Why Musk and Tesla Will Win

Musk and Tesla aren’t new to the automotive industry, but they are a young company when you compare them to American stalwarts like Ford and GM, established in 1903 and 1908, respectively. Tesla, founded in 2003 by engineers Martin Eberhard and Marc Tarpenning has slowly and patiently been rolling out their grand plans to help bring the world into a sustainable future. Tesla is not your standard, run of the mill automotive company though. They do so much more than just manufacture cars.

Elon Musk, a South African born entrepreneur is now Tesla’s largest shareholder. After a series of internal conflicts in 2007 the board ousted Eberhard, from the company. Musk assumed leadership as CEO and product architect, and set Tesla on the path it is on today. Musk, the longest running CEO of any automotive company, is a visionary and engineer having played a large part in the design of most of Tesla’s models and infrastructure, and recently a diplomat, having brokered agreements in both China and in Germany to manufacture Tesla vehicles and batteries.

Tesla’s economy model, the Model 3

The Right Roots

Musk and Tesla have a genuine belief in the future of electric vehicles. They started as an EV company, and that’s the way they’re headed. There is no backup plan. There is no plan B.

Meanwhile, traditional automotive companies, are playing both sides. They are hesitant to exit combustion engine markets because there’s still money to be made. Some of them have aggressive plans to grow their EV divisions in the next decade, but none have plans to completely transition to EV technologies anytime soon. The waters are still being tested. This will be problematic for them in the future, and here’s a look at why. Let’s take the examples of BlackBerry, Palm Pilot and Nokia. Companies all of which excelled in their prime, but failed to successfully transition in time to the future. The future being phone which had a fully functional touch screen, web browser and app store. You might say they were all well positioned, but they had very little drive to cannibalize their existing lineup. They were content giving consumers what they expected, and generating plenty of revenue doing so. But investing in the future would be risky. Apple was willing to place a surmisable risk to give consumers the future, and that’s one of the key reasons the giant is worth over $1.3 trillion. Today BlackBerry no longer makes phones and struggles to exist and Nokia, bought by Microsoft is no longer relevant. Palm Pilot, purchased by HP in 2010 has been dismantled and sold for parts. Most car companies are destined to meet the same fate.

The Gigafactory

Tesla’s smart factory, known as the Gigafactory will be the key to the company’s long term success. The Gigafactory produces Tesla vehicles, batteries, powerpacks, solar panels and solar roof tiles at a fraction of the cost of a conventional factory. The cost significantly declines through economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating the majority of the manufacturing processes under one roof. Here’s what makes the Gigafactory different from conventional factories, and why it will help Tesla be unstoppable in the future:

  • Seamless integration. Uses seamlessly connected manufacturing sections using a combination of robotics, AI and human hands with highly sophisticated and timed manufacturing techniques.
  • Optimization. Designed with few moves as possible with lines in close proximity to the loading docks, sophisticated automation and gravity. [1]
  • Energy self-reliant. Designed to be completely energy self-reliant with a combination of on-site solar, wind and geothermal sources. In other words no fossil fuels will be used and energy costs go to zero after initial hardware costs have been incurred.
  • Accurate alignment. It might not sound like much, but Tesla has aligned their Gigafactories to true north so that equipment can be mapped by GPS and solar panels on the roof can be accurately aligned.
  • State-of-the-art recycling center. Conducts on-site recycling of lithium-ion batteries, and capturing nickel, aluminum, and lithium to use in new batteries.[2]
Tesla now has Gigafactories in Sparks (Nevada) Buffalo (New York), Shanghai, and Berlin by end of 2021

Customers First

From day one, Musk and Tesla have been focused on providing customers with tremendous value for their purchase. Tesla’s Autopilot feature, for example, allows drivers to optimise their route, match their speed to traffic conditions, keep within a lane, automatically change lanes, transition from one road to another and exit at their destination. It also provides the capability to self-park when near a parking spot, allowing the car to be summoned to and from your garage. What other automotive company can say that?

Tesla vehicles are built to be ready for a future where full self-driving becomes a reality. They are capable of receiving software upgrades via the cloud to keep up with new technology – with no need for a visit to the garage – something competitors simply can’t match.

Musk has been known to personally respond via Twitter to customer complaints. He repeatedly demonstrates the industry benchmark way to respond – and in one of his finest examples to date, turned a customer complaint into a great product innovation.[3]

Musk often responds to customer complaints and suggestions on Twitter with quick resolve

Control the Ecosystem

Tesla has control of the software, batteries, charging stations and is developing a fully fledged ecosystem to support their vehicles.

The Smart Car

One of the most ingenious and future thinking methods to create value for the current owner of a Tesla and for future owners is continuous and regular software updates. Similar to your smartphone that updates every year with plenty of exciting new features every year, so does a Tesla vehicle. The company has an in-house team of software engineers that have created a brilliant UI that improves with regular updates, some of which include Cabin Overheat Protection Mode, Tesla Theater, Smart Summon, Karaoke (also known as “Car-aoke”) and Tesla Arcade.[4] And if that’s not impressive enough then the self driving feature might be. Tesla has developed an autopilot feature which can drive the vehicle in the city and on highways, with human supervision. It hopes to one day roll out full self driving capabilities which all recent models are capable of. Musk has said Tesla plans to roll out Robotaxis in the coming years once the cars are fully autonomous. He promises this feature will allow Tesla owners to make a little extra cash on the side turning their vehicle into an autonomous taxi for allotted times in the day.

The Tesla interior is simple and clean with no dials or nobs to control environmentals, just a touchscreen.

Batteries

One of the key areas that will allow Tesla to dominate other automotive companies is their in-house production of batteries. Batteries for most of Tesla’s vehicles are on average as much 40% of the total cost of the vehicle.[5] With the rollout of the first Gigafactory in 2015 and several more since then, Tesla has positioned itself to grow its battery production so that it can be completely become self sufficient and reduce the cost of it’s vehicles.

Charging stations

The Tesla supercharger stations are a brilliant innovation, but they are also an extremely difficult concept to roll out effectively, as well as maintain and keep customers satisfied. As Tesla pumps out more vehicles the strain on the Supercharger network grows. The exciting part is if Tesla can manage this well, they will have established a brilliant incentive for customers to join. 

Home

I mention earlier Tesla does so much more than just make cars. They also manufacture and install solar panels, solar roof tiles as well as battery packs to store the energy captured. Where it gets exciting is this energy can be used to power your home, but also for your Tesla vehicle, effectively giving you “free” energy. This has some exciting potential that could come in the form of incentives from by the federal government, municipalities and perhaps even Tesla itself. 

Telsa has plans to create an ecosystem that supports electrification of your home and vehicles

Integrated Technologies

Tesla has become a hub for innovation, patents and technologies now used by automotive giants like Daimler.[6] There’s a rumour that some boardrooms hang a picture of Elon Musk nearby to strike the message into its board members, “Musk and Tesla are a real and present danger to the future of this company.” Automotive companies such as Ford, GM, Audi, Daimler, BMW, Toyota and Nissan are on Tesla’s heels, but they are always following, and Tesla seems to always be one step ahead.

In the recent launch of the Cybertruck, Tesla’s light commercial vehicle we learned that the same stainless steel alloy used in SpaceX’s spaceships, another Musk company would be used in the truck to make it bulletproof and virtually indestructible. We can also expect that with the launch of SpaceX’s Starlinksatellite Internet access, Tesla customer’s will eventually benefit from this.

But it doesn’t stop there. Musk is founder of OpenAI, field of artificial intelligence (AI) with the stated aim to promote and develop friendly AI in such a way as to benefit humanity as a whole. These technologies could eventually be integrated with Tesla vehicles to provide an improved driving experience, one day connecting the driver’s mind with the vehicle. The Boring Company, an infrastructure and tunnel construction services company could change how Tesla customers commute in large cities, cutting travel times by up to half. And Hyperloop, a vactrain passenger and freight transportation concept could also be rolled out to advance long distance travel, cutting transport times by as much as 90%.[7]

First-Principles Thinking

Musk and Tesla use a problem solving method called first-principles thinking. Aristotle, Euclid, Thomas Edison, Feynman, and Nikola Tesla all used it. First-principles thinking is the practice of actively questioning every assumption you think you know about a given problem or scenario, and then creating new knowledge and solutions from scratch.

Reasoning by analogy is done through building knowledge and solving problems based on prior assumptions, beliefs, and widely held “best practices” approved by majority of people.

During a one-on-one interview with TED curator Chris Anderson, Musk discussed this missing link, which he attributes to his genius-level creativity and success. It’s called reasoning from first principles.

“Well, I do think there’s a good framework for thinking. It is physics. You know, the sort of first-principles reasoning. Generally, I think there are — what I mean by that is, boil things down to their fundamental truths and reason up from there, as opposed to reasoning by analogy. Through most of our life, we get through life by reasoning by analogy, which essentially means copying what other people do with slight variations.”

Essentially, first-principles thinking help us develop a unique worldview to innovate and solve difficult problems in a way that nobody else can even fathom. When faced with the issue of expensive battery packs (costing as much as $600 per kilowatt hour), Musk took another approach. With first principles you say, “What are the material constituents of the batteries? What is the stock-market value of the material constituents?” It’s got cobalt, nickel, aluminum, carbon, some polymers for separation, and a seal can. Break that down on a material basis and say, “If we bought that on the London Metal Exchange, what would each of those things cost?” It’s like $80 per kilowatt hour. Instead of following the socially accepted beliefs that battery packs were expensive Musk challenges these beliefs by asking powerful questions that uncover the basic truths or elements, e.g., carbon, nickel, aluminium. Then he creates ingenious innovative solution from scratch.

Usually, when we’re faced with complex problems, we default to thinking like everybody else. First-principles thinking is a powerful way to help you break out of this herd mentality, think outside the box, and innovate brand-new solutions to familiar problems.

“It is important to view knowledge as sort of semantic tree. Make sure you understand the fundamental principles, i.e., the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.”

Elon Musk
Elon Musk at the Cybertruck unveiling in November 2019

By identifying your assumptions, breaking these down into their basic truths, and creating solutions from scratch, you can uncover these ingenious solutions to complex problems and make unique contributions.

Data Supremacy

The future of the auto industry is data which means Tesla has already won. Millennials no longer rush to get their driver’s licenses. They see a vehicle as a costly burden of fuel, finance, and insurance. And who would blame them. A vehicle typically spends up to 90 percent of its useful life parked and depreciating. In a few years vehicles will mostly be seen as a nuisance and incidental tools for occasional transportation. Why leave your car in your garage when it could be a side business. Leased or rented by the hour or the mile, shared, summoned on demand, or done away with entirely. Our emotional connection to our vehicles is fading. Now it’s all about scale and numbers. The millions of Tesla vehicles on the road are feeding boatloads of experience data, driver behaviors, performance reports, etc. every single day into the smart systems in Palo Alto, California. It’s a machine learning flywheel that just continues to accelerate. There’s no shortcut in the process, and there’s no compression algorithm for actual roadside experience and data. And in this Tesla is also winning.[8]

2030

As we enter a new decade, it’s easy to look back and think Tesla, had it in the bag all along. But it’s been a tough go for this company that nearly ran out of money on a number of occasions, and even recently. If the Tesla stays on the trajectory it is on, in a decade from now, it will have more than tripled in size. As new Gigafactories are added in South America, Africa and others are added in Asia, Europe and North America, it will be a juggernaut pumping out cars and batteries on every continent a demand surges. It will be so far ahead of its competitors they will only be able to see the dust and taillights (pun intended) of Tesla speeding into the future.

“The people who are crazy enough to think they can change the world are the ones who do.”

Steve Jobs

References

  1. This is Elon Musk’s key to Tesla’s future. The Verge. November 30, 2018.
  2. 8 awesome innovations in Elon Musk’s Gigafactory. Business Insider. April 15, 2016.
  3. 5 Reasons Why It’s Elon Musk and Tesla Vs. Everyone Else. Dr. Geraint Evans. May 21, 2019.
  4. Introducing Software Version 10.0. Tesla. September 26, 2019.
  5. The Economics of Tesla Batteries. Investopedia. June 25, 2019.
  6. There could be a Tesla, Mercedes-Benz collab coming. CNBC.com. February 7, 2019.
  7. “Hyperloop One, FS Links And KPMG Publish World’s First Study Of Full Scale Hyperloop System”. PR Newswire. July 5, 2016.
  8. The Future of the Auto Industry Is Data. Which Means Tesla Has Already Won. Inc.com. February 4, 2020.

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