Why Elon Musk could be the next Steve Jobs

Owen Thomas · 11/17/08 03:00PM

When visionaries clash, whose vision do we believe? On newsstands this week, Newsweek's Dan Lyons savages Tesla Motors, the electric-car maker. Tesla was once the brightest hope of Silicon Valley's clean-transportation industry; now on its fourth CEO in less than two years, it's better known for manufacturing boardroom drama than actual vehicles. Lyons writes that Tesla's Roadster is a "classic Silicon Valley product — it's late and over budget, has gone through loads of redesigns, still has bugs and, at $109,000, costs more than originally planned. Company founder Martin Eberhard (left, at bottom) says that lead investor Elon Musk (left, at top), who recently installed himself as the company's fourth CEO, made costly changes to the car's design and is "a terrible CEO." Musk's retort: "Martin is the worst individual I've ever had the displeasure of working with."Eberhard and Musk have long feuded, even before Musk ousted Eberhard as Tesla's CEO. But I'd note that for once, they're not outright contradicting each other here. It's far more common for Musk to have a version of events that conflicts with everyone else's accounting. His history of events at PayPal, the electronic-payments startup he cofounded, seems to be shared only by him. And Musk has been telling everyone who will listen that SpaceX, his rocket startup, has a "Nasa contract to build the Space Shuttle replacement after 2010." If you ask Nasa administrators, they'll say that's more than a stretch of the truth. (In fact, SpaceX is competing for a contract, but it has only hit some of the milestones; Nasa is currently planning to rent out space on Russian rockets to supply the International Space Station, and a future supply contract for SpaceX is a possibility, not a certainty.) So Musk has a tenuous relationship with reality. Is this a handicap in his business? Apple CEO Steve Jobs is famous for his "reality distortion field" — a charisma that leads others to believe the most exaggerated claims, because the vision behind them is so compelling. Of course, Jobs actually has brought his outlandish vision to life four times: With the Apple II, the Mac, the iPod, and the iPhone. Musk has realized the Roadster, and SpaceX has managed, after several crashes, to launch one lone rocket. He's also got SolarCity, a startup which installs solar panels on roofs. If in 2011, we live in a shiny future where we drive Tesla cars powered with clean electricity from SolarCity panels, and SpaceX's Falcon1 rockets are supplying orbital space stations, then we will be living in a reality of Musk's making — much as Jobs envisioned the iPod in the dark days of October 2001, and then, three years later, saw them everywhere on the New York subway. There's another possibility, however, which would also make Musk like Steve Jobs — the Jobs of two decades ago, who was forced out of Apple by the CEO he hired. Tesla could go under, SpaceX could fail to win the Nasa contract, and SolarCity could get beaten down by rival cleantech startups. And then Musk, driving his Roadster on the lonely roads of Silicon Valley, would find himself facing a reality not constructed in his mind. An unpleasant thought, that. Far easier just to succeed.

Tesla chief's actress girlfriend into his "physics"

Owen Thomas · 11/12/08 05:20PM

The liquored-up consensus at San Francisco watering hole Joey & Eddie's last night: Tesla Motors CEO Elon Musk is actually kind of hot. Musk, who drove up in one of his electric car startup's Roadsters to speak to me yesterday, is divorcing sci-fi novelist wife Justine and has taken up with a British actress, Talulah Riley, whom he squired to a party earlier this year at Tesla's Silicon Valley showroom.Riley told the Daily Mail that she "fell in love with Elon because of our mutual love of physics." Perhaps it was "physiques." Those British accents are tricky. Justine Musk's comment on the 23-year-old Riley, in her LiveJournal: "She is not blonde, and I do find this refreshing." (Photo of Musk by Robert Scoble; photo of Riley via Daily Mail)

My evening with Elon Musk

Owen Thomas · 11/12/08 02:40PM

I confess: I completely missed the Tesla Roadster parked outside when I walked into Joey & Eddie's, the San Francisco watering hole where Valleywag used to hold weekly meetups with readers. But there was no mistaking the guy parked at the bar: It was Elon Musk, the CEO of Tesla Motors. He had driven up to surprise me at the behest of Adeo Ressi, the founder of VC-ratings site TheFunded.com, who was Musk's housemate in college. Matt Marshall, the editor of VentureBeat, also dropped by. Musk pressed a set of keys on me and offered a Tesla test drive; I turned them down. Honestly, I figured I'd crash the thing, and I didn't want to put a further dent in Tesla's already parlous cash balance. But I finally agreed to go for a ride with Marshall. How was it, you ask?Kind of boring. If you like amusement-park rides, you'll love the Tesla Roadster. If, like me, you sit there calculating the infinetesimal odds that the operator's insurers will allow a rollercoaster to actually pose any real danger to you, you'll hate it. I spent the ride up to Coit Tower and back thinking about how much coal was burned to generate the electricity now being thrummed away by the Roadster's motors. Back at the bar, Musk was affable enough, considering I've hinted he's taking out his midlife crisis on his employees and may be scheming to take over Tesla Motors completely by running it into bankruptcy. He laughed at the last idea, and then thanked me for the suggestion, saying he hadn't thought of that particular financial maneuver. Musk still blames cofounder Martin Eberhard for Tesla's current straits. When Tesla raised its fourth round of funding in 2007, Musk says, Eberhard, then CEO, told investors that the Roadster's cost was $65,000, giving it a $25,000 gross margin. "It's right there on the slide, with Martin's name on it!" Musk told me. The company, he adds, was already in the middle of a search for a CEO to replace Eberhard. A private-equity firm which had invested in Tesla sent some consultants to help Tesla sort out supply-chain issues, and they found that the Roadster's parts actually cost the company $140,000. "We might as well have sent customers $50,000 and saved the bother of making the car," said Musk. Former Flextronics CEO Michael Marks, a Tesla investor, confirmed their findings — and that's when Musk decided to fire Eberhard and replace him temporarily with Marks. Just as now, the company's cash position was running low, and Tesla tapped existing investors for new funding, despite having just raised a round. He revealed none of this at the time, he says, because it would have jeopardized the company's ongoing CEO search. (Not that that worked out particularly well; Musk installed Ze'ev Drori, then replaced him last month.) That's Musk's version, anyway. I'm skeptical, if only from experience with Musk; when he was running PayPal, I remember him making statements that company insiders told me didn't match the facts. But as he was leaving to drive back to the Valley, Musk mentioned that his divorce from his sci-fi novelist wife Justine was a mutual matter; he got the paperwork in first, but she was getting ready to file papers, too. That, at least, checks out. I'm still not sure if I should trust Musk's account of what led Tesla to these perilous straits. But I do believe now that he's brave enough to drive a Roadster up to San Francisco and deliver it in person.

Is Elon Musk aiming to take over Tesla?

Owen Thomas · 11/07/08 04:20PM

Tesla Motors, Silicon Valley's troubled electric carmaker, is still running on financial fumes, with $9 million or less in the bank. It's been widely misreported that the company has already raised $40 million. In fact, that's the amount it's hoping to raise, in the form of convertible debt, from current investors in a rights offering, which will take 30 days to complete. Musk made a fortune from PayPal, the online payments startup purchased by eBay, and other startups. He says he has enough money to take the entire round if other investors don't step up. And that may be exactly what he's hoping will happen.In a bankruptcy, holders of Tesla's debt will have priority over all holders of common and preferred stock in the company — including the Valley celebrities like Google cofounders Larry Page and Sergey Brin and eBay billionaire Jeff Skoll who have invested in Tesla. Raising this round of debt, followed by a bankruptcy filing, could be Musk's way of squeezing out other shareholders — especially cofounders Martin Eberhard and Marc Tarpenning. Employee with unexercised stock options will get wiped out in such a scenario. Current shareholders will have a right to invest in this debt round according to their current share — but Musk may well be counting on the short 30-day offering period and tight financial markets to shut out anyone who doesn't have the cash handy. Why do I think this is a likely scenario? Because Musk has done something similar before. When Musk briefly served as PayPal's CEO, he'd run the company's bank account to six weeks' worth of cash. PayPal insiders say Musk was pulling "financial machinations" to maintain his control of the company — but the board fired him instead and replaced him with cofounder Peter Thiel, who steered the company to its $1.5 billion purchase by eBay. Unfortunately for Tesla, there's no obvious white knight like Thiel on the horizon.

The martyr of Tesla Motors

Owen Thomas · 11/04/08 12:40PM

Having laid off 75-some employees and run his electric carmaker's cash balance down to $9 million, what is Tesla Motors CEO Elon Musk busying himself with? Conducting a witch hunt to find who leaked Tesla's financials to Valleywag. The Truth About Cars has published an email it claims is from Musk, which includes a letter apology from R&D director Peng Zhou. The only thing that's curious: Our tipster said he'd been at Tesla for four years. Zhou has only been there for two years. In Musk's haste to find someone to blame, did he extract a forced confession from the wrong man?

Tesla CEO admits his carmaker's running out of cash

Owen Thomas · 10/31/08 11:00AM

Tesla Motors, the automaker which is Silicon Valley's best hope to build an electric-car industry, will run out of cash in three months if it does not raise new financing. CEO Elon Musk has confirmed Valleywag's report that it has spent most of its customers' deposits and is running low on cash. In an interview with Reuters, CEO Elon Musk conceded that the company only has $9 million in the bank, as a concerned Tesla employee told us yesterday. Tesla's contract with customers specifies that deposits can be used for "working capital" — but last I checked, "working capital" means liquidity available to a company. It does not mean "money that has gone out the door." So Tesla may arguably be in breach of contract with the 1,200 customers who have put between $5,000 and $60,000 down for its Tesla Roadster. Tesla has only delivered 50 cars.Musk has previously said that Tesla will be able to turn cash-flow positive in nine months, if it receives new investment. He now says he's seeking an additional $20 million from Tesla's current investors, and expects to get it next week. Do the math: If Tesla has $9 million in the bank, and requires another $20 million to get to positive cash flow over the next nine months, then it is burning at least $3 million a month. And that's after it laid off 24 percent of its workforce and announced plans to shutter its Detroit office.

Tesla Motors has $9 million in the bank, may not deliver cars

Owen Thomas · 10/30/08 07:00PM

The Valley's hottest electric-car maker is running on fumes. Tesla Motors, the brightest hope of Silicon Valley's nascent clean-automotive industry, has only $9 million in the bank, a longtime employee tells us. The company, which recently laid off dozens of employees and announced the closing of its Detroit office, called an all-hands meeting yesterday evening to inform employees of its financial state. What makes the company's low cash balance especially scary, our tipster says, is that the company has taken "multiple tens of millions" of dollars in deposits from customers — anywhere from $5,000 to $60,000 per vehicle — and has only delivered 50 of them. The obvious conclusion: Having already spent its customers' deposits, it may run out of money before it delivers the cars they have paid for. Here's the Tesla insider's report:

Elon Musk blames past CEOs for Tesla's failures

Owen Thomas · 10/27/08 12:00PM

To anyone familiar with Elon Musk's brief, troubled career as CEO of PayPal, the troubles at Tesla Motors, his electric-car startup, seem all too predictable. As does his spin on his decision to lay off dozens of employees, close Tesla's Detroit office, postpone a new model, and replace Ze'ev Drori as CEO. Musk blames past CEOs — chiefly cofounder Martin Eberhard — for the company's current troubles.“It’s taken us about a year to correct major errors,” Mr. Musk told the New York Times. Eberhard has a snappy response: “Look at the constant factor at the company through all the years: Elon.” A history lesson from PayPal: Not until Peter Thiel replaced Musk as CEO, and he ceased day-to-day involvement with the company, did it thrive. (Photo by Peter DaSilva/New York Times)

New Tesla Motors chief, novelist wife are divorcing

Owen Thomas · 10/15/08 04:00PM

It's typical for aging entrepreneurs in mid-career to acquire a fancy new set of wheels. Elon Musk has instead acquired a job running a fancy carmaker — Tesla Motors, the electric-car startup he has backed from the get-go with the millions he made selling Internet companies. He is also getting a divorce, according to a blog post by his wife, fantasy novelist Justine Musk. This is no mere tawdry personal detail.Do the geographical math. Until Justine threw him out this summer, the couple lived in a Bel Air mansion with their five children. Los Angeles is clearly a better locale for Justine to pursue her writing career. Tesla is based in the Bay Area. Word swept the Tesla office of a pending divorce after Elon showed up to the opening of Tesla's Menlo Park showroom with a "twentysomething actress," one attendee said. How he managed to pursue an affair while meddling in the affairs of Tesla and his other company, space-exploration startup SpaceX can only speak to Musk's off-the-charts time-management skills. His decision to fire Tesla's CEO and take over the job himself just means more time away from his family. Only Elon and Justine know all the reasons why they are divorcing. And which came first — did Elon decide to throw himself into his work after realizing his marriage was a failure, or did his obstinate workaholism jeopardize his marriage? Either way, it beggars belief to think the divorce wasn't a factor in the uproar at Tesla. That will be no comfort to the employees who will soon be laid off by a CEO going through a midlife crisis.

Tesla CEO: "Extraordinary times require focus"

Owen Thomas · 10/15/08 03:00PM

Elon Musk, the Tesla Motors investor who has freshly installed himself as the electric automaker's CEO, has explained his management coup and the company's pending layoffs in a blog post. Tesla's $47 million engineering center outside Detroit, near the automotive industry's biggest pool of technical brains? Gone. Tesla's much-anticipated Model S sedan? Delayed until the middle of 2011, at best; the company is ceasing all real activity that would lead to a car getting built. The $109,000 Roadsters customers have ordered? "I personally stand behind delivering a product that you will love," writes Musk. Musk has not yet enumerated how many of Tesla's employees will lose their jobs.

Ze'ev Drori out, Elon Musk in as Tesla CEO

Owen Thomas · 10/15/08 12:20PM

Here's the narrative you're going to hear about Tesla Motors, the Silicon Valley electric-car company which is prepping layoffs and replacing its CEO: The company's founding investor sweeps in to save the day. It is true that Elon Musk, the company's main financial backer, is stepping in to replace CEO Ze'ev Drori, who's staying with the company as vice chairman and a member of the board. But anyone with a sense of history should be very worried at the prospect of Musk taking the wheel.Musk lucked out twice, with the $300 million of a long-forgotten Internet portal, and the survival, despite his best efforts, of PayPal, the payments site now controlled by eBay. According to Elon Musk, Elon Musk was the driving force behind PayPal during his brief, tumultuous reign as CEO of the payments company. Musk's version of events is a fiction believed by no one else. I know this because I spoke to PayPal insiders regularly while he was CEO, and they told me of chaotic management, boneheaded marketing and technology decisions, and serious turnover under Musk's reign. That is what Tesla has to look forward to. In some sense, it's already been enduring it since Musk ousted founder Martin Eberhard and replaced him with Drori last year. Musk has been working at the company for several days a week, Darryl Siry, Tesla's VP of marketing, tells me, in an effort to portray Drori's beheading as some kind of smooth transition. With a parlous economy, Tesla was already in for a bumpy ride. Musk is keeping his second job as CEO of SpaceX, a private rocket company which has seen several botched launches. Add to that the infamous tale of his PayPal-era car crash, and you've got an entrepreneur who's better known for destroying vehicles than building them.

Privateers rocket to space fifty years after communists

Jackson West · 09/29/08 11:40AM

Sure, Leonid Brezhnev's particular flavor of state capitalism and political repression was no pleasure to live under. But consider this, free-market apologists: Those wily Soviets and their evil regulated markets out-innovated us in the space department to claim first-mover status. It wasn't for another fifty years that private capital finally caught up in the form of Elon Musk's SpaceX, on the company's fourth flight. And the rocket didn't even deploy a satellite — much less a satellite with a lovable monkey inside. [Wired]

Once again, Vanity Fair leaves geeks at the kids' power table

Owen Thomas · 09/03/08 03:00PM

Preeminent among the magazine world's kingmaking power lists is Vanity Fair's New Establishment, which appears in the October issue — on newsstands in L.A. and New York today, but not in the Bay Area for another six days. Silicon Valley gets similar short shrift: The names who make it there are predictable bigs like Steve Jobs and Larry Ellison, or Hollywood-crossover types like Jeff Skoll, eBay's first employee turned movie producer. Walt Mossberg, now employed by New Establishment perennial Rupert Murdoch, also squeaked in. The consolation prize Vanity Fair offers: Its "Next Establishment" list, reserved for the likes of Twitter's Ev Williams. It's a marvelous piece of New York media trickery — flatter the geeks by making them feel included, but corral them into a side room so the real power brokers aren't offended by comparison. True, the "Next Establishment" suggests that these are people who might matter in the future. But in saying that, Vanity Fair's editors are also sending the message that right here, right now, its "Next" nominees are nobodies. On this year's list:

Barely legal billionaires insist there's tons more money to be made

Jackson West · 08/22/08 05:20PM

21-year-old billionaires in the making? To tell the truth, the youngest Forbes has come up with in the past decade was Elon Musk at 27. That was back in 1998, with only $22 million. Musk's face is more lined, but he still isn't a billionaire, even after cashing out from PayPal's sale to eBay. Forbes at least has some standards — only reason I can imagine Zuckerberg isn't in the piece is because his share of Facebook's valuation is still mostly theoretical. As for Bebo's Michael and Xochi Birch? They're back to their birthday announcement and e-card concern BirthdayAlarm.com, not content with a cabin in the hills at all. (Photo by Ryan Anson/Bloomberg News/Landov)

Peter Thiel funds Elon Musk's sputtering rocketships

Nicholas Carlson · 08/07/08 12:20PM

Peter Thiel fought viciously with Elon Musk in the early part of this decade; after they merged their companies to form with PayPal, they wrestled for control, with Thiel emerging victorious as the CEO who led the company through an IPO and a $1.5 billion sale to eBay. At the time, Musk was the richer, having sold a forgotten company to another forgotten company for an unforgettable $220 million. The two have long since made up — and a lucky thing for Musk, who now finds himself a supplicant to Thiel. Thiel's venture capital firm, the Founders Fund, has agreed to invest $20 million in Musk's faltering SpaceX, a rocket-ship startup whose latest vehicle crashed into the Pacific Ocean rather than soaring into the beyond.Ignominiously, the botched launch ended up splashing the ashes of James Doohan, the actor who play Scotty in Star Trek's ashes all over the Pacific. Perhaps more materially, three satellites — two from NASA and another form the department of defense — also saw their trips cut drastically short. Thiel's $20 million follows $100 million of Musk's own money already sunk into the project. As friendly as the two are now, Thiel's investment has to be humiliating — a reminder that Musk may have the occasional clever idea, but it takes a Thiel to make it pay off.

Elon Musk's latest failed rocket launch sends Scotty's remains into Pacific, not space

Nicholas Carlson · 08/04/08 11:20AM

On Omelek Island in the Pacific Ocean, 2,500 miles from Hawaii, a rocket carrying the ashen remains of Star Trek actor James “Scotty” Doohan and 207 other people was poised to rocket to the heavenes Saturday. Footing the bill: Elon Musk of PayPal and Tesla Motors fame. Instead, the tech entrepreneur, now dabbling in aeronautics, tried and failed to launch a rocket into orbit for the third time on Saturday. The Falcon 1 owned by Musk's private space exploration company, SpaceX, left the ground and stayed off it for 2 minutes and 20 seconds before second- and third-stage rockets failed to ignite. The whole thing, including Scotty's ashes, plunged back to earth. Musk, promising to "never give up," called the failure "a big disappointment." Aye, the haggis is in the fire for sure. All of this reminds us of a definition of "founder": "to fill with water and sink."