The Role Of Elon Musk's Management In The Succes Of Tesla And Space X

Introduction

Elon Musk is Founder, Chief Executive Officer and Chief Technology Officer of 'Space Exploration Technologies Corp' ['SpaceX'] since it was started on 6 May 2002, and the Chief Executive Officer and Product Architect of 'Tesla, Inc. ' since July 2003. Musk's goal as an Entrepreneur of Tesla is to increase the recognition and availability of Sustainable energy, through solar energy sources, which he has devoted the daughter company of Tesla 'Solar City' towards, and Electric vehicles. With the end goal of 'SpaceX' is to colonize Mars and reduce costs of space travel and transportation, and to lessen the cost of Electric Vehicles in society, using his three-part 'Master Plan': "Create a low volume car, which would necessarily be expensive, use that money to develop a medium volume car at a lower price, use that money to create an affordable, high volume car and Provide solar power. No kidding, this has literally been on our website for ten years. " Starting both companies proved a struggle for Musk, this can be seen through the stigma that both of the companies and he received from the media and investors. There are reasons that these companies should not have succeeded, whether it was Russian diplomats upselling ICBMs or the Tesla stocks being rated least likely to succeed on wall street; even with a presidential candidate criticizing the entrepreneur. All of this however did not stop Musk from continuing his mission to wean the western world off of the fossil fuels that it has become so addicted to. In this Essay, I will answer the question 'What aspects of Elon Musk's management and principles have contributed to the increase of international recognition and turnover of Tesla and SpaceX?'.

His management and principles are a crucial factor that has contributed to the massive successes of the two companies. The policies, in particular, that stand the two companies out from the aerospace manufacturing and Electronic vehicle manufacturing crowd that has grown in the past decade are the pace of innovation, thinking from first principles, his inability to succumb to pressures from others and owning the companies with an all-in approach. These and other reasons contribute immensely to the dramatic increase in recognition that these two companies have gained.

Starting the companies and negative stigma

In 1999 Musk sold his co-founded 'web-software' company 'Zip2' for $307 million to Compaq Computer. And roughly a year before the official founding of SpaceX Musk decided that he wanted to devote the majority of his capital from this sale to the space industry. Musk wanted to use modified intercontinental Ballistic Missiles (ICBMs) to send a type of greenhouse to Mars. He visited the Mars society which is where he took much of the inspiration for the company and where he met investors and future leaders in the company. There were already researchers who were developing chambers dedicated to these greenhouses that were to be sent to Mars. However, to send these Musk would need ICBMs, and logically he looked to Russia, when visiting representatives of Russian companies NPO Lavochkin and Kosmotras, Musk was hoping to get 3 ICBMs for $20 Million whereas the representatives laughed at him and offered him one for $8 million. Musk felt as if he was not being treated seriously and stormed out of the meeting. And on the way back to the United States as the other businessmen talked in the plane, Musk drew a spreadsheet, this spreadsheet musk used to determine that in fact, they could build this rocket by themselves, this is a prime example of one of Musk's fundamental management principles.

SpaceX also had pressures put on the company after three failed launch attempts, financial burden mostly, with a lack of funds Musk had to invest the rest of his capital from the sales of Zip2 and PayPal to keep the company alive. Tesla Motors (now Tesla Inc. ), however, was not founded by Musk himself, it was founded in 2003 by Martin Eberhard and Marc Tarpenning on July 1st. It was only in 2004 when Musk joined during investments, Musk joined as an investor and entered as the chairman of the board of Directors for the company. He, at this time, was also the biggest shareholder for the company with roughly $6. 5 million invested in it. This number would increase dramatically throughout the years; Musk ended up spending double of what he expected to invest, he at one point invested the entirety of what was left from the Zip2 and PayPal sales after investments into SpaceX into Tesla. This investment is another example of Musk's 'All in Approach to the company. Also, when an issue with the Roadsters Body panels arose, Musk flew to England himself to pick up the tools and parts needed. Very few Chairmen and CEOs would do this for a company and it is traits like these and his management style that has stood the company out like this in an industry where the probability of success for a business is improbable, with the most recent successful car manufacturer (before Tesla) in the United States being Chrysler in 1925.

The principles

The first and arguably the most important of the management principles is the pace of innovation; this applies to SpaceX more than Tesla. However, one can still see this is both companies. Musk Has said in the past during an interview with Jaime Peraire (Head of the Aeronautics and Astronautics Department at MIT) during the 2014 MIT AeroAstro Centennial Symposium that the pace of innovation of SpaceX is faster than other companies in the pacing industry due to the management culture being mainly engineering focused: "… we've got a super-engineering driven culture … I'd much rather promote someone who had strong engineering ability, than so-called management ability. "

Focusing on Engineering ability, although it may lead to less of a focus on aspects such as Organization and time management, however, it means that when major or minor problems arise they can be dealt with quicker and more efficiently. With more people dedicated to engineering, even the CEO, and founder, the company progresses at a faster rate and innovation increases compared to other traditional management run companies.

Another aspect of the management of the companies that contributes to their pace of innovation is the 'Best idea wins' culture rather than the final decision being made by the person with the highest seniority, this allows for attempts to innovate to become more successful and would create a more inclusive environment for all employees. Musk has also said in the same interview that at SpaceX they "promote rapid communication", this would have also contributed to the innovative speed of the companies, seeing as faster communication means that problems and ideas can get through the chain up to the top quicker and therefore are resolved or implemented at a quicker pace.

Another management principle is a trait that Musk had carried since childhood when he was scared of the dark, and he said to his mother one day "Darkness is merely the absence of photons". This anecdote from his childhood is an example of thinking from first principles; in an interview with Kevin Rose, Musk describes the thought process of an average person as "doing something that has already been done … with slight iterations" instead of this Musk uses thinking from first principles which is boiling an idea down to 'it's fundamental truths' and building up from there. This method of thinking not only helps with costs of building or purchasing items, but it also links to the pace of innovation seeing as it means that you can decide if an idea is feasible or not in shorter overall time. Although this method takes relatively more time to use, you will follow ideas that are not viable less than the normal method of thought. Musk has used this method in multiple situations for the two companies. One example of Musk's use of this is When creating the original Roadster, the price per Kilowatt hour in batteries for the vehicles, was more than the company could afford, so they brought it down to first principles and thought about what materials they would need. The quantity of them and the price of each element; through this method they found that the rate was significantly lower, providing more funds to become available for other areas. The most innovative use of this thought process is after SpaceX launches a rocket they land the core and boosters; No one had ever used this method before, and I believe that not only does this mean the rockets are reusable but the financial savings that it provides for the company give it an advantage in the industry by itself. This idea of thinking from first principles is another core principle which I believe that others working at SpaceX have adapted to launch the company as the first successful privately owned commercial space travel company. Musk also used this method after his trip to Russia, when he created a spreadsheet detailing each material needed to develop a rocket, the quantities and the prices on the open market, determining that they could, in fact, build the spacecraft themselves for a much lower price rather than buying from a manufacturer such as Boeing or Airbus.

The final management principle which has significantly contributed to the successes of the two companies, especially during their earliest stages, this is the approach of owning a company with an 'all-in' approach, this means effectively "working hard every waking hour". This principle can be observed in multiple instances throughout Musk's time at the companies. One example of this would be 'being hands-on' in operations even as a company increases in size; Musk has shown this throughout his time at the companies, in Ashlee Vance's biography of Musk he describes his hands-on approach: "… this comes from Musk's maniacal attention to detail and involvement in every SpaceX endeavor. He's hands-on to a huge degree". This quote provides what I believe is a hugely accurate representation of Musk's attitude at both Tesla and SpaceX. Also linking to the idea of a more skilled leadership than management based, seeing as a management focused leadership would not be as hands on. He also uses pure mathematics in a way that allows him, with his all-in approach, to outperform any other company in the same field. Musk used the idea that if you work at roughly the same rate most of the time, then all progress comes down to the amount of time that you work. At USC he uses the example of someone working 50 hours a week compared to someone working 100 hours a week will get half as much done in a year as the person working 100 hours.

On the other hand, however, Musk has a tendency to speak his mind, which is not necessarily a bad quality. However, there is evidence that Tesla Stock has dipped as much as 10% in the past which has been directly correlated to the statements that he has made. For example, according to CNBC after Musk gave up 'taking Tesla private' Its stock dropped roughly 6%. This could be and is used against the company as a whole. It seems that Musk also doesn't have as large a filter as others in the industry. For example, Tesla and Musk are now under investigation by the United States justice department. This is after announcing his plans to take the company private on twitter in an alleged attempt to 'sway' the stock market.

Conclusion

To conclude, I believe that all of these principles: thinking from first principles, a fast pace of innovation and the all-in approach, are linked, through solid work ethic, self-control or a passion for the subject/company that he applies the work to. I believe that this is the factor that drives Musk to work so hard and carefully on the product that is being made, instead of hiring someone else who knows and not being informed on the subject. And although many dismiss him due to statements he makes on or off twitter, he has a drive to complete any task, which other's opinions cannot suppress. This is the real source of his incredibly impressive and effective management and management principles that have driven the companies as far as they have come today.