-minute trip. It was complex, had all these turns, this difficult course it had to take, and it had no human assistance. And them collecting all this data and have this self-driving capability, it's pretty huge, in my opinion. And I think it potentially gives Tesla a huge leg up going forward because, because currently there's something like two million Teslas around the world that are constantly collecting vast amounts of data for them to continue to improve the car itself and then improve that

full self-driving feature. So Tesla is in a very unique position and I think there's a ton of potential for them to differentiate themselves in that aspect when you think about the data and what the potential implications of that are and then having all these really smart engineers is working on the artificial intelligence side. Then towards the end of the book, I thought it was interesting that Isaacson mentioned that Musk had launched an AI company in 2023. You know, there's sort of that falling out with OpenAI. Now he's getting in doing things with Tesla on the AI front.

Now he's created another company. It's called X.A.I. And he personally recruited a leading AI researcher from Google's DeepMind Unit to be the chief engineer. Isaacson had said that Musk now would be running six companies. You have Tesla. SpaceX, Twitter, The Boring Company, NeurLink, and now X.aI. And he comments that that's three times as many companies as what Steve Jobs was in charge of at his peak, which was just Apple and Pixar.

This company, X.aI, it's essentially a competitor to OpenAI, and one of its primary goals was to ensure that human consciousness wasn't destroyed by what AI might become. And then the final chapter of the book here, this gargantuan book, is on the Starship, launch in April of 2023. Apparently this rocket is so big that eventually it would be able to take a fleet of a thousand people to Mars to sustain a colony on Mars. Their goal with the launch was to just get it off the launch pad, clear the pad, rise high enough so it's out of sight, and then essentially intentionally blow it up above the water so it didn't cause any damage. And then this sort of launch gave SpaceX necessary information and data to move forward.

with what they wanted to do with that. And then the Starship launch actually ended up being a big success. Isaacson explains that this story is emblematic of Musk. Someone who aims high, acts impulsively, takes wild risks, and accomplishes big things. And that mission is kind of interesting. I think people will see on the news that, oh, this rocket blew up when it was in space exercise, it was a really big success. But interestingly, it was actually in the public's eyes, it's like, what the heck,

why is he blowing this up? It probably looks like a failure. So I find that quite interesting as well where SpaceX needs to do what they need to do. And the public has their own views and opinions on what's happening. So it's just really hard to comprehend just how much Musk has going on with these six different companies. I honestly don't even know how he functions, which is why this makes for such a fascinating biography to read. At the time of recording here in late 2023, Musk is only 52 years old, so he still has plenty more time to continue writing his story. And it's going to be an interesting one to follow along on in the years to come. So with that, that concludes the book.

I'd love to hear what you thought of this episode. What were your big takeaways? If you read the book, did you like it? Did the book or the episode make a big impact on you? You can let me know by tweeting at me and sharing the episode on Twitter. My handle is at Clay underscore Fink, C-L-A-Y-U-N-C-K. Or you can just shoot me an email. I'd love to hear from you. My email is Clay at theinvestorspodcast.com. Thanks so much for tuning in and I hope to see you again next week. Have a good one. Thank you for listening to TIP.

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