#415 How Elon Thinks

My friend Eric Jorgenson spent years—and thousands of hours—studying Elon Musk. Eric read everything Elon has written, read everything written about Elon, and watched every interview Elon's given. He distilled all of Elon's insights into his new book. This episode is all about How Elon Thinks based on The Book of Elon: Elon Musk's Most Useful Ideas in His Own Words. Episode sponsors: Ramp⁠⁠⁠⁠⁠⁠⁠ gives you everything you need to control spend, watch your costs, and optimize your financial operations —all on a single platform. Make history's greatest entrepreneurs proud ⁠⁠⁠by going to Ramp.com to learn how they can help your business save time, save money⁠⁠, and grow revenue.⁠ Automate compliance, security, and trust with Vanta.⁠ ⁠⁠⁠Vanta helps you win trust, close deals, and stay secure—faster and with less effort⁠⁠⁠⁠. ⁠⁠⁠Find out how increased security leads to more customers by going to Vanta⁠⁠⁠. Tell them David from Founders sent you and you'll get $1000 off.

• 0:00Speaker 00

  My friend Eric Jorgenson has spent a few years and thousands and thousands of hours reading everything that Elon has written, reading everything that has written about Elon, watching every single interview that Elon has ever given, and then he compiled all of Elon's most useful ideas into the book that I'm holding in my hand, which is the Book of Elon. The subtitle is Elon's Most Useful Ideas in His Own Words. I'm going to read one line from Eric about the benefit that he experienced from doing this, and then from here on out, every other thing will be Elon in his own words. Eric writes, "To me, Elon represents the idea that I am capable of more than I ever imagined." And so I'm just going to run through, in chronological order, all the notes and highlights

• 0:44Speaker 00

  I took from reading and rereading this book. The idea is, I want this to feel as if Elon is speaking directly to you and I. So it starts out, Elon says, "I don't mind if my legacy is accurate or inaccurate, as long as I die feeling I've done the right thing for the future of consciousness." Elon gives a lot of advice centered around making sure that you're living a useful life, building things that make other people's lives better is the way I think about this. He says, "You can choose to not be ordinary. You can choose not to conform to the conventions taught to you by your parents. It's possible for ordinary people to choose to be extraordinary. Be useful." "The measure of success in my life is how many useful things can I get done? I wake up in the morning and ask, how can I be useful today? I want to maximize my utility.

• 1:26Speaker 00

  I try to take the set of actions most likely to improve the probability that the future will be good. Do useful things for your fellow human beings. It is hard to be useful, to contribute more than you consume. Can you have a positive net contribution to society? Aim for that. I have a lot of respect for someone who puts in an honest day's work to do useful things. I admire anyone making a positive contribution to humanity." And then Elon was asked a question, like, "How do you know if you're helping?" And I liked his answer here. "How many people did you help multiplied by how much help you provided each person on average? For any product you're trying to create, ask yourself utility improvement compared to the current state of the art, multiplied by how many people it would affect.

• 2:08Speaker 00

  Building something that makes a big difference to a small number of people is just as great as something that makes a small difference for a vast number of people. Not every product will change the world, but if it's making people's lives better, that's great." And so then he talks about what he's trying to do is make the future better by developing new technology. "The future will not get here fast enough unless we force it." I came to the conclusion that if we can advance the knowledge of the world, if we can do things that expand the scope and scale of consciousness, then we're better able to ask the right questions and become more enlightened. And so he's asked a follow-up to this. What do you think is your most core skill? He says, "I devote myself to the advancement of humanity using technology. My core personal competence is technology. I want to build wondrous new technologies where you feel awe when you see it. How does that even happen?

• 2:53Speaker 00

  How is that even possible?" And then he talks about the motivations behind starting his companies, and he's giving advice to fellow entrepreneurs. Don't start a company because you want to be an entrepreneur or because you want to make money. It is better to approach from this angle. What is the useful thing you could build that you wish existed in the world? I did not start companies from the standpoint of, "What's the best risk-adjusted rate of return?" Or, "What I think could be successful?" I just find things that need to happen and try to make them happen. I thought these things needed to get done. If my money was lost, okay, it was still worth trying. And then once you figure out what to work on, he says, "Then try to get other people to work with you to create that thing. Keep making it better and better. If you create something useful, money will be the result.

• 3:35Speaker 00

  A properly working economy rewards the creation of useful goods and services. Successful entrepreneurs come in all sizes, shapes, and flavors. I'm not sure there's any one particular trait that makes them. If there is only one, have an obsessive nature about the quality of the product. In this context, being obsessive-compulsive is a good thing. Given that, really, really, really liking what you do is a big advantage. If you like what you're doing, you think about it even when you're not working." And then he talks about the inevitable pain that comes from building a company. I always tell you, one of my favorite maxims from the history of entrepreneurship comes from the founder of Four Seasons. He says, "Excellence is the capacity to take pain." Elon says, "My way of dealing with mental problems

• 4:16Speaker 00

  is to make sure you really care about what you're doing and then take the pain." On the next page, he follows up on that. If you need encouragement, don't start a company. And then he talks about that humanity fails over and over again about predicting the popularity or the uses for the invention of new technology. When you're building a radically new product, people don't know they want it yet. When they first started making TVs, they did a famous nationwide survey. Will you ever buy a TV? And around 96% of respondents said no. Then he goes back to this reoccurring theme that he repeats that you should be creating more than you're consuming. It is much better to work on adding to the economic pie. Create more than you consume. A lot of this book goes into his work ethic, the fact that he thinks the things that he's working on are very important, so therefore he's willing to endure a lot of times of just pain and suffering.

• 5:00Speaker 00

  Says, "Work like hell. I am wired for war." He's asked the question, "Why doesn't the world have more Elon Musks?" If you think you want to be me or do the things I've done, I would say you're probably mistaken. Long periods of my life have been very painful and difficult. The amount I torture myself is next level. You need to have some kind of rage demon in your skull that drives you. I've done these things because I felt a strong compulsion to do them. I've been burning the candle at both ends with a flamethrower for a very long time. He continues to issue this warning. You think you want to be me, I guarantee you don't want to be me. You can't be in a constant fight for survival, always in adrenaline mode, and not have it hurt you. I would say this to 20-something-year-old me, I think there's some merit to not being too intense and enjoying the moment a bit.

• 5:44Speaker 00

  Occasionally stopping to smell the roses would probably be a good idea. Elon talks a lot about fear. He talks about the fact that you're always going to feel fear, you have to do it anyways. I don't remember if it's in this book or another book, but one of my favorite quotes from Elon about this, he says, "Don't fear losing. It hurts the first 50 times, but then you're able to play with less emotion. You will be able to take more risks." In this book, he says, "Look fear straight in the eye and it will disappear. The nature of fear is that people don't look at it. Look at it directly and it will be gone. When something is important enough to you and you believe in it enough, you do it in spite of the fear." It is normal to feel fear. If you don't feel fear, you definitely have something mentally wrong. Just feel it and let the importance of your mission drive you to do it anyway. And he was asked a follow-up question.

• 6:29Speaker 00

  How do you persevere through these hard challenges? Where do you find the strength? And I loved his answer. That's not how I think. I think this is simply something important. It must get done. We will keep doing it, or we will die trying. Quitting is not in my nature. I don't care about optimism or pessimism. Fuck that. We're going to get it done. There's an entire section on how Elon thinks like a physicist, and he uses this to get to the truth. He repeats this a lot. The truth matters to me a lot. Pathologically, it matters to me. In business and personal life, wishful thinking causes a lot of mistakes. You have to ask whether something is true or not. Wishful thinking is a natural human tendency. It is a challenge to tell the difference between believing in a new idea and persevering or pursuing an unrealistic dream.

• 7:13Speaker 00

  The real test of any startup is how well it responds to adversity and adapts. When most things start out, they don't make much sense. But as long as you adapt quickly, you can make the company work. A few weeks ago, I just did this episode called "How SpaceX Works." Huge chunks of that episode is about this idea. If you haven't listened to it, I'd highly recommend going back and listening to it after this. Being tenacious and super focused on the truth is extremely important. Look for feedback from all sources. If you have beliefs that are incompatible with a rocket getting to orbit, that rocket will not get to orbit. Physics is a harsh judge. He repeats over and over again. Physics is law. Everything else is a recommendation. Wishful thinking is innate in the human brain. You want things to be the way you wish them to be, so you tend to filter out information you shouldn't.

• 7:58Speaker 00

  That's why I always assume we're losing, even when it looks like we might win. That line's too good not to repeat. That's why I always assume we're losing, even when it looks like we might win. And then he mentioned something that he's been repeating for a decade and a half, the importance of using first principles thinking. The normal way we conduct our lives is reasoning by analogy. That means we do something because it's similar to something else or what other people are doing. It is easier to reason by analogy rather than from first principles, so that's what we do most of the time. But for important things, that kind of thinking is too bound by convention or prior experiences. You will hear, "It's always been done this way," or "No one's ever done it." That is a ridiculous way to think. First Principles is a powerful, powerful method for life. And before we get back into this, I want to tell you about the presenting sponsor of this podcast,

• 8:43Speaker 00

  Ramp. I have been reading a lot about SpaceX lately. SpaceX is one of the most valuable private businesses in the world, and one of the main themes in the history of SpaceX is constantly attacking and questioning your costs. Ramp helps many of the most innovative businesses in the world do exactly that. And Ramp does this by using first principles thinking. The median company that is running on Ramp cuts their expenses by 5%. And one thing SpaceX has demonstrated is a religious dedication to controlling costs actually helps increase revenue because you can pursue opportunities you couldn't otherwise. And we see that in the Ramp data, too. The median company running on Ramp also grows their revenue by 16%. So when you're running your business on Ramp and your competitors are not,

• 9:28Speaker 00

  you have a massive competitive advantage that compounds over time. Ramp is the only platform designed to make your finance team faster and happier. Many of the top founders and CEOs that I know run their business on Ramp. I run my business on Ramp, and you should, too. Go to ramp.com today to learn how they can help your business save time, save money, and grow revenue. That is ramp.com. And so he's asked a follow-up. How do you apply first principles thinking? Break something down to the most fundamental principles. Start by asking, what are you most confident is true at a foundational level? That sets your axiomatic base. Then you reason up from there. Then you check your conclusions against the axiomatic truths. It's hard to think this way.

• 10:13Speaker 00

  It takes a lot of effort. But if you're trying to do something new, it's the best way to think. And so then he gives an example of how he applied first principle thinking to one of his companies. He says, here's an example from early in building Tesla. People said battery packs were too expensive to make cheap electric cars. They assumed they would always be expensive because they had been in the past. That is pretty dumb. If you apply that reasoning to everything new, then you would never try anything new. Oh, nobody wants a car. Horses are great. We're used to them. They can eat grass. There's lots of grass all over the place. There's no gasoline available, so people will never buy- Buy gas cars. People did say that, and they said it a lot. People assumed batteries for electric vehicles would always cost $600 per kilowatt hour. The first principles approach to battery costs is this.

• 10:57Speaker 00

  What are the batteries made of? What are the materials that made up batteries? What is the market value of those materials? It's got cobalt, nickel, aluminum, carbon, some polymers for separation, and steel can. Okay, what if we bought that amount of material on the London Metal Exchange? What would each of those things cost? Oh geez, it's only $80 per kilowatt hour. So clearly, we just need to think of clever ways to take those materials and combine them into the shape of a battery cell. That's how I knew it was possible to build batteries much cheaper than anyone else realized. And then he just got a great quote about the importance of taking ideas from different domains and applying it to whatever you're working on. He says, "What is simple in one arena is often profound in another." First principles thinking built SpaceX. Most people think, "Historically, all rockets have been expensive.

• 11:41Speaker 00

  Therefore, in the future, all rockets will be expensive." But that is not true. The first principles thought process around the rocket became general purpose for all parts. I love this idea. I call this the idiot index. How much more does a finished product cost than the cost of its materials? If a part or product had a high idiot index, we could cut the cost with more efficient manufacturing techniques. If the ratio is high, you're an idiot. I expect all of my engineers to know all the best and worst parts in their systems as judged by the idiot index at all times. That's what I mean by thinking about things from a first principles standpoint. If I'd analyzed it by analogy and said, "What are all the other rocket companies doing? What do their rockets cost? What historically have other rockets cost?" That is reasoning by analogy,

• 12:25Speaker 00

  but it really doesn't illustrate what the true potential is. And then there's a great idea in the book that I haven't heard him speak about much, but I think should be repeated over and over again. It's this idea of starting with, "What does the theoretically perfect product look like?" Start from there, work backwards. The idea of the theoretically perfect is going to be a moving target, because as you learn more, the definition for that perfect product will change. You don't actually know what the perfect product is, but you can approximate a more perfect product. Then ask, "What tools, methods, or materials do we need to create to get the atoms in that shape?" People rarely think this way. But thinking in limits is a powerful tool. At SpaceX, we often consider what's possible within the absurd.

• 13:08Speaker 00

  If my team says something is impossible, I try to open their minds to new potential solutions by asking, "What would it take?" And then he talks about the fact that most people do this because they have these fake ceilings, these fake limits on themselves. Most people can learn a lot more than they think they can. They sell themselves short by not trying. I encourage you to read a lot of books. Just read. Read books. Try to ingest as much information as you can. I was always really interested in reading. When I was a kid, I read everything I could get my hands on. I ran out of things to read in our house, so I read the encyclopedia. Develop good general knowledge. Read a broad range of material. And then he talks about this habit that he developed when he was a kid, that he could teach himself things, that he used it to build his companies. Diving into SpaceX and Tesla, I had to learn how to make hardware.

• 13:51Speaker 00

  I had never seen a CNC machine or laid out carbon fiber. I didn't know about any of these things. But if you read books and talk to experts, you can pick them up quickly. Most people self-limit their ability to learn. It's pretty straightforward. Just read books and talk to people. And so then Elon talks about the fact that he thinks of himself primarily as an engineer, and this is why engineering is magic, and who wouldn't want to be a magician? When I was young, I wasn't sure what I was going to do when I got older. I thought the idea of inventing things would be cool, because I read a quote from Arthur C. Clarke that said, "A sufficiently advanced technology is indistinguishable from magic." That is really true. If you go back 300 years, you'd be burned at the stake for things we take for granted today. Being able to fly is crazy.

• 14:35Speaker 00

  Being able to see over long distances, communicate, and instantly access the world's information from anywhere on Earth, that is also crazy. This would all be considered magic in times past. Engineering is about creating things that never existed before. And then Elon talks about his love of military history. He says, "Engineering wins wars." In Sun Tzu's Art of War, there should have been a chapter saying, "If you have a decisive technology advantage, you can win with minimal casualties to your side." If there's a big difference in the technologies, the side with the advanced technology will win. If there's an overwhelming technological advantage, that side will win even If the odds are dramatically stacked against them. To use an extreme example, if you can shoot lasers from space to any spot on the ground by just pointing at it,

• 15:19Speaker 00

  it wouldn't have mattered if you're fighting Julius Caesar or Napoleon. They just got lasered from space. Most battles in history, because technology moves slowly, were more about maneuvering, tactics, and strategy. But when there's a technology discontinuity, it fundamentally changes the whole situation. Wars in the modern era are very much technology race wars. How fast can we create new technology? The best example would be the nuclear bomb. Anyone who got nuclear bombs first won. That's it. End of story. And so then he goes back to why engineering is so important, because he says engineering creates value. I find ideas to be somewhat trivial. But the execution of good ideas is extremely difficult. Prototypes are easy. Production is hard.

• 16:02Speaker 00

  Production and being cash flow positive is excruciating pain. You only build value in a company if you do hard work to solve tough problems. That's why companies are valuable. It's why they should be valuable and largely why they are. And so then there's a section on doing the work and building the companies. If conventional thinking makes your mission impossible, then unconventional thinking is necessary. I am the CEO of these companies because I feel I'm responsible for them, not because it's the best thing for the quality of my life. What you actually get as CEO is a distalization of the worst things going on in the company. If you're the CEO, you work on the worst problems in the company. You only spend time on things which are going wrong, the things other people can't fix, the most pernicious and painful problems.

• 16:46Speaker 00

  And so he talks about, and he's asked the follow-up question, how do you manage through failure? Managing through big failures is painful and difficult. It feels terrible. The company looks at me to rally them, so I do, but I feel terrible. Failure is a punch in the gut. And then he talks about the importance of earning a deep understanding inside your own company. Says one reason SpaceX could move so quickly is that I made both the engineering decisions and the spending decisions together in one brain. In most companies, those are at least two different people. There's some engineering guy who's trying to convince a finance guy that this money should be spent. But the finance guy doesn't understand engineering, so he can't tell if this is a good way to spend money or not. Plus, they may not trust each other. I'm making the engineering and the spending decisions together with all the information in one place. My brain trusts itself.

• 17:33Speaker 00

  Another thing you'll hear Elon repeat over and over again is the importance of leading from the front line, front lines leadership. When the team is being asked to work super hard, I have to be right there with them and they have to see it. If I fall asleep in the middle of the factory floor at four in the morning and wake up four hours later, they see that. They're like, if the CEO is willing to take that level of pain, I can do it too. The troops fight harder if they see the general on the front lines. Nobody bleeds for the prince in the palace. Get out there on the front line. Show them that you care and you're not in some plush office somewhere. If they see the general out on the battlefield, the troops are going to be motivated. Wherever Napoleon was, that's where his armies would be at their best. It is my firm belief that the separation of the workplace into executives and employees

• 18:17Speaker 00

  does not create a good working environment. We eliminate all special privileges of executives. Everyone has equal access to parking, eating at the same tables, and there's no management offices. Managers should always take care of their team before they take care of themselves. The supervisor is there to serve his team, not the other way around. All technical managers must have hands-on experience. Otherwise, they're like a cavalry leader who can't ride a horse. Do whatever the task is, whether grand or humble. And he goes back to the importance of just persevering through adversity, through pain. There's a great quote from Churchill, "If you're going through hell, keep going."

• 18:57Speaker 00

  I seem to have a high innate drive, and that's been true even since I was a little kid. When I was a kid, I thought I was insane. It became clear other people's minds weren't exploding with ideas all the time. I felt strange. It's hard to turn off. It is like a never-ending explosion. Adversity shaped me. My pain threshold became very high. And then he gets back into this idea. You've heard him repeat it a few times. I've heard this quote attributed to a few different founders, but it's, you know, starting companies like eating glass and staring into the abyss. He says, "When starting a company, usually the beginning is fun. Then it's hellish for a number of years." Starting a company is like eating glass and staring into the abyss. Eating glass means you've got to work on the problems the company needs you to work

• 19:40Speaker 00

  on, not the problems you want to work on. You end up working on problems you wish you weren't working on. But if you don't eat the glass, you're not going to be successful. And then we see he repeats this again, but if something is important enough, then you do it, even though the risk of failure is high. My advice for somebody who wants to start a company, bear in mind that the most likely outcome is failure. Reconcile yourself to that strong possibility, and only if you still feel compelled to do it, then you do it. That said, many people fear starting a company too much. What is the worst that could happen? You're not going to starve to death. You're not going to die of exposure. Really, what is the worst that could happen? And then Elon has a bunch of interesting ways to think about what a company actually is.

• 20:23Speaker 00

  He does start with the main premise, the most important thing, which almost all of history's greatest entrepreneurs would agree with. The most important thing is to attract great people. You have to find an amazing group that you really respect. A company is just a bunch of people coming together to create a product or service. There's no such thing as a business. That's just a group pursuing a goal. Depending upon how talented and hardworking that group is, and to the degree in which they are focused cohesively in a good direction, that will determine the success of the company. The most important thing is to attract great people. A company is essentially a cybernetic collective of people and machines. This collective is far smarter than an individual. People sometimes forget a company is just a group of people gathered together to make products for fellow human beings.

• 21:06Speaker 00

  As long as they make great products, the company will have great value. If you don't have a compelling product at a compelling price, you don't have a great company. And then he talks about the importance of building a culture inside of your company of just builders, people actually doing the work. Another important principle, you want everybody to be able to think like the chief engineer. They need to understand the system at a high level, well enough to know when they are making a bad optimization. If you're able to get talented, hardworking people to join the company, work together, and have a relentless sense of perfection towards a common goal, you will end up with a great product. If you have a great product, lots of people will buy it, and the company will be successful. That is why our most important consideration is recruiting the best people.

• 21:48Speaker 00

  The output of any company is the vector sum of the people within it. If we attract the most talented people over time, and our direction is correctly aligned, we will prevail. And then this is just a great line. "A small group of technically strong people will always beat a large group of moderately strong people. Do everything you can to gather great people." And then he talks about just how difficult that actually is. It's easy to say, it's really difficult to do. And he gives some historical examples about, hey, this guy was really talented. We might not have hired him if he applied. I love this. He goes, "Sometimes these things get messed up in recruiting. I sometimes wonder, if Nikola Tesla applied to Tesla, would we have even given him an interview? That is not clear. They might say, 'This guy came from some weird college in Eastern Europe. He's got some odd mannerisms. We don't know if we should give him an interview.'"

• 22:33Speaker 00

  I worry that's what we would do. Our response should be, "Man, Nikola Tesla, this kid is super smart. What does he want? We'll pay him anything." And then he just has a great sentence here to figure out the kind of people you actually want to hire. Think about if that person was working on that mission of the company before they applied for the company. He says, "Usually, the person who had to struggle with the problem really understands it." It's really important for me to tell you, this goes on for pages after pages of the pages about how important it is. He talks about like trying to essentially recruit as if your company was like the special forces. He says, and this is why, "Wherever the smartest, most driven people are choosing to work, that company is going to win." He's asked a follow-up, "Is building great teams and products just a question of being well-funded?" And I love Elon's response here. "If there was a factory producing excellent engineers, that would be true.

• 23:17Speaker 00

  Except this factory doesn't exist. It is incredibly difficult to find the right talent, integrate them into an organization, and have it work effectively. Money is not the constraint. There is only a small number of excellent people, and they are hard to find." And then he's got two pieces of advice on hiring. "You look at the character of the people they choose to spend their time with, and then optimize for attitude over skills." So he says, "One test for assessing someone's character is to look at the character of their friends and associates. While people can put a mask themselves for their character, their friends and associates will not. You can judge a person's character by their associates." That's the first one. This is the second one. "When hiring, look for people with the right attitude. Skills can be taught. Attitude changes require a brain transplant."

• 24:02Speaker 00

  And then he goes back to the importance of finding the truth. This section is called "Feedback over feelings." "Physics does not care about hurt feelings. It cares about whether you got the rocket right. All bad news should be given loudly and often. Good news can be said quietly and once. It is not your job to make people on your team love you. In fact, that's counterproductive. Camaraderie is dangerous. It makes it hard for people to challenge each other's work." Wanting to be everyone's friend leads you to care too much about the emotions of the individual in front of you, rather than caring about the success of the whole enterprise. Focusing on that one individual can lead to a far greater number of people being hurt. I think it is a real weakness to want to be liked, a real weakness, and I do not have that.

• 24:45Speaker 00

  And then he goes into designing the organization, that you have to remove these organizational boundaries, this is something he repeats over and over again, he does in every one of his companies. In any product, you can see the errors in the organization's structure. They will manifest themselves in the product. A major source of issues is poor communication between departments. The way to solve this is to allow free flow of information between all levels. Communication should travel via the shortest path necessary to get the job done, not through the chain of command. Any manager who attempts to enforce a chain of command will soon find themselves working elsewhere. Connect designers and manufacturers to make sure they communicate often. The people on the assembly line should be able to immediately grab a designer and engineer and say, "Why did you make it this way?" And he says why this is important.

• 25:28Speaker 00

  If your hand is on the stove and it gets hot, you pull it right off. But if it's someone else's hand on the stove, it'll take you longer to do something about it. You cannot separate design, engineering, and manufacturing. They need to be together because you're going to make mistakes. You want to identify and fix those mistakes today, right now. And if you separate them, the mistakes will fester. And then this is great advice. Physically, go to where the problem is immediately. One of my rules is go as close to the source as possible. And then he enforces this idea of simple communication. Do not use acronyms or nonsense words. Anything that requires an explanation inhibits communication. We don't want people to have to memorize a glossary just to function.

• 26:10Speaker 00

  I noticed a creeping tendency to use made-up acronyms. Excessive use of made-up acronyms is a significant impediment to communication, and keeping communication clear as we grow is incredibly important. A few acronyms here and there may not seem so bad, but if a thousand people are making these up, over time, the result will be a huge glossary that we have to issue to new employees.

• 26:35Speaker 00

  I told people that acronyms need to stop immediately, or I would take drastic action. The most simple, straightforward, low ego terms are generally best. And again, he talks a ton about the importance of designing and really engineering your organization. He has a great idea here. He says, "You always have to look at the incentive structure of an organization and ask, is that organization properly incentivizing innovation?" And before we get back into this, and speaking of incentivizing for innovation, I want to tell you about my partner, Vanta. Elon says that the only true currency is time. The one thing you cannot replace is time. He says, "I often tell the Tesla team, it's okay to scrap equipment or money, it is not okay to scrap time." Vanta helps you save time.

• 27:19Speaker 00

  Vanta helps your company prove you're secure so more customers will use your product or service. You can think of Vanta as your always-on AI-powered security expert who scales with you. The more your business grows, the more complex your security needs will get, and that complexity can turn into chaos. Vanta helps you tame that chaos. Vanta automates compliance, continuously monitors your controls, and gives you a single source of truth for compliance and risk. So whether you're a fast-growing startup or an enterprise company, Vanta fits easily into your existing workflows. This allows you to keep growing a company that your customers can trust. Many companies will not sign contracts unless you're certified, and that is causing you to lose out on sales. That is why the average Vanta customer reports a 526% return on investment after becoming

• 28:04Speaker 00

  a Vanta customer. Vanta will help you win trust, close deals, and stay secure faster and with less effort. This will save you time. Go to vanta.com/founders and you'll get $1,000 off. That is vanta.com/founders. And then Elon talks about designing an organization that allows for a lot of experiments, one that can actually evolve. And he says, "It's important to create an environment that fosters innovation, and you want to let it evolve in a Darwinian way. You don't want to pick one technology or path and decide that it will win, because it may not be the best option. You need to let things evolve. Failure is a side effect of iteration." I once told a discouraged engineer, "If you can't tell me four ways you fucked something up before you got it right, you weren't the one doing the real work.

• 28:46Speaker 00

  If we're not occasionally blowing up an engine on the test stand, we're not trying hard enough."

• 28:52Speaker 00

  And so Elon has this almost religious devotion to simplicity. He says simplicity wins. He says, "Never use a cruise missile to kill a fly. Just use a fly swatter." "Every decision we made in early SpaceX designs had been with simplicity in mind. Simplicity both improves reliability and reduces cost. Fewer components means fewer components to buy and fewer components that can go wrong." There's a great maxim on this that says, "Genius has the fewest moving parts." "Simplicity is our mantra. It creates both reliability and low cost. Simplicity comes from hundreds of little changes." And so he gives this example of Tesla and the Model 3 buildup. "For months, I was at the Gigafactory trying to help fix battery production. It's a lot of little things.

• 29:35Speaker 00

  I look at every tiny part of each process and ask, is this process necessary? For example, a robot would put a car frame on a turntable. The turntable rotates, then another robot picks it up. The problem was that the turntable sometimes breaks down. So we eliminated the turntable and just have a robot-to-robot handoff. Then we had one less step, less equipment, and didn't have turntable breakage to consider. It is a lot of this really simple stuff, but a thousand times. It is a lot of minimizing things that can go wrong and maximizing the efficiency of the simple things. You want fewer things, not more." I gotta repeat that. "You want fewer things, not more."

• 30:19Speaker 00

  And then the book goes into what Elon repeats the most, which is the algorithm. "I became a broken record on the algorithm, but it's helpful to say it to an annoying degree. I have every one of my companies rigorously implement a five-step process for engineering. I call it the algorithm. The order is very important. Number one, make your requirements less dumb. Number two, try very hard to delete the part or process. Number three, simplify or optimize. Number four, accelerate. Number five, automate." And then he's asked a question. "Why is the order of the steps so important? I've personally made the mistake of going backwards on all five steps multiple times. Many things at Tesla were automated, accelerated, simplified, and then deleted." And so he walks us through the steps.

• 31:02Speaker 00

  "The first step is to question your requirements and make your requirements less dumb. You have to start there because otherwise, you could get the perfect answer to the wrong question. Your requirements are definitely dumb. It does not matter who gave them to you. Whatever requirements you do have must come from a person, not a department." You have to be able to ask a person, and the person putting forth the requirement must take responsibility for that requirement. Many times, we've had dumb requirements, dug into them, and discovered no one currently working in the department agrees with that requirement. Step two, try very hard to delete the part or process. It sounds obvious, but people often forget to try deleting something entirely. If you're not adding deleted things back in, 10% of the time,

• 31:47Speaker 00

  you're not deleting enough. I tell them in advance, "Look, we're deliberately going to delete more than we should. Some of the things we delete, we're going to put back in. At least one in 10 things, we're going to add back in." People get a little shook by that. But if you're so conservative in deleting that you never have to put anything back in, you obviously have a lot of stuff that isn't needed. At SpaceX, I would tell the team, "We're on a deletion rampage. Nothing is sacred. Please go ultra hardcore on deletion and simplification. We put immense effort into reducing mass." Then, once you've deleted as much as you can, the third step is to simplify or optimize. The third step, the third step, not the first step. Why? Because if not, you're working on optimizing a thing

• 32:32Speaker 00

  that should simply not exist. Then, and only then, step four, accelerate cycle time. Once you're moving in the right direction and moving efficiently, you're moving too slow. Go faster. You can always make things go faster, but do not go faster until you've worked on the other three things first. I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted. Speeding up something that shouldn't exist is absurd. If you're digging your grave, don't dig it faster. Stop digging. And then the final step is to automate. The big mistake in the Tesla factories was I began by trying to automate every step. To fix that, we had to tear hundreds of expensive robots out of the production line. We put a hole in the side of the building

• 33:17Speaker 00

  just to remove all that equipment. Always wait until the end of designing a process, after you've questioned all the requirements and deleted unnecessary parts, before you introduce automation. And then this is one of my all-time favorite Elon quotes: "A maniacal sense of urgency is our operating principle." Get rid of all large meetings unless you're certain they're providing value to the whole audience. In which case, keep them short. Also, get rid of frequent meetings unless you're dealing with an extremely urgent matter. Meeting frequency should drop rapidly once the urgent matter is resolved. Walk out of a meeting or drop off a call as soon as it's obvious you aren't adding value. It is not rude to leave. It is rude to make someone else stay and waste their time.

• 34:00Speaker 00

  The only true currency is time. The only true currency is time. The best offense, this is incredible, it talks about speed is both offense and defense. The best offense and defense is speed. The SR71 Blackbird is a military plane with almost no defense except acceleration. It was never shot down, not even once. Over 3,000 missiles were shot at the SR71 Blackbird and none hit. All it did was go faster. The power of speed is underappreciated as a competitive factor. A factory moving at twice the speed of another factory is basically equivalent to two factories. I have, this is so great, when he talks about how he's operating on a day-to-day basis, it's related to speed.

• 34:44Speaker 00

  I have a running triage of what I do at each company, constantly thinking, what is the most useful thing I could do now? In early SpaceX, I told the team, everything we did was a function of our burn rate. We were burning through $100,000 a day. In the same way, I expected the revenue in 10 years to be $10 million a day. Every day we were slower to achieve our goals was a day of missing out on that revenue. And then he goes back to the idea of this only true currency is time, it's so valuable. Tesla is getting to the point where every high-quality minute of thinking has a million-dollar impact. That is insane. If Tesla is doing $2 billion a week in revenue, that's about $300 million a day, seven days a week. There are many instances where a half-hour meeting improved the company's financial

• 35:29Speaker 00

  outcomes by $100 million. The one thing you cannot replace is time. I often tell the Tesla team, it's okay to scrap equipment or money. It's not okay to scrap time. And then he has a great sentence here that I think is obvious, but I don't think we think enough about. He says, "The longer you do anything, the more mistakes you will make cumulatively." I just did this episode on Roger Federer, and he made the point that the people that are the best in the world at what they do, they made way more mistakes than anybody else in their profession. And so Elon says, "The longer you do anything, the more mistakes you will make cumulatively." And then this may be the main theme of the book, the fact that we must make stuff. Elon is sharing these ideas. He's encouraging you to make things. Manufacturing is underrated. It is hard. We must make stuff.

• 36:11Speaker 00

  Some people have an absurd view of the economy as a magic thing that just produces stuff. Let me break it to the fools out there. If we don't make stuff, there's no stuff. Some people have become detached from reality. This notion that the government can just send checks out to everyone and everything will be fine is not true. You can't just legislate money to solve things. If you don't make stuff, there is no stuff. Technological progress is not inevitable. It's not some kind of abstract concept. Humans make technology. If we don't do it, it will not happen. Somebody has to do the real work. There is an overallocation of talent in finance. Too many smart people go into finance. We should have fewer people doing finance and more people making stuff.

• 36:53Speaker 00

  Manufacturing used to be highly valued in the United States. These days, it hasn't been as much, which I think is wrong. Making cars is an honest day's living, that's for sure. Making anything or providing a valuable service like good entertainment, good information, these are valuable things to do. I've got mad respect for the makers of things. This is a great maxim, and I don't even think I have to explain it. Elon does this all the time. He says, "Attack the constraint." Another great section that says manufacturing is the moat. "Two things define manufacturing competitiveness: economies of scale and technology. If you maximize your level of technology and maximize your level of scale, this is obviously going to be the most competitive situation. That's why plants are so freaking giant." And he talks about some of the innovations at Tesla.

• 37:37Speaker 00

  "We have also introduced a major innovation, which is to cast the car as a single piece." I got this idea from toy cars. I wondered, toys are cheap. How do they make toys? They just cast them. I was like, "Well, can you build a casting machine big enough for a car?" They said, "No one has ever done that before." I said, "Are we breaking the laws of physics?" They said, "No." So I said, let's just ask them. There were six major casting machine suppliers in the world. Five of them said no, and the sixth said maybe. I said, I'll take that as a yes. And then part three of the book is all about building companies. It starts with a question and answer from Elon. Question, what fuels your creativity? Answer, pressure, necessity. And in this section, he's just got a lot of practical advice.

• 38:21Speaker 00

  Like, you want to sell your products straight to the end consumer. You don't want somebody standing in between what you're making and what you're selling. Talks about the fact that, you know, you should be putting your own money into your companies. I always wanted to push my chips back on the table or play the next level of the game. I'm not good at sitting back. And he tells a hilarious story about starting X.com back in the 90s. Mike Moritz joined the company board. He told me, dude, you should not invest basically everything except your house and car in your startup. But I kept my chips on table. And then he just goes back to this idea of this constant iteration, trying to get, essentially using reality as a validation tool is the way I think about this. I'm trying to create an accurate mental model of reality. If I have a wrong view on something, or if there's an improvement that can be made, I say, I used to think this, which turned out to be wrong. Thank goodness, I don't have that wrong belief anymore.

• 39:04Speaker 00

  I'm a huge believer in feedback. And he likes to compete. He says, what matters to me is winning and not in a small way. Goes back to after he sold X.com, which turned into PayPal, and makes the most important decision of his life, which is to start SpaceX. He says, I could go and buy one of the islands of the Bahamas and turn it into my personal fiefdom. But I'm much more interested in trying to build and create a new company. I haven't spent my winnings. I'm going to put almost all of it back into a new game. And so he's talking about this idea, it's like, well, I made a bunch of money in twice, Zip2 and PayPal building software. Why go into, you know, space, energy, automotive? And he says, a lot of entrepreneurial talent and financing goes into the internet. Other sectors like automotive, solar, and space don't see new entrants. Not a lot of entrepreneurs go into those areas, and not a lot of capital goes into those startups.

• 39:49Speaker 00

  That is a problem because innovation tends to come from new entrants to an industry. In an oligopoly, no one is forced to innovate. New entrants drive innovation more than anything, which is why I've devoted my efforts to building new companies in those industries. He goes back to the idea, "Don't celebrate the prototype. Celebrate production. Prototypes are easy. Production, especially profitable production, is insanely hard, insanely painful." He says, "We made so many mistakes in the beginning of Tesla. Almost every decision we made was wrong. We made a finically individually-made, super-expensive prototype. I remember in the early days, giving a test ride to Larry Page and Sergey Brin, the founders of Google. There was some bug in the system, and damn it, the car would only go 10 miles an hour. I was in the passenger seat, saying, 'Guys, I swear, it goes a lot faster than this.'"

• 40:33Speaker 00

  "They were kind enough to put a little investment into the company despite the world's worst demo. It was a flat-out, burning..." I gotta read that again. "It was just a flat-out, burning dumpster fire of stupidity. It would have been much, much smarter to start with a clean-sheet design and not try to modify something else. I was going to start an EV company with JB Straubel, based on the AC Propulsion prototype. When I asked AC Propulsion if it was okay to do that, they said, 'There's some other people who want to create an EV company. Would you like to join forces with them?' I said, 'Okay.'" "That was a huge mistake. JB and I should have just started the company ourselves. My default inclination is to start things from scratch, even more so after this experience." And there's just huge chunks of interesting tidbits from the early Tesla,

• 41:18Speaker 00

  the early history of Tesla, I should say. He talks about he didn't, wasn't planning on becoming Tesla CEO. "I never wanted to be CEO, but I learned you could not truly be the Chief Technology or Product Officer unless you were the CEO. Being CEO of two startups at the same time was not appealing. It shouldn't be appealing. For anyone thinking it was a good idea, it was a terrible idea. I have..." This is hilarious. "I have a habit of biting off more than I can chew and just sitting there with chipmunk cheeks." And he talks about Tesla should not have worked. "The number of American car companies that haven't gone bankrupt is a grand total of two. Ford and Tesla. Starting a car company is idiotic." And then he talks about trying to raise money for Tesla when the company looks terrible, and they're going through a great recession. "Trying to raise money for a startup electric car company in 2008 while GM was going bankrupt was difficult.

• 42:02Speaker 00

  The investors I found said they would invest as much as I put in, so I put in everything. All the money I had left, literally everything. I didn't have a house. I was staying in a friend's spare bedroom." And he talks about how grateful he is for these investors to stand up at the time. He says, "Tesla did not look appealing either. There was no DOE loan. There was no Dimer deal. The car had a negative gross margin. Oh, and the largest shareholder was pissed off going AWOL. It was ugly." And this pushes them to the edge of sanity. And so he's asked the question, like, how do you prioritize with so many things going wrong at once? Prioritizing has usually been out of desperation, not selection. It's not, oh, let's sit back and leisurely decide how we should spend these resources. It's, this isn't working. If we don't make it work, we're gonna go bankrupt, so we better make it work. We messed up almost every aspect of the Model 3 production line.

• 42:44Speaker 00

  There were so many mistakes, the entire company had to be devoted to fixing them. We took everyone off every other project. We all started working on the Model 3. We had to make it work, or there wouldn't be any more Tesla. I felt like Indiana Jones running down the temple. There's a huge boulder chasing you, and you need to jump across a giant pit in the ground. If you slow down, the boulder will crush you. And if you don't make the leap, you'll die in the pit. That's prioritizing. And so he was asked the question, how did you motivate the team to do whatever it takes? I told them we had to go ultra hardcore. They had to prepare for a level of intensity greater than anything they had experienced before. I lived in the factories for three years fixing that production line, running around like a maniac through every part of the factory, living with the team.

• 43:26Speaker 00

  I slept on the floor, so the team going through a hard time could see me on the floor. And they knew I was not in some ivory tower. Whatever pain they experienced, I had more. I worked to the edge of sanity, but here's the result. At this point, I think I know more about manufacturing than anyone currently alive on Earth. I can tell you every damn part of that car is made. That's what happens if you live in the factory for three years. And so in this section, he's talking about control and vertical integration, but really it feeds what he said was a massive committed advantage, and that's just the speed at which your company can move. There's a lot of vertical integration at Tesla. We make the battery pack, the power electronics, and the drivetrain ourselves. We're vertically integrated because the pace we needed to move was much faster than the supply chain could move.

• 44:08Speaker 00

  To the degree that you rely on the legacy supply chain, you inherit their legacy constraints, including their speeds, cost, and technology. And then Elon talks about, even though you're moving fast, you still have to pay attention to every little detail. Most people don't consciously notice the small details, but they do subconsciously. Your mind takes an overall impression. You know if something is appealing or not, even though you may not be able to point out exactly why. That sense is a summation of many details. Most of us experience this as, hey, that's ugly, or that's beautiful, or wow, that's elegant, but can't break down why. Steve Jobs has a great line about this. He said, "A great product has to be better than it has to be. Pay attention to the little details. Train yourself to notice them.

• 44:49Speaker 00

  If you're trying to make a perfect product, attention to detail is essential." Focus on signal over noise. A lot of companies get confused. They spend a lot of money on things that don't actually make the product better. We put all of our money back into research and development, manufacturing and design. For any company, ask, are the efforts we're expending resulting in a better product or service? If they're not, stop those efforts. And he goes back to this idea of picking a mission. Like, you have one life. Just pick a mission you think is important. I don't look at ideas and ask, "What is the rank ordered list of best business opportunities from a financial standpoint?" I look for problems that are important to fix. Company stock value is not a metric by which I judge my own achievements.

• 45:32Speaker 00

  It's not like I was trying to figure out the rank ordered best way to invest my money, and on that basis, I chose space. I didn't think I could do real estate or invest in shoemaking, and wow, space has the highest return on investment. That was not my premise. The likeliest outcome is that I would lose all my money. But what is the alternative? No progress in space exploration? We've got to give this a shot, or we're stuck on Earth forever. And you know, in present day, SpaceX is one of the most valuable private companies on the planet. I've been reading a lot about it lately, and something I just kept in mind is the fact that Elon started it 24 years ago. He was 30 years old, and everybody made fun of him. They kept calling him this internet guy playing with expensive toys, this software guy is what they would call him.

• 46:15Speaker 00

  And yet, the more he learned about this, the more he started reading, started talking to people, the more convinced he thought there was a massive opportunity here. He has a funny, everybody's heard this idea of him breaking it down, what the material costs for a rocket are from first principles thinking, but he also, this is the first time I think I've ever seen this in anything I've read on Elon, he has a funny way to describe why he thought there was also an opportunity to make a more cost-effective launch vehicle. Because at the time, Russia was the only option. And he goes, "How could the Russians build low-cost rockets? It's not like we drive Russian cars, fly Russian planes, or have Russian kitchen appliances. The US is a pretty competitive place, and we should be able to build a cost-efficient launch vehicle." And then he starts analyzing the industry, and this just made me laugh, too. There's a tendency in big aerospace companies to outsource everything.

• 46:58Speaker 00

  That's been trendy in many industries, but aerospace has done it to a ridiculous degree. They outsource to subcontractors, and then the subcontractors outsource to subcontractors. You have to go four or five layers down to find somebody actually doing the real work, somebody cutting the metal or shaping the atoms. Every level above that tax on cost. It's overhead to the fifth power. I began to understand why things were so expensive. And once Elon picks a mission, he burns the boats. He says SpaceX is in this for the long haul, and come hell or high water, we are going to make this work. After three failed attempts, he sends this email. Here was the email to the team. "There should be absolutely zero question that SpaceX will prevail in reaching orbit and demonstrating reliable space transport.

• 47:40Speaker 00

  For my part, I will never give up, and I mean never. Thank you for your hard work. Now on to Flight 4. I don't ever give up. I'd have to be dead or completely incapacitated." And then he just goes back to this idea of building crude prototype as fast as possible. You want to maximize the amount of iterations you do. You want to use reality as your validation tool. He says, "The first goal is to make the damn thing work. We'll optimize it later." Initial production was simply a learning exercise. None of the initial designs will be long term. We're just trying to learn in the shortest period of time. The early Starship assembly yard looked like a garage shop. We have super advanced technology being built in a tent in a parking lot. And then he has a maxim here. Eliminate what isn't necessary to solve the key problem. And he gives an example.

• 48:24Speaker 00

  Early versions of Starship didn't even have doors. We didn't need doors. We did need to be super focused on getting to orbit. Doors were just unnecessary complexity. The first 10 ships or more, we won't get back from orbit. And he talks about why he had to build something as big as Starship to begin with. He talks a lot about the fact that scale has value in and of itself. To get a meaningful payload to orbit, scale is important. We need to make big things. There is a value to scale here. Scale has value in itself. For example, the same computer that controls a tiny rocket controls a big rocket. The percentage weight of the electronics is significant in a small rocket, but becomes vanishingly small in a big one. And then he's gonna give an example of accumulation of a lot of these ideas that he's been recommending to you and I.

• 49:09Speaker 00

  Talks about the fact that they removed the landing legs. And he was asked, "Why did you do this?" Again, here, we try to think to the limit of physics. The problem with landing legs is they add mass. We have to protect them during reentry, and we have to get a giant rocket from wherever it landed back onto the launch stand. That is tricky. I was trying to think of the limit. What's the fastest way to achieve reusability? It would be to land on the launch stand. Why not just have it land on the arms of the tower it launches from? When we first talked about it, it sounded batshit crazy. To custom-build a giant tower to catch the heaviest flying object ever made with mechanical arms? Pluck it out of the air? But we did it. It's an epic sight.

• 49:52Speaker 00

  Giant robot arms catching a giant rocket. And then he has two sentences here that I think is related about to the work that he did at SpaceX for sure, and also Tesla, but specifically SpaceX. There must be things you're excited about, that you're glad to be alive for. There is something special, far more rewarding than money, about working with an epic team to make breakthroughs. And it is really a message of optimism. I can't emphasize this enough. As long as we push hard and are not complacent, the future is going to be great. It is insanely hard to build and ship useful products to a large number of people. There is a hell of a difference between a company that has shipped a product and one that hasn't. It is night and day. If you create great products and services, which create wealth, that should be applauded.

• 50:36Speaker 00

  You increase the standard of living of the country and perhaps the world. Work on things that you find interesting, fulfilling, and that contribute some good to the rest of society. And that is where I'll leave it. I highly, highly encourage you to buy the book. I'm releasing this episode on the day the book is available for purchase. I'd buy one for yourself, buy a few for your friends, the people you work with. I think these ideas are very important, and I would like to help spread them as much as possible. The book doesn't have to be read in chronological order. It could easily be read in a weekend, and your life will be better by doing so.