Tesla

"“When Moritz invested, he was like, ‘We should hire a CEO.’ And I said, ‘Great, I don’t want to be CEO,’ ” Musk said. “I had no desire to be a CEO. It’s really a lot of chores... Being CEO sucks.” (Musk added that he had “tried hard not to be CEO of Tesla.”)"

"The tone was set from the top. Engineer William Wu remembered that Musk expected employees who worked late on a Friday night to return by Saturday morning. (Later, Wu purchased shares early in Tesla, just after its IPO, based on this experience. “[ Workaholism] does no good for me as an employee, but then I feel like, if Elon does that at Tesla, then Tesla’s going to succeed no matter what. It’s painful to work with him as an employee—but as an investor in his company, it’s a wise decision.”)"

"outfit their homes with solar panels. Tesla and SpaceX help each other as well. They exchange knowledge around materials, manufacturing techniques, and the intricacies of operating factories that build so much stuff from the ground up."

"Each one of his businesses is interconnected in the short term and the long term. Tesla makes battery packs that SolarCity can then sell to end customers. SolarCity supplies Tesla’s charging stations with solar panels, helping Tesla to provide free recharging to its drivers. Newly minted Model S owners regularly opt to begin living the Musk Lifestyle and"

"As he reviewed the workflow, he realized there was no standardization of what was being done at workstations. This was because the design of the vehicle kept changing, and without standardized work, it was harder to know if the installation of parts was the problem or if there was a legitimate design flaw. Normally, the steps would have been plotted out years in advance; tested innumerable times; certified and documented in a picture book for workers to memorize. Tesla hadn’t done that—each worker had come up with their own process. Watkins thought he knew the answer. He ordered up GoPro cameras to attach to some workers to document their steps. They were going to reverse-engineer how they were building the car to figure out how to fix the problems. They also implemented a buddy system; subsequent stations down the line checked the work of preceding ones. As Chain, the quality executive, would later write about his experience: “What would have been deemed as unacceptable by any carmakers was seen as part of an ongoing process by Elon Musk who believed, rightly so, that the user experience of driving a truly innovative automobile would outweigh minor defects that will be eventually corrected.”"

"Back in LA, Musk had dinner at a Beverly Hills steakhouse with a friend and early Tesla investor, Jason Calacanis. Musk was in a dark place. His third rocket had just exploded on liftoff, and SpaceX would go under if the fourth did. Calacanis had read that Tesla only had four weeks of money left; he asked Musk if that was true. No, Musk said. Three weeks. Musk confided that a friend had loaned him money so he could cover his personal expenses. There were other benefactors: Bill Lee, Al Gore’s son-in-law, invested $2 million, and Sergey Brin put in $500,000. Some employees were even writing checks, not sure they’d ever see the money again. Things looked bleak. Still, Musk said he wanted to show Calacanis something. He pulled out his BlackBerry and revealed a picture of a clay mockup of the Model S. “That’s gorgeous,” Calacanis said. “How much can you make it for?” “Well, it’s going to go 200 miles,” Musk said. “I think we can make it for $50,000 or $60,000.” That night Calacanis returned home and wrote out two checks for $50,000 each and a note to Musk: “Elon, looks like an incredible car…I’ll take two!”"

"That night, more than just a sales pitch for the Roadster, Musk laid out his grander plan for Tesla. The cost of the car not only bought attendees an exceptional sports car, it would help generate money to invest in developing other green vehicles."

"A few days later, Musk would go further, posting on Tesla’s website his vision for the company, an elaboration on his simple three-step premise. Or, as he called it, “The Secret Tesla Motors Master Plan.”"

"He added another goal: He wanted to provide “zero emissions” electric power generation. The blog referenced his recent investment in a solar panel company, called SolarCity Corp. It was a venture with his two cousins (making him chairman in a third company, after Tesla and SpaceX) aimed at putting solar panels on homes, which, he wrote, could generate about fifty miles of driving per day worth of electricity."

"Marks inherited the unenviable position of trying to answer what Tesla was in the moment. He didn’t have the luxury of considering what it might become; he needed to save it today. He would suggest a different road from the one Musk had envisioned, and in doing so, he would quickly seal his own fate."

"One engineer recalled using the time on the flight to ask Musk his opinion on the suspension characteristics for the Model S, a subject they had been debating. Because Tesla was building their car from scratch, such questions were purely up to them. Was the car’s handling going to be sporty, like a BMW, or more giving, like a Lexus? Musk paused, looking directly at his engineer. “I’m going to sell a fuck load of cars, so whatever suspension you need so I can sell a fuck load of cars—that’s the suspension I want.”"

"“In keeping with a fast growing technology company, all free cash flow is plowed back into R&D to drive down the costs and bring the follow on products to market as fast as possible,” he wrote. “When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car.”"

"With investors suitably wooed, Musk huddled with his bankers on a call to discuss what they’d price Tesla’s stock at. The bankers recommend starting at $15 a share. Said Musk: “No. Higher.” Goldberg hadn’t been doing IPOs for very long but in his three years at it, he’d never seen any CEO push back on price like that. After all, these bankers from Goldman Sachs and Morgan Stanley were the experts. Now the experts were stunned. They muted their phones, filling their side of the conversation with profanity as they debated their next steps. Who the fuck does he think he is? Who here can convince him otherwise? Is this whole thing going to fail? Is it too late to pull out? In the end, they had gone too far to back down. Musk had them over a barrel, and after watching him for months as he pushed back against custom, they knew it was well within his MO to walk away if he didn’t get what he wanted on arguably the most important part of the IPO—the decision that would impact how much money Tesla took away from the arrangement."

"Each time Musk raised more money for the company, his grasp on the company grew tighter. Tesla was a game of control, and Eberhard had lost."

"The mechanics of the plan, reductively speaking, were this: Tesla would cut to the bone to save cash, and hope Roadster reservation holders didn’t freak out and seek their deposits returned. They would quickly reveal a design for the Model S to stoke further interest in the company, then again begin taking deposits. This would give them enough runway to coast until further investment could be generated. If the plan succeeded, they could eke their way through to Model S production. If it failed, they would stiff an ever-growing base of customers, all but spelling their demise."

"He added that there would be a “modest reduction” in headcount that he described as “raising the performance bar at Tesla to a very high level.” “To be clear, this doesn’t mean that the people that depart Tesla for this reason wouldn’t be considered good performers at most companies—almost all would,” Musk wrote. “However, I believe Tesla must adhere more closely to a special forces philosophy at this stage of its life if we aspire to become one of the great car companies of the 21st century.”"

"“We are revolutionizing the auto purchase and ownership experience,” Blankenship told the San Jose Mercury News. “At a typical car dealership, the goal of the dealer is to sell you a car that’s on the lot. At Tesla, we’re selling you a car that you design. The shift is people say: ‘I want this car.’ ”"

"Every Friday afternoon before heading to dinner with his wife at a steakhouse near the San Jose store, Blankenship went to the Tesla showroom to study the customers. He watched them linger as they took in the floor-to-ceiling display windows, as they took test drives, as they used the free charging station in the parking lot behind the store."

"To win over Panasonic, Straubel needed to convince Yamada that Tesla meant business. He had a plan. It harked back to how Tesla had cajoled early investors into taking a chance on a little startup. To stoke Daimler and Toyota for the Model S, years before it was ready, they had worked up mule cars—dummies that were close enough to the real thing to give their audience a taste of what was to come. Tesla needed something they could showcase, a mule factory. Blueprints for a factory, however, failed to capture the kind of excitement their prototype cars had. The Tesla team became convinced that they needed to demonstrate to Panasonic and other suppliers how serious they were about the project. Quietly, they forged a deal with landowners in Sparks and began preparing the site for construction. They called bulldozers and earth movers from around the state, erected massive lights, began moving tons of dirt. The bill was enormous, climbing to $2 million a day. Straubel wanted to have a site prepped for a demonstration to Tesla’s would-be partners. He had to make it convincing enough to suggest that Tesla was charging forward—with or without them."

"Together with a Tesla lawyer, Blankenship sat in the state office going through the books, line by line, exploring the limits of what was possible. They presented an idea: Can we open a showroom that’s purely educational—no sales, just staff members on hand to tell people about the electric car? An official looked at the existing language. “Well, that’s not in here.” “So that means we can do that?” “Well, we’ll have to…” “No, no, no,” Tesla’s lawyer interjected. “It’s not in the law, it cannot be in the law next week.” Tesla had found the loophole they needed, and they sped right through it. The timing of their meeting, just after the legislative session had ended, meant they’d have fully two years on the ground before the statehouse had a chance to revise the laws on the books."

"Blankenship glanced online at the handful of stores Tesla had already established—many were either former car showrooms or designed like them. A customer had to drive to get to one. He thought that would be fatal for Tesla. Car customers tend to be loyal; a majority of new vehicle buyers in 2010 returned to the brand that they bought the last time. Some brands had even better return rates, such as Ford Motor Co., which saw a 63 percent loyalty rate. Tesla needed not just to convince people of their brand, but to persuade them to leave their old one. It didn’t help their cause that Tesla was asking buyers to take a chance on a new, unfamiliar technology."

"One of the next places Blankenship targeted wouldn’t offer such easy entree. Texas was among a handful of states that banned carmakers from selling directly to customers. Musk wasn’t about to lie down, though. Tesla simply needed to find a way around the law."

"Musk was building a culture around how he wanted Tesla to operate. He subscribed to “first principles thinking,” a way of problem solving that he attributed to physics but that was rooted in Aristotle’s writings. The notion was to drill down to the most basic ideas, ones that can’t be deduced from any other assumptions. Put in terms related to Tesla: Just because another company did it one way, that doesn’t mean it’s the right way. (Or the way Musk wanted it done.)"

"It was in many ways classic Tesla: Musk making aspirational statements as part of a broader effort to motivate his teams to do the impossible, and in turn to excite investors. Except this time, Musk had said the factory would churn out as many as 200,000 cars in the second half of that year, and after three months it had done less than 1 percent of that figure."

"He continued to resent the fact that Tesla was publicly owned, with so many short sellers betting on its demise. “I wish we could be private with Tesla,” he said. “It actually makes us less efficient to be a public company.”"

"“When Moritz invested, he was like, ‘We should hire a CEO.’ And I said, ‘Great, I don’t want to be CEO,’ ” Musk said. “I had no desire to be a CEO. It’s really a lot of chores… Being CEO sucks.” (Musk added that he had “tried hard not to be CEO of Tesla.”)"

"The tone was set from the top. Engineer William Wu remembered that Musk expected employees who worked late on a Friday night to return by Saturday morning. (Later, Wu purchased shares early in Tesla, just after its IPO, based on this experience. “[Workaholism] does no good for me as an employee, but then I feel like, if Elon does that at Tesla, then Tesla’s going to succeed no matter what. It’s painful to work with him as an employee—but as an investor in his company, it’s a wise decision.”)"

"Apple and Tesla have made a huge effort to train its Chinese workers to manufacture their products—and earned fabulous sums of money by doing so. These stories are replicated in varying degrees across China’s other communities of engineering practice, production hubs for shoes and garments in the eastern city of Wenzhou, medical equipment in Wuxi and Suzhou, and, most wonderfully of all, guitars in the mountains of Guizhou’s Zheng’an County. Overall, China’s manufacturing workforce employs more than a hundred million people, around eight times that of the United States. That is a big stock of people who are fueling the creation of new process knowledge."

"Low-wage ecosystems like Shenzhen became a giant magnet for US process knowledge. Beijing made a deliberate decision not to be like Japan, which kept its market limited to American companies; rather, China mostly welcomed foreign manufacturers to train its workers. It is some sign of China’s economic openness that so much of its exports are driven by Apple and Tesla, while Japanese exports have been driven almost entirely by its own companies. After it built up a critical mass of process knowledge, however, Shenzhen became as much an innovator of new electronics as an implementer of American ideas."

"The results of the Chinese government’s unceasing interventions in the economy are at best ambiguous. [Economic studies have shown](private://read/01k3jwt46q240aq6fe12mqkyr0/16_Notes.xhtml#_idTextAnchor378) that the recipients of Chinese subsidies have, on average, lower productivity growth. Xi’s aggressive promotion of industry has triggered trade wars with not just the United States but also many developing countries as well. China’s tech successes are no convincing demonstration that a wise state can plan the future. When the state shoves its weight around—forcing foreign companies to hand over technology, showering a favored sector with subsidies, injuring a firm while elevating another—it is often far from being helpful. The forced technology transfer agreements meant to prop up China’s state-owned automakers instead robbed their need to invest in their own innovative capacities. China’s automotive successes come from companies like privately owned BYD, which had no foreign partners, after the entrance of wholly owned Tesla forced the company to raise its game."

"It’s not clear to me that it was part of Beijing’s grand strategy to rely on American companies to become a manufacturing leader. But in some cases, the state understood that’s what they were doing. Beijing did something unprecedented for Tesla in 2018: It allowed the company to fully own its plant in Shanghai. Previously, any automaker that wanted to produce in China had to partner with a domestic company. So Japanese, German, and American companies dutifully partnered with state-owned enterprises in order to access the enormous market. The state had hoped that these domestic companies would learn from the likes of Toyota and Mercedes-Benz and match their quality. In reality, Chinese automakers were sluggish from their research dependence on their foreign friends."

"Thinking of Apple’s investment like a government program is instructive. Year in, year out, China didn’t have the talent or expertise to build the products that Jony Ive’s studio conceived, but the engineers Apple hired out of MIT, Caltech, and Stanford, or poached from Tesla, Dell, and Motorola, routinely got them up to speed. Apple could send a caliber of talent to China—what one Apple veteran calls “an influx of the smartest of the smart people”—that no government program ever could. And the culture was such that the Apple engineers would work up to eighteen hours a day. Moreover, whereas a government program could at best train a workforce to engineer products, it wouldn’t have the ability to actually purchase the goods. But Apple could and did."

"The site had previously been run by a state-owned company called Tesla, whose specialty was radar systems and whose biggest client had been the government of Iran. The site had an eerie feel to it, like it had been hit by a neutron bomb. Forklifts stood motionless on the floor and cups of tea, their contents long gone cold, had been left on the tables. In May 2000, Foxconn was able to buy the plant for just 102 million CSK (€2.9 million), a fire-sale price because it was bringing in jobs. Foxconn also won from the government a ten-year tax holiday."

"Thinking of Apple’s investment like a government program is instructive. Year in, year out, China didn’t have the talent or expertise to build the products that Jony Ive’s studio conceived, but the engineers Apple hired out of MIT, Caltech, and Stanford, or poached from Tesla, Dell, and Motorola, routinely got them up to speed. Apple could send a caliber of talent to China—what one Apple veteran calls “an influx of the smartest of the smart people”—that no government program ever could. And the culture was such that the Apple engineers would work up to eighteen hours a day. Moreover, whereas a government program could at best train a workforce to engineer products, it wouldn’t have the ability to actually purchase the goods. But Apple could and did."

"The paradigm shift Apple initiated was so consequential that it left Chinese officials convinced that its JV model was broken. In 2018, officials in Shanghai allowed Tesla to become the first foreign automaker to establish a manufacturing plant in the country without a local partner. It was characterized in the press as a sweetheart deal, as if government officials had succumbed to the charm of Elon Musk. But China was acting in its own interest. When Musk proposed to open the factory within two years, the mayor of Shanghai convinced him to fast-track the effort to just twelve months, offering big incentives, including affordable land and tax benefits. “It was probably the fastest and most CapEx-efficient factory ever built in the car industry, let alone EVs, in the world,” says Harsh Parikh, then the head of global supply management for CapEx at Tesla."

"The presence of a single predator causes the whole tank of sardines to better themselves. Beijing, it’s often said, wanted Tesla to play the role of the catfish for the EV industry. The theory is partly misleading. It implies that Tesla just *inspires* competitors to do better, but Tesla works intimately with and improves its third-party vendors, who then supply the local EV brands such as BYD. This, of course, is the Apple model, and Parikh—who played a key role in establishing the Shanghai Gigafactory—specifically hired engineers with Apple experience to set the plan into motion. “Working with Tesla is not easy,” Parikh says. “But the mindset of suppliers is ‘We’re going to become very strong if we can adapt.’ It’s just like working with Apple. If they can unlock the scalability, then they can grow with Apple, or grow with Tesla, and become world-class suppliers.”"

"Thinking of Apple’s investment like a government program is instructive. Year in, year out, China didn’t have the talent or expertise to build the products that Jony Ive’s studio conceived, but the engineers Apple hired out of MIT, Caltech, and Stanford, or poached from Tesla, Dell, and Motorola, routinely got them up to speed. Apple could send a caliber of talent to China—what one Apple veteran calls “an influx of the smartest of the smart people”—that no government program ever could. And the culture was such that the Apple engineers would work up to eighteen hours a day. Moreover, whereas a government program could at best train a workforce to engineer products, it wouldn’t have the ability to actually purchase the goods. But Apple could and did."

"Tesla broke ground on the Shanghai Gigafactory in December 2018; by late 2019 China-made Model 3 vehicles were coming off the production line. Immediately they were a massive hit, and the Tesla Model 3 was China’s bestselling EV in 2020. Chinese consumers “didn’t want to buy anything being manufactured by Chinese brands; they all wanted Tesla,” says Parikh. “As soon as Tesla came, there was a paradigm shift from consumers, and that’s something the Chinese government saw. This was an opportunity to have the entire EV industry in China compete with, and learn from, Tesla.”"

"Tesla’s investment in China has worked out brilliantly for China’s EV sector, with quality improving across the board. The share of EVs and plug-ins soared from under 5 percent in 2019 to 38 percent in 2023. And the investment has certainly worked out well for Tesla: Shanghai now accounts for half of the company’s global production. But there are longer-term uncertainties and unanswered questions. “In this game, one American company—Tesla in cars and Apple in phones—gets to win,” says another former Tesla executive. “They don’t care if all their US competitors lose. It’s actually better for them. But on the other side, all the Chinese companies win. They all get to step up and create a massive market where none previously existed.”"

"TESLA: 7 FOR 7 Tesla is one of the few cleantech companies started last decade to be thriving today. They rode the social buzz of cleantech better than anyone, but they got the seven questions right, so their success is instructive: TECHNOLOGY. Tesla’s technology is so good that other car companies rely on it: Daimler uses Tesla’s battery packs; Mercedes-Benz uses a Tesla powertrain; Toyota uses a Tesla motor. General Motors has even created a task force to track Tesla’s next moves. But Tesla’s greatest technological achievement isn’t any single part or component, but rather its ability to integrate many components into one superior product. The Tesla Model S sedan, elegantly designed from end to end, is more than the sum of its parts: Consumer Reports rated it higher than any other car ever reviewed, and both Motor Trend and Automobile magazines named it their 2013 Car of the Year. TIMING. In 2009, it was easy to think that the government would continue to support cleantech: “green jobs” were a political priority, federal funds were already earmarked, and Congress even seemed likely to pass cap-and-trade legislation. But where others saw generous subsidies that could flow indefinitely, Tesla CEO Elon Musk rightly saw a one-time-only opportunity. In January 2010—about a year and a half before Solyndra imploded under the Obama administration and politicized the subsidy question—Tesla secured a $465 million loan from the U.S. Department of Energy. A half-billion-dollar subsidy was unthinkable in the mid-2000s. It’s unthinkable today. There was only one moment where that was possible, and Tesla played it perfectly. MONOPOLY. Tesla started with a tiny submarket that it could dominate: the market for high-end electric sports cars. Since the first Roadster rolled off the production line in 2008, Tesla’s sold only about 3,000 of them, but at $109,000 apiece that’s not trivial. Starting small allowed Tesla to undertake the necessary R&D to build the slightly less expensive Model S, and now Tesla owns the luxury electric sedan market, too. They sold more than 20,000 sedans in 2013 and now Tesla is in prime position to expand to broader markets in the future. TEAM. Tesla’s CEO is the consummate engineer and salesman, so it’s not surprising that he’s assembled a team that’s very good at both. Elon describes his staff this way: “If you’re at Tesla, you’re choosing to be at the equivalent of Special Forces. There’s the regular army, and that’s fine, but if you are working at Tesla, you’re choosing to step up your game.” DISTRIBUTION. Most companies underestimate distribution, but Tesla took it so seriously that it decided to own the entire distribution chain. Other car companies are beholden to independent dealerships: Ford and Hyundai make cars, but they rely on other people to sell them. Tesla sells and services its vehicles in its own stores. The up-front costs of Tesla’s approach are much higher than traditional dealership distribution, but it affords…"

"Tesla’s success proves that there was nothing inherently…"

"I see how my restraint runs counter to the bet-it-all mindset of some of the current business stars. Elon Musk, a brilliant mind and inveterate risk-taker, has famously doubled down again and again. He poured roughly half of his entire fortune into SpaceX when it was near bankruptcy, as he did with Tesla."