Elon Musk, the real-life Iron Man?

Mathias Talmant
16 juil. 2020
8 min de lecture

Masterminds Series

Foreword

Elon Musk hit the headlines when SpaceX launched astronauts to space for first time. It means the US no longer relies on Russia to ferry astronauts into space. How convenient is that, just after President Trump inaugurated the Space Force to “deter aggression and control the ultimate high ground”. Is Elon Musk the real-life Tony Stark who will trigger the next tech revolution and unlock the possibility of human life on Mars? What has he achieved so far and what are his plans for the future? In this second issue of MasterMinds, I will paint a portrait of the visionary Elon Musk.

Quick Facts

Elon Musk is an entrepreneur, an engineer, a dreamer and a successful businessman who works around the clock. He is the mastermind at the helm of Tesla, SpaceX and SolarCity. He sold his first computer program at 12 and was billionaire by the age of 40. He is now wealthier than Warren Buffett, but no success has ever pleased his unquenchable thirst for innovations.

Just like Tesla before him, Musk’s creative mind has big plans for Humanity, call it space travel, clean energy, efficient transports or AI symbiosis. Besides the glitz and glamour, Elon Musk can also be proud of what he achieved after all obstacles he had to overcome. He was bullied as a child, mocked by the space and car industry, then he almost died of malaria, he went through several divorces and even lost a child but did not lose his head.

Not your average nerd

Musk was born in 1971, in Pretoria, South Africa. He is the son of Maye Musk, a Canadian model and Errol Musk, a South African electromechanical engineer, pilot, and sailor. Musk’s childhood was not a bed of roses. His parents divorced and he was severely bullied throughout his childhood. Because they were smart and non-conformist, Elon and his brother were marginalised and persecuted, so much so that they were hospitalised once. A perfect scenario for a Netflix teenage drama.

Elon was a brilliant nerd. At the age of 12, he became interested in computer programming and wrote a game called “Blastar” (which you can play online). He sold it to a magazine for $500. Having a photographic memory, his only friends were books. He could spend hours reading everything from comics to encyclopaedias.

Elon Musk received a Bachelor of Science degree in physics and in economics. In 1995, at age 24, Musk moved to California to begin a Ph.D. in applied physics and materials science at Stanford University. But he left the program after two days to pursue his entrepreneurial aspirations in the areas of the Internet, renewable energy, and outer space. Musk sold his first company when he was 27 for $22 million. At this point, he could have retired, but it was not enough for him. His purpose was not achieved yet. Elon wanted to have a profound effect on the world.

As brilliant and inspiring as Elon Musk may be, he is no saint. He is as demanding with himself as he is with his colleagues. His employees depicted him as a “jerk” because he was never satisfied. This insatiability gave him the drive to succeed and thrive in his many projects, but he often slacked off on human management.

The Entrepreneur

From Zip2 to PayPal

In 1995, Musk and his brother, Kimbal, started Zip2, an online city guide for the newspaper publishing industry. They worked with The New York Times and the Chicago Tribune and sold the company for $307 million only 4 years later.

Not satisfied with his success, Musk quickly turned around and used $10 million from the sale of Zip2 to fund X.com, an online financial services and e-mail payment company. One year later, X.com collided with Confinity, a rival which had a money transfer service called PayPal. The latter emerged to compete with eBay’s bought-in system and ultimately became the leading payment system in the world. eBay threw out the towel and acquired Paypal in 2002. Elon went away with $180mn at 30 years old. At this point, Elon Musk looked toward the stars to find another challenge.

Flamethrowers, apparels and a pinch of marketing

Musk is not only a brilliant engineer; he is also a fantastic marketer who succeeded to turn his name into a brand. Tesla, Space X, Neuralink all have sexy mission statements and their related fan base. With 37 million followers on Twitter, Elon Musk is a serious influencer who held his fan boys up to ridicule in several occasions, though they kept paying through the nose for his merch. This is how The Boring Company (the firm behind the Hyper Loop) sold thousands of flame throwers and fire extinguishers with the following caption: “You can definitely buy one for less elsewhere, but this one comes with a cool sticker”.

Personally, I admire Elon Musk’s achievements and I think we need bolder (no pun intended with the Pay Pal photo) men/women like him to reach a new paradigm. However, I think there is so much hype around him that some investors and consumers act irrationally, hence why Tesla’s stock price is unreasonably high at this stage. Let’s not forget a stock gives a claim on a company’s assets and earnings. You’re not buying a share of Elon when you buy Tesla.

The Engineer

TESLA

In 2004, Musk used his money from the sale of Paypal to join Tesla’s founders and take it from an engineering project to the first auto industry start-up in Silicon Valley. His plan was made of three steps: 1) make a high price car at low volume, 2) a medium price car at medium volume and 3) a low price car at high volume for wider market penetration and greater economies of scale. The goal was to first bring a proof of concept as to driving an electric car was no trade-off for performance and style.

Source: Tesla Motors

The Roadster was more of a minimum viable product with no ground-breaking innovations since it used a Lotus-built glider and a battery made by AC Propulsion. More R&D was needed to reach the next step, but improving battery efficiency costs a pretty and in 2008 the company runs out of cash. After several rounds of litigation with previous employees, three failed launches at Space X and the GFC at the door, Elon’s three companies were in free fall.

Musk took the leadership in 2008 and took drastic measures. He cut a quarter of the workforce, recalled 75 million of the Roadsters, raised $40 million, built a strategic partnership with Daimler and succeeded to borrow $465 million from the government and turned Tesla into an EV pioneer.

Source: Tesla Roadster, Visual Capitalist

Two years later, in 2010, Tesla started trading on Nasdaq. It was the first American car maker company to go public since Ford in 1956. At this point, the firm shifted its focus toward more affordable cars, the model S and the model X. However, profitability was yet another challenge as lithium-ion batteries' high cost makes it hard to compete with gas-powered vehicles. Elon Musk’s solution was the GigaFactory. In 2013, he unveiled plans to build a gigantic factory in Nevada to reach economies of scale in lithium battery production. Another significant milestone was the implementation of semi autopilot on its model S. Finally, in 2016, Tesla announced the Model 3, the “car for the masses” and one year later it surpassed General Motors to become the most valuable US car maker.

Tesla’s mission to accelerate the world’s transition toward sustainable energy is very appealing, but ambitious. This young car maker dreams big and is already eying for the semi, truck and transit markets. If the firm seems to be well ahead of its time in terms of technology, commercial traction is not there yet and Tesla’s stock multiples do not seem to reflect that. From a car maker’s perspective, the stock seems way overvalued, but from a tech firm, there may be some more room to go up as Tesla’s guru will not cease to amaze us.

SOLARCITY

The solar energy service provider was created in 2006 by musk’s cousins and grew by acquisitions until 2016 when it became a Tesla’s subsidiary. It is part of the tech guru’s continuing effort to promote and advance sustainable energy. “As one company, Tesla (storage) and SolarCity (solar) can create fully integrated residential, commercial and grid-scale products that improve the way that energy is generated, stored and consumed”. The success of the firm is due to is solar lease option for homeowners. It allows customers to pay a lower monthly fee for clean electricity without any upfront payment. Excess power can be resold and new solar roofs make it more aesthetic.

HYPERLOOP

Just like Nikola Tesla before him, Elon Musk has a brilliant mind and his inventions went beyond the scope of energy. In 2013, he showcased a sci-fi like form of transportation called the "Hyperloop". It promises to optimise commuting between major cities by propelling pods through a network of low-pressure tubes at speeds reaching more than 700 mph. The inventor estimated that it would cost $6 bn (1/10 of the cost for the rail system planned by the state of California). Virgin Hyperloop one is working on the project to erect the first project in Dubai’s desert.

The Dreamer

Elon Musk is the archetypal serial entrepreneur who embraced technology with a desire to push the limits of what is possible for humankind. No wonder why he is the closest analogue for Marvel’s billionaire weapons dealer.

Source: Elon Musk cameo in Iron Man 2

SPACE X

Musk founded his third company, SpaceX, in 2002 with the intention of building spacecraft for commercial space travel. He put the majority of his worth to fund it because nobody believed the firm would be financially sustainable. By 2008, SpaceX was well established, and NASA awarded the company the contract to handle cargo transport for the International Space Station - with plans for astronaut transport in the future - in a move to replace NASA’s own space shuttle missions. He streamlined 1960’s space tech and made cheap rockets. Just like Henri Ford did with the automobile, he revolutionised a heavy industry, but Rome was not built in a day. Here are some of the key milestones that Space X had to go through to become NASA’s number one partner (ignoring all the failed launches, doubt, uncertainty, pression from shareholders, etc).

Source: MT Finance.

Since 2011, NASA has paid Russia up to $90 million per person to ferry crews to the ISS aboard the Soyuz craft. Seats on the SpaceX capsule are around two-thirds of this cost. In September 2017, Musk presented an updated design plan for his BFR (Big Fucking Rocket), a 31-engine behemoth topped by a spaceship capable of carrying at least 100 people. He revealed that SpaceX was aiming to launch the first cargo missions to Mars with the vehicle in 2022. He said “I would like to die on Mars, just not on impact”. It is very unlikely to meet this deadline, but NASA's Project Artemis and Jeff Bezos' Blue Origin venture are other examples of space programs that may help humanity to go to infinity and beyond!

STARLINK

On top of its ambition to make space travel cheaper and conquer the universe, Space X also wants to “deliver high speed broadband internet to locations where access has been unreliable, expensive, or completely unavailable.” It has grown its internet constellation to 422 Starlink satellites in low Earth orbit so far and expect to start service in Canada and the Northern US in 2020, followed by near-global coverage in 2021. SpaceX is planning a constellation of up to 12,000, or potentially 42,000 internet satellites. At end of life, satellites will deorbit to self-destruct in the atmosphere to keep space clean, but some concerns are being raised about light pollution.

NEURALINK

Neuralink is an American neurotech company founded by Elon Musk, which develops implantable brain–machine interfaces. In 2014, he said during a conference at the MIT that AI was like “summoning the demon” and that it could potentially be more dangerous than nukes. This is as cyber punk as it sounds. The visionary is aware of the danger of a “Skynet” lurking in the cyberspace, but the promises of his microchip may well be worth a try. Last year, he revealed that the device would consist of a microscopic chip implemented on the Brain that connects via Bluetooth to a smartphone.

AI-powered implants could possibly help people with neurological disorders. In other words, this invention could not only create a seamless connection between Humans and Machines, but also cure some incurable pathologies like depression, addiction, Alzheimer and many others. Human trials are planned soon, but more details will be provided on August 28, as Elon Musk teased on his tweeter account.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

MT Finance - Mathias Talmant.