2012 SUCCESS Achiever of the Year: Elon Musk
When you work on an epic scale, tossing out huge ideas as if they were pennies aimed at a wishing well, you get used to hearing the word crazy. For Elon Musk, the term springs up so frequently, he might as well print it on his business card—right in front of his name. Crazy Elon Musk. Who else would have the audacity to plan a privately funded mission to Mars?
That’s right, Mars. Take a moment to think about that vision, because it’s how all this crazy business began: with a madcap scheme to draw attention to the lack of ambition in America’s space program.
A lifetime before he aimed at distant planets, Musk was a driving force behind two of the most successful startups the digital world had ever known. Zip2, the Internet services provider he co-founded with his younger brother, Kimbal, at age 24, was purchased by Compaq for $307 million. PayPal, the online payment system he developed with Peter Thiel and Max Levchin, was scooped up by eBay for $1.5 billion. After all his shares were added up, Musk was worth $180 million.
It takes a certain measure of savvy to pull off deals like those, and you’ve got to respect a man who assembles such a private fortune in only seven years’ time. So when Musk decided, after a soul-searching car ride with a college friend on the Long Island Expressway, that he should aspire to put life on Mars by rocketing a miniature greenhouse there, people humored him. And when he flew off to Moscow to talk with the Russians about purchasing two intercontinental ballistic missiles, they smiled. But when he announced that he was going to start yet another company—one that would build its very own rockets—they concluded he was nuts.
“The public tends to respond to precedents and superlatives,” Musk said in a commencement speech at Cal Tech last June. That’s why the notion of sending that greenhouse into space held so much appeal for him. Not only would it bring life to Mars, the first tiptoe for what will be a marathon colonization effort, but it would also be the greatest distance life from Earth had ever traveled. NASA has sent rovers to the Red Planet before, most recently last year, to take photos and collect samples, but the idea of sending living organisms has been only vaguely conceptualized. Musk believes a permanent human base on Mars is attainable sooner than even the foremost stargazers can fathom, though tremendous advancements must first be made in rocket propulsion.
At the time of his galactic epiphany, only three nations—the United States, Russia and China—had ever succeeded in putting spacecraft into orbit. It’s easy to understand why some skeptics—scientists, venture capitalists, journalists and politicians—might’ve doubted him. Musk began with no formal training in aerospace engineering. At the University of Pennsylvania in the ’90s, he earned bachelor’s degrees in physics and business. Even his closest friends joined the chorus, a handful of them banding together to express their concern. One of them actually sat him down and forced him to watch videos of rockets blowing up. “We staged an intervention,” says Musk’s college roommate Adeo Ressi. “We told him he was going to end up losing all of his money—which he did.”
To his credit, Musk was willing to hear everyone out. He’s a big fan of negative feedback, and he knew that his friends’ fears had merit. Boeing had spent close to $2.5 billion to design and build the Delta IV rocket used to launch today’s satellites. The company employed more than 150,000 people. As Musk told 60 Minutes, “I would have to be insane if I thought the odds were in my favor.” But that did not stop him from moving forward.
In June 2002, around the time of his 31st birthday, he launched the Space Exploration Technologies Corp., better known as SpaceX. To get it off the ground, the young maverick burned through $100 million from his own bank account.
By all rights, Elon Musk should be a household name, much like the Tony Stark character (Read more about Robert Downey Jr. as Tony Stark) he inspired in the Iron Man movies. He’s always been a bit of an enigma, though.
Born in South Africa in 1971, Musk was not like the other neighborhood boys in Pretoria. Not only did he love to lose himself in books, but he remembered virtually everything he read. The son of an engineer (electrical and mechanical) and a dietitian/model, he learned early on how to harness his brainpower to make money. At 12, he sold his first piece of software—a video game called Blastar—for $500. He later tried to open a video arcade with his brother, though neither child was old enough to sign a lease. At 17, Musk left home to make his fortune in America. In part, he was running to escape mandatory military service. But he knew, too, that the United States is where the action is. If you were going to create things that change the world, it’s where you had to be.
Of course you can’t just show up in America without a green card. So Musk set out first for Canada—the birthplace of his mother—and took on a series of odd jobs, eventually enrolling in one of the nation’s top schools, Queens University in Kingston, Ontario. After a year, he transferred to Penn, where he collected those dual degrees while making some money on the side by hosting huge parties, complete with bartenders and bouncers, in the house he shared with Ressi. He graduated in 1995 and moved west to Stanford, with plans to develop expertise in high-energy supercapacitors while working toward a graduate degree. That lasted all of two days. In no time he saw the feverish entrepreneurial spirit in Silicon Valley, observed the staggering success of the Netscape IPO, and threw himself headlong into the game.
He summoned his brother from Queens University, recruited a friend, and the three worked night and day beneath the leaky roof of a tiny Palo Alto, Calif., office that also served as their home, creating the code for Zip2. The venture capitalists who backed the trio insisted they hire a CEO to oversee the business. To this day Musk bristles over the repercussions of that decision. The company was a success, luring business and investment from clients such as The New York Times, Hearst and Knight Ridder. But Musk believes the firm could’ve been an even bigger player in the dot-com revolution, a genuine rival to celebrated search leaders Yahoo and Google.
When Zip2 was sold, Musk pocketed $22 million. He immediately invested it in his next big idea, a digital payment service called X.com. In the spring of 2000, at age 29, he merged the company with a competitor called Confinity, which offered a similar service known as PayPal.
Confinity CEO Peter Thiel stepped aside and let Musk steer the company, and by some accounts he did an admirable job of blending the two operations. But he clearly ruffled some feathers. It’s fair to say Musk has never been graced with incredible charm. He will often smile and force out a laugh, but he’s not much of a conversationalist. People who know and like him are accustomed to having him drift away in mid-conversation—even on the phone—lost in thought for a half-hour, sometimes more.
After nearly 10 months in charge, Musk left the PayPal office for a long-awaited vacation in Australia. While he was gone the board of directors voted to replace him with Thiel. The dismissal stung, Musk says, but it did not soften him. He was still the company’s largest stockholder. When eBay came calling in 2001 with a $400 million offer, Musk challenged the management team to turn it down. The auction site returned with an offer of $800 million, and he was even more vocal about the need to hold out for more money. The company had become profitable, he argued. The business was continuing to scale.
“That was probably one of the most important decisions we made at PayPal—not to sell, but instead go public,” says Thiel of PayPal’s strong IPO in February, 2002. “We ended up selling to eBay about six months later for almost twice as much—$1.5 billion.”
Is it courage that sets Elon Musk apart from most business leaders? Of course not. Nearly every entrepreneur at some point has to take a leap of faith. What makes Musk extraordinary is this: In an era when young hotshots with laptops are scrambling to launch the next Google from their dorm rooms, he chose to risk his entire net worth on three enterprises with sweeping infrastructures and steep research and development costs.
First he poured $100 million into SpaceX, which is now housed in a 550,000-square-foot facility formerly used to construct 747 fuselages. Then in 2003, he sank $50 million into Tesla, an automaker determined to manufacture electric cars for the masses. And three years later, it was a $10 million initial investment in SolarCity, a company that installs and leases solar panels across the country.
It’s tempting to say he makes everything look easy, but that’s definitely not the case. Musk handed off the reins at SolarCity to two cousins, reserved the CEO role at SpaceX for himself, and initially tried to guide Tesla from afar, only to eventually find himself with a second CEO job. These days he shuttles back and forth a couple of times a week between SpaceX headquarters in Hawthorne, Calif., and the Tesla nerve center in Palo Alto. The workload—85 to 90 hours per week—helped destroy his first marriage to sci-fi novelist Justine Musk, and no doubt contributed to the downfall of his second, to British actress Talulah Riley. In order to spend quality time with his sons—twins born in 2004 and triplets born in 2006—he often piles them onboard his jet for the 400-mile commute.
Musk’s failures have been epic. In 2000 he wrecked a $3 million McLaren F1 sports car he had neglected to insure. Tesla’s $98,000 Roadster arrived months behind schedule. And the first three rockets built by SpaceX produced crash-and-burn videos akin to those Musk was forced to watch with his friends. The first barely made it off the ground, the second spun out of control five minutes into flight, and the third ended with a collision between its first and second stages only eight minutes after liftoff, spilling the cremated remains of astronaut Gordon Cooper and actor James Doohan— Star Trek’s Scotty—into the Pacific. On behalf of space services company Celestis, SpaceX was attempting to ferry the ashes to orbit, per the wishes of the loved ones of deceased stars.
“That was definitely a difficult blow,” Musk says. “The important thing is that none of our customers left SpaceX. They all sort of held the faith.”
Musk never lost his. When the fourth rocket climbed into the blue sky above the Marshall Islands—2,400 miles southwest of Hawaii—on Sept. 28, 2008, he did not have the funds to build a fifth. No matter. About 91/2 minutes into the flight, 250 miles above the mission control center, the second stage engine shut down as planned and the Falcon 1 became the first privately developed liquid-fuel rocket to orbit the Earth. “This is one of the greatest days of my life,” the CEO gushed in the post-mission celebration he shared with SpaceX’s 150 employees. “We are going to be taking over for the Space Shuttle when it retires.”
If it’s hard to fathom how one man could risk $100 million on such a far-flung dream, just imagine how hard it would be to turn right around around and take the last $3 million in your bank account and sink it into a struggling car company. That’s precisely what Musk did three months after SpaceX’s triumph, back in the days when the nation’s banks were pleading for federal bailouts, and General Motors and Chrysler were teetering on the edge of bankruptcy. He had to borrow money to pay the rent, he says.
It was the most gut-wrenching stretch of his life, a span he likes to call the “period of maximum suckage.” He was working like a dog. His first marriage was unraveling. His dreams for Tesla were on life support. But he did not blink. “Either I went all-in or Tesla dies,” Musk told a reporter for Men’s Journal. “I didn’t want to look back and say there was something more I could have done.”
Never a Final Frontier
On May 25, 2012, the latest SpaceX rocket, Falcon 9, ferried a laptop computer, 162 meal packets and a fresh set of clothes to the astronauts at the International Space Station, kicking off a $1.6 billion contract (at minimum) with NASA for at least 12 more resupply missions. The same week, Tesla announced that in June—ahead of schedule—it would begin fulfilling orders of the Model S, a four-door electric sedan priced about $50,000 after tax credits. It’s now taking orders on a similarly priced crossover SUV known as the Model X. In June of 2010, when the company went public, it was valued at $2.2 billion. SolarCity entered 2013 with hopes to raise $200 million in its own IPO.
That’s not to say that Musk’s critics have backed off. In one of the presidential debates last fall, Mitt Romney questioned the federal funding that had helped prop up Tesla in its hour of need. America’s auto dealers are taking the CEO to task for bypassing them in favor of company-owned, Apple-like showrooms. The nation’s gossip mill has taken to combing through his divorce papers, not to mention each and every quarterly earnings report, looking for signs of weakness.
Musk has not grown shy. He appears regularly on television, seated beside Jon Stewart and David Letterman, speaking in his soft, sober way of biblical things: the sun, the moon, enlightenment, the apocalypse. He takes great pains to explain his thinking, but honestly, it’s hard to make the leaps with him. Who else masters the intricacies of rocket science by reading books and asking questions?
Musk reminds us of a time when the United States was a nation of big ideas, when we endeavored to bridge the coasts with railroad tracks, dig the Panama Canal, and, yes, put a man on the moon. “He has this incredible sense of mission,” says Thiel, the man who squeezed him out of the CEO position at PayPal. “The things that he is working on—if he were not doing them, they would not be done.”
As for Musk’s now-legendary risk tolerance, well, Thiel says it’s a mistake to think of SpaceX, Tesla and SolarCity as outrageous bets. “All have succeeded in a pretty big way,” he explains. “If you get three out of three, it’s not just winning this fluke of a lottery. The strategy of identifying important sectors that were completely neglected was an important component of success. In a way, that made it less risky than it appeared.”
Musk admits there is little distinction between information and intuition in his business decisions, however bold. “Data informs the instinct,” he says. “Generally I wait until the data and my instincts are in alignment. And if either the data or my instincts are out of alignment, I sort of keep working the issue until they are in alignment, positive or negative.”
Though much is made of Musk’s struggles in personal relationships—uneven conversations, the two marriages down the tubes, friendships strained by his deep thoughts and ambition—the truth is he has a profound understanding of what it is that makes human beings tick. He knows it’s not enough to build a functional electric car. To fire up the world’s imagination, the thing has to rocket from zero to 60 in 3.9 seconds—just like a Ferrari. To create a whole new worldview, you can’t simply reach the International Space Station. You have to make space travel affordable and put the journey to Mars in the grasp of the well-heeled voyager.
So the real question is not whether Elon Musk is insane. It’s whether we are crazy to doubt him—to doubt that, as he says, the nation’s highways will be jammed with electric cars in the next two decades, or to insist that humans could not possibly set foot on Mars in the next 10 years.
If history is any judge at all, Musk will prove us wrong.