Episode 5: Insane Mode

Elon Musk has been compared to Ironman’s Tony Stark, and he’s perhaps the most prominent leader and public figure of all car companies today. But how did Elon become the person he is today, and how has his personality shaped Tesla as a company?

Credits

Executive Producer & Host: Kristofor Lawson.

Mixing & Production by James Parkinson.

Jasmine Mee Lee is our assistant producer.

Artwork by Andrew Millist.

Theme Music by Nic Buchanan.

Other music in the episode from Breakmaster Cylinder, and our ad music comes from Epidemic Sound.

Transcript

George Blankenship (Tesla Event):I now have the honour of introducing the person who, on a daily basis at our company, pushes the ideal that nothing is impossible. Ladies and gentlemen, Mr Elon Musk!

KRIS: Telsa just wouldn’t be the same without Elon Musk. As an early investor, inaugural Chairman, majority shareholder and CEO, there is no doubt he’s steered the company into its prominent position in the electric vehicle industry. He’s been compared to Ironman’s Tony Stark, and he’s perhaps the most prominent leader and public figure of all car companies today.

DANA HULL: You know, Elon is a larger than life personality.

KRIS: Once again, its Bloomberg reporter Dana Hull.

DANA HULL: He has a voracious mind. He is an incredibly avid reader. He's really into gaming… I think he is demanding and exacting, but he's demanding and exacting of himself as well. I mean he works incredibly hard running two companies simultaneously. He just has like a voracious curiosity and a really kind of ambitious mind, and he thinks about things in the future, and I think he inspires people because of that.

KRIS: But how did Elon become the person he is today, and how has his personality shaped Tesla as a company?

KRIS: From Lawson Media, This is Supercharged. A show about power, conflict, and the people who are driving change. I’m Kristofor Lawson, and this season we’re exploring electric vehicles, and how Tesla is forcing the entire automotive industry to move towards an electric future.

KRIS: This is episode five: Insane Mode.

[Episode Montage]

KRIS: Elon Musk was born and raised in Pretoria, South Africa to a Canadian mother and South African father. Like many innovators and entrepreneurs, Elon showed great aptitude from a young age. In a 2017 interview with Rolling Stone, he stated that he was “raised by books”. In 1983 at age 12, Elon created a computer game called “Blastar”, which he programmed entirely by himself. He then later sold it to a computer magazine for $500.

MELISSA SCHILLING: Back then, we didn't even have the internet. Right? There was no YouTube tutorial, there wasn't even Windows. He was building a computer game when we had DOS. That was a command-line interface and it was really hard to learn.

KRIS: That’s Melissa Schilling, author of Quirky, a book that explores the science behind the traits and quirks that drive creative geniuses to make spectacular breakthroughs.

MELISSA SCHILLING: Most people didn't even have computers back then. So for him to teach himself how to programme a computer and to make this video game is really astonishing. So I'm sure when he did it and sold it, it gave him an intense sense of, "Wow, I can do things that actually make money. If I set my mind to something, I can achieve things that other people will be really surprised by." So that was a big important early win for him that I think helped contribute to his sense of self efficacy.

KRIS: By 1988, Elon had obtained a Canadian passport and left South Africa to attend university in Ontario, Canada. A few years later, he would arrive in the United States and enroll at Stanford with the intention to do a PhD on energy storage technology for electric vehicles - although he dropped out after just two days to pursue an internet startup.  

KRIS: Musk, along with his brother Kimbal, founded his first company Zip2 in 1995. Zip2 was essentially an internet version of a telephone directory, and it had maps included. It was sold in 1999 to Compaq for $307 million US dollars.

KRIS: That same year, Musk founded his second company X.com, one of the world’s first online banks. Less than 6 months into its existence the company merged with Confinity, its main competitor, and was renamed PayPal, after the product that Confinity were already developing prior to the merger.

MELISSA SCHILLING: He had a vision of the entire financial system being put on the internet. So, what he wanted to do was something much grander than PayPal. And that's what X.com was supposed to be for.

MELISSA SCHILLING: Now, he was disappointed a little bit because PayPal had an immediate payoff and its use was very clear to people. And so people started focusing on PayPal as opposed to a complete digital financial system. And so he was a little bit disappointed by that because he wanted to see something far grander...

KRIS: Still, the merger paid off for Elon, setting him on a path for further success. In 2002, PayPal was acquired by eBay for $1.5 billion US dollars. Musk walked away with $150 million in profit, and went on to establish his next company, SpaceX that same year.

KRIS: As a young man, Elon Musk had a vision of the sort of work he wanted to do, and the problems he wanted to help solve - and by this point in his career he had already tackled two of them.

Elon Musk: When I was in college, I tried to think “what are the really big problems that face the world, that which will most affect the future of humanity?”. And the three that I thought were the most important were the internet, transition to a sustainable energy economy, and a third was space exploration, in particular becoming - making life multiplanetary.

KRIS: That’s Musk in a 2008 interview with The Henry Ford museum. Although he has had financial success through his business ventures, Elon’s motivations have always been greater. And part of that drive to solve some of the world’s biggest problems was inspired by the kind of role models that he looks up to - people like Steve Jobs and Bill Gates. And he also stated in that same 2008 interview, that he takes more inspiration from Thomas Edison than his company’s namesake, Nikola Tesla.

Elon Musk: I think, you know some of the obvious role models - I think Edison was certainly a role model, probably one of the biggest role models. It’s an interesting contrast, like Edison vs Tesla - because it’s interesting, you know, the car company is called Tesla - and the reason it’s called Tesla is because we use an AC induction motor, which is an architecture that Tesla developed. And the guy probably deserves a little more play than he gets in current society. But on balance, I’m a bigger fan of Edison than Tesla, because Edison brought his stuff to market and made those inventions accessible to the world, whereas Tesla didn’t really do that.

KRIS: But Melissa Schilling says that she actually sees more similarities between Musk and Nikola Tesla...with a touch of Steve Jobs thrown in the mix as well.

MELISSA SCHILLING: I think they are a lot alike. In fact, at one point when I was studying them, I spent about a year at first studying Steve Jobs before I got to Nikola Tesla and Elon and at some point, I had this funny feeling that somehow Elon Musk was the secret love child of Nikola Tesla and Steve Jobs although I couldn't figure out the logistics of how that worked. But, he has this interesting blend because like Nikola Tesla, he's got the photographic memory. You know, Nikola Tesla also had an obsession with Mars, a complete obsession with Mars which is just a weird, strange coincidence, right? Nikola Tesla had the huge self efficacy, Elon and he both have this incredible intelligence where they could do calculus and advanced physics in their heads. So they have these things in common.

MELISSA SCHILLING: And also the intense, intense idealism they both have in common, and the sort of social awkwardness, I think, they have in common. But, Steve Jobs had a lot of those traits but Steve Jobs could also be obstreperous and difficult and aggressive. And I think sometimes Elon can be like that, too. But there are some times when Elon has done things at his company that people compare to Steve Jobs, perhaps in a negative way.

MELISSA SCHILLING: But it's part of this “I'm going to get it done, whether you like it or not” attitude. And also, all three of them are very low self monitors, which means none of them invested a lot of energy in thinking about how they were perceived by others - actually Nikola Tesla was quite worried about his physical appearance. But, he didn't monitor the things he said or the way he behaved to seem normal. That was not part of his motivation.

KRIS: But perhaps the strongest trait that Elon shares with Nikola Tesla is his outlook on the world and how that influences the work he pursues.

MELISSA SCHILLING: There is a form of religion in there, right? A belief, an intense conviction about what you can do in the world that is beyond what we see around us. And I think that Elon has that right. He sees the world we're going to build on Mars. And to him, it's real. And to other people it's science fiction. And to have that intense faith, that’s a form of religion, I would say - it’s not a traditional religion, it's a form of spirituality.

MELISSA SCHILLING: Now, the one thing he doesn't have, he doesn't have the charisma, I don't think. He's not known for being a great storyteller or giving great speeches, not the way that Steve Jobs was or the way perhaps Nikola Tesla was. But, people believe in him.

Elon Musk (Tesla Model S Launch): It’s about breaking a spell. So the world has been under this illusion that electric cars can not be as good as gasoline cars. That if you have to go with an electric car you’re accepting a product that’s worse. What the Model S is fundamentally about is breaking that illusion. IT’s showing that an electric car can in fact be the best car in the world. That’s what makes it really important.

KRIS: It’s Musk’s ambition and forward-thinking mindset that has enabled him to convince investors and customers to buy into his grand vision for Tesla. And since he took over as CEO in 2008, Elon has become the face of the company. Here’s Dana Hull.

DANA: Tesla and Elon are very intertwined. Here in the United States, in terms of corporate America, he’s probably one of the most well known CEOs that we have. He's very active on Twitter. And he markets the company like no other. So, the Tesla brand recognition is very intertwined with Musk as a person, and because Elon is a futurist who's involved in a lot of other endeavours, he's able to kind of pull off these marketing events that benefit Tesla in a way that would be very difficult for anyone else to do.

KRIS: And Elon’s visionary way of thinking influences every move Tesla makes.

EDWARD NEIDERMEYER: Tesla has become more and more about Elon Musk.

KRIS: This is author, Edward Neidermeyer.

EDWARD NEIDERMEYER: He's become more and more central to everything that the company does, but particularly its image and I think that, you know, as that's happened more and more that, you know, that's happened as they've gotten more into the mass market with the Model 3, which actually requires, again, a very different kind of culture. And you know, what we're seeing now is that there are divergences between what is good for Tesla, and what is good for Elon Musk. And unfortunately, Elon Musk in his image inside that company seemed to be more important than what's the right thing for the company, period. And if you look at their governance, the way their board is set up, you can understand sort of why that's happened. Elon Musk has basically, you know, the original founders have all been out for a long time, and he really just has a stranglehold on on power at that company. And some of that has been good, but again, as you get into a more mass market scale, no one person can manage, you know, 35,000 employees, which is what Tesla has. The only thing that can manage that scale is culture.

KRIS: When you look at an industry like space exploration, where grand ideas are embraced, Elon’s ambitious mind translates really well to that environment - and we clearly see that with everything Musk is achieving and striving for at SpaceX. But the automotive industry requires a very different kind of approach. And a lot of the problems that Tesla has experienced, as they move further into mass market vehicles, is directly related to Musk’s bold vision for the company.

EDWARD NEIDERMEYER: You have to be a team player and a consensus builder to really rise to the top of one of these major automakers. When you have a smaller, premium automaker, that's where traditionally you've seen the Elon Musk type characters - whether that's Enzo Ferrari or Ferruccio Lamborghini or Colin Chapman at Lotus. To make a great premium car you need that uncompromised artistic, almost vision to be realized, right? It’s, one person is going to have an artistic vision that a committee is just not going to have. And I think the Model X is a really interesting illustration of that. The Model X could not get built by any other automaker because people from the manufacturing and quality assurance would have just said “listen, those doors, I get it, they look cool, but the costs are just going to be out of control, let's just put regular doors on there”. And ultimately they would win that debate. Inside of Tesla, the culture is very much one where people do not question Elon Musk's leadership, even when they know better. There just isn't a counterbalance. It's Elon Musk's vision, and everybody else trying to make that into reality. But what you don't have are like, as many robust debates, you know because people who are involved in this company, find it very difficult, if not impossible, to stand up to Elon Musk’s visions and to say, “you know what, that seems like a good idea but actually, if you really look at it, it's not going to be.”

KRIS: And with all of his power and influence at Tesla, Elon Musk has become so important that the company’s success or failure rests on his shoulders.

EDWARD NEIDERMEYER: In a way, the ultimate failure of leadership is when you build a company that cannot succeed without you. And my concern is, I think that Elon Musk may have done that. It's very difficult to imagine that Tesla would be able to certainly keep raising money the way they have, I don't know that they would have the brand image that they have, the appeal of the cars, and just sort of the marketing, and the PR that he does just by being him is so important. And also culturally, inside the company, there isn't a self-sustaining culture. The culture at Tesla is “what will Elon, think about it about it? If Elon will think this is a good idea, then we're going to do it. If he doesn't think it's a good idea, we won't do it.”, that's the culture. And so you remove him from it, and the culture becomes rudderless. He is both Tesla's greatest asset and its greatest liability.

KRIS: And after the break, Tesla’s stability is tested as a single tweet costs Elon Musk his position as Chairman.

[ AD BREAK ]

KRIS: Through his many ventures, Elon Musk has risen to prominence as an incredibly public figure. He has a passionate fan base of people who believe in his aspirations, including 30 million followers on Twitter. But that profile also comes with responsibility, especially when you’re the Chairperson and CEO of a public company.  

KRIS: On the 7th of August 2018, Musk posted an extremely controversial statement on Twitter - quote: “Am considering taking Tesla private at $420. Funding secured.” The tweet caused serious disruptions to the stock market and Tesla’s stock price rose by more than six percent.

DANA HULL: That tweet caused enormous havoc. I mean everyone was like, "Well wait, who are the investors?" Ultimately, the United States Securities and Exchange Commission sued Musk for securities fraud.

SEC press conference: Today, the SEC filed securities fraud charges against Elon Musk, the Chairman and CEO of Tesla Motors…. The SEC’s complaint, which was filed earlier today in Federal District Court seeks a finding that Musk committed securities fraud - an injunction prohibiting him from doing so in the future, civil penalties, discouragement of any ill gotten gains, and a bare prohibiting Musk from serving as an officer or director of a public company in the future.

KRIS: That’s the SEC’s Stephanie Avakian at a press conference on September 27, 2018. So this was a big deal. Taking Tesla private would mean removing all of its public shareholders, and Musk’s statement was problematic because it simply wasn’t true.

HARVEY PITT: All of this was just part of Mr. Musk's very fertile imagination, but had no real basis in reality.

KRIS: This is Harvey Pitt, former Chairman of the SEC, from 2001 to 2003.

HARVEY PITT: A major principle function of the SEC is to guard the market from the pernicious conduct of fraud artists and to ensure the fairness of our securities markets as well as full and fair disclosure by public companies that have raised money from the investing public.

HARVEY PITT: Mr. Musk's tweet about taking the company private was deemed by the SEC to be materially misleading because among other things, there was no transaction, there was no financing, there had been no price established, there had been no special committee by the board of directors to govern all of this….

SEC press conference: While leading Tesla’s investors to believe that he had a firm offer in hand, we allege that Musk had arrived at the price of $420 dollars by assuming a 20 percent premium of Tesla’s then existing share price, and then rounding up to $420 dollars because of the significance of that number in marijuana culture, and his belief that his girlfriend would be amused by it.

HARVEY PITT: The tweet appeared designed to have an immediate market impact and… This created an impression in the marketplace that he already had negotiated a transaction in which a willing buyer or group of buyers were willing to pay a specific price, which he disclosed… and the difficulty with that statement was most corporations are careful enough not to make important disclosures using Twitter or similar apps…

KRIS: Just two days after that SEC press conference, it was announced that Elon Musk had reached a settlement, agreeing to step down as Chairman of Tesla. He also agreed to pay $40m USD in penalties.  

HARVEY PITT: There actually were two settlements. It appeared that initially Tesla and its lawyers had agreed to settle, and then Mr. Musk decided he did not want to settle with the SEC. And he threw what some might call a hissy and got the board of directors to agree that it would support him and not settle the case with the SEC. The result of that was that a second settlement ultimately was crafted but the second settlement was much worse for Mr. Musk and for Tesla than the original settlement had been, because Mr. Musk had tried once to renege on a settlement. And the SEC, once bitten was going to protect itself and the interests of investors. So I think it's important to realise that there was some very significant restraints that were intended to be imposed on Mr. Musk as a result of the second effort at settling the case. And, he ultimately went through and signed that settlement.

KRIS: That final settlement also required that Tesla appoint an independent Chairperson, making Musk ineligible for the position for three years. Additionally, Tesla had to appoint two new independent directors to its board, and Musk’s tweets and communications with investors now had to be monitored. But this didn’t stop Elon from speaking out.  

HARVEY PITT: Mr. Musk, after the settlement went on an attack of the SEC. I don't think that the SEC paid or pays any attention when people want to attack it in the petulant manner exhibited by Mr. Musk… calling it the Short sellers Enrichment Commission. Now, he is not required to admire or think well of the SEC, but… what he is required to do, however, is to live up to the terms of his agreement, that there would be an adult in the room, and before Mr. Musk would issue anymore tweets, his tweets would be reviewed by whoever was serving as the adult in the room.

KRIS: This comes back to the kind of person Elon Musk is. Even the SEC wasn’t going to hold him back. Here’s Melissa Schilling.

MELISSA SCHILLING: He's brilliant, he's super, super competent and capable but he cannot be managed in the way you might want to manage him. So you just hold on and go for the ride.

MELISSA SCHILLING: Would it be better if maybe there were limits on the things he said on Twitter? Probably. You know, having the stock be volatile is bad. Having people lose faith in the stock is bad because you need the stock to do well in order to sustain being able to get access to capital, and he needs capital to run that company because remember, it's a relatively young company. So it consumes a lot of cash. Companies that are growing as fast as Tesla are growing are going to be in the red for a while, that's normal. That doesn't mean they're failing. That's just the process of rapid growth because you have to build out assets long before you can earn profits on them.

MELISSA SCHILLING: So, having some limits on the things he says on Twitter, probably good. But, the second part, could the board of directors manage him? Probably not. He's going to be his own person. He is never going to defer to authority, probably of any kind. So the only point at which he's going to be restrained in what he says on Twitter is going to be the point at which he decides to restrain himself. It’s not going to be somebody else restraining him.

DANA HULL: It's kind of a double-edged sword, because on the one hand what fans and customers love about Elon is that he is accessible. I mean, he will answer customer questions and complaints and feedback on Twitter. If you catch him at the right moment, he'll respond. He's seen as very accessible and authentic, which is an attribute that a lot of people like. But on the downside, if he's tweeting out material information and moving the stock market, in the eyes of regulators, that is securities fraud.

KRIS: And Elon Musk seems to have made a bit of a habit of his controversial or misleading tweets. On the 20th of February, 2019 Musk posted, quote “Tesla made 0 cars in 2011, but will make around 500k in 2019”. This figure wasn’t consistent with numbers released by the company, and four hours later Musk had backtracked, clarifying that deliveries for 2019 were estimated to be “about 400k.”

KRIS: Another series of tweets in 2018 landed Musk in a court case. It all began with efforts to rescue a young soccer team and their coach who had been trapped in a cave in Thailand. Musk had offered to help by building a custom submarine, but by the time it was ready for deployment, a rescue mission was already underway. Vernon Unsworth, a British diver involved in the rescue had told CNN that Musk could, quote "stick the submarine where it hurts", believing it to be a PR stunt. Musk retaliated on Twitter, calling Unsworth a “pedo guy”, before swiftly deleting the post. Unsworth sued Musk for defamation, before Musk hired a private investigator to look into Unsworth, in order to backup his claim. Throughout the court case, Musk maintained his stance that his tweet was an insult, not defamation. Following a two day trial, on December 6, 2019, a jury found that Musk’s tweets did not meet the legal standard of defamation.

KRIS: It’s worth noting that at the time of recording, several of Musk’s questionable tweets are still online, including his initial posts about taking Tesla private. While Musk is clearly a smart and successful innovator, far too often, his actions have negatively impacted Tesla. Here’s Harvey Pitt.

HARVEY PITT: For shareholders in Tesla, why would anyone want to see their CEO behave petulantly and attack a regulator that could exercise what many believe could be life and death power over the company. It's just not wise to wave a red flag in front of a bull, but Mr. Musk seems to enjoy doing that.

HARVEY PITT: I think he is obviously a creative genius. He had very strong ideas about what electric cars could do, and as we are all witnessing around the globe, Tesla’s efforts are being emulated by virtually every major automobile manufacturer now. And Tesla has had a very good public reception, although it has had some serious operating problems. It's not been able to deliver cars at anywhere near the pace it requires. It is losing money at an alarming rate and it's debt load is constantly increasing.

HARVEY PITT: In that environment, what shareholders deserve is to have a leader who combines Mr. Musk's creativity and his creative genius with a leader who understands how to operate an enormous manufacturing concern and knows how to put everything together in a way that assures the public that the efforts of the company are directed at solving its operational problems and taking full advantage of the creative genius that has gotten them so much acclaim.

HARVEY PITT: It seems to me that Mr. Musk has 50% of that equation, but he is lacking in the qualities that I believe reasonable investors would find reassuring in a CEO of an enterprise that has had more than its share of operational difficulties.

KRIS: Obviously, Elon Musk also has his responsibilities with SpaceX, and Harvey says dividing his time across both companies, as well as his many other commitments, could be making matters worse.

HARVEY PITT: It's certainly possible to take two well-established, highly efficient companies, and manage both of them in a way that promotes shareholder values, takes advantage of synergies, and produces good results for both companies. I believe when you are dealing with two start-ups that are on the outer edges of corporate developments; one electrical cars and the other space exploration, neither of which can be run pursuant to an already existing template. It becomes exceedingly difficult for any individual, even one as creative as Mr. Musk to run both companies equally well and serve the shareholders of both companies.

HARVEY PITT: I think there is a major risk in trying to do too much, and do so with what clearly appears to be, far too little in the way of resources and the like.

DANA HULL: I think it has been difficult for him at times to delegate…

KRIS: Again, this is Dana Hull.

DANA HULL: One of the criticisms of Tesla is that not only does Tesla not have a COO, but Elon is not a full-time CEO. He's not there every day. He spends a lot of time on SpaceX. But that said, he works an incredible number of hours, so whether he's physically there in the CEO chair from nine to five every day doesn't really matter. I mean he's always very engaged with what's going on in the company. But I do worry about him burning out. I mean he is running two companies, and that's a tall order for anyone. It's very hard to do successfully. And you have to just sort of wonder about succession planning. If Elon ever wanted to take a step back and just focus on SpaceX, who would run Tesla, who would be the heir apparent? And that's not very clear right now.

DANA HULL: It's rare for CEOs to be involved in so many projects.

DANA HULL: Critics will say that he's stretched too thin. He really just needs to focus on Tesla, that Tesla needs a CEO who can just be 100% there. But he wouldn't be Elon if he did that. So I guess I'm just curious about his own time management. Is he sleeping well at night, or is he an insomniac? You know just how is he sort of doing personally because he’s talked quite openly about the excruciating toll that all of this has taken on him. And the CEO of the company should not need to sleep on the factory floor to make sure that things are getting done.

DANA HULL: I mean the CEO company should not need to sleep on the factory floor to make sure that things are getting done. So people see it as an indication of just how dedicated to Tesla Musk is, and I'm not doubting that, but I don't think it's necessarily a positive thing. I think it raises questions about the ability of everyone else to get things done and chains of command and the delegation piece.

KRIS: As Tesla moves forward, unwavering in their mission, their biggest challenges are yet to come. But all eyes will be on Elon Musk, the one person on which this company's fate rests.

EDWARD NEIDERMEYER: You know, the his fans say that it's not about the money for him. And obviously when you hear you know, someone say a billionaire doesn't care about money that's that rarely rings true, right? But I think in the case of Tesla, there is actually some truth to that, because this pattern that we've seen with him on, you know, I think there's there's never really been a point at which Tesla ever seemed like it would actually make a lot of money. But I think what he did see was that Tesla could be an amazingly strong brand. And that by associating that brand with him and him with that brand… it could make him into, you know, this, this really popular Beloved, you know, popular culture figure. And he's done that. He wanted to be seen as the visionary behind Tesla. He's built his image to around these altruistic ideas; saving the planet from pollution, building another home for humans in the stars. I think those have been really powerful at building that image as well. And again, I think that's what motivates him is, I think those goals genuinely motivate him. But I think also the idea that he is this guy that is solving these heroic problems. He clearly wants to be seen as a hero. And he is seen by many as a hero.

KRIS: Coming up on the final episode of Supercharged for Season 1, as our transition to sustainable energy continues, how will our electric grid adapt? And what does the future hold for Tesla?

[Episode 6 Montage + Credits]

ENDS

Show Comments