Why Elon Outcompetes Everyone | Eric Jorgenson

33:14And I'm just like, just circle any sentence that you disagree with. Like, I know that you don't think you like him. I know that you think you disagree. But this is a book full of his words. So show me which ideas you disagree with. Like, do you not think we should be multi planetary? Do you not think these existential risks exist? Do you not think that you know, we're capable of operating with with a higher level of urgency? It's actually hard to disagree with a lot of things when you just see them down in black and white. But because they're such new and different thoughts than most people encounter in their daily life, it does sort of like people kind of automatically sort it into the crazy bucket instead of really like taking a second to absorb it and be like, it actually makes a lot of sense.

33:55I think the other thing too, is like our brains are hardwired to delete as much as possible. And so if you come across information, and like the way that he thinks is so foreign to the way that everyone else thinks, that if you come across his way of thinking and you're not trying to adopt it it's more useful to just forget about it and delete that it even existed in the first place than to try to like study it and learn from it and absorb it yeah and so the bucket that i would sort of put this in for maybe the average person is i think most people we all need meaning we all want meaning and i think that there's this sort of slow motion crisis of meaning happening between like fear of ai taking our jobs, lower trust in institutions, more confusion around like, you know, declining religiosity in folks.

34:42And so if the answer to like, how do I live a meaningful life? Like, Elon is actually puts forth a really compelling answer to that. He has a worldview that is like, we are trying to figure out more about the universe, we're trying to answer more questions like on a scientific basis and understand why we're here and what opportunities are before us. We're trying to preserve the only consciousness that we're aware of. We're trying to preserve all of life as we know it. We're the only conscious things on this planet. It's our responsibility to act on behalf of all forms of life to try to preserve them.

35:14That's environmentalism at the highest possible level, right? Is not just how do we conserve what we have, but how do we expand it? How do we protect it? And that's a really meaningful thing. That's why these people sort of show up in droves to work at these companies and try to solve these missions. He's starting from how do we make the future better? And that is worth that kind of mission is worth dedicating your life to. And so, you know, I, I love anybody who reads this book, but I really think getting it into the hands of like 12 to 18 year olds is so massively impactful and important because so many dominoes are still yet to be knocked over.

35:53Like what you think is important will determine what, how hard you work to go to a great college. It'll determine what companies you apply to, it'll determine what major you choose, it'll determine the industries that you think are exciting, it'll determine how hard you work at your job and the level of priority you give to it. And a shocking amount of the most important work being done at these companies is being done by really young people. Like, you know, the cadre of folks that you hang out with and interviews all like, people in their 20s building unprecedented things like these are incredible miracles.

36:27And so many people are told, or implicitly or explicitly, like, no, no, you got to like, go pay your dues at a old company for 40 years before you even know what you're talking about. And that's just so obviously wrong through the lens of history and practicality, especially in California these days. One of the things that Elon does, which is, he will basically give anyone the ability to hang themselves at his organizations. And so you can pretty much just absorb and ask for as much responsibility as you want. Yeah. This is another answer to your question of like, how do you thrive at these companies?

36:58You get shit done. Yeah, you should done. And then you ask for more on your plate, like you asked to be served. Yeah, the reward for work is more work is more work, right? And so if you achieve things, you will be given more responsibility immediately. That's all that anybody's running a company is trying to do find somebody who's competent at executing things and give them more responsibility and more responsibility and more responsibility until they break. Like, that's the game. And if you are trying to rise up in those companies and be as useful as possible. That's your goal, too. It's like, I want to, I want to solve the problem in front of me, I want to build more stuff, I want to get things done.

37:27And I want to do that at the highest level that I possibly can for as long as I can. Let's talk about the algorithm. Elon didn't have this for a very long time. I'm not sure exactly when he created it. I think it was like 2019 ish after the 2018 model three production ramp where he was just realizing all across over the course of many months, that there was a bunch of automation that didn't even like automating processes and parts and stuff that didn't need to exist. And he had been super all in on automation. And then he started going just line by line and trying to tear out as much of as many of the machines.

38:02He would just like take a like an orange spray paint can and just on a machine and they would haul it out in the parking lot. And they like apparently bored a hole through one of the sides of I think the Fremont factory to do this. But yeah, how did how did the algorithm actually come together? Like, when did he figure that out? And how did he kind of like rank which one made sense? You know, which part or process made sense first? Yeah, the algorithm was the loot box for surviving Fremont. You know, like he, he says that he learned this by making all of the mistakes in reverse order, right? So I'll explain the algorithm is a five step process that he installs in all of his engineers and all of his engineering companies.

38:42He's got signs on the thing. He'll repeat it in meetings. It's his method for breaking bottlenecks, right? And so it is start by questioning the requirements. Question every requirement. Doesn't matter how smart the person is. Accept no requirements from departments. They have to have individual human names attached to them. You get requirements from all over the place, right? Some come from government partners, customers, internal, whatever. So question every requirement, you want the fewest possible and highest quality requirements, delete all the ones you can. The second step is to delete, simplify, like delete anything you possibly can delete, delete, delete.

39:19The most useful heuristic here is that you have to over delete. And if you're not adding back 10 % of what you delete, you haven't been deleting enough. But the reason to simplify is simplicity gets you both reliability and low cost, you want fewer parts, you want fewer lines of code. So complexity is recursive, like each additional element that you have causes more complexity and causes more effort and causes more work, right. So those first two steps, actually, in my mind, carry 80 % of the weight, because number three is just optimize, which is sort of the typical engineering work that we think of as like making the right trade offs and optimizing the system.

39:54The fourth is accelerate, go faster. And the fifth is automate. And the problem is that almost everybody, Elon included, and he says this is the mistake he made at Fremont over and over and over again is doing all five steps in reverse order. So he would automate something his original vision for the Fremont factory is we're going to automate the whole production line from the very beginning. It's going to be amazing. No humans at all super low marginal costs, everything will be great. But he tried to make it go faster, then try to optimize. So there's many parts that he would try to automate then try to make the robot go faster then try to optimize the path or that robot was following uh then it would turn out you could delete the product and you didn't need the robot or the or the particular part because nobody had questioned the requirements in the first place yeah and that is just like figuring out one of those epiphanies is a maybe a 10 million dollar win because but it just comes from deleting something that didn't need to exist in the the first place.

40:56And once you have that experience of like addition by subtraction, like when the answer is deleting something, and the upside is eight figures, you're like, Oh, my God, this is manna from heaven, like I've got to delete everything that we possibly can. And it is, it is shocking. Once you sort of start to try to run this in your own company or in your own life, it is unbelievable how frequently, how hard it is to do how different your mental pattern is from actually how that works. And as we talked about with the Starlink story, like there's huge benefit to doing it and doing it well. And this is, I think, a very generalizable, not just engineering process, but way to approach problems in life.

41:38I love this quote. If conventional thinking makes your mission impossible, then unconventional thinking is required. It is an amazing quote, and it summarizes Elon's sort of intolerance of obstacles. One of the stories that he ascribes to that quote is the building the tent in the model three parking lot is basically like realizing that the production line that existed was not going to be able to meet their number and so he's like fuck it we're building the tent and we're gonna you know buy some more tools buy some more robots hire some more people and we're gonna build a second production line in the parking lot and i think i'm sure they ended up getting like tickets and permit fees and all kinds of stuff for that but he's like we had to we had to make the number or tesla would be dead unconventional thinking like this is over and over again like the intolerance of obstacles the questioning of requirements is I think some of the source of his his magic and mystique another one is like you know oh it's going to take a year and a half to get this permit it's like all right grab somebody sends them to the permit office and says do not come back until we have this permit like I refuse to believe it takes 18 months to get this permit and time after time it's like oh it comes back three days later with a permit unconventional thinking um that accelerates your timeline and saves you potentially like a year and a half of burn and potential bottleneck like that kind of unconventional thinking that kind of high agency um is just so i think to people who seek to be effective in the world those stories are so encouraging and inspiring and refreshing and just like oh thank god like somebody who's just tears down all the walls all the false perceptions all of the cruft and just like cuts straight to it and gets things done something i think a lot about is how elon might play the game if he was born at a different point in time i think you've referenced him as similar to napoleon and a bunch of these other characters i would think of him in a similar vein but i kind of wonder how you know the the napoleon of today wouldn't necessarily go kill a bunch of people same thing with like cornelius vanderbilt he wouldn't necessarily hire some assassin to go kill someone and take back his ships and i wonder how elon might have played the game if he was born like 300 years ago i think there are different of archetypes of great founders you know like toby lukey is a very like engineering minded founder um elon is more of a conqueror like i think you know, extremely willful.

44:09And, you know, Napoleon, I think like Naval referenced Napoleon in his forward to like, Napoleon's ability to be instant bias to action, and like strategic brilliance, I think are both traits I see mirrored in Elon. And I know Elon studied a lot of military history. He also talks about in the book, he talks about the tendency people have to use their contemporary morals to judge the historical actions of others which who existed in a like completely different moral environment and so like you know it's not that long ago the fish that ate the whale like sam zamuri overthrew the honduran government like hired assassins like that you know in the robber baron era the industrialist era like you know there were violent protests and people were like putting down picket lines with mercenaries like um the the tools of the trade are are different at different eras i expect that elon is the kind of person who would win in the domain that he chose to play in do you want to talk about empathy at the like individual level versus empathy at the mission level it's sort of one of elon's maxims that empathy is not an asset um and i think a lot of leaders over index on empathy for the individual rather than empathy for the team or for the mission um and this is what a lot of people i think criticize jobs for they criticize elon for is like oh he he should have given that person another chance he shouldn't have fired them so quickly um and the reality is that 99.9 percent of firings probably err on the side of caution not on the side of well you should have given them another chance you should have um you fired them too soon and we as people just always want we feel like we deserve another chance and so we put ourselves yeah we put ourselves in the shoes of someone that we feel uh is on the receiving end of an injustice and we feel like elon perpetrated an injustice to an individual maybe by not giving them you know a second or third chance um but in a situation where there's billions of dollars of capital and equipment and the whole rest of the team is performing um it is empathy for the mission and empathy for the team to make sure you've got the right person in that seat and get rid of anybody who's not you know an a player and a plus player he says this is like the special forces like excellence is the passing grade and that's why these companies are some of the most effective places on earth um you know mark andreessen has talked about what makes elon effective and he says like going to spacex is like being dropped into a shocking zone of competence like the bar is just so high for everybody there and you know everybody knows the quote about a players want to work with a players that becomes self reinforcing and that culture becomes self perpetuating and it does filter for people that want to be really excellent push to be even more excellent and work as hard as they possibly can what role does fear play and like being someone that others fear it's a good question i uh i know the machiavelli quote right about like you can be feared or loved and you know fear is more reliable or something like that um i think there is probably a mythos around Elon and like an Elon meeting and the fear of being, you know, fired on the spot, because you weren't prepared is, is a real thing.

47:25You know, I think there's, you can be motivated by carrot and stick and the combination is the most effective. You know, you're working on a grand, beautiful mission, you're being pushed, you're being held to a high bar. And you can get the most out of yourself when you've got something you're like, I really, I know I want to clear that bar and I know the stakes for not clearing that bar are high. I think Elon would say and has said like, I try to give people I give people hardcore feedback, right. But he also says I try to do it about the the action, not the person, which is a very important distinction.

47:58And he's been on the receiving end of that, you know, himself, like, he seeks negative feedback, he says, that's a very important part to close the iteration loop. You know, and there's stories from the Isaacson book that I'm sure, you know, we've both read many times, it's like, you know, you failed quite badly in this meeting. You should know all your parts, you know, in order by their Indian index. And if you don't, you're gone. If you don't, you're gone. I expect improvement or your resignation will be accepted. I'll see you tomorrow. Like, this is what I expect. And this is when I expect it.

48:26Let's see it. And, you know, the person that that story is about showed up and crossed the bar tomorrow and was like, I am a different and better person now as a result of being held to that. And I understand things and do things that I didn't before. I don't know that I've seen this other organizations, but there is this constant idea of churn. As soon as you join an Elon company, you're just running down a clock. And who knows exactly how long that clock is. Like I was listening to the biography from Walter Isaacson. And a lot of people inside of the organizations that Elon runs don't even necessarily like that he's fired a lot of the people that he's fired.

49:02And yet he keeps on doing it. And so I almost feel like it's having some result that they don't necessarily understand like it forces it does force some fear it forces like some urgency if you don't have your shit together you might be exited at any given moment what do you think the benefits are churn is a frame that's kind of used usually for like customers quitting a product and so it's it's sort of an inherently negative frame um and i'm not sure that that's totally the right frame right um people are the right people for different companies at different times. And one of the things Elon's pointed out is like, you generally turn a whole company over at each order of magnitude or 80 % or something like that.

49:43And companies like Tesla and SpaceX are growing so quickly that in particular in leadership positions, the person to take the company from 100 million to a billion is a different VP than the person who's going to take the company from a billion to 10 billion. And a two-year tenure looks short at a typical company, but a two-year tenure where you covered an order of magnitude is a great tour of duty, especially if it's one where your lifestyle is completely compromised as the employee right where you're like you know I'm working on seven yeah or working 24-7 or or living on quatch or you know if your family's in LA and you're working at starbase like that's not a situation that people necessarily want to be in for 10 or 15 years and there's not an inherent moral good to working at one place for 20 years I feel like that's a pretty kind of outdated idea but I think I think you know fresh new talent the ability to rise quickly the ability to prove yourself quickly and understanding that you have a relatively short period of underperformance before you'd be pushed out of an organization is a way to keep the bar really high on the idea of ruthlessness and being willing to be disliked I think Elon doesn't actually like people not liking him, even though he is willing to be disliked.

50:59If you look at the people that he surrounds himself with, they typically don't voice, at least publicly, any feelings that they have that are not positive. And if they do, then they are no longer in his inner circle. Very quickly, let's talk about like, his willingness to kind of be disliked and kind of be ruthless. It is interesting that at the same time, he sort of says empathy is not an asset, and he has the willingness to be disliked, which I think is true. Like, I think you could not have done what he's done if you didn't have the ability to put sort of the mission ahead of how someone feels about you.

51:35Like, he's had to run through wall after wall. He's had to do so many difficult things and have so many difficult conversations over the course of what he's done that I think it is true that he has, at least in many ways, has steeled himself to being disliked, preventing him from getting something done that needs to get done. So I take that as the frame for kind of the empathy is not an asset, like the willingness to be disliked is an advantage, in particular, if you're trying to do something innovative, in particular, if you're trying to, if you're taking on an industry, of course, that industry is going to attack you in any way that it possibly can.

52:12So one of the other things that he's doing at the same time, though, is also sort of running a pretty public campaign about like, hey, I'm not a bad billionaire like I sold all my stuff I don't want these like attack vectors of being overly materialistic I want it to be clear that I'm not sitting on billions of dollars in a bank account not doing anything like he has a high net worth that comes from stock which comes from controlling the companies that he's in control of that he started or funded so he does really I think it matters to him to not be unfairly characterized like yeah if you have a different opinion about him than he may have that's okay but he just he wants to make sure that basically you're not like unfairly targeting him for like having a car where yeah which is like you don't want persons like you know way to go through life anyway like i i think um i think he he's just become a lightning rod for you know contrary he's one of the most famous people alive and um in some ways courted that in some ways it's just a natural byproduct of building some of the things he's building and having led the organizations that he's leading.

53:22But it is a very tricky thing. And I think he has a deep sense of like, you know, right and wrong and injustice. And I imagine, you know, in particular, like with his dad, right? His dad is a relatively well known to be a liar and a manipulator and has abused, you know, him and his family in the past. And like, so people publicly saying like, Like, oh, you just, you know, you inherited your wealth because, you know, the dad claimed to be sort of providing these benefits. Like that has to really hit the heart, like a very soft spot. And has to be enraging. Like, you know, how could it be anything else?

54:06Like this person who tormented you claiming credit for something that you truly did yourself. and then other people who are your enemies for their own you know personal reasons then attack you like based on this false claim like of course anybody would would be like that's not the kind of like oh yeah just steal yourself to that kind of dislike of course that would bother you um i can't imagine handling that kind of pressure right like how many people want 100 million enemies and are willing to stand on their principles to take that and still show up and keep going over and over again like it is a very I do think he is very principled and he's willing to endure being disliked to stand by those principles and I think that's a like interesting and admirable thing you know the Bill Gates example of like Bill Gates claims to be a environmentally friendly, you know, let's save the environment.

55:04And yet he's like shorting Tesla. Exactly. Yeah. Like that is not, those are not actions that Elon would take. Like, and there's many things that he could be rightly criticized for doing. And he does seek negative or seek critical feedback on actions. But I do think, you know, to your point, expects a level of sort of solidarity and loyalty, in particular from the people who are like closest to him on a public lane when he has so many people actively trying to undermine him, which then undermines the success of the missions, right? There is a strong extent to which additional capital, additional employees, all of these things come from public perception of him and his work and the importance of the missions.

55:47And it's not helpful to have people throwing Molotov cocktails at Tesla dealerships. That does not help tesla that does not help achieve the mission of solving climate change um and so i think like there's an extent to which being disliked being liked or disliked or at least understood to be on a mission and a principled person on a mission is an important part of getting these things done there's one aspect which is setting the vision setting the mission making sure that everyone's aligned towards it there's another thing about creating enemies and chaos and using you know the little finger line chaos as a ladder um i really think that Elon is like fully embraced that philosophy of basically create chaos.

56:27And as you know, things are happening all over the place, just be better at playing the game in real time. If lots of shit is happening and there's too many signals, other people's brains will get fried. Whereas he that's where he's able to lock in. Yeah, I feel like when he sees the game board clearly from a really zoomed out view, what looks like chaos to people sort of with a narrow view, he can still navigate really cleanly through because he's moving really fast. and he understands like the ultimate goal. And I think if you have those two things, like the short-term stuff that looks like chaos is just kind of noise.

56:58Well, I also think that the fact that he is able to play in that way and he knows that the easiest way to play is where other people are kind of on, you know, if the ground is changing, then it's easy to make a move that wouldn't be able to be made if the ground wasn't changing. And so it seems like whenever there is like a peacetime moment, he will just inject uncertainty chaos action until the ground is moving again well and his his speed causes that chaos right like you know when he launches a new program or a new company like his sudden push towards data centers in space really changes the the board of yes who's investing what capital into what different i did it i mean even like the data centers in space thing he was asked on a podcast how he came up with that idea and he said it just went viral on twitter a few months ago but then you look at the valuation of spacex from when he comes up with this idea to today and it's like 4x higher and i'm like this you know the first 20 years of spacex are just one-fourth of an idea that he has in his mind and then he's going to go you know raise 100 billion or something in an ipo for it's also it's an interesting like uh starlink part two where like starlink was actually an outcome of like hey we have all this volume yeah we have launch capacity because we've created it.

58:15And rather than wait for the market to figure out what to put in it, we'll just start putting up our own stuff. And I think data centers in space is basically the same thing for the Starship program. Max Olson's essay talks about this, like the integration of volume and iteration speed being integral to kind of the SpaceX culture, which is just, is a great question and a great essay. Mars is obviously the long-term mission for SpaceX and making life multi-planetary. Yeah. But it's very interesting to me to see Elon pivot to we're going to make a moon base in the short term next few years. And then we will start working on Mars and like eight to ten or longer.

58:54Do you think that Mars was basically a useful thing to pursue until they finally got the ability to actually launch things? And then they're like, all right, let's just go target the thing that, you know, is an obvious first step. I'm wondering if, you know, Mars was just the useful mission to get people here. And now the realistic thing is like the moon and he's just going after the realistic thing or the fast thing. I think I think you sort of you see it with increasing resolution as you get closer to it. And so I think Mars is, you know, as you said, is still the North Star, still the goal, still the ultimate outcome.

59:28But I think there was it probably became more clear that there is a near term, like high ROI projects to do that is also on the same stretch towards Mars. and i think there's it's gonna actually gonna be a really exciting it's partly probably the ai breakthrough partly um like solar technology and capacity is like those things are all coming together to make it another s curve that will make mars incrementally easier um rather than just like pouring cash from you know falcon 9 and starship into going to mars it's probably just each incremental leap that you see with a little more clarity once you get closer to it.

1:00:07There's a moment in the Walter Isaacson biography where I think around 2020, Tesla, you know, the stock was just absolutely ripping. And at two separate moments, he tweeted like, the stock is too high. And of course, the market reaction was not pleasant about that. Ironically, the first time it just kept on going higher. He was like, I guess I don't. And then he went on a few podcasts. He was like, I don't know, I said it was too high. But then in the Walter Isaacson biography he recounts the story of basically elon one night just sat alone in a room and just thought the entire night and then in the morning came out with the conclusion that the only way like this new the only new business line that would justify the valuation of tesla just working backwards is uh full self-driving and like this massive robotaxi fleet and then they just kind of went all in on that i wonder how many times elon has kind of basically taken some massive thing and then just backfilled how do we actually justify the thing that exists yeah like rabbits out of hats over and over again um this is a little bit back to like the unreasonableness as part of the magic and like the childishness of like yeah no like do the crazy thing let's go for it um and you know being wrong about whether it comes in three years or five years is like less important than whether it comes at all.

1:01:29And, you know, the sort of goal gradient hypothesis, right, of like, we're sprinting to a finish line, and we sprint harder, the closer it is. And I don't think it's intentional or manipulative. But I do think there's a real thing to like feeling like it's two years away, is like, oh, we're on a sprint, we're on a sprint, and we sprint those two years, and we cover a lot of ground, and we find out there's maybe there's 18 more months of work, and maybe there's another year. But like, that's how something like autonomy, you know, we've made so much progress in autonomy since then but that was a big part of the vision even from the earliest days of tesla i think um or close to it was like there's two big changes coming to automobiles in this era which is electrification and autonomy um and doing both at a time when the industry itself was not working on it with particular diligence um you know you set up these huge expectations for tesla for sure I've noticed that with almost every great entrepreneur they will become more ambitious over time as things start to work And it's really there's almost like an s-curve You can think of people's ambition as like they will rapidly run up the s-curve of how ambitious they actually are Yeah, and then the best entrepreneurs in the world you'll just notice that like the new The s-curve is almost shrouded in fog.

1:02:44You don't actually know where the where the top out is And then as you go up, you can see a little further and see a little further. And they just become more and more ambitious. With Elon, it seems like there have been different levels of ambition over time. And if you really think about it, he's just basically the most ambitious person, probably, maybe ever. Starting new civilizations on other planets, just keeps on getting bigger, keeps on resetting the bar. You know, he just announced the TerraFab or something. And he's like, now we're going to basically use the entire moon just to launch AI satellites.

1:03:17kind of nuts um just using entire planets that people just don't think this way how do you think his brain is different i don't know if it's different like what does everybody want two to three times what they have now like when you survey people like what's your net worth goals like i don't know 3x whatever i have um you hear people go to like all these seminars like i'm at i'm at three million dollars and i want to be at 10 and elon elon says like i definitely emboldened over time and um i think it's one of senra's maxims like uh you know appetite comes with eating and you know i agree with the trend right like every entrepreneur who succeeds like we all strive for more you want to build you know reach the next triple the next order of magnitude elon just covered more ground than anybody else and he has there's no limit to his imagination and so like i think his imaginativeness i think his unbelievable track record so far like he's he keeps taking chances and they keep working out um it's like what are you going to do but keep taking chances and keep doubling down and he's able to tackle things he's already said i didn't ever think i would get a chance to work on the things i'm already working on let alone what's coming next but these do i mean the leverage sort of compounds on itself and when you have like you know these billions of dollars these incredible engineers and the momentum like not gonna let up just gonna what's next what's next what's possible how do we keep going like I feel like we're so lucky to live in the era where we get to like be a part of this happening most companies that start out the gate with a huge amount of cash behind them hundreds of millions or billions of dollars almost universally don't end well yeah they don't they don't seem to actually produce value and like create something useful but Elon has enough of a track record of I think creating useful things that he's got like a unique position where he's able to throw just insane amounts of capital behind a new idea in a very short timeframe with the right mental models and then actually have success.

1:05:12Yeah, one of the things that he's underrated about him is actually how frugal he is how like the common thread of his companies is actually for as technological and breakthrough and innovative as they are. They're not over capitalized, you know, they they are capital efficient and they are driving costs down all the time um you know the north star of tesla is as many teslas on the road as you can and increasing safety through autonomous driving and spacex's north star is like minimize cost of mass to orbit um you have to run an entirely frugal organization in the same way that like amazon does everything they can to to lower prices and walmart does everything they can to lower prices that's the culture of these organizations.

1:05:52And so even though they did start with, you know, tens of millions of it was also his money, and he was paying close attention to where it went. And he was driving this like, sort of frugal culture of innovation. And through the product itself, it's the goal of these organizations to be relatively cheap. Like the equity value of them is so massive because of the growth rate that they're on, and how singular the capabilities of the companies are, which comes from the engineering ability and vertical integration that they have, which I think is so interesting. You reminded me earlier of the vector sum model for building a team, which I think is another like, how does he outperform?

1:06:30What are his tools? What are his his mindset? I love the idea of there may be a whole bunch of really smart people. But if they're not if someone is super smart, but not aligned, then it can actually be a complete distraction and negative, like negative impact on the overall organization. Exactly. So you as a founder, like you start a company, you are one arrow. And maybe like this, the size of the arrows, how smart you are, and how long the arrow is, how fast you're moving. And as you add people to your company, you're adding additional arrows, and maybe they're big or small arrows, maybe they're long or short.

1:07:01I'm not using the like mathematical language here, but it's just easier to visualize what's going on. And as you add people, you know, you could have all different kinds of alignment, and you get all different kinds of arrows. But the more aligned they are, the bigger they are, and the longer they are, that is the vector sum of the organization. And as you add them all up into like a big arrow, that's how much ground you're going to cover. So you want the smartest people, you want them working hard, and you want them all aligned and working towards the same thing. And one of the things that he uses to achieve this is like one metric, he says video games without a score are boring.

1:07:33So as you're like building a team, you want one metric that every decision should be run across run against. So different eras, it's different or different teams is different numbers, obviously, like for autonomous driving, it was how many miles are driven on average between a human intervention. How many times do people feel they need to grab the wheel or step on the brakes to change what the autonomous software is doing? And so every meeting that he has with that team, the first slide is what is that number and how has it changed? What is that number and how has it changed? And so every decision that they're making, every design decision, every incremental hire, every effort, every dollar they spend is like, does it move that number that Elon wants us to move?

1:08:09And when you sequence those changes out, that's how you get to these like, oh my God, people are driving across the country now without any interventions, you know, hundreds or thousands of miles. That's actually an interesting thing to think about as well, being really, really thoughtful about which metrics you go after. And what is the actual goal? I think not enough people spend enough time figuring out what is the objective, like the real objective that I'm going after. And if you don't have that, you can have the highest agency, best people in the world, super smart, super energetic. But if they're like all working in these different directions, like this is the whole idea of you just hire a bunch of smart people and let them cook i don't think that actually works um in in in a real way and so i you know thinking about how elon figures out which you know he's going to tackle some new objective some new thing which metric to go after and like how to decide which one that is yeah the maybe the most famous one in retrospect is probably going to be you know cost of launch to orbit cost of mass to orbit yeah like dollars per kilogram to orbit um and and that's you know that's been consistent across falcon one falcon nine starship like each program is designed and each design decision is made like how do we minimize the cost or maximize the payload um to orbit for cost yeah um and then then it becomes a volume right so you've got you can optimize that on an individual ship level you can also optimize that on a system level like how many of these things can we build?

1:09:33How quickly can we ship it? Where does the booster land? Where does the ship land? Like, how do we build a launch system that drives it all through as quickly as possible? And so that's a number that's been dominating decision making at SpaceX for a really long time. And it does go back to that cost, like the efficiency, the efficacy, with the North Star being like getting to Mars, building a civilization on Mars. And in the meantime, you know, it's achieved Starlink. In the meantime, it's dropped launch cost two orders of magnitude and also unlocked this opportunity for data centers in space and many, many other things that are happening in the space economy that, you know, are just going to continue, right?

1:10:10But there's also the Tesla Model 3 scale up was 15 ,000 cars a week or we're dead, I think was the number. It was 5 ,000 a week. 5 ,000 a week. Okay. Yeah, 5 ,000 cars a week or we're dead. And so that's on TVs all over the place like that is he must have said that a thousand times a day everybody on the team knew it um that's the bar we have to clear and that was the result of like many many calculations of you know what's our capital what's our burn how many sales have we made like what's our return again like if conventional thinking won't fulfill the mission then you know use unconventional thinking at one point he figures out that the max capacity at the fremont factory is going to be like three thousand or three thousand five hundred a week and suddenly he goes okay what's the next thing and they end up setting up the entire tent yeah that was building 5 000 yeah and i do i do find it very interesting that he immediately was like yes we will get fined this is a thing that will happen doesn't matter what matters is just getting making sure that we achieve the objective yeah there's just a speeding ticket you know but survival of tesla was on the line i love jeff bezos's line where he says your margin is my opportunity how does elon operate with that philosophy really he's got a incisiveness about inefficiency that he sees in other industries and this goes back to sort of at what level is your empathy like he comes at a product from a first principles way and says this is how effective or how cheap or how efficient a product could be and it looks at all the different ways that an industry uh maybe is acting inefficiently um and Same thing with the idiot index.

1:11:44Yeah, the idiot index almost on an industry scale, right? And so looking at aerospace, it's like, you know, these primes, but just basically act like an oligopoly who have this poor incentive system, the government's their main customer, they've got subcontractors on subcontractors on subcontractors on subcontractors. And he looks at that and says, yeah, we can do we can make an order of magnitude improvement. Like there's a lot of people making profit for not adding a lot of value. And we can take all of that. And, you know, his businesses don't tend to act to protect margin very often. I think he puts himself and his organizations in a place where continuing to innovate is always the main incentive.

1:12:22Like, you know, SpaceX, as an example, they could just sit on and cash flow Falcon 9 for 20 years. And it would be one of the best businesses of all time. But they were immediately plowing money back into Starship to kind of ride that next S-curve up. it's very interesting to me that if you think about the most extreme version of capitalism it honestly kind of turns into a non-profit like the very best businesses in the world are like a costco where in order to achieve the scale that they have they're just giving away they they are they're minimizing i think they have a max margin of like 15 on any given product and if you look across the entire organization where does the profit actually come from it's basically just their card memberships so they make like 120 bucks per per person per year and outside of that they're effectively just running at a loss yeah bezos has a good like binary here which is like there's two kinds of companies some exist to charge more and some exist to charge less and we will be the latter that's like amazon walmart uh tesla like that is how those companies operate of course you know louis vuitton is the opposite right luxury brands are always like, how do we maximize margin and perceived value?

1:13:33And like, but I would argue the customer value, the consumer surplus created by companies that pursue a low cost strategy are almost always higher in the long run. And they become the biggest companies and the ones that generate the most equity value because they have the most customers and they do the most good in the world on the way. When I was interviewing Peter Beck recently from Rocket Lab, he said something that I kind of intuitively thought might be the case, which is if you don't control your ability to launch, then you're effectively operating at the whims of some other third party and like good graces.

1:14:11And they could pull the plug at any given moment. And he said, the only space companies that will matter in 10 years are the ones that have the ability to launch rockets. Meaning like they own their own launch pads and space and like their ability to launch. and I thought that was very interesting. I also know there's a whole bunch of startups that are like, we're gonna launch a whole bunch of satellites. But if Elon or Peter Beck does decide, sorry, I got to, you know, I have my own capacity and we are scaling launch at this insane rate, but our ability to use that launch is growing at an even faster rate.

1:14:45Then suddenly there's really no third party providers. How do you think about that? How do you think that'll play out? is an auction at the toll booth to get off the planet and whoever can afford to pay the most like will get off the planet first um but to their credit spacex is building as much capacity as they can um i think because one they know how to use it and two they know volume drives cost down and cost keeps them ahead they have a large cost advantage and if they can do a really high volume of starships like nobody else will even be able to touch them that's also how they achieve the mission, right?

1:15:21If the mission is Mars, the mission is not near term cash flow, maximize profits. The mission is Mars, you need a massive volume of ships, and volume comes with cost. And so yes, you'll come up with your own use cases to fill your cargo. But you also want all the customers you get because the customers are helping to fund, you know, and fund additional production, but also fill the volume that drives incremental cost down. There's an idea that Elon has that I don't think other entrepreneurs or most entrepreneurs share, which is this idea of thinking in limits. And so instead of saying, you know, we're going to make this robot, and how do we make one robot?

1:15:58He'll first kind of say, if we were going to make like a billion of these robots, what would the asset, you know, how would the curve of cost basically asymptote to zero? Right? And what is the raw material costs and making that? What do you think the importance of thinking in limits is? I think it's incredibly valuable tool. You know, he does it at a really extreme level, like the kind of entry level to this is Charlie Munger's idea that like great brands minimize or maximize a few variables. And so if you just start there and sort of continue it, you know, the thinking and limits, the first principles thinking the idiot index are all sort of linked, they're different lenses on the same kind of idea.

1:16:39But the thinking and limits really helps you illustrate helps you understand what the theoretically maximum, perfect product is, or perfect solution might be. And then everything between where you are and that theoretically perfect thing becomes one of these sort of obstacles to tear down or not tolerate or question until it dissolves. And it's one of the things that I think makes them like a paradigm shifting set of organizations, right? It changes from incremental improvements. How do we improve 10 % to how do we improve 10X? how do we get closer to this theoretically perfect thing um there's just a very imagination expanding thing and elon has a trick for this which is like when you once you conceive of that theoretically perfect um just start asking what would it take like not not why can't you but what would it take in order to accomplish it and sometimes the answers to that have been you know we can't do this radically simplified rocket engine design because this material you know doesn't have the tensile strength to hold up at this weight well what would it take it would take a material with different properties well is it physically possible to create that new material that new alloy um well in theory i guess why not okay is anybody on earth working on it has anybody made progress on it are there any papers written about it like what would it take to build that new material that makes this new design that is a massive step function improvement better and if you look at the you know the meme of the three raptor engines like there's probably 10 000 or 100 ,000 of those decisions that drive simplicity and optimization and new materials and new designs along that path that increase the cost and effectiveness of that, you know, that engine that's going to be the thing that takes us hopefully all over the solar system.

1:18:28I forgot which CEO tweeted this, but someone posted a picture of the Raptor 3 engine. And then the CEO commented like, oh, that is beautiful. But like, it didn't show you know, it's they didn't really show the full thing and then elon's like actually here's a video of it firing yeah yeah this is in fact a full engine yeah um if something is easily measurable elon seems to try to expand the vision and expand the mission and create new things until it's almost impossible it's like this option like option value if you think about the car business right first it's we sell cars and then that becomes easily measurable.

1:19:08But having access to more capital and cheaper capital and having a higher straight value may be useful. And other things like having talent that wants to come join you because your vision is bigger. Suddenly he creates full self-driving as a narrative. And so suddenly you can't really price it as a, it's not actually a car company, it's a technology company. It's like a full self-driving company. And then at some point, even that doesn't become, people aren't gonna buy cars. they're just going to rent them for an hour or 30 minutes or something as they're driving them. But then suddenly it's like, actually, Tesla is not even a car company.

1:19:42We're going to build robots and we're going to be like the biggest robot producer in the world. We're going to make a billion robots a year. Again, you just can't really measure it. It's, you know, fairy dust almost. And, you know, but he's got this track record to prove that he can make the fairy dust real. And then eventually he's just like, Tesla is an AI company, actually. And it's the same thing with spacex yeah and along the way become you know one of the biggest grid battery providers and oh yeah the energy business too it's like integrate backwards into you know refining their own lithium because that was the bottleneck for battery production and um yeah it's a really what role does that like resetting what people's expectations are to just increase the size and scope so that it's impossible to pin down here is the value here's how you should value it most companies seem to have one innovation, right?

1:20:31They ride one S curve. Eugene Wei has a great story about Amazon sort of mapping those S curves and stacking them. And I think Tesla, Elon has referred to as a series of startups. Tesla and SpaceX both are this unprecedented stack of S curves. And so there's always some where it's like, you know, that happened a few years ago. And now, you know, the technology level has plateaued, and it's in a sort of a cash flowing state. And that's where you know Falcon one Falcon nine are now Starship is sort of on its way up that it's not an operating cash flowing thing but we're you know rounding the corner into but Starlink is really in that like all right we have a good sense of what that business is we have the numbers it's a good business we don't know yet quite what data centers in space are going to be that's a little hand wavy but that's kind of always how a new s curve feels and it's not always clear that the math will math or exactly how it'll work out in reality but there's also a pretty good reason to believe you know given the series of s curves that have happened before that it'll work out i feel like we always have this funny dysmorphia of the present with regards to elon where like we look at the things that were impossible that were achieved in the past that and be like oh my god he he's so good at this i can't believe you know it's so fantastic that starlink worked out what a genius and then we look at to your point the next s curve the pixie dust the hand waves and say like but that'll never work we'll never have a mass driver on the moon that's crazy we'll never have you know data centers in space that doesn't work all the experts say that doesn't work and even after 25 years of him achieving the impossible in this moment we still feel qualified to sort of judge and dismiss you know what he's saying is going to happen next and of course he's not always right in the in the micro um but as he points out he's like i've lost many battles but i've never lost a war and i'm generally right on the outcome and wrong on the timeline the only two things that I really remember him saying this is what the future is going to be and then they didn't really pan out was Hyperloop and the full battery pack swapping where you would just drive up the thing would take off your old battery pack give you a full new one and you just drive away those are the only two technologies that just never really worked and the battery pack I think you could totally imagine like that could absolutely work but it just there was different design trade-offs that made it impractical.

1:22:48I think there's a Chinese automaker that might be doing it. Yeah, they do. Yeah, it's also interesting to think about his, I think Elon's real only competition in most of his industries is China. Yeah, which most people in America are just not aware of, you know, where the Tesla, where the Chinese automakers are. There's this knife fight analogy where the best CEOs basically just wake up, grab the knife, and go start stabbing. Yeah. I got that from Brent B. Shore. Yeah. Operating a business is like living in a knife fight, you know. Yeah, I think China is playing the game on hard mode. And so you're basically just in a knife fight with a bunch of other incredible assassins.

1:23:23Yeah, I'm sure that's a very difficult environment. But it's also really cool. The innovation that is coming out of China is cool and inspiring. And frankly, we should take a close look at it. Because it, again, is showing us kind of where we could or should be, but haven't been yet. when shit goes horribly wrong, Elon kind of internalizes it and then forces. I think he almost drives, even tries to find the humor in things. And then once he's, there was this famous one where I think the third ship blew up before the fourth launch where it actually succeeded and went to orbit. And at first he was incredibly like dismayed, but they went out there, just saw the wreckage, saw what didn't work, figured it out.

1:24:07and then I think like that night or even like the next night he was laughing about it and just moved on and like let's go get to the next thing how does he internalize pain and deal with setbacks in an unusual way yeah it's funny I think there's a couple different potential modes there I think you know he has this like hardcore mode where he's like you know he wrote an email to that company is like come hell or high water like we will make this company work I'll spend every dollar I have like I will not I will not quit you'll have to kill me like um we'll just keep keep going I'd never give up I'd have to be dead or incapacitated right like there's that hardcore mode and then as you point out is like that sense of humor and lightness that comes from kind of like playing life like a game and being like it's all a sim like we're just gonna do the best we can to play this game as hard as we can like and get as far as we can and take the next chance and like YOLO, right?

1:25:03Like, there's a lightheartedness in that, that helps when you're going after these incredibly big challenges with such high stakes. And, you know, I think we talk a lot about the financial risks he took, but we don't people underestimate, I think, the reputational risk, like the ability to charge into something with a high likelihood of failure and proving that, you know, all your haters were right when they said like, Oh, an internet guy is going to start a rocket company, you're going to fail, you're going to lose all your money. Like, um, there was high odds that he went down as a cautionary tale of like hubris of, you know, burning a fortune, um, at least in the medium term, but also, you know, knowing how willful and determined he is, maybe he would have just kept trying to start versions of these companies until they were eventually successful.

1:25:47Um, so, you know, even if he did multiply by zero at some point along the line, I'm sure he would have gotten up and kept trying. Um, and for some people it was probably even harder to risk reputation or publishing public embarrassment than it is to risk, you know, capital and effort on an outcome. What do you think the biggest evolution has been over the last 30 years of his operating philosophy now that he has more and more resources and more and more social credibility and track record to back up his claims? I think there's an inflection point probably past which Tesla and SpaceX both became like undeniable, which is probably like the combination of model three on the tesla side and the falcon 9 success um and nasa contract on the spacex side that i at that point and they were around the same time i think tesla was still kind of a little probably a little um uncertain until like autonomy came in but at that point it was like oh this is like a tenth of a percent chance this guy walked through fire for years and years and years um the the bit kind of flipped on his public perception and that was when that was his like oh we're gonna base Tony Stark on Elon Musk like Iron Man era um and he was a hero to the the tech community and the rocket nerds and the space people and everything which is incredible But it was before this sort of controversial era of, you know, getting involved in politics or being overly grandiose about some of what was coming in the future.

1:27:22And so I think that inflection point gave him unbelievable amounts of like capital and credibility that led to him doing stuff, you know, like the Twitter X takeover and Doge and stuff where he became like an actual household name. final thing to end it on is just the idea of effectiveness and what makes a super effective individual. I like the thought experiment of if you had perfect information and perfect energy, like what could you achieve? And, you know, through a financial lens, just to use it as an example, like if you knew exactly which stock was going to go up the most today and tomorrow and the day after in the market, you could put all your money in whatever the best performing stock was every day and stack it up and it would not take you long to become a billionaire right um and i use that just to say like when you're working on the right thing at the right time uh and it's massively effective you can you multiply those things together and you achieve orders of magnitude different outcomes and those tools in that mindset are available to anybody right these are not superhuman traits you don't have to be a genius to adopt these particular things um and hard work is actually the least important thing of the formula.

1:28:38It's the right work done quickly with maximum effectiveness. That's sort of the equation of being an effective person. And there's, there's a million billion reasons why people are not working on the right thing, not working on it immediately, and not working on it with maximum effectiveness. But all of those reasons, you don't have to solve all those reasons to just invert it and start using that mindset, like run this constant triage of what's the most important thing I could be doing right now? What's the highest leverage action I could possibly take? And how hard can I jump on that lever?