Elon Musk: 5 Areas That Will Have the Most Important Effect on Humanity | Inc. Magazine

About a year and a half ago, before Model S shipped, I remember him saying with sort of a gleam in his eye that he relishes the day that he'll be driving around somewhere in Silicon Valley and see a 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 here today saw a Tesla driving around Silicon Valley? And I don't mean the one out there because that means you've all seen multiple Teslas, right? I saw 10, I counted today, just, and I have a short commute, so that dream has become reality, and what Tesla has done has been a marvel to watch. So I think a lot of folks here, 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 and 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 I get there? Sure, so, let's see. Is that on? Yeah, it seems to be good. In the case of Tesla, SpaceX, and SolarCity, and actually also the PayPal and the Institute for that, it really stemmed from when I was in college, I was trying to think what would most affect the future in a very likely to be a positive way. The three areas where I was quite sure it would be positive were sustainable energy, internet, and making life multi-planetary. And then there were a couple other areas where it's maybe a question mark, like AI and writing genetics. And what was the last one? Yeah, rewriting genetics. Rewriting genetics. It just happened. Big impact. It's good to know where phase three and four might come, yeah. Potentially negative consequences, hopefully positive, that something could go wrong. So did you have a recorder, like the top three and a couple of contenders, or were they all just kind of jumbling around waiting for the right moment? No, I just thought, if you look ahead and say what's really gonna 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. So there's this moment of epiphany that you held for a while, because you didn't pursue those right away, right? This was sort of an early vision that you then got opportunities to execute on. Yeah, so 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, or just let's say the cost of goods analysis for the rocket, or the, gosh, EV should be better than internal combustion engines, just in general, I'll commit. I'll believe that that should be done. Yeah, I didn't really get into any of this with the expectation of success, or at least, yeah, I mean, I started out thinking, okay, I'm gonna do something in the electric vehicle space, and that's why I originally came to Stanford, was to work on advanced energy storage technologies, in particular, ultracapacitors. So that was continuing on research that I'd done as an intern in Silicon Valley in the summer prior. So that's why I originally came out in 95, and then during that summer, I wrote some internet software, and I thought, okay, I can either work on electric vehicle technology, or I could sort of work on internet stuff, try to do something with the internet. And I thought the internet would be something that would dramatically affect the future of humanity, be like acquiring a nervous system. And whereas previously, communication would have to occur almost by osmosis, from one person to another, slowly through telephone or mail or something like that. But now, if you have a nervous system, any part of the human collective 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 as sort of information. But with everything digitized and access anywhere, you could be in a jungle in South America, and if you had just an internet link somehow, you'd have access to all of humanity's information. So it would actually effectively create a superorganism and fundamentally change the nature of humanity itself. So I just wanted to be kind of part of that. Is that the path to AI that you might see? It's actually not exactly AI. It's some sort of human-machine collective intelligence. So different from AI. Although AI may not turn out to be exactly what, hopefully it's not exactly what's, you know, like describing Terminator or something. Now, a quick pause. For those who haven't been to SpaceX, the data center has gotta be the coolest thing you've ever seen. It's Skynet on the door, Cyberdyne systems and branding and everything. The most badass set of lights coming from all the blinking servers. So he doesn't own it. Exactly. Our FBA and CFD cluster is called Cyberdyne systems. We'll get back to influences later on, but I'm gonna try to see if I understand what you were saying about this. You see the long arc of, and what's important to humanity. Not little problems, but huge problems that can 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, government's screwed, you know what we're gonna do, right? You have this incredible sort of scope of ambition. Planetary scope, interplanetary scope. A little more than just changing the world, let's change some other worlds too. And this is big stuff. Is that always in your mind or did you become more emboldened over time that this is available, we can do these things? It definitely emboldened over time. I mean, when I started the first internet companies up to, with my brother and another person, Greg Curry, it wasn't really with the thought of being wealthy. You know, I've got nothing against being wealthy, but. We'll get back to that later too. But it's just, it was just from the standpoint of wanting to be part of the internet. And I figured if we could make enough money to just get by, that would be okay. And when we started off, we literally only had like one computer. And so we had a web server during the day and I'd code at night. And we just got a small office in Palo Alto back when rent was not insane. And it cost us like $450 a month. It was cheaper than an apartment. So we actually just slept in the office and then showered at the YMCA at the occasional El Camino. So we'd walk over there and shower. And that was actually, I think that was when I first met you by the way. And so probably not many people know this, but we actually pitched Steve in like January 96 on the Zip2 business plan. And actually, Steve was actually one of the most up to speed on what actually was in our business plan. Most of the people we met did not actually read our business plan. In fact, a lot of people we, a lot of venture capitalists we met at the time didn't even know what the internet was. They've never used it. I'm not sure if they still do. Yeah, right. Yeah, I'm talking like, sort of well-known people on Sand Hill. It was like, wow, okay. But at the time nobody had made any money on the internet. So I guess that's, then it wasn't really clear evidence that there was a business. And yeah. Those were fun times. I remember Kimball and you coming in. Right. Very young looking guys. That's how I feel. I think I was in my first four months on the job too. Yeah, yeah, exactly. So let's just hear for a sec. 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? I think it's. Because look at the correlation. Yeah. Struggling companies. Everything's in the craft can in December, 2008. So let's take on a new CEO gig. Yeah. And same for Steve going back to Apple. No, definitely it was not my intention to be CEO of two companies. I mean, there's certain things that I kind of wanted to, I thought were important to happen. And I thought it was important that an electric vehicle happened, that there was a success in the electric vehicle arena, because the incumbent companies were convinced that it was not possible to create an electric car that looked good, had a good range performance and so forth. And that even if you did make such a car, it would not sell. Electric 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, all those things. That was a Tesla Roadster. And if you created, if you made such a thing, people would buy it. And so that's what we were trying to do with Tesla. By the way, I should say one minor correction on the introduction. I'm not a co-founder of SolarCity, but I am a co-founder of Tesla. That's okay. That's a good point. And product architect. Yeah. Many of its key features. Very much like jobs. Both the hand and some of the detail as well as the long arc of what's important for the company. Though the quip though about being co-CEOs is more than just a joke in that I wonder if in ways that are hard to predict and you wouldn't set out. But inevitably, both companies cannot expect more than half your time at most. It sort of naturally forces a delegation upon you and an expectation they 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. It probably does, yeah. I think I probably do, yeah. I mean, I have to triage the things that I do at each company and constantly think about what is the most useful thing that I could do. But even with that, it still actually does take an enormous amount of time. And for a while there, I was just doing constant 100 hour a week. And that's definitely wearing. And now I'm kind of in the 80 to 90, which is more manageable. But if you divide that by two, it's only like maybe 45 hours per company, which is not much when there's a lot of things going on. Like a slacker, I mean, yeah. So, you know, it is interesting also how you have a love for certain aspects of the product. So at SpaceX, the whole concept and the vision of going to Mars, backing into features and stuff. It's a wonderful thing to see. I think what obviously should strike folks in the room as remarkable is the diversity of industries that you tackle, right? From commercial banking to the multi-industrial complex to the automotive industry. These are heavily regulated industries that generally investors flee from and startups routinely fail in and they haven't seen much change for good reason over decades. So there might not be an obvious pattern in which industry you tend to thrive in, but I wonder if there's a pattern perhaps in 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, for first principles perhaps instead of iterating from the past, a breakthrough? And is there a reason you end up in these otherwise really tough industries? I mean, I don't know if that's ever occurred to you that you don't, even with SolarCity going up against the regulated utilities, none of these are places that you normally find entrepreneurs. Yeah, like I said, it was not from the standpoint of like, what's the best risk-adjusted rate of return or, you know, where I think things can be successful. It's just like, I think these things need to happen, try to make them happen. And certainly when we started SpaceX for Tesla, I thought the probability of success was less than 20%. You know, probably a fair bit less than 50%. In the case of SolarCity, I thought the probability of success was probably greater than 50%, but it wasn't clear what the magnitude of success would be. It could just be small. And, but it was, I mean, I just thought these were things that needed to get done. And even if the money's lost, okay, it's still worth trying. So you had conviction, but it didn't mean certainty, right? You knew that all vehicles would be electric in your heart, but not that Tesla would necessarily succeed. I mean, I think the sort of fundamental good that Tesla can accomplish is acceleration of the inevitable, which is electric transportation. But I think there's a lot of value to accelerating, even though I think it's somewhat inevitable, it's about this value to accelerating it to minimize the environmental and economic damage that would otherwise occur. So, you know, it's better if we transition to sustainable transport 10 years or maybe 20 years sooner than might otherwise be the case. And I think that Tesla's effect has been much greater than the cars that it's made internally, because when we announced the Tesla Roadster, then Bob Lutz, who was Vice Chairman of GM at the time, saw our press release and said, if a small company in California can do it, then so can GM. And he took it to his engineers, who told him that you couldn't build an electric car and told them that they needed to get going. And that's what got the bolt rolling. And that in turn got Nissan to do the lead. And so it's kind of got things going. And ultimately, it's what we induce other companies to do that will have a greater impact than 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 mission, as Elon has articulated 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 to help others in that shift as well, which is remarkable. So we supply powertrains to Toyota and to Mercedes, for example. To help what could be viewed as your biggest competitors one day, you know? Absolutely. Before we get to that sort of purpose-driven mission, I do wanna ask one, or at least maybe make sure the audience realizes how cool this car is. So Elon 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. Consumer Reports saying it's the best car they've ever tested. Road and Track saying it's the most important car in America's history. The safety testing showing it's the most safe car ever manufactured by far, including vans and SUVs. And so it's pretty remarkable to have had performance, desirability, safety, and all these parameters. So is it luck, or is there something particularly unique about the EV design space that let it be possible to build the best car? Well, I think luck does play some role here, but I think electric vehicles have a fundamental architectural advantage. If one designs an electric vehicle from the ground up and takes advantage of what's possible, like if you just were to convert a gasoline car, you would not achieve these advantages. But if it's properly done, you can actually package the battery pack in the full pan and achieve a low center of mass and have a very compact motor and inverter and gearbox so that the actual usable space in the car is significantly greater than a gasoline car of the same overall external pixel dimensions. And then if you do a few other things, which aren't necessarily specifically related to an electric car, like using an aluminum body and chassis is helpful because you can absorb more energy per unit mass, essentially, in a crash. Like a crumple zone? Yeah, exactly. Well, part of it's related to electric vehicle architecture, and part of it is related to other technical decisions that were made in the design of the Model S. And so, yeah, that's what leads to having a high safety is, I mean, I don't want to sort of go into too much detail because it might take up too much time, but like I wrote a blog post. 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, before, like, along either the product dimensions, like, it will have all these great features, like, at the get-go, did it all gel? And then secondly, I'm also curious, when did you first know that all vehicles would be electric? Like, was that early, medium? Oh, that was probably 22 years ago, something like that. Before you met Tesla? Before, way before. Before there was Tesla. Before there was, way before there was Tesla, oh yeah. Well, like I said, when I originally came out, when I, I mean, when I was studying physics in 10, that's probably when I totally became, or maybe, no, sooner than that, probably when I was in my sophomore year of college. Did you have certainty in your heart? Yeah, absolutely, it's super obvious. Yes, yes, now, yes, now it is, and there are some doubters. 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 will be of this point of view. But we won't have made the transition yet, but we'll realize that it's a ridiculous debate to be having. You were a lone voice of sorts back then, probably amongst your cohort and friends, and, you know, social connections. Yeah, actually, I used to talk to, like, dates about electric cars. How'd that go? It wasn't helpful. It got better. Yeah, so, actually, I ran into a girl I dated briefly in Canada, Kristen Nicholson. She's now, like, a writer for Scientific American, and she mentioned, yeah, when we were on a date, to ask her, do you ever think about electric cars? And she said, no, I don't. So, yeah, this was a while back. I mean, it's pretty, I mean, almost everything's electric that we have in our daily lives. So, it was from the physics of it. Yeah, absolutely. The heat loss of an internal combustion engine just, yeah, pretty amazing, pretty amazing. So, 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, so, but I find it fascinating. I was at a lunch at a Google event, and out of the blue, with no expectation this would be a topic, 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. Really? Yeah. He said that? Yeah. And so, I'm like, paper or pen? Can we please get this down on? Yes. So, he likes zingers. I know that, actually. He's a good friend of mine. So, context is important. You know, I met Larry before he got venture funding. Oh, really? So, yeah. Wow. So, that's like 1997 or something. Wow. Well, he's a remarkable guy, obviously, also an underachiever, and, you know, has a company that wants to do good in the world, right? 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 corporation that's pursuing things that are directly aligned with things I care about, like getting off of oil and colonizing other planets. He believes in those missions, and thinks that a corporation with, endowed with the right to do that as its business purpose, is the best vehicle out there, and 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'd never get to the second half of their life, like Steve Jobs. I mean, not in a joking way, I mean, seriously, and it was a very deep moment. So, it raises the question of a purpose-driven business. So, you've heard already that Tesla's not just trying to make money, right? It's not a parody. I mean, if you read the most recent shareholder letter, it says, he profits from that. In fact, I started off the shareholder letter saying the profits are not our primary goal. And then, I got a little bit of, some of the board members who questioned that statement. And I was like, well, it's true, you know? And like, for now, or like, just while we're growing, but no, just not the priority. Which I think, in a business school, is a really good point to dwell on for a moment. Yeah, it's not that I think they're unimportant or anything, it's just not the primary goal. And I actually told people that on IPO as well. And so, it's not like new information, or at least, you know, if people ever watch the IPO, it's not new information. And yeah, actually, amazingly, the stock went up after that. I think there's a profound reason. I mean, you see the benefits of being focused on something that's a higher calling as your primary motivation. Employees love it, customers love it, partners love it. And you feel better about your job. The interesting thing, the irony, perhaps, is that, at least within our portfolio, the companies that have that kind of a founding principle actually make more profit and grow their revenue more quickly than the ones that don't. And now, it's this low sample set, but the handful that have taken this bold of a step to say, no, no, no, 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 wildly profitable, the auto industry wouldn't follow you. In other words, this whole mission of catalyzing a shift to a new electric vehicle isn't gonna work if the business model's worse than the current business model. And so, you know, it's the obvious byproduct of what you're focusing on. Well, not obvious, but it occurs to me that it's a byproduct. It wasn't obvious at first at all. But I'm curious if that thought occurred to you, that, oh yeah, the profits will come. Or, yeah, Ryan. Well, we have to generate positive cash flow, or we have to generate enough cash flow to fund future developments, which requires having a good gross margin. And so, I guess one could just say, okay, well, we're gonna stop developing your product, and then you'll be really profitable. So at any given point, you could sort of say, well, we could be profitable at this point in a significant way, 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 founding vision was to colonize Mars indirectly. Again, interestingly, catalyzing others to move, and then you realized, hey, I gotta actually lead this charge. Yeah, well, I mean, with SpaceX, originally, I started off just thinking, well, how do I increase NASA's budget? Actually, that was my goal. So it was like 2001, with just a friend of mine, and he asked me what I was gonna do after PayPal, and I thought, well, you know, I was wondering, I'd like to get involved in space, but I just didn't think there was anything I could do as an individual. But I was curious as to when NASA would be sending a team to Mars, because that was always gonna be the thing to do after the moon. I figured that there'd be some plan, and I'd just go to the website, and I could read the schedule. And then, oh, yeah, it's like, okay, 2017, good, okay. But actually, there wasn't anything on the website, and at least I thought, like, can I not find it? Like, what's going on in here? And is it secret? I don't know. But it turned out that NASA had done a study on what it would cost to do a manned Mars mission, and this was under Bush I, and in his post, 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. Yeah, for the government. 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. Anyway, but I thought, well, if I can do something that would galvanize public interest, and then that public interest would translate to additional appropriations from NASA and increase their budget, then maybe they could do it. So actually, what I started thinking I would do is send a small greenhouse to the surface of Mars with seeds and dehydrated gel, and then upon landing, hydrate the gel and grow the plants, and the public interest would respond to precedents and superlatives. So this would be the furthest that life's ever traveled, the first life on Mars, and you'd have this great shot of green plants on a red background, and I thought, okay, maybe that would get some. It's a money shot. You gotta be that guy. Be the money shot, yeah. I'm never quite sure whether that's a sort of a word you can use or not. Um. Now I'm realizing maybe I should. Yeah, I didn't know its origins until somebody pointed it out to me, but. So. Okay, moving back to that greenhouse on Mars. Yeah, so the photo is out there, and it inspires others. Yeah, so you have this great photo, and I thought, okay, we could make this happen. This would be cool, and as we get the money, and it could sort of send the team to Mars, and it'd be great. So I tried to figure out how to do this with the proceeds that I had from PayPal, and I was able to figure out how to get the cost of the spacecraft down, and the communications, and the little greenhouse and everything, but the one thing I couldn't compress was the cost of launch. There was only a few options, and the U.S. options were way too expensive, and so I ended up going to Russia three times to try to buy the biggest ICBM in the Russian nuclear fleet. That's where I'd start, yeah. Yeah, that was. Go big or go home, right? I mean, okay. There was some strange trips, that's for sure, but it's like virtually, like you can buy any, it's a very capitalist society in some ways. So I actually did negotiate a deal to buy two of the ICBMs minus the nukes, but I came to the conclusion after that third trip that it wouldn't really matter. I actually came to the conclusion that my initial premise was wrong, because I actually think there's a tremendous amount of will in the American population particularly to explore. The United States, maybe more than any other country, is a distillation of the human spirit of exploration, and it's really fundamental to psyche. So if people think there's a way, I think you could actually get a lot of support, but it can't be just banging your head against the wall. You've got to believe that this can be done without breaking the federal budget. So that's when I said, okay, well, is there some way to affect the cost of space transport, and so I got together with a group of people over a series of Saturdays just to try to understand, is there something fundamentally super expensive about rockets, or can the cost be substantially improved? And we had a bunch of those brainstorming sessions, and I couldn't see any fundamental obstacle to improving the cost of rockets, so that's when I started SpaceX. I'll just build them myself, and then all. But like I said, at that point, I would say the probability of success was definitely less than 30%. I thought it would most likely not succeed, but it was worth a try. That's fascinating, the parallels are so many between these companies. Again, probability is low, certainty that it needs to be done, certainty that it could be done, but for physics and first principles, success is an option, 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, it looks like the product of a software engineer, modular reuse, like let's build one engine, and step and repeat, and building all kinds of elegance into the system design to abstract away, almost from the hardware into the software into the design, the beauty of the system. And I wonder if that's why incumbents don't see the sort of re-engineering of the car, or the rocket, or what have you. The Hyperloop is just, 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? Interesting, interesting. Looking at the time, I'm gonna ask one last question, but I'll give a heads up on, if there's mics, start getting them ready for audiences. I don't want to monopolize people's time here. Actually, there's so many questions I wanna ask, but what I'll start with, maybe I'll end here for at least some of the quirky ones about influences. So you've, we've heard about the Iron Man reference, and your childhood interest in comic books, and Chugger's Guide to the Galaxy, and Asimov. But there's all kinds of things woven into Cyberdyne systems at SpaceX that we've heard, and then some Easter eggs. So some of us noticed that the stereo goes to 11 on the Tesla. This is a Spinal Tape reference for those who know that this one goes to 11, and you need just one more. It's louder than loud. That's right. But no one seems to have noticed the product lineups. You got the Model S, you got the Model X. You've just trademarked the Model E. No one's heard anything. And the Model Y. Now, what's behind this? I know, exactly. I guess there's not a lot of humor in trademark law. Because, yeah, obviously we just trademarked sexy. And then we're having this discussion with Ford, because Ford's counsel, they also didn't get it, because 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's just a joke. We don't do that. What does it spell? Come on. Fantastic. 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 do that? Let's take a couple questions from the audience. I'll let you guys figure out how to do the allocations. Thank you very much. I heard you talk about supersonic aircraft. You guys have done some beautiful work at SpaceX on VTOL. Clearly, Tesla is focused on electric. Have you thought about the synergies of electric and VTOL and aircraft for solving the 405 challenge? For solving the 405 problem, well, I mean, I do think there's a really- And VTOL, vertical takeoff and landing. Yeah, right, sorry. Vertical takeoff and landing is VTOL. And yeah, I do think there's a really, I think the optimal sort of air transport solution is a VTOL electric supersonic plane. And it actually works together quite well for a bunch of reasons. In particular, the higher you go, the better the electric, the more efficient the electric aircraft is, whereas if you have a combustion aircraft, as you get higher, it tends to get worse because you have a kind of a fixed aperture. And yeah, the engine is, the hole in the front of the engine is a fixed size. And so you have to pick a particular cruising altitude. And so you've got to 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 end up having to slow the air down and it ends up being not that efficient. An electric aircraft would just get better and better as it got higher. And then electric motors have a higher power to weight ratio than a combustion engine. So you could actually have the power to do the vertical takeoff and landing part with a fairly small motor compared to combustion. And then you could get rid of the elevator and rudder. So you don't need the rear control systems if you gimbal the motor. So it starts to look like a pod craft like. Yeah. So it's, yeah, it's something not quite easy. The real trick of it is like, how do you make it really long range and at least as safe as a distinct aircraft? Those are really the only two questions on that one. But they're tricky. They're certainly tricky. Don't underestimate those two questions. Great, let's go to the next one. Or whoever has a mic. However, we're doing the allocation fairly efficient. Maybe give him a hand. Okay, we have someone, great. Hi, Yan Gu, GSB 94. Hey, Steve, long time no see. One question, is Tesla going to expand the worldwide? And I think GSB is going to host China 2.0 tomorrow. And do you have any plans to go into the biggest car market today? But I know you're a little concerned through another friend of mine. I actually asked you indirectly a few years ago that you were concerned about the secret and the parroting in the Chinese market. Are you still concerned about that? Or you have a strategy? Yeah, so Tesla's definitely gonna ship worldwide. In fact, the Tesla Roadster is in 31 countries right now. And we expect to ship the Model S to China starting next year, as well as to Japan, and Hong Kong, and Singapore, and Australia. So really, it's gonna be quite widely distributed next year. Certainly, China is an extremely important market. In fact, for premium sedans, China's about half the world market for premium sedans. So if you take some- And growing, right? Yeah, if you take something like the Mercedes S-Class, but last year, 54% of Mercedes S-Class was sold in China. So pretty important market. And so we're gonna definitely do a major push in China. And actually, some of the most enthusiastic potential customers we've seen are people from China. So we actually wanna make sure that the car actually has features which are specific to the Chinese market, and make sure that it's not just taking an American product and just sort of sending it to China without any changes. We wanna make sure it's tailored to the market. And Japan, as well, I don't wanna, but not many American cars sell in Japan. I think that would be- Good symbolism. Yeah, I mean, I think we should take the Japanese market seriously, and I think if we do things right, we should have reasonable sales. Yeah, so that's gonna be next year. 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 think the new government is taking intellectual property a lot more seriously. So I'm actually starting to feel more and more confident about the technology actually not being copied in China, or at least, you know, it's getting much better. And I don't think it's gonna be too much of an issue until we wanna establish local production. And that's where, you know, we need to make sure that we do it right, and there's not an incentive for the factory team that we established there to sort of go across the board and create a computer factory, but that concern is a few years away. Do we have another one? Oh, yeah. Up here. And the students are largely upstairs. Is that right? Yeah, up here. Yes. Hi, Alan. This is Gabriel Parra, MBA student. First of all, thank you. It is very inspiring to hear an experience about actually, you know, changing the world using our organization, plus the country that you created. Hopefully it will inspire another Iron Man movie as well. And I was wondering if you can tell us more about the experience about, like, you know, how to balance, you know, the straight up 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, work for the humanity rather than just make profits in the short term. So, what was the question? I'm not sure if I, how do we, how do you balance? Oh, how do you balance? Well, yeah, well, I mean, first of all, I should say, you know, with all of the companies, but I think particularly SpaceX and Tesla, although they're, you know, in a good position today, they went through some super tough times. And in fact, for SpaceX, I reserved the capital to do three, to have three launch failures, or to withstand two launch failures and have the third one be a success, or three strikes. 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, as Steve knows, we got the Tesla financing round done on the last hour of the last day. It was 6 p.m., December 24, 2008. If we hadn't gotten it done then, the company would have gone bankrupt a few days after the results. So, these are, these are, I should not mention this. The only reason that happened is he wrote a check for the remainder of his wealth to save the company during payroll on Christmas when no one else would. And Goldman had just failed a private offering and the financial collapse was amongst us. There was no DOE loan. There was no Daimler deal. The car had a negative gross margin. It was not pretty. Oh, and you had, you know, your larger shareholder was completely pissed off. You know, going AWOL. Yeah. It was ugly. Yeah. It was a stressful period. And that was just at work. Yeah. So, for a while, there really wasn't a question of profit or non-profit. It was like, we need to live. How do we live? That was the main challenge. And now, I mean, now we're at the sort of the stage where we can say, okay, we can shift the dial between, we could make, let's say at this point, a medium amount of profit or a small amount. We've sort of chosen to make a small amount because we can reinvest the cash flow into future products. So now, you know, right now, we're reinvesting the cash flow into developing the Model X, which is an SUV, and to increasing the production capacity of the factory and doing a little bit of advanced planning on the third generation vehicle that'll be a mass market, sort of affordable, compelling electric car. So that's really, I guess, what's meant by, in this case, not pursuing, we're not trying to maximize profit at this point because 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 general, but it's just, it's not, I mean, I actually don't think it's the smart move. 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. And it's interesting because earlier, I said we'd get back to it, you mentioned that your goal is not to start a company that has the chance of making the most money for you the quickest, right? And that the wealth, personally, is almost a byproduct of these activities of passion. And by analogy, in the investment field of venture capital, you could look for the thing that'll make the most money the quickest, right? Like a new ad network or social media. But who cares? I think it really just doesn't help the world in any meaningful way. And there are much, 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. Focusing on those, 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 that same purpose-driven kind of almost messianic zeal. So the balance question almost implies a dichotomy that may not be opposed, but may be aligned if you orchestrate it, right? Yeah, maybe more of a short-term versus long-term approach. Yeah, exactly. Great. We have a hand up here, Wes? Up here. Another one up here? Sure. Up here, this'll be the last question. Oh, is this the last question? Okay. Yes, from your current car marketing strategy, you could say that your car is directed towards the luxury car marketplace, 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 maybe in the $25,000 to $35,000 range? Yeah, absolutely. Good question, Andon. In fact, the first blog piece I wrote for Tesla was the Tesla Master Plan, which is to start off with an expensive low-volume vehicle, then go to a mid-price, mid-volume, and then sort of low-price, high-volume. So we're kind of in phase two, and with our third-generation vehicle, we expect to be somewhere in the $30,000 to $35,000 range for the car, which, when you take into account the savings from 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. Maintenance is much less, the fuel costs are much less. Yeah, absolutely, that's right. Well, great. Well, I want to thank you very much for this, and transition to the closing segment of our evening. Thank you. All right. Well, Elon, congratulations on behalf of the Stanford Graduate School of Business and the Stanford Alumni Association, and the Business School Alumni Association. Dean Salone would like to present you with this year's Entrepreneurial Company of the Year. Thanks, thank you very much.