April 17, 2018

From the Vaults: ElonX.2


    Rumor has it that Robert Downey, Jr. used Elon Musk as his template for the billionaire industrialist playboy Tony Stark (see Stan Lee’s Marvel Universe under ‘A’ for Avengers and ‘I’ for Iron Man).  Certainly there are differences:  Stark has Pepper Potts, amazing holographic computer technology, no children, and, of course, there is that Iron Man suit. Musk has two ex-wives, five children, better than average computer coding skills, and is the CEO of three major high tech companies, but let’s not split hairs.  Downey was given a tour of the SpaceX factory and came away from the experience noting the similarities to it and the sets that were being built for the Iron Man movie he would soon be starring in.  Downey was impressed that Musk was, “Not a foul-smelling, fidgety, coder whack job.”  Downey concluded that both Musk and his Tony Stark character, “had seized an idea to live by and something to dedicate themselves to.”  Downey made sure that Tony Stark’s workshop had a Tesla Roadster sitting next to his desk effectively making the real Musk and the fictional Stark, according to Downey, “…contemporaries.  Elon was someone Tony probably hung out with and partied with or more likely they went on some weird jungle trek together to drink concoctions with the shamans.” While Stark tries to save the world by building semi-autonomous robots to protect humanity from various forms of mayhem, both alien and domestic, Elon Musk has set his sites on saving humanity from themselves.  Elon’s weapons of choice would not be robots (well, not yet, anyway). He would begin his humanity saving crusade with rockets, electric cars, and solar panels.

    In the days after eBay paid $1.5 billion for the growing financial service PayPal  (Musk earned some $250 million for his share of the company), Musk eventually set his sights on space.  A life long science nerd, Elon bandied about several projects like sending a breeding colony of mice on a round trip to Mars or perhaps an automated greenhouse that would show that life could flourish (with a little help) in the harsh Martian environment.  If Musk has one fault in his visionary plans, it is the uncanny knack for under planning his project budgets and timelines. His current space plan was kickstarted when he was unable to get the Russian space program to take his efforts to purchase rocket bodies seriously.  Having failed in his bid to purchase a Russian rocket, the homeward bound team drank and brooded in silence for some time. Musk finally announced, “Hey guys, I think we can build the rocket ourselves.” SpaceX was born.

     Ashlee Vance’s book (Elon Musk, HarperCollins, 2015) does a marvelous job of telling the tale from the first failures of SpaceX in the early 2000s through 2015 when they were poised to become the United States’ go to provider for resupply missions to the International Space Station.  Events Vance anticipates in his 2015 book (like the development of the Falcon Heavy rocket and the Dragon V2 capsule intended for carrying humans into space) are already in full swing. With every success, Musk’s SpaceX vision has expanded. He now envisions his company leading the way to Mars to fulfill another of his humanity serving goals:  make humans an interplanetary species. Musk’s story goes far beyond the hotshot billionaire facade of someone trying to make a buck selling tourist rides to the lower reaches of space ala Richard Branson or Jeff Bezos. Not only is Elon Musk reinventing the ‘how to get into space economically’ paradigm, he is using his engineering ingenuity to put Americans back to work.  Silicon Valley high tech start-ups have come and gone, but Musk’s empire is still here. Not only is it still here, it is growing.

    Musk didn’t found the Tesla Motors car company.  That honor goes to Martin Eberhard and Marc Tarpenning who, like Musk, earned a hefty $187 million when their NuevoMedia company (they did pioneering work with an electronic book reader called the Rocket eBook) was purchased by Gemstar International Group, owners of TV Guide.  Everhard and Tarpenning looked around for some form of Earth impacting, life altering technology to invest in.  They settled on building a better electric car. They started by first tweaking the numbers on a spreadsheet to help them optimise everything from vehicle weight to the size of the batteries needed to make it work.  

    Anytime a new car company is announced, folks are quick to remember that the last successful major car company founded in the United States was Chrysler…in 1925.  The major car companies also have had a habit of stiff-arming any form of electric car since the OPEC oil embargoes of the Carter administration. The Tesla founder’s number crunching told them that they would need to concentrate on a lightweight, sporty car that the public would be able to buy directly from them, by-passing the normal dealership sales model.  They were making slow progress when they approached Musk about investing in the company. His $6.5 million buy-in made him the majority stockholder and the chairman of the board, a position that would allow him to eventually take full control of the company and its direction. They had no car, limited resources, a small staff, and little else to show at the time that Musk came on board.  What they did have was the smarts to realize that the 18650 lithium batteries were improving steadily and they would become the backbone of Tesla Motor’s ambitions to get an electric car on the road.

    Tesla Motors expansion into a new headquarters mirrored the growth pattern at SpaceX:  the large, open factory floor put the engineering department in among the people doing the testing and assembly.  Musk also took a page from Henry Ford’s industrial handbook and began to develop his companies around the idea Ford called ‘Vertical Integration’.  Ford’s idea was to supply his car company with raw materials from subsidiaries owned by the mother company. Musk wanted to wean his companies away from outside suppliers and self manufacture whatever technology that they would need to succeed.   By 2010, Tesla Motors was able to obtain a failed GM/Toyota factory for a song (paying $42 million for a plant and machinery that originally cost $1 billion), and talk Toyota into investing some $50 million in the company. In essence, they got the whole shooting match for free.

    Of course, it hasn’t all been smooth sailing.  In late March of 2018, the car company sent out a voluntary recall for some 123,000 of their Model S sedans stating, “We have observed excessive corrosion in the power steering bolts, though only in very cold climates, particularly those that frequently use calcium or magnesium road salts, rather than sodium chloride (table salt),” the email read. “Nonetheless, Tesla plans to replace all early Model S power steering bolts in all climates worldwide to account for the possibility that the vehicle may later be used in a highly corrosive environment.”  While they felt that the failure rate would only be about .02 %, the fact that they are playing it safe and not just chasing nickels and dimes speaks volumes..

    Behind the scenes, Musk began planning a string of recharging stations that would allow Tesla owners to ‘refuel’ for free.  Future expansion calls for an automated full battery pack swap out at these stations that would cost the equivalent of an internal combustion engine oil change.  Critics felt that Tesla Motors wouldn’t be able to make a viable electric car. New models are on the drawing board with family friendly SUV type vehicles and freight hauling trucks on the horizon.  For Musk to realize his vision of reducing America’s dependence on foreign oil, he will need to make over the solar panel industry as well. Not surprisingly, Musk has already gone full steam into this field as well.

    In 2004, Musk’s cousins Lyndon, Peter, and Russ Rive were looking for a new venture that would make them money, while at the same time, “make us feel good every single day,” according to Lyndon.  Elon suggested they look into solar energy which compelled the brothers to form SolarCity in 2006. Their model allowed them to buy solar panels from other manufacturers and concentrate on analyzing customer needs and service.  Their innovative lease to buy financial packages saw them become the largest installer of solar panels in the United States in just six years. In the end, Elon became the largest shareholder (about one third of SolarCity) and the company’s chairman of the board.  

    Vance sums up Musk’s latest venture:  “SolarCity, like the rest of Musk’s ventures, did not represent a business opportunity as much as a world-view.  Musk had decided long ago – in his very rational manner – that solar made sense. Enough solar energy hits the Earth’s surface in about an hour to equal a year’s worth of worldwide energy consumption from all sources put together.  Improvements in the efficiency of solar panels have been happening at a steady clip. If solar is destined to be mankind’s prefered energy source in the future, then this future should be brought about as quickly as possible.” SolarCity, like Tesla and SpaceX, continues to acquire the Vertical Integration manufacturing facilities it needs to attain Musk’s far reaching vision.

    SolarCity and Tesla Motors are mutually beneficial companies with solar cells and battery storage in common.   SpaceX shares manufacturing improvements and technologies that will help all three companies create more affordable products in their respective fields.  If one agrees that the majority of the aerospace, automotive, and alternative energy companies underestimated Musk’s efforts, they are not taking him lighty any more.  By 2015, SolarCity panels were generating a volume of electricity large enough for the company to be classified as a utility. States are throwing billions of dollars in the form of tax incentive programs to get Musk’s facilities built with in their borders.  Even NASA has shifted from their former stodgy view of SpaceX to embrace them as the the forerunners of the ‘new’ space program.

    The negative stories that portray Musk as an egotistical maniac may have more than a grain of truth behind them.  The sniggering that used to accompany announcements of his next space adventure have largely been replaced with something that resembles awe.  Whether one likes him or not, one must admit that he has more in mind than simply amassing a larger fortune. If he wants to improve the lot of mankind while helping to put humans on Mars, I am all in!

Top Piece Video – As long as we were talking about Iron Man . . .