In remarkable timing, today, two major financial milestones occurred on the same day.
Thanks to a relentless surge to Tesla’s share price, the company overtook Facebook as the 5th largest company by Market Cap. Tesla now follows Apple, Microsoft, Amazon and Google as the highest valued companies available on major US stock exchanges the NYSE and Nasdaq.
With such a rapid rise to the top 5 club, it’s worth looking up the list at the distance Tesla has to climb to the top spot. The following list is the value of each company by Market Cap.
- Apple – 2.203 Trillion
- Microsoft – 1.65 Trillion
- Amazon – 1.587 Trillion
- Alphabet (Google) – 1.204 Trillion
- Tesla – 773.525 Billion
- Facebook – 765.449 Billion
The second milestone was that Elon Musk has taken the mantel of being the richest person on the planet, overtaking Amazon’s founder and CEO Jeff Bezos. Musk is now worth some A$250 Billion on the back of his share portfolio in Tesla and with the stock putting on an amazing 17,000% since going public back in June 2010.
On the surface, it’s a historic rise that makes no sense on the traditional evaluations of earnings multiples, but those who look deeper can understand why $TSLA just won’t quit.
Elon is an engineer
Unlike most founders or CEOs at companies, Musk isn’t an expert in managing people, but rather leading by example. Key to the success of Tesla and all Musk properties, is the ability to distill problems into their most basic elements, then gets about solving them.
When you’re in the top spot at a company, your job description is essentially problem solver. Your whole day will contain employees presenting you with issues and if you get lucky they’ll present you with option A or option B. If you get really lucky, there’ll be an obvious choice, like a direction that would create a cheaper and better product, but most of the time, you’re making a choice that is going to suck every way till Sunday.
Musk has a fairly unique ability to see problems as opportunities and definitely uses the mantra of innovating out of a problem. The limitations are not ones imposed by his board, or external factors, but rather the absolute restriction of the physics, with everything that is technically possible, seemingly on the table.
Most CEOs sit in meetings, evaluating the risk profile of implementing solution A vs solution B, but Musk has a laser-like focus on solving the technical problem, while preserving the experience and price point of the end-user.
It would be easy in a company like Tesla that has profits rolling in, a soaring share price and market cap, to take your foot off the accelerator and by more conservative in your targets. Musk continues to push hard on the team to get great at their core competencies and deliver on aggressive timelines that makes the competition blush.
Elon bets on himself
There’s been so many times that Musk has been willing to invest his person wealth in a project, Tesla and SpaceX being prime examples, that would take his net worth to zero.
Most people with that level of wealth would hang up their entrepreneurial ambitions and live comfortably. Around the age of 30, this would have been the easy option, but Elon wasn’t done leaving his mark on the world and dreamed much bigger than most.
Musk decided to start, and take a very different route than most startups. Instead of pitching investors and protecting his own wealth, Musk believed so dearly in the idea of reusable rockets to reduce the cost of space travel, that he invest much of his personal wealth into SpaceX.
Famously that company had 3 unsuccessful launches (read explosions), until Falcon 1, Flight 4 was ultimately a success and made it to orbit. This iteration on the design is the engineering marvel that is Musk.
The fact the 4th rocket succeeded was no fluke, but rather a result of the hard work of Musk and the team at SpaceX, double, triple checking every calculation, every nut and bolt to ensure they eliminate as many possible issues and prepare the rocket for success.
By May 2012, they became the first private company to send a spacecraft to the International Space Station. By December 2015, SpaceX landed their first stage on land and since then has become experts at landing rocket stages back on earth, or catching them at sea, dramatically reducing the cost going to Space.
Now 18 years on, SpaceX has 18,000 employees, over successful 100 launches, the company has billions of dollars of contracts to launch Satellites and Musk has his yes firmly set on getting humans to Mars.
At some point, Musk looked at the transport sector and realised things needed to change dramatically and set about transitioning the world to sustainable transport (read: Electric Vehicles). Tesla Motors was born in 2003 and by 2008 he was CEO.
Being CEO didn’t mean life was easy, with Musk reportedly sleeping on the Tesla factory floor, or at least in a conference room. There’s a VERY short list of CEOs that would ever contemplate this, let along go through with it repeatedly.
Mission 1 of Tesla was to make an electric sports car that would perform so well that people would pay a premium for it. The revenue from this would be re-invested into the company’s next product and so the cycle began.
The original Roadster funded the development of the Model S, that funded the Model X, that funded the Model S which then funded the Model Y and so the cycle continues. We’re now looking at Cybertruck, Semi and the new Roadster but the most important piece of this product cycle was Musk’s continued ability to see risk in a very different way to most of us.
How many of us would be willing to go zero, with the understanding that if the worst happened, that you have so much confidence in your ability to rebuild your career, that you’d risk it all.
Hopefully most decisions we make in life aren’t that massive game of poker where you have to go all in, because the associated stress is not something most of us would tolerate.
This speaks to how steadfast Musk is about changing the world. Call it balls, call it vision, call it what you want, he seen a future and invested everything he had to make it happen. The fact that he is being rewarded with the title of the richest person today is so amazingly summarised by his Tweets about it..
I can’t explain how perfectly this shows Musk’s absolute focus on the goal at hand, to replace the 60 Million+ new cars that are sold every year with EVs.
Elon Bets the company
First it was the Model 3 ramp, then more recently autonomy with Full Self-Driving.. but Musk continues to make ‘bet the company’ kind of decisions with seeming ease. Where others would be nervous to take on such risks, Musk is not just ok with the level of risk, he backs himself repeatedly and his team.
The team part of this endevour is awfully important. If you’ve ever hired someone, or thought about corporate culture, then you’ll understand the challenges of getting all employees to be aligned to the company goal, being experts in their field, all while retaining them to execute the vision of the company.
Sure there’s the option of paying above industry rates, but it seems Tesla doesn’t need to. Such is the want to work at Tesla, to help change the world and make it a better place by moving away from internal combustion engines, employees want to work at Tesla.
Any employee who receives stock compensation as part of their employment package has an vested interest in helping the company reach their ambitious goals and that seems to be paying dividends.
Willing to share his vision
Musk is a unique character that doesn’t look comfortable on stage or in front of the camera, but does love to share his vision for the future. When you’re ultimately hoping for people to help you with your mission, you need to be a great communicator, someone who can detail the problem, then lay out the solution.
Musk excels at this.
A prime example of this is Musk on stage at Autonomy Day in 2019, where he spoke in detail about the technical challenges and aspirations of the company to deliver it on a seriously aggressive timeline.
We then had Battery Day in 2020 which also showcased to the world, Tesla’s plan to reduce the cost of batteries (the single largest cost of an electric car), along with their plan to increase range, cycle life and reduce cost of manufacturing over the next decade.
This is behaviour we’ve never seen before.
Typically the corporate plans and internal targets are guarded secrets that are never shared publicly, a typically risk adverse strategy, in case they can’t hit their deadlines.
This doesn’t seem to concern Musk and ‘Elon Time’ is now a joke in the community, but what’s deadly serious, is the fact that while sometimes late, Musk does execute and deliver on promises. This means if he says something, he has the engineering talent and the finances to make it happen, so betting against him is a risky venture.
Once you set your target as building electric cars as your goal, then the challenge is how efficient you can make your factory and how many of them can you build.
After being able to break ground and start shipping vehicles inside 12 months at Shanghai, the industry was shocked, that shouldn’t be possible, but Musk found a way.
Now with Giga Berlin and Giga Austin, Tesla looks set to replicate that rapid development of factories that are being built ultimately to create cars at a a crazy rate.
Tesla is a story of a tech company that was trying to work out manufacturing faster than auto manufacturers could work out the tech. We now know that Tesla won that race by many years.
In 2021, Tesla are projected to make close to a million cars and 2 million by the end of 2022. That ramp has never been seen before and that’s now got the world’s attention as Tesla continues to increase margin on each car, while reducing the cost of production and ultimately making electric cars more affordable.
Musk has also taken time to be on various podcasts, including Joe Rogan, Lex Fridman, Third Row Tesla Podcast, Tesla Daily, Macques Brownless and more. Interviews seem like a distraction to the vision, but clearly Musk sees the value in taking a couple hours out of his busy schedule to be in front of those audiences and share his vision to potentially new people.
I wish we could clone Elon Musk. Imagine if the world had 5 of him, a LOT of things would happen in a much more aggressive timeline, which means the world would reap the benefits years or decades faster than otherwise would occur.
Musk bets on himself, his team repeatedly and has an uncanny ability to proceed through hardcore engineer challenges where he bumps up against the laws of physics.
Almost nobody is prepared to take the risks that Musk does. Almost nobody is prepared to commit to the hours per day, week, month and year that Musk does to executing. Almost no CEO is willing to share their vision publicly, but when that vision is to make the world a better place, it’s one that’s easy to enrol into.
I applaud and congratulate Elon on his success and wish more of us were like him. If you don’t already, go follow @elonmusk on Twitter.