Elon
Musk is the world's most controversial business manager, following the example
of Steve Jobs. Both their lives are detailed in biographies by Walter Isaacson,
full of information on how they interacted with people, built their networks,
and succeeded by iconoclastic behavior. I will summarize this information,
together with research by Michel Villette on the ruthless tactics of making the
big fortunes in the late (pre-Internet) 20th century. The sociology of
micro-interaction will help explain how Musk generates emotional energy and
spreads it to his hard-core followers. Clarity about the past can shed light on
the turmoil of the present.
Growing up in the Wild West-- South
Africa
Part
of Musk's iconoclasm is that he is not a modern person at all; more of a
Huckleberry Finn translated into the world of the digital revolution. His
father was an engineer with a string of business ventures, a bush pilot in the
borderlands of decolonizing Africa, trading off-the-books and running an
unregistered emerald mine to avoid shakedowns by local authorities. Growing up,
Elon rotated among living with his divorced mother (a fashion model with a
career of her own), his father, and other relatives where he played with his
brother and cousins and adventured together into the night life of dangerous
cities. The opposite of the helicopter parents of contemporary America, the
boys grew up unsupervised. Working with his father on construction projects in
the wild, he carried a gun, learned about dangers the hard way, and got a head
start on the adult world before his early teens.
Elon
went to school but was essentially self-educated. In elementary school he liked
to work out problems in his head, tuning out from the others while following
his own thoughts. This made him unpopular for a while, but he grew up to six
foot two inches, and did a lot of no-holds-barred fighting with his gang of
cousins. Like his father, he followed
his own interests; reading through encyclopedias, collecting technical manuals,
taking apart old equipment to see how it works.
One
might say Elon Musk was an unusually intelligent child. But that is hardly an
adequate explanation of his success. There are many millions of people in the
world who are in the top 1% of IQ, but only a handful who are pathbreaking
innovators and build vast business fortunes. What else does it take? One
ingredient is emotional energy-- a sociological concept that means not only
passion for hard work, but also self-confidence and taking the initiative. A
second ingredient is spreading emotional energy to other people--- getting
other people enthusiastic about your project, and creating a self-propagating
network of enthusiasts. A third ingredient is pointed out by Michel Villette:
of the entrepreneurs who made great fortunes from the 1950s onwards (the
creators of IKEA, Walmart, LVMH, etc.), none came from families of bureaucratic
employees; their parents ran businesses (small or large), and encouraged their
children to start their own money-making enterprises from an early age. They
are less concerned about credentials than seizing opportunities. They acquire
an entrepreneurial ethos that is aggressive and even predatory, with little
respect for rules and traditions that get in the way of success.
Science-fiction and the window of
opportunity
Like
many other children, Elon grew up reading science fiction. It had a special
appeal to him because it is about adventures in the world of future
technology-- and technology was what his father made him familiar with. Elon
tried to envision what the technology of space travel would be like, as a
practical matter--- going beyond the fiction writers who assume future
technology as a premise of the plot. So far this is little different from
millions of kids who make model rockets. Elon took seriously the possibility
that the earth might become uninhabitable-- from nuclear war, from climate
change-- and reasoned that the solution would have to be living on another
planet. Already endowed with an entrepreneurial mentality, Elon recognized that
the first step must be to create a business that would make it financially
feasible to build interplanetary rockets. He took it for granted that it had to
be done by private initiative-- his own-- since governments are bureaucratic,
embroiled in politics, and not to be trusted to do it right.
So
his first problem was to make money. Having left South Africa just at the time
when civil war was being fought in the transition from apartheid, he found
himself in the dot-com explosion of the 1990s. While still an undergraduate at
University of Pennsylvania, he started a company to compile an on-line version
of the Yellow Pages-- the old unwieldy phone book of business addresses. Elon
gained experience with Internet-based business, acquired some like-minded
collaborators, and got to know-- and distrust-- financial investors. Venture
capitalists sold the company and Elon ended up in 1999 with $22 million.
His
next venture was to create an on-line alternative to the stodgy process of
getting bank loans, depositing income and clearing checks. He quickly
recognized that the banking industry was hopelessly old-fashioned-- a window of
opportunity to exploit someone else's weakness.*
*Villette's
research found this was the chief strategy of fortune-making entrepreneurs. For
instance, IKEA's founder recognized that old-fashioned downtown furniture
stores were expensive and inconvenient, stealing their market with
do-it-yourself assembly furniture sold from a warehouse.
Elon
pivoted to an on-line version of newspaper Want Ads and For Sale Ads with
payments by email. But rivals had spotted the same opportunity. Musk found
himself in a race with Peter Thiel, for essentially the same universe of users.
Recognizing that whoever came in second would be squeezed out, they negotiated
a merger. Negotiations were tricky and hostility continued during their
partnerships as PayPal. Thiel suspected Musk was overstating his number of
accounts, and tried to keep him from contacting his executives for fear of Elon
overwhelming them with his energy and persistence. Within three years, Musk was
pushed out. Soon after, PayPal was acquired by E-bay and Musk got $250 million.
The
pattern on Musk's dealings was established. He would leverage one business venture
to start the next, generating money to invest and establishing financial
contacts who recognized the prospects of his technological vision and his
contagious enthusiasm. And he was willing to make enemies, yet come back to
them later when they could work together for mutual advantage. To cite one
example: Musk sized up Donald Trump as a con man and opposed him in 2016
[Isaacson: 262]. By the time of the Twitter acquisition and its aftermath, Musk
was open to an alliance.
Targeting Pentagon contracting practices
and building Space X
Now
Musk was ready to start sending rockets into outer space. He located another
big window of opportunity, actually two windows. NASA had essentially ceased
operations for deep space exploration; no launches to Mars were being made or
planned. Musk would do it privately.
The
other open window was presented by the government's policy for funding military
procurement. The government contracted for aircraft, weapons, vehicles etc. by
selecting an established provider like Boeing and guaranteeing to pay the cost
of production plus a guaranteed profit. The cost-plus system had been adopted
out of concern that the mega-companies of the defense industry could not be
allowed to fail, leaving the US without a ready source of supply. In practice,
the system allowed for regular cost overruns; all the more so in the era of
high technology, where innovations are constant and complex components (like
the ultra-computerized F-35 fighter) are hard to integrate. There were
scandalous examples of expense-- a toilet seat cover costing thousands of
dollars-- which arose out of the layers of production: the lowest level billing
its cost; the next level of assembly adding another slice of cost; on up
through the final product passed on to government accountants. Of course there
are reports to be made and permissions to be obtained; anyone who has worked as
an employee for the Federal government knows that it is often quicker and
cheaper to buy something at a hardware store than to go through the required
acquisitions process. The procurement system has some concern for cost, but its
method of dealing with it is to add still more layers of administration that
increase cost more than reduce it.
Musk
decided to take an entirely different approach to the cost of building rockets.
What is the cost of a rocket in materials, electronics, and fuel? He calculated
that a rocket could be built for one-fiftieth (2%) of what NASA had been
spending. [99] He offered to contract with the government to produce rockets at
a fixed price; furthermore, to launch them, take their payload into space; and
in a more advanced phase, land the rocket and reuse it. * His company, SpaceX,
would be paid for its successful launches; or otherwise take the loss. It was a
gamble; Musk's business model was to take risks, based on his calculations of
the science involved, and pushing the margin of error.
*
Re-usable rockets became possible by equipping them with visual sensors, like
backup cameras when parking your car.
Musk
had another big advantage over what NASA and the Defence Department had been
doing. Their procedure was to compile a lengthy list of specifications and
requirements for the hardware they were purchasing; and eventually to check up
on whether they had been met. This not only increased the layers of
bureaucracy, but put the designers at a distance from the people doing the
production. Musk was confident he could do better by retaining control. He
questioned whether official requirements were based on physics and practicality,
and would not accept the bland assertion of anonymous authority. Instead of
taking his rockets through a lengthy process of testing, he preferred to let
them explode, discovering their limits, make corrections, and move on to the
next round. (In his business model, materials were the cheap part of the
enterprise.) He started with small, relatively cheap rockets instead of huge
payloads. Within a year, SpaceX had its first contract with DOD, launching
tactical communications satellites for ground commanders to get battlefield
imagery. It coincided with another window opening: the Iraq war was just
starting, and the Pentagon was in its RMA (Revolution in Military Affairs),
Secretary Rumsfeld's effort to computerize warfare. From here, Musk would pivot
to blanketing the planet with low-altitude satellites to improve Internet
access, and to other projects where cheap rockets could be deployed.
Rescues and take-overs
Buyouts
gave Musk money to plough back into other ventures. He also benefitted from another
window of opportunity: the stock market was on a historic roll during most of
this time. Contagious enthusiasm among investors was rampant in the technology
sector, where startups could leap to huge valuations, debt and current
profitability being assumed to take care of themselves down the road. Once Musk
established a personal network among the big players, he could add his energy
and persuasiveness to get the backing for further enterprises. No longer
starting from scratch, he took over failing or troubled ventures in areas where
he understood the technology.
The
big acquisition was Tesla. It had begun in 2003 as an amalgamation of three
start-ups for cars powered by lithium batteries connected in large arrays. Musk
was approached for funding, and became Chairman of the Board. He was personally
committed to EVs as a solution to climate crisis, but also attracted by the
thrill of a sports car with acceleration beating the Ferraris and McLarens of
the gasoline-powered era. Musk intended to spend most of his attention on
SpaceX, but he became increasingly critical of two failings at Tesla: The
startup execs thought that EVs would reach the market faster if they used
existing supply chains-- the body from Lotus, electric engine and other
components from elsewhere. [133] This ran contrary to Musk's conviction that
producing as many components as possible in-house was cheaper, and more
reliable than leaving oneself at the mercy of suppliers and their iffy
standards. He was also upset by ugly and uncomfortable car design: if we are
going to create a buzz for a $100,000 car, it had better be dazzling. Musk grew
increasingly involved in decisions as Tesla floundered financially. He used his
position as payer of bills to fire quarreling managers, and in 2008 took over
as CEO.
Getting
Tesla to financial viability would be a roller-coaster over the next 10 years.
On the favorable side was another window of opportunity: climate change was
becoming a popular movement among affluent, upper-middle class liberals. Favorable
tax policies and government rebates to EV buyers kept the company afloat. Musk
copied Steve Jobs' strategy with Apple: a product that was not only
technologically advanced, but beautifully designed, and above all, cool. The
fan experience of Apple's product launches and Apple Stores was replicated as
Teslas hit the market. A futuristic silhouette, door handles sunk flush and
operated by wireless, computerized sensors scanning all directions, allowing
quasi-autonomous driving with a promise to become fully autonomous in future
upgrades; repairs and upgrades sent remotely. And sporty: electric motors at
the wheels eliminating the drive train and making possible unbelievable
acceleration (zero to sixty under 2 seconds). A Tesla became a mobile computer,
much as Apple's iPhone became a handheld computer.
Apple
had won out in the highly competitive personal computer market by selling
products that were fashionable, getting consumers to pay a premium for their
elegance and prestige. Musk similarly led off Tesla production at the high end,
selling cars with big expensive batteries (and home battery-charging cables)
with a large roaming distance. Mainstream rivals like GM had the opposite
strategy, selling small cheap cars with limited mileage range. But small cars
make small profits; and they never acquired a wave of enthusiasm to make up for
it. Big luxurious cars bring big unit profits. The problem was to get over the
hump: shaving costs while bringing production up to scale. Cheaper models of
the Tesla would come later.
Musk
understood that an innovative product was not enough; the enterprise could only
become successful if the manufacturing process was the most efficient in the
market. Here Musk could bring to bear his own predilection for getting involved
with the practical details of making equipment work.
Hands-on, do-it-now
Already
in the days of SpaceX, Musk and his team scavenged and improvised, taking the
low-cost route to producing a cutting-edge product. Since NASA launches were in
abeyance, they found unused launch sites-- an atoll in the Pacific; an
abandoned launch pad in Texas; eventually taking over decaying sites at Cape
Canaveral. He salvaged parts from failed predecessors. Concerned with how thin
the steel walls of a rocket could be (thinner is lighter, requiring less thrust
and less fuel), and not satisfied with a conventional standard, he asked the
welders how thin they could go-- and pushed them even thinner. If it explodes,
then we'll know, he said. [328] When a crucial orbital launch was on the line
(a failure would doom future funding), a rainstorm left the antenna that
provided flight guidance too wet to operate. The solution: find a hair-dryer,
and get an engineer up on top of the rocket blowing the sensors dry. Next
morning the radio frequencies were not quite right, but Musk decided it was
good enough to launch. It turned out to be so. [210]
As
his enterprises became more far-flung, Musk would continue using whatever was
available to get around anything holding up the works. Having acquired Twitter,
he found that its servers were in danger of being cut off by a rental property
in rural California where they were warehoused. Arriving at night with a small
crew, and brushing aside a watchman, Musk took a flashlight and crawled under a
server rack to see how they could be disconnected. Jimmying panels with a
knife, he found they could be manually detached-- half expecting they might
explode. He immediately sent out to rent all locally available vans, while he
and his crew cut the connections and, ignoring seismic stability precautions,
loaded the servers to move to his own location. [582-5] Recently the richest
man in the world by market valuation but once again on the financial brink,
Musk was still taking matters literally into his own hands.
During
the crucial phase of expanding Tesla's factory production, Musk moved his desk
to the factory floor, to be near the production line. Unlike traditional
companies that compartmentalize R&D and other functions at disparate
locations, Musk wanted his designers close to where the product was being made,
taking feedback and modifying immediately. He wanted his best engineers to be
speeding the production process. He would walk around the factory floor, not
just to question the managers but to see for himself what was holding things
up. They found an assembly-line bottleneck where a robot was misaligned.
Instead of spending time re-aligning the robot, they decided on the spot to see
how fast a human could do the robot's task. It turned out that the human was
faster and more reliable. Musk promptly unleashed his team to check every robot
in the factory, and remove all robots whose work could be done better by
humans. [271-78] Himself an advocate of the most advanced mechanization, he was
not caught in that box either; willing to reverse himself where results were
concerned. High-tech or low-tech, whatever works.
Hardcore team
Musk
aimed to surround himself with a team who shared his enthusiasms: space travel,
pouncing on opportunities to innovate, rethinking the basic science instead of
conventional best-practices. And above all, energized by their work, carried
along by their trajectory towards the unattainable goal and the impossible
deadline. Musk was repeatedly setting target dates and missing them;
pragmatically, a formula that generated productivity leaps along the way. But
he had to have the right people: technology nerds, sci-fi geeks, who were
simultaneously hands-on mechanics, programmers, and backwoods adventurers. He
was not looking for people skills. In a job interview, Musk would pepper the
candidate with specific questions about a technology, one detail-freak to
another.
Musk
had no sympathy with a trend that had taken hold in the decades of success in
the high-tech industries: striving for work-life balance. Working from home,
family-friendly schedules, on-site spaces for relaxation and games, were to his
mind the opposite of hard-core. He wanted fanatics like himself. It was another
of Musk's off-beat bets that turned out to be correct: there were quite a few
technology fanatics eager to join a team led by one of themselves.
Musk's
takeover of Twitter was a confrontation of work philosophies. It didn't
necessarily make sense financially; the company had a problem with advertising
revenue, which would become worse after the takeover. It appealed to Musk in
part because it revived his early scheme to create a universal on-line hub
where all manner of transactions would take place; and it converged with his
vision that Tesla was not just an electric vehicle company but an advanced
computer/ robotics/ AI company that would make science fiction real. It was
another one of Musk's quick decisions, a gamble but what the hell; he knew
where to raise the money.
It
would prove fateful because it brought a pivot in Musk's politics. He had
rebelled against COVID-era restrictions while he was struggling to bring Tesla
into profitability; and aligned him with conservatives accusing social media
companies of censoring political opinions. Like a number of other technological
innovators in the past (Henry Ford, Steve Jobs), Musk flipped from left to
right as they became successful. Political polarization speaks the language of
binary oppositions; but the careers of radical innovators are more like worm-holes
in hyper-space.
Musk's
takeover of Twitter was a lightning-strike. Existing top management were cut
off from access and locked out of their offices. The rest of the work force was
to be drastically culled; a soft spot of work-life balance was about to be
reduced to hard-core. Musk and his posse set out to locate who was doing a lot
of work and who wasn't. How could this be done in a hurry? As expert
programmers themselves, Musk's team seized upon computerized records: which
engineers had written the most code in a year, and which had written the least?
The posse found a fraction were doing the bulk of the work. Half the company's
employees were fired. But how to ensure the loyalty of those who remained? Musk
decided to take a bet: among high-productivity personnel, how many would opt to
stay on "to build a breakthrough Twitter 2.0" as "extremely
hardcore-- working long hours at high intensity"? Those who did not opt in
by the next day would receive 3 months severance. Surprisingly, almost 70
percent chose to be enrolled in the hardcore. [518-20, 550-51]
If
this sounds familiar as of February 2025, it is much the same tactic as DOGE in
the early Trump administration.
Party animal, perennial teenager
Musk's
ownership of former-Twitter X turbo-charged his habit of posting anything that
comes into his mind, multiple times a day. On-line, he is jokey, sardonic,
opinionated, spitting out puns and insults. He treats his high-tech peers (Jeff
Bezos, Sam Altman) like a trash-talking teenager. But Musk is not a chatty or
sociable person. He is not a good public speaker, as is apparent from call-outs
at Trump rallies. Musk is not an extrovert, although the distinction between
extrovert and introvert has been overdone in psychological tests. Like many
people who are immersed in a particular specialty and expertise, he can be
outgoing and spontaneous in the presence of like-minded people.
In
his youth, Musk was far from being the popular kid or fraternity boy. As he
became the center of his hard-core business teams, he frequently got into
arguments over what was feasible. He
developed a pattern of how to get beyond tense standoffs: suddenly changing the
tone of the conversation, to silly or outlandish joking. His own version of
work-life balance was to interrrupt the intensity of work with wild parties and
escapades: smoking drugs during a recorded interview; inviting a sumo wrestler
to his forty-second birthday party and taking him on in a match (thereby
throwing out a disk in his own neck); challenging Mark Zuckerberg to a cage
fight. These are macho fantasies of boys; but if you become wealthy enough, and
remain free of ties to respectability, you can go on being a teenager at any
age. Musk is an extreme example, but this appears to be an historical trend, at
least in America since the late 20th century. *
*
Perhaps this helps explain why the diagnosis of autism has mushroomed in recent
decades. Musk himself has joked about
being on the spectrum. The sociological question is: what causes what?
Into the future
Can
Musk's management style be imitated and applied elsewhere? Musk himself
imitated some aspects of Steve Jobs' style.
So did many others in high-tech industries, although mainly his showy
product launches. Can hard-core intensity and hands-on direction go on forever?
Obviously not. Tim Cook, Jobs' successor at Apple, has a much calmer style. In
any organization, routinization and burnout occur after a certain number of
years. Perhaps this is a reason why Musk keeps shifting to new ventures.
Can
Musk's style work in all arenas, especially those not involving business
profits, or those not producing tangible hardware? A blitz through the
workforce at Twitter may be a template for a blitz through the Federal
government, but blitz means a lightning strike. It is a gamble and a drama,
things that Musk likes and has been successful with in the past. But:
Government
is not primarily designed to be efficient. Historically, bureaucracy was
promoted by kings to keep rebellious aristocrats under control. American
democracy was designed to be decentralized, cross-cutting checks and balances,
with an important role for law courts, in order to keep any particular faction
or emotional movement from sweeping everyone else before it. Of course politics
can also struggle over financial expenses and culture wars. These become part
of the mix, not necessarily the determining part. What works in high-tech
business cannot be simply replicated in government.
There
is a still larger picture. High-tech trends can bring new crises, spilling over
everywhere. As I have been writing for some years, artificial intelligence has
the potential to eliminate much of the white collar work force, just as factory
mechanization has done to the manfacturing labor force. Government employment at
all levels (not just Federal but state and local) has been a Keynesian
mechanism keeping the economy going. Without sufficient employment, people
cannot buy what technology produces. Letting AI eliminate the surviving sources
of employment is a formula for a terminal crisis of capitalism itself. The
future may yet take another lurch in a socialist direction.
References
Walter Issacson. 2023. Elon Musk. Simon and Schuster.
Walter Issacson. 2011. Steve Jobs. Simon and Schuster.
Michel Villette and Catherine Vuillermot.
2009. From Predators to Icons. Exposing
the Myth of the Business Hero. Cornell
University Press.
Randall Collins. 2004. Interaction Ritual
Chains. Princeton
University Press.
