>> Good evening and, Welcome to the Stanford Graduate School of Business.
I'm Garth Saloner.
I'm the dean here, at the GSB and it's my privilege to welcome you
all, To this wonderful event, I want to thank, The award selection committee for.
This really fantastic selection.
As well as all of the companies who have supported us by sponsoring the event.
This is the 36th event of its kind.
The 36th annual encore award reception and each of the award is given...
To an entre, entrepreneurial company that embodies the spirit, innovation
and unique culture of the companies that we're familiar with in in Silicon Valley.
And so let me be the first to congratulate Tesla and Elon Musk for.
The award this evening.
[SOUND] I'm going, be brief
before handing you over to, to Jeff.
But I did want to just spend a few minutes saying a little bit
about the things that we've been doing here, at the Graduate School of Business.
In the area of entrepreneurship and I'm
very quickly gonna reference three innovations this year.
The first is we have an entrepreneurship course and
have had for many years in which we put
our students together in multi-disciplinary teams from across the
university and they work on projects together and this year.
As a harbinger of technology to come we
have for the first time flipped the classroom
to Stephanos Xenios who teaches the class recorded
what would have been the lectures and instead
the students got to use the class time to be mentored and to work together on
the projects and I think that's very much a sign of the times and, and the future.
The second is many of you will be familiar with a program that we offered here at
Stanford in the summer and during the year which
we used to called the Summer Institute for Entrepreneurship.
We now call it Stanford Ignite.
This is a, a program that at Stanford was aimed at graduate students at Stanford not
in the business schools so it's students and
engineering medicine, and life sciences, and so on who.
Might be starting a company or be working for companies that were innovating.
And we'd give them a general management education.
With an entrepreneurial spin.
And this year we started to take that that program globally.
So we offered a version of it in Bangalore, India this summer, and are in
the midst of teaching one in Paris right
now in a partnership with their called Politechnique.
And that program too, makes heavy use of technology.
Most of the classes are actually, faculty being from the Snite Management Center...
To those locations.
The final thing I wanna, I wanna reference is again, many of
you are familiar with SIIDE which is the Stanford Institute for Innovatiion
and Developing Economies, an institution that we launched here at the business
school about two years ago, it had a landmark event this summer.
When we opened our first Innovation Center in Accra, Ghana where we have
in the first cohort, 29 local entrepreneurs who we are working with to
help them to scale their businesses and it's a, it's a regional, a
regional hub and a regional program
with participants from, from five neighboring countries.
So, lots going on at the GSB while we're.
Helping to make entrepreneurial awards.
We're trying to do our bit to simulate
the entrepreneurial ecosystem and in that vein, let
me just say that in everything we do, we rely very very heavily on this community.
You come into our classes to help teach and mentor our students...
And and help us in a, in a whole variety of ways and, and we're extremely grateful.
And and delighted to have you all with us this evening, thank you very much.
I'm Geoff Yang.
And I have the privilege of chairing the Stanford ENCORE Award Committee.
So, you may ask, you know, how do we pick a particular company to win the award.
And I'll tell you, we look at four things.
You know, the first is companies that embody the entrepreneurial spirit.
We look for companies that are doing something big, bold, and important.
I look for companies where the founder has or continues
to play a very important role in the company's success.
And we look at companies that have interesting
stories, or who've, or whose founders are interesting personalities.
So you might say, well how'd you get Tesla, then?
It isn't quite.
So the story of Tesla, you know, the so, you look how it stacks up.
And you say well Tesla was started by two engineers, Martin Eberhard
and Marc Tarpenning who believed that electric vehicles could change the world.
Tesla has succeeded in an industry where start-ups aren't supposed
to succeed by incorporating novel design approaches to little things
like concept design, and battery design, and body design, and
drivetrain design, and manufacturing design,
supply chain management, mass production.
Tesla is attempting to disrupt, disrupt an industry in
which its competitors have massive scale and long histories.
Elan Musk, this is a company series, they are lead investor
and now and chairman continues as its CEO and product architect, check.
And finally an interesting story, will test those
practically gone out of business, my understanding is
a couple times and is now runaway success of the market cap of over $23 billion.
It's CEO was the inspiration for Tony Stark
in the Iron Man series according to it's director.
Check, check kind of an interesting personality.
You get the
Tesla was the first US auto company to go public since Ford Auto Company in 1956.
And despite having approximately 1% of the revenues of GM and Ford and BMW,
its market cap is roughly a third to a half of these venerable brands.
It's my pleasure to introduce Elon Musk.
Elon was a native of South Africa
and studied at Queens University, University of Pennsylvania.
And ultimately Stanford to pursue a PhD in physics.
He started Zip2, a software provider, which was sold to Compaq, he co-founded
X.com which was later renamed to something called PayPal which was acquired by eBay.
He founded his third company SpaceX in 2002 and continues as its CEO and CTO.
Which I hope he'll tell us a little bit about.
He's also the founder and chairman of Solar
City and then in his spare time earlier this
year he announced a proposal to form a
new form of transportation he's working on called Hyperloop.
But most importantly for the purposes of
tonight's program he's CEO of Tesla Motors.
Tonight Telsa, I mean sorry, tonight Elan will be interviewed by my friend and
fellow Standford encore award committee colleague, Steve
Jervison, managing director of Draper Fisher Jervison.
Please join me welcoming Steve Jervison and Elan Musk.
>> Someone will yell if we got this wrong.
I think they told us five times he
sits there I sit here, and that just [INAUDIBLE]
So before we start we're going to try to keep this a little casual and
interesting as well as trying to get into the mind of musk a little tonight.
It's a marvelous place to delve.
You all have a chance to ask some questions later.
So, you can start thinking about that now, I'll start with a few.
But, as a warm-up.
And, I think this might be something you wanna, might like to see, About
a year and a half ago, about Model-S ships, I remember him saying, sort of
with a gleam in his eye, that he relishes the day that he'll be driving
around somewhere around in Silicon Valley and
see the Model-S on the road that's not.
Like an employee car that's in testing, but
like a real customer, like, that he doesn't know.
And so as a quick survey of hands, how
many people saw a Tesla driving around Silicon Valley.
And I don't mean the one sitting out
there, that means you've seen multiple Teslas, right?
I saw ten, I counted today, just.
Now I have a short community, so that dream has become a
reality, but what Tesla has done has become a marvel to watch.
>> So I think a lot of folks
here, you know business students, students, friends of
the firm, are really curious on how this all works and so if we could, start with
some design questions and then some organizational people
kinds of questions, but starting with design, as
you think about the big problems in the
world that you are addressing, do you start with.
A particular product in mind like there could be
this Model S, there could be this Falcon 9.
And then think How do I get there?
Or do you start with saying There's something
broken in the world and I'm gonna fix it.
And I'm gonna commit to do it.
Even if I don't know how to get there.
So, let's see.
>> Is that on?
It seems, seems to be good.
>> [UNKNOWN] when
I was in college
[UNKNOWN] in a positive way.
But the three areas where, where I was quite sure
we we're positive were sustainable energy, internet, and making life multiplanetary.
And then there were a couple other areas where there's
maybe a question mark, like the A.I. and writing genetics.
>> Yeah, rewriting genetics.
>> Rewriting genetics.
>> Potentially negative consequences, hopefully positive.
Something could go wrong.
>> Top three and a couple contenders, or were they always kinda jumbling around?
Speaker 1: Waiting for the right moment.
Speaker 2: No, I just thought that, looking ahead, what's
really going to have an important effect on the future of
humanity as a whole, those were the five areas that I
could come up with standing in the shower, basically, you know.
Speaker 1: So there' this moment of epiphany
that you held onto for awhile because you didn't
pursue those right away, because this was an early
vision that you then got opportunities to execute on.
>> So when you, maybe if we pick an example like Tesla
going towards the Model S or SpaceX going towards the Falcon 9, do
you commit the team yourself, your resources to that endeavor, you know,
now a little farther along, when you have the end point in mind?
Just let's say the cost of goods analysis for the rocket or the
cash ev should be better than internal
combustion engines, just in general I'll commit.
I'll believe that should be done.
>> I didn't really get into any of the swift with the expectation of success.
Or at least...
Yeah, I started out thinking okay, when I
do something in the electrical vehicle space, and that's
why I originally came to Stanford was to work
on advanced energy storage technologies and take ultra capacitors.
So that was continuing on research that I'd done
as an intern in Silicon Valley the summer prior.
so, so that's, that's why I originally came out in '95.
And then during that summer I read some internet software and I thought okay, I
can either work on electric vehicle technology, or,
or I could sup, support on internet stuff.
try, try to do something with the internet.
I thought the internet would be something that would.
Dramatically affect the future of humanity be like, like acquiring a nervous system.
And whereas previously, communication would have to
occur almost by osmosis, you know, from
one person to another or slowly through telephone or mail or something like that.
But now, if you have a nervous system, any part of the.
So human collective know, can know about any other part instantly and
previously you'd have to be at the, sort of library of congress even
to have the library of congress' sort of information but, with everything digitized
and accessed anywhere you can be in a jungle in South America and.
And if you had just narrow that link somehow,
you could, you'd have access to all of humanities information.
So it actually, effectively create a super organism
and, and fundamentally change the nature of humanity itself.
So I was kind of, just wanna be kind of part of that,
>> Is that the path to AI that you might see?
>> It's, its actually not exactly AI, its, some sort of.
>> human machine collective intelligence, so different, different from AI, although
AI may not turn out to be exactly what, hopefully not.
Its not exactly what's, you know, like,
described in Terminator or something, you know.
>> Quick pause for those who haven't been to Space 6.
The data center has got to be the coolest thing you've ever seen.
It's, you know, SkyNode on the door,
Cyberdyne systems branding and what have you.
[LAUGH] The most badass set of lights
coming from all the little blinking servers.
So these are the own it.
>> Our FEA and CFD clusters is, is called Cyberdyne Systems.
>> We'll get back to influences, later on, but I wanna try to see if
I understand what you were saying about this, this you see the long arc of.
And what's important is humanity not little
problems, but huge problems that could be solved.
A lot of us go around and we see something frustrating like traffic on the 405.
And we just take it as, well, crap.
The governments screwed or behind it, right?
You have this incredible, sort of scope
of ambition, right, planetary scope, interplanetary scope, right?
A little more than just changing the world.
Let's change some other worlds too, right, and this is big stuff.
Was that always in your mind or did that, did you
become more involved in it over time that this is available.
We can do these things.
It definitely emboldened over time.
I mean, at the, you know, when, when I started the first, internet company.
It was '02, with my brother and an, another person, Gregg Curry.
The, it wasn't really with the thought of being wealthy.
It, you know, I've got nothing against being wealthy, but, [LAUGH] [LAUGH]
>> We'll get back to that later, too.
>> [LAUGH] But, but it's just, it, it was just from the
standpoint of been wanting to be a part of the, the internet.
And I, I, I figured if we could make enough
money to just get by, it will be, that'll be okay.
and, and, and when we started off, we had, we had, we actually only had, like,
one computer, and so it'll be our web
server during the day, and our code at night.
And we, we just got a, a small office in Palo Alto back when rent was not insane.
it, it costs us like $450 a month.
It was cheaper than an apartment, so we actually just slept
in the office and then showe, and then showered at the YMCA.
[UNKNOWN] So we'd walk over there and, and shower and and that was
actually I think that was when I fir, we fir, I first met you by the way.
And so, [UNKNOWN] probably not many people know this, but we actually
pitched Steve in like January 96 on the, the zip 2 business plan.
And actually I thought, Steve was actually one of the most up
to speed on, on, on what was actually was in our business plan.
Most, most people we met did not actually read our business plan.
In fact, a lot of people [UNKNOWN] time, didn't even know what the internet was.
They had never used it, [CROSSTALK] they didn't think it would amount to anything.
>> I'm sure, I'm not sure if they still do.
>> Yeah, right.
Yeah, I'm sorta like you know, sort of like well known people in San Hill.
I was like wow, okay.
But at, at the time nobody made any, any money on the internet so I
guess that's you know there wasn't any clear
evidence that there, there was, was a business.
>> Those were fun times, I remember Kemball and you coming in.
Very young looking guys.
[LAUGH] I think I was on my first four months on the job too.
>> Yeah, yeah, exactly, so >> So, let's just [UNKNOWN] for a second.
I've I've also had the great honor to work with Steve Jobs briefly.
But enough and as a business school student to study
him with as much scrutiny as I could during that period.
And there's some obvious parallels.
And so let's start with the most obvious.
But, just must be like elephant in the room.
Is the secret to your success to be the CEO of two companies at the same time?
>> No, I think it's >> Because look at the correlation.
>> Struggling companies, everything's in the crap
can in December 2008, so let's take
on a new CEO gig, [CROSSTALK] and same for Steve coming back to Apple.
>> No, def, definitely it was not my intention to be CEO of two companies.
I mean [INAUDIBLE] there are certain things that I kind of wanted to,
that I thought were important to happen, and I thought it was important that.
That there was.
The, the, an electric vehicle happened.
That there was success in the electric vehicle arena.
Because the, it, the encumbered companies were convinced that it
was not possible to create a electric car that looked good.
That had a good range and performance and so forth, And that
even if you did make such a car it would not sell.
Because people had this love of gasoline, and so we had
to show that it was possible to create a compelling electric car.
Long range, good looking, you know, tho, those things, that was the Tesla Roadster.
And if you created, if, if you made such a thing, people would buy it.
And so that, that's what we, we tried to do with, with, with NASA.
In, in fact I should try to say, one minor sort of correction on the introduction.
I'm not a, I'm not co-founder of Solar City, but I am a co-founder of Tesla.
>> It's okay, that's a good point.
And [CROSSTALK] of many of it's key features.
>> Very much like Jobs.
Both handled some of the detail as well as
the long arc of what's important for the company.
>> [UNKNOWN] CEO is, is more than just a joke in that I
wonder if in ways that are hard to predict and you wouldn't set out.
For this amount of work, it seems insane.
But inevitably, both companies can not expect more than half your time at most.
It's sort of naturally forces a delegation upon you and an expectation
that you have to rise up for partial awareness at best, right?
>> And I just wonder if that helps drive prioritization and really
focusing on what's important a bit more than you otherwise might have to.
>> That probably does, yeah, I think I probably
do, yeah, I mean [UNKNOWN] the things that I do,
at each company and constantly think about what is
the most useful thing that I, that I could do.
But even with that it still actually does take an enormous amount of
time for a while there I was just doing constant 100 hour weeks.
And that's, that's definitely weary.
And, and now I'm kind of the in the 80 to 90 which is more manageable.
but, but you know that if you divide that by two, it's only like, you know like 45
hours per company which is not, is not much if you with a lot of things going on.
>> You're like a slacker.
>> So you know, it is interesting also how
you have a love for certain aspects of the product,
so at space X, the whole concept and the vision
of going to mars, and back into features and stuff.
It's a wonderful thing to see.
I think what should obviously strike the folks in
the room as remarkable is the diversity of industries
that you've tackled, right, from commercial banking to, industrial
complex to the automotive industry these are heavily regulated industries.
The general investor [INAUDIBLE].
So, there might not be a, an obvious pattern
in which industry you tend to strive in but I
wonder if there's a pattern process like do you, approach
each of these perhaps the way a software architect might.
To think of, a different way to bring innovation.
A different way to reset you know, from
first principles perhaps instead of iterating from the past.
And is there a reason you end up in these otherwise really tough industries?
I mean, I don't have [INAUDIBLE].
Even on solar city going up against regulated utilities.
These are places that you'd normally find entrepreneurs?
>> yeah, like I said, it was not from the stand point of like
what's the best risk adjusted rate of return or
you know, what I think if things could be successful.
Just like I think these things need to happen.
Try to make them happen, and so then when we started space X which has the.
I, I thought that the probability of success was less than the
property percent, They were probably up there, but less than, a few percent.
In the case that's on the study, I thought the probability of success was probably
greater than 50%, but it wasn't clear what lying true to success would be, you know.
>> It could just be small, And,
Yeah, but, but it was I mean just thought these were things that needed to get done.
And even if the money's lost, okay, it's a little worth trying
>> See conviction, but it didn't mean certainty.
>> You knew that all vehicles would be electric in your heart,
>> Ultimately, ultimately yes.
>> but not that the [UNKNOWN] necessarily succeed.
>> I mean I think there's a fundamental good that Tesla.
What can accomplish is acceleration of
the, of the inevitable, which is electrotransportation.
>> But I think there's, there's a lot
of value to, to accelerating, even though I think
it's somewhat inevitable, there's value to accelerating to minimize
the environmental and economic damage that would otherwise occur.
You know, it's better if, if we
transit, transition to sustainable transport ten years
or wha, what may be 20 years sooner than might otherwise be the case.
And I think the Tesla's effect has been much greater than the cars made,
that's been made internally because when we
announced that Tesla roadster, then above lights.
Who's [UNKNOWN] leader of GM at the time.
So, are press released, I said, if a small company
in California can do it, then, and so can GM.
They took it to his engineers who told
him that, that you couldn't build electric car.
And, told them that they need to get going.
That's what got the boat rolling.
And that in turn got Nissan to believe.
And, and so, it's, kind of, got the, got, got things going.
and, and ultimately it's like it's what we induce other companies to
do that will have a greater impact on the cars we make ourselves.
>> You know, it's an interesting point I'm gonna come back to later this
idea that Tesla's founding missioners as [INAUDIBLE]
particularly from the very beginning through the most
recent reports to the public is to
catalyze an industry shift that Tesla will be
some part of, but at some part will help others in that shift as well.
Which is remarkable from.
>> We supply power trains to Toyota and to Mercedes and that type of thing.
>> So what could you give to your biggest competitors one day.
Eh, you know.
Absolutely I can accelerate that.
>> Before we get to that sort of purpose driven mission I do wanna ask, or at least
make sure the audience realizes how cool this car
is, and so [UNKNOWN] doesn't have to do this.
In case you haven't been as much of a fan as
the two of us it's a bit unprecedented the reviews it's received.
It's a bit unperson the reviews received is saying it's the best car
they've ever tested, [INAUDIBLE] saying it's
the most important car in America's history.
Um,the safety testing shows it's the most safe car ever manufactured.
By far including vans and SUVs.
And so it's pretty remarkable to peg
performance, desirability, safety, and all these parameters.
So, is it luck or is it something particularly unique about the
EV design space that let it be possible to build the best car?
>> Well I like to think it plays some roll here.
But I think we, I think electric vehicles have a fundamental [INAUDIBLE] advantage.
If, if one designs an electrical from the
ground up, and takes advantage of, of what's possible.
Like if you just were to convert a gasoline
car, you would not you would not achieve these advantages.
But if it's properly done you can actually.
Package the battery pack in a full pan and achieve a low center
of mass and, and have a very compact motor and, and a motor
and cable box so that the actual useable space in the car is significantly
greater than a gassing car of the same overlook ex, excel dimensions.
And then if you do a few other things, we
try [UNKNOWN] necessarily specifically related to an electric car like
using aluminum body and chest is helpful because you can
absorb more energy per unit mass essentially in a crash.
>> Like a [UNKNOWN] >> Yeah exactly.
well, so it, yeah, quite part of it is related to [UNKNOWN] and part of it
is related to other technical decisions that,that we
made in the design of the model S.
And so, yeah, that's what leads to sort of having a high safety is, I mean I
don't want to go into too much because it might take up too much time, but.
>> Did you know some of those things at the
get go or did they unveil themselves as you went along?
I'm just curious...
How the vision materializes.
For example, either the product dimensions, like it will have all these
great features, like, like at the get go did they all gel?
And the second thing, am also curious when did
you first know that all vehicles would be electric?
Like, was that early?
>> That was probably 22 years ago, something like that.
>> Before you met Tesla?
>> Before there was Tesla.
>> Before there was, way before there was Tesla.
Well like I said, You know, when I originally came out.
When I, I mean when I was studying physics and
That's probably when I, I thought it was the case.
Or maybe, no sooner than that.
Probably when I was in my.
Sophomore year in college.
>> Did you have certainty in your heart?
>> Yeah, absolutely.
It's super obvious.
[LAUGH] Now, yes, now it is.
[UNKNOWN] >> I think it was super obvious then, but
>> Yeah, this is what blows my mind, because even like three
years ago, most people probably didn't agree with this point of view.
And if I could be confident of any prediction
I could make it's that within 10 years, all people.
What were the others' point of view?
But we want to make the transition yet, but we
realize that this is a ridiculous debate to be having.
>> You were along voice of sorts back then, probably
amongst your cohort and friends, and you know, social factions [CROSSTALK].
>> Yeah I used to talk to, like dates about electric cars.
>> How did that go?
>> It wasn't, wasn't helpful.
>> It got better?
>> [LAUGH] yes [UNKNOWN]
And she said no, I don't.
[LAUGH] So yeah, that's a while back.
I mean, it's pretty, i mean almost everything
is electric that we have in our daily lives.
>> Well, from the physics of it, the heat loss of an internal combustion engine.
Pretty amazing, it's pretty amazing.
I want to share a little story that leads to a question along a different angle.
I don't think you've heard this before, but I find it fascinating.
I was at a lunch at a Google event, and
out of the blue, with no expectation that this would
be a topic, and Larry Page turned to me, knowing
a little bit about our connection and said, you know...
>> How much money do I have and he mentioned a number,
I thought that was cute that he was trying to recall that.
He goes you know if I were to get hit by
a bus today, I should leave all of it to Elon Musk.
>> He said that?
And so I'm like, paper, pen.
Please get this down on.
Yes, so he likes zingers.
>> I love that actually.
He's a good friend of mine.
>> Context is important.
>> I met Larry before he got venture
So that's like 90.
>> Back in the [INAUDIBLE] days?
>> Well he's a remarkable guy.
Obviously also an underachiever and you know, has a
company that wants to do good in the world.
And I think he looks at you with a bit of envy because
what he then proceeded to say was, you know, I could give my
money to a non profit and a lot less would get done than
a cooperation that's pursuing things that are
directly aligned with things I care about.
Like, getting of, of oil and colonizing other planets.
He believes in those missions.
That a corporation with endowed with the right
to do that as its business purpose is the
best vehicle out there and he wishes he could do more of that in his own life.
He compared poignantly, I think, to some other
software companies in the pacific Northwest who might have
executives who do evil for their first part of
their career then do good for the second half.
And then the sad story of others who never got to the second half of their life.
>> Like, like Steve Jobs.
I mean not in a joking way I mean seriously and, and it was a
very deep moment so you've heard already that [UNKNOWN].
>> [UNKNOWN] in fact, I [UNKNOWN].
And then I, I got a little bit of,
some of the board members to question that segment [LAUGH].
And I was like, well it's true, you know.
>> You mean like, for now or like just, just like we are growing.
But no, it's just not the priority.
which I think in a business school really a good point to dwell on for a moment.
>> Yeah, it's not that, that I think they're unimportant or anything.
It's just not the primary goal.
>> And actually I've told that to people [UNKNOWN].
And so it's not like new information, or at least you know, if you're, if you're
people who watch the [UNKNOWN] information and yeah
and actually amazing the stock went up after that.
>> I th, I think there's a profound reason.
I mean, you, you see the benefits on being focused
on something that's a higher calling as your primary motivation.
Your employees love it, the customers love it, [CROSSTALK]
others love it, and you feel better about your job.
The interesting thing, irony perhaps, is that at least
within our portfolio, the companies that have that kind
of a founding principal actually make more profit and
grow their revenue more quickly than the ones that don't.
And now there's this little sample set, but
the handful that had taken this bowl to
the step, to say no, no, no, that we will not make that our number one priority.
Actually do a great job.
And it occurred to me, and I don't know
if this was conscious in your head at some point.
That if you weren't widely profitable, the auto industry wouldn't follow you.
In other words, this whole mission of catalyzing a shift to new electric
vehicle isn't gonna work if the business
model's worse than the current business model.
>> You know, it's, it's the obvious byproduct of what you're focusing on.
They're not obvious, but it occurs to me that it's a byproduct.
It wasn't obvious at first at all.
[LAUGH] But and I'm curious that that thought occurred to
you, that oh yeah, the other profits will come, or eh.
well, we have to generate flows of cash flow, or, or we have to
generate enough cash flow to fund future
developments, which requires having a good gross margin.
and, and so I guess one could just say okay, well
we're gonna stop developing your product and then you'd be really profitable.
So at any given point, you could sort of say we'll, we
could be profitable you know at this point in, in a significant
way but, but we've got these great things that we wanna develop
for the future and they're a good investment and that's what we're doing.
And similarly, at Spacex the, you know, the founding vision was to colonize Mars.
Again, interestingly catalyzing others to move.
>> And then you realize hey, I've gotta actually lead this charge.
>> Yeah, well, I mean when Spacex, originally, I started
off just thinking, well, how do I, increase NASA's budget?
Actually, that was my goal.
>> so, it was, it was like, 2001 I was just, just talking to a friend
of mine, and the guy asked me, he asked me what I was gonna do after
Paypal, and I thought well, you know, I
was wondering like, I'd like to get involved
in space, but I, I just didn't think
there's anything I could do as an individual.
And, but I was curious as to when we, when we, NASA would be sending a,
a team to Mars, 'cuz that was always gonna be the thing to do after the moon.
I figured that, that there'd be some plan and I'd just go to
the website and I could read, you know, the schedule [LAUGH] and then [CROSSTALK].
Oh yeah, it's like okay, 2017 good, okay, [LAUGH]
but it, but actually there wasn't actually on, on the
website and [LAUGH] at least I thought like, can
I not find it, like what's going on in here.
And is a secret, I don't know.
so, but it turned out that that NASA had done a study on
what it would cost to send, to do a manned Mars mission and
I, this was under Bush the first and I, he in his, in
his first he asked for a 90 day study shortly after taking office.
And NASA came back with a $500 billion price tag.
And he said, okay maybe not.
>> That's when $500 billion was serious money [LAUGH] for the government.
So so, so then that got totally shelved, and it was like you were not allowed to
talk about any kind of crewed mission to Mars at NASA and anyway, so I, I, but
I thought well, if I can do something
that would galvanize public interest, that, and and then
that public interest would translate to, additional appropriations
for NASA, increase their, their budget, then, then maybe
they could do it.
So the fir, so actually, what I sort of thinking I, I
would do is send out a small greenhouse to the surface of Mars
with seeds and dehydrated gel and then up, upon landing, hydrate the gel
and grow the plants, and the public test respond to precedence and superlatives.
So this would be the furthest that life's ever traveled.
The first life on Mars, and you're gonna have this great shot of green
plants on a red background and I thought okay maybe that would get [INAUDIBLE].
>> The money shot.
>> That would be the money shot, yeah.
I, I'm never quite sure if that's a sort of a word you can use or not.
>> Yeah, I, I, I don't, I don't know
it's origins until somebody pointed it out to me, but.
>> Okay, moving back to that green house on Mars.
Yes, the photo is out there, and it is.
>> Yeah, see the photo is out there.
>> Yes, loved it.
It was a great photo.
and, and Okay, we'll make this happen and it will be good.
At best, they'll get the money and we could do the, they could
sort of send a, a team to Mars and it would be great.
So I try, try and figure out how to do
this with the proceeds that I had from, from PayPal.
And I was able to figure out how to get the cost of the,
the spacecraft down and the communications and,
and, and the little greenhouse and everything.
But the one thing I couldn't compress was the cost to launch.
'Cuz here're only a few options and the US
options are way too expensive, and so I ended
up going to Russia three times to try to
buy the, the biggest ICBM in the Russian nuclear fleet.
>> That's where I'd start, yeah.
>> Go big or go home.
>> That was I mean, okay, [LAUGH] you know.
The, the, it was, it was there was some strange trips that's for sure.
[LAUGH] But you know, there's like virtually, like you buy
any, it's a very capitalist society [LAUGH] in some ways.
So, so I actually did negotiate a deal to
[LAUGH] to buy two of the ICBMs minus the nukes.
And [LAUGH] but, but I came to the conclusion
that that third trip that it, it wouldn't really matter.
Like, if we, if we, I actually came to
the conclusion that my initial premise was, was, was wrong.
>> Because I actually think there's, there's tremendous amount
of will in, in the American population particularly to explore
United States you know maybe more than any other
country is a distillation of the human spirit of exploration.
And it's really fundamental to psyche so, if he will think
there's a way, I think we'd actually get a lot of support.
>> but, but, then it, it can't be just banging your head against the wall.
You gotta believe that this can be done without breaking the federal budget.
so, that's where I said okay, well, is there
some way to affect the cost of space transport?
And and, is going and, and so I, I, I got together with a group of people over
a series of Saturdays just to, just trying out
[UNKNOWN] there's something super, ex,
fundamentally super expensive about rockets?
Or, or, can the class be, substantially improved?
and, I had, we had a bunch of those
at our brainstorming sessions and I couldn't see, I
couldn't see any fundamental obstacles to improving the cost
of rockets, so, that, that's when I started SpaceX.
>> I think I'll just build 'em myself.
>> And then, all [CROSSTALK].
>> But I'd said, at that point I would say
the, the probability of success was definitely less than 40%.
I thought it would most likely not succeed.
But was worth a try.
>> But it's fascinating the, the parallels are, are so many between these companies.
As again, probability is low.
>> Certainty that it needs to be done, >> Yeah.
Certainty that it could be done by [INAUDIBLE] physics
and first principles that it's success is an option, right?
It's one of the possibilities.
And interestingly starting with a Roadster and a Falcon
1 as a proof point to a larger design.
>> You know as I look at the falcon 9,
and, it looks like the product of a software engineer.
>> [LAUGH] right.
>> Modular reuse, like let's build one engine and step and repeat.
And building all kinds of elegance into
the system design to obstruct away, you know,
almost from the hardware into the software,
into the design, the beauty of the system.
And, and I wonder if that's why incumbents don't see that sort of
re-engineering of the, of the car or the rocket or the what have you.
The hyper loop is this, they don't approach
it in that kind of blank sheet of paper.
How would you do this if you didn't have to create jobs across districts?
>> Or you didn't have some other ulterior motive.
Looking at the time, I wanna give a, I'm gonna ask one last question, but I
give a heads up on if there's mics to start getting them ready for the audience.
Cuz I don't wanna monopolize, people's time here.
Actually there's so many questions I wanna ask.
But, but I'll, what I'll start with [INAUDIBLE] and here
for at least [UNKNOWN] some of the quirky one about influences.
So you [INAUDIBLE] we've heard about the, the iron man reference
and your childhood interest in comic books and [UNKNOWN] the galaxy and
[INAUDIBLE], but there's all kinds of things woven into like Cymbeline
systems that, that SpaceX that we heard and then some Easter eggs.
So, Some of us noticed that the story goes to 11.
>> On the, on the Tesla.
This is a Spinal type reference for those who know [UNKNOWN].
This one goes to 11 and we just, just one more.
>> It's louder than loud.
>> That's right.
>> That's right.
But noone seems to have noticed the product line-ups.
You got the Model-S.
You got the Model-X.
>> Oh yeah.
>> You've just trademarked the Model-E.
>> No one's been in that.
>> Well what do you.
>> And the model, and the model [CROSSTALK] Y.
>> Now, what's behind this?
>> [LAUGH] I know, exactly.
Well this, I guess there's a lot of humor in trademark, the trademark law, you know?
[LAUGH] 'cuz yeah, obviously we just trademarked "sexy".
So and, and then we're having this, this discussion with the, like Ford,
'cuz they the fourth council, they also didn't get it.
Like, 'cuz, 'cuz, they're, they're sort of slightly opposing us using model E.
>> And then they saw that we registered model Y.
And they said, oh, you're planning to use model Y instead of model E.
Like no, it was just a joke.
>> Right, we don't do that.
>> We're like, what is this bell?
Well do we, I'll keep going if we don't, but
do we have microphones for folks if they wanna ask questions?
Okay, let's do a quick see if anyone.
Oh my gosh, yes.
We have some, why don't we that?
Let's take a couple of questions from the audience.
And I'll let you guys figure out how to do the allocations.
>> [COUGH] thank you very much.
I have heard you talk about, supersonic aircraft.
[COUGH] you guys have done some beautiful work at
Space-X on [UNKNOWN] clearly Tesla is, is focused on electric.
Have you thought about the, the synergies of
electric MVTOL and aircraft for solving the 405 challenge?
>> For solving the 405 foam, well I mean, I do think there's, there's a [CROSSTALK].
>> And VTOL, Vertical Take Off and Landing.
>> Yeah, right, sorry.
Vertical take off and landing is VTOL.
And yeah, I do think there's, there's a really, like the, I think the
optimal sort of air transport solution is a, a VTOL, electric, supersonic plane.
and, and actually works together quite well for a bunch of reasons.
You in, in particular, the higher you go, the, the better the electric.
The more efficient the electric aircraft is.
Whereas if you have a combustion aircraft as you, as
you get higher it gets, it tends to get worse.
'Cuz you have kind of a fixed aperture and air scoop.
>> The, the engine is the hull and the front of the engine
is, is, is, is a thick size and so you have to pick a
particular cruising altitude and so you've gotta figure out how do you, get the
right amount of air at sea level all the way through really high altitude?
And then you've got this issue of supersonic combustion.
That, you know, you see having to slow the air
down and it ends up being not, not that efficient.
But an electric aircraft would just get better and better as, as it got higher.
And the electric motors have a higher part of weight ratio than a combustion engine.
So you're gonna have, you can actually have the power to do
the vertical take off and landing part with a fairly small motor.
Compared to combustion.
And then you could get rid of the elevator and and rudder.
So you, you don't need the rear control services
if you gimballed in, if you gimbal the motor.
So it starts to look podcraft, like a.
>> Oblivion or something.
>> [LAUGH] Right.
And it's it's yeah.
It's not something, not quite, the, the real trick of it is like how
do you make it really long range, and at least as safe as existing aircraft?
Those are really the only 2 questions on that front I think.
[LAUGH] But they're, they're tricky.
They're certainly tricky.
>> Don't underestimate those two questions.
[LAUGH] >> [LAUGH]
>> Great, let's go to the next one or whoever
has a mic however we're doing the allocation fairly and efficiently.
Can we give him a hand?
Okay no, we have someone, great.
>> Hi, yan kua jsv94.
Hi Steve [LAUGH] long time no see.
One question, are you, is Tesla going to expand worldwide?
And i think jsv is going to ho, host China 2.0 tomorrow, and
do you have any plans to go into the biggest car market today?
But I know you were a little concerned through another friend of mine.
I actually asked you indirectly a few years ago, that you were concerned
about the the secret and the parroting in the Chinese market.
Are you still concerned about that or you have a strategy?
>> yeah, so, so Tesla's definitely gonna shift world wide, in fact the
Tesla roadster is like in 31 countries right now and we, we expect
to, to ship the, the Model S to, to China starting next year, as well
as to Japan and Hong Kong and, and Singapore and, and Australia.
So, sp really it's gonna be quite widely distributed next year.
And certainly China is an extremely important market.
In fact, for premium Sedans, it China's bought
half of the world market, for, for premium Sedans.
>> And growing.
Take some of that Mercedes S Class.
But last year 54% of Mercedes' S class' were sold in China.
So pretty important market.
and, so, so, we're gonna definitely do a major portion in, in, in China.
And then actually some of the most enthusiastic
potential customers we've seen are people from China.
So we, so we actually wanna make sure that the car actually
has features which are specific to the Chinese market and, and make
sure that it's not just, you know, taking an American product and
you know just sort of sending it to China without any, any changes.
So we wanna make sure it's tailored to the market.
And Japan as well.
I don't wanna [UNKNOWN] you know, a lot, not many American cars
sell in Japan but I think that would be [COUGH] like, we [CROSSTALK].
>> Good symbolism.
Yeah, I mean like, I think we should take the Japanese market seriously, and
I think if we do things right, we should have reasonable sales there.
So, yeah, so that's going to be next year.
[COUGH] I mean as far as copying stuff, I think that's certainly a risk.
I think China's actually getting a lot better these days and I, and I
think the, the new government is taking,
taking intellectual property a lot more seriously.
So I'm actually starting to feel more and
more confident about the, the, the technology not,
actually not being copied in Ch, China, or
at least you know, it, it getting much better.
and, and I don't think it's going to be too
much of an issue until we want to establish local production.
And, that, that's where we need to make sure
that we do it right, and it's not an incentive
for the factory team that we established there to sort
of, go across the road and create a competing factory.
But that concern is a few years away.
>> Do we have another one?
The students are largely upstairs.
Is that right?
>> Yeah, up here.
>> Hi, Allan [LAUGH].
This is [INAUDIBLE], a NVA student.
First of all, thank you.
This is very inspiring, to hear an
experience about actually, you know, changing the world.
Using our, an organizational pulse.
The, the organizations that you created.
hopefully, we'll inspire.
I know, already, I remember the movie as well.
And, I was wondering if you can tell us more about
your experience about, like, you know, how to balance, you know?
The trade-off between your profits and, you know, following.
Purpose that goes further than just make money.
You know, you are trying to change the world.
You know, or for the humanity rather than just make profits in the short term.
>> What was the question.
I'm not sure if I got?
>> How, how do, how do you balance?
>> Okay, how do you balance.
Yeah well I mean first of all I should say you
know with with, with, with all of the companies but, but I
think particularly space x and Tesla although they're in a, in
a good position today they, they went through some super tough times
And, and in fact, for SpaceX, I reserved a capital to do, to have three
launch failures, or to withstand two launch failures,
and have the third one be a success.
And actually we had three launch failures, we were just able
to scrape enough money together for a fourth flight that succeeded.
In 2008, and also in 2008, Steve knows, we, we got the
Teslar planeting round done on the last hour of the last day.
It was like 6 pm, December 24, 2008.
If we hadn't gotten it done then, the county
would have gone bankrupt a few days after Christmas.
So, these are, this, this.
>> What he's not mentioning is, the only reason that happened is
he wrote a check for the remainder of his wealth to save the company
[UNKNOWN] the car had a negative gross margin, and its not pretty.
Oh and you had, you know, your large issue owners.
>> That we pissed off, and you know, going AWOL.
This is ugly.
[LAUGH] It was a stressful period.
>> [LAUGH] And that was just at work.
So, so, so for awhile there really wasn't a question of profit or non-profit.
[LAUGH] It was like, we need to live.
How do we live?
I always look for the main challenge.
and, and, and now I mean, now we're at this
stage where we can say okay, we, we can shut
the dial between, we, we could make, let's say at
this point a medium amount of profit or a small amount.
So, we chose to make a small amount, because
we can reinvest the cash flow into future products.
So, you know, right now we're reinvesting the cash flow
into developing the Model X which is an SUV, and into
increasing the production capacity of the factory, and doing a
little bit of advance planning on the third-generation vehicle that'll be.
A mass market a, it's a reportable compelling electric car, so, so
that's, that's really I guess what, what's meant by, in, in this case,
not, not, concerning, we're not trying to maximize profit at this point, because
it, it, it would constrain the business, the growth of the business and.
Constrain the overall objective of
transitioning the world towards electric cars.
so, I got nothing against profit in, in general, but it's just, it's
just, it's not I mean I actually don't think it's the smart move.
If, if one were to take net present value of future cash flows,
I think maximizing profit at this stage is actually not the smart move.
>> You know, and it's interesting, because earlier I said we would get back to it.
>> You mentioned that, your goal was not to start a company that has
a, you know, the chance of making the most money for you the quickest.
>> And that the wealth personally is
almost a byproduct, of these activities of passion.
And by analogy like in the investment field in capital.
You know, you could look for the thing
that will make the most money the quickest, right?
Like a new ad network for social media.
But who cares?
>> I mean, it really just doesn't help the world in any meaningful, and
there are much, over the longer, if you take a longer term perspective, there are
things you could do that don't answer the short term question of what's gonna make
me the most money this year, or this five year period, but over 20 years.
Folks don't know, ironically, he may make the most
money, right, of any entrepreneur, or these companies might
be more profitable than their cohort that doesn't follow
the same purpose driven, kind of, almost messianic zeal.
So, though the balance question most implies a dichotomy that may
not be opposed, but may be aligned if you orchestrate it right.
>> Yeah, maybe of a short time of a short term versus a long term approach.
>> Yep exactly.
Great, we have, we have a hand up here?
>> Up here?
>> Another one up here?
>> Up here.
This will be the last question.
>> Oh, is this the last question?
>> yes, from your current car marketing strategy you could say
that your cars are directed towards the luxury car market place, so.
That's a fairly well-defined, market.
Do you have any plans for expanding it to the general
marketplace, to, say, make a car for the masses, which
might be, may be in the $25 to $35,000 range?
>> yeah, absolutely.
>> Keep pushing it, huh?
>> In fact, the, the fi, first blog piece I wrote
it has, was the test master plan, is to start off
with an expensive, low volume vehicle, then go to a mid
priced, mid volume, and then sort of low price, high volume.
So we're kind of in phase two.
And without their generation vehicle, we expect to
be somewhere in the $30-$35,000 range for the car.
Which when you take into the account from the
savings from the use of electricity instead of gasoline, is
more like comparing it in the U.S. to about
a $28,000 car, or in Europe to a $22,000 car.
>> And the maintenance is much less, the fuel costs are much lower?
>> Yeah, absolutely.
I want to thank you very much for this.
And transition to the second closing segment of our minion.
>> Thank you.
[SOUND] Well Elon, congratulations on
behalf of the Stanford Graduate School of Business
and the Stanford, Alumni Association,
Business School Alumni Association.
Dean Sloan would like to present you
with this year's Entrepreneurial Cup of the Year.
>> Thanks, thank you very much [SOUND].