This is Part 2 (minute 24:16 – 48:36) of the interview the Khan Academy published on YouTube on April 23, 2013 as a part of its “Entrepreneurship” lecture series. Salman Khan asks Elon Musk questions about rockets, timelines, and how he sees the future of his companies SpaceX and Tesla, and the audience is eager to hear from him about what he looked for when starting his companies and if there is any news regarding the “Hyperloop”. When reading the interview, please keep in mind that some things here were said with a wink or a laugh and were not meant entirely serious. So, if you should wonder about one or the other statement, it’s best to watch the scene in the YouTube video to avoid misunderstandings. To access the German translation or Part 1 of this transcript, please click on the corresponding link.

Sal Khan: (24:16) And you ended up… you had some failures, but obviously some huge successes. What was the cost that you were able to build this rocket for relative to what they were being built for before?

Elon Musk: Let’s see. For the Falcon 1, which is the first rocket we built, and the first three flights did not make it. In fact, we got progressively further, but the first rocket came in and landed maybe a couple hundred yards away from the launch site and (in) tiny fragments. So, yeah, anyway, that rocket ended up costing around $6 million compared to (25:00) other rockets in that class, which were about up to $25 million.

Sal Khan: Wow. So significant?

Elon Musk: Yeah, like a quarter. But there’s an even better step beyond that, which is to make rockets reusable. Right now, that is around what our comparison price is… excluding the refurbished ICBMs. So, if you say building a rocket from new, how does the SpaceX rocket compare to a rocket from Boeing or Lockheed? It’s about a quarter of the price. However, if we make it reusable, then it can be two orders of magnitude cheaper.

Sal Khan: Two orders of magnitude cheaper. A 100th of the price?

Elon Musk: That’s right. For you.

Sal Khan: Only today. Memorial Day sale.

I’ve seen some… you are doing like these vertical landings, literally out of like the 1950s Sci-Fi movies. And that’s what you’re talking about?

Elon Musk: Yeah. Essentially, the rocket needs to come back and land at the launch site and then reload propellant and take off again, like an airplane in its reusability.

Sal Khan: How far do you think we are from that? When do you think…you know, your best guess, when we’ll actually see that happening?

Elon Musk: Well, I’m hopeful we can do it next year.

Sal Khan: Oh, Okay. Yeah. We’ve got some ambitious stuff at Khan Academy for the next year, too. So we can compare. We’re redesigning the site, you know.

Elon Musk: Right. We’ve been working on it for a long time. I should say, SpaceX has been around for 11 years, and thus far, we have not recovered any rockets. We recovered the spacecraft from orbit. So that was great. But none of our attempts to recover the rocket stages have been successful.

The rocket stages have always blown up essentially on reentry. Now, we think we’ve figured out why that was the case. It’s a tricky thing because Earth’s gravity is really quite strong. With an advanced rocket, you can do maybe 2% to 3% of your lift-off mass to orbit, typically. And then reusability subtracts 2% to 3%. So then you’ve got like nothing to orbit or negative. That’s obviously not helpful.

So, the trick is to try to shift that from say 2%, 3% in an expendable configuration to make the rocket mass efficiency, engine efficiency, and so forth, so much better that it moves to maybe around 3.5% to 4% in expendable configuration. And then try to get clever about the reusability elements and try to drop that to around the 1.5% to 2% level. So you have a net payload to orbit of about 2%.

Sal Khan: But you’re doing it at one, two orders of magnitude cheaper.

Elon Musk: Yeah. Absolutely, because our Falcon 9 rocket cost about $60 million. But the propellant cost, which is mostly oxygen – it’s two-thirds oxygen, one-third fuel – is only about $200,000.

Sal Khan: Wow.

Elon Musk: And it’s much like a 747. It costs about as much to refuel our rocket as it does to refuel a 747 within… well, pretty close, essentially.

Sal Khan: Assuming you all are successful, and you all have proven yourself to be successful on these audacious things in the past, I mean, what happens? I mean, that seems like it’s… what happens in the next five, ten years in the space industry, if you all are successful there? I mean, do we get to Mars? Do we have kind of market forces, commercialization of space starting to happen?

Elon Musk: Yeah. Let’s see. Well, the first step is that we need to earn enough money to keep going as a company. So we have to make sure that we’re launching satellites. Commercial satellites like broadcast communications, mapping, government satellites that do scientific missions. Earth-based or space-based missions. GPS satellites. That kind of thing. And then also servicing the Space Station, transferring cargo to and from the Space Station, which we’ve done a few times. And then taking people to and from the Space Station.

So we’ve got to service the sort of Earth-based needs to launch satellites, and that pays the bills. But in doing that, keep improving the technology to a point where we can make full reusability work. And we have sufficient scale and sophistication to be able to take people to Mars.

Sal Khan: Wow. So you think this is going to be a reality? What’s your best guess of when we’re going to have someone on Mars?

Elon Musk: I think probably about 12 years.

Sal Khan: That’s nothing. And you think it’ll be a round trip? It won’t just be some type of permanent colony on Mars?

Elon Musk: I think it’s probably a round trip. (30:00) It’s not for sure.Aspirational, it’d be a round trip.

Sal Khan: This is mind-blowing. And then on Tesla. I mean, Tesla’s obviously, from my vantage, it’s a huge success. What do you think in that industry… well, I’ll ask kind of the same question. What did you think… this is something that GM and Toyota and these massive multi-billion dollar organizations have been trying. What gave you the confidence to pursue it? And now that it seems to be a huge success, where do you think this industry’s going to be the next 5, 10 years?

Elon Musk: With Tesla, the goal is to try to accelerate the advent of sustainable transport. I think it would happen anyway, just out of necessity. But because we have an un-priced externality in the cost of gasoline… – We weren’t pricing in the environmental effects of CO2 in the oceans and atmosphere. That’s causing the normal market forces to not function properly.

And so the goal of Tesla is to try to act as a catalyst to accelerate those sort of normal forces. The normal sort of market reaction that would occur. We’re trying to have a catalytic effect on that. And try to make it happen, I don’t know, maybe ten years sooner than it would otherwise occur. That’s the goal of Tesla. So that’s the reason we’re making electric cars and not any other kind of car. And we also supply powertrains to Toyota and to Mercedes and maybe to other car companies in the future to accelerate their production of electric vehicles. So that’s the goal there. And so far, it’s working out pretty well.

Sal Khan: I mean, I just saw a news report earlier today that you sold more Model S’s than… you are leading that segment of the industry. The Mercedes S Class, the BMW 7 Series, or the Lexus LS400, or whatever it is.

Elon Musk: Yeah, actually, that seems to be the case. I didn’t realize they sold so few cars in that segment. Because we don’t sell that many cars. We sell 5,000 a quarter, you know, 12,000…

Sal Khan: Well, out here, they seem like, you know, every…

Elon Musk: Well, this is our home team. We better sell a lot in the Bay Area. Because otherwise, we’re like…

Sal Khan: And, well, I mean, similar thing. How did you start? What gave you the confidence? And do you see yourselves as kind of a major automotive, mainstream brand in five, ten years, all the way down to competing with the Honda Accords and Civics?

Elon Musk: I mean, yeah. Our goal, it’s not to become a big brand or to compete with Honda Civics, rather to advance the cause of electric vehicles. We’re just going to keep making more and more electric cars and driving the price point down until the industry is very firmly electric. Like maybe half of all cars made are electric or something like that, which is not to say that we expect to make half of all cars. We want to just have that catalytic effect until at least that occurs. The point at which we’re approaching half of all new cars made are electric, then I think I would consider that to be the victory condition. The faster we can bring that day, the better.

Sal Khan: When would be your guess when that happens?

Elon Musk: Well, I made a bet with someone about three years ago that it would be sooner than 20 years. So it’s 17 years from now. But that’s conservative. I think it’s probably maybe 13 or 14 years.

Sal Khan: Wow. Right when we’re going to Mars.

Elon Musk: Right.

Sal Khan: It’ll be exciting times.

Elon Musk: True. Exactly. I was just thinking about that. It was like, oh, those time frames are kind of coincident. The nature of new technology adoption is it tends to follow an S-curve. What usually happens is people under-predict it in the beginning because people tend to extrapolate in a straight line. And then they’ll over-predict it at the midpoint because there’s late adopters. And then it’ll actually take longer than people think at the mid-point, but much shorter than people think at the beginning. But I’m pretty excited about how things are going. And, in fact, I think that the pace of technology improvement in electric energy storage is really moving faster than anyone thinks.

Sal Khan: Wow. I got one more… (asking Ester) How are we doing on time? (35:00) Where’s Ester? Oh, 9 o’clock. So how much time do you have? I want to make sure we don’t go over.

Elon Musk: Well, I guess maybe another 15 minutes.

Sal Khan: Okay. I’ll finish with one last question, and then we’ll open it up. What advice do you have for us at Khan Academy?

Elon Musk: I don’t know. You guys seem to be doing really great. I was wondering if you had advice for me.

Sal Khan: Oh, no, well.

Elon Musk: Yeah. It seems like you’re doing an amazing job of… really super leveraged. I mean, obviously, a small team, and you’re having a dramatic effect on…

Sal Khan: Yeah, half these people don’t even work here. They’re just like…

Elon Musk: Right. It’s, I think, very impressive thing you’re doing to spread knowledge and understanding throughout the world.

Sal Khan: The universe soon if you hold up your end of the bargain.

Elon Musk: It’s actually kind of funny. If you think, what is education? Like you’re basically downloading data and algorithms into your brain. And it’s actually amazingly bad in conventional education. Because like it shouldn’t be like this huge chore. You’re making it way, way better. But I think a lot of things that I would say you’ve probably heard 100 times. And, in fact, if not doing, the more you can game-ify the process of learning, the better. For my kids, I do not have to encourage them to play video games. I have to like pry them from their hands, like crack.

Sal Khan: Yes.

Elon Musk: It’s like, drop that crack needle.

Sal Khan: You have that problem at your house, too. The crack is addictive.

Elon Musk: To the degree that you can make somehow learning like a game, then it’s better. And I think, unfortunately, a lot of education is very vaudevillian. You’ve got someone standing up there kind of lecturing at people. And they’ve done the same lecture 20 years in a row, and they’re not very excited about it. And that lack of enthusiasm is conveyed to the students. They’re not very excited about it. They don’t know why they’re there. Like why are we learning this stuff? We don’t even know why. In fact, I think a lot of things that people learn – that probably there’s no point in learning them. Because they never use them in the future.

Sal Khan: Because who’s going to launch a rocket into space? I mean, that’s just like– exactly, that never happens.

Elon Musk: Well, people don’t stand back and say, why are we teaching people these things. And we should tell them, probably, why we’re teaching these things. Because a lot of kids are probably just in school, probably puzzled as to why they’re there. I think if you can explain the why of things, then that makes a huge difference to people’s motivation. Then they understand the purpose. I think that’s pretty important.

And just make it entertaining. But I think just in general conventional education should be massively overhauled. And I’m sure you pretty much agree with that. I mean, the analogy I sometimes use is, have you seen, like, Batman, the Chris Nolan movie, the recent one. And it’s pretty freaking awesome. And you’ve got incredible special effects, great script, multiple takes, amazing actors, and great sound, and it’s very engaging.

But if you were to instead say, okay – even if you had the same script, so at least it’s the same script – and you said, okay, now that script, instead of having movies, we’re going to have that script performed by the local town troop. And so, in every small town in America, if movies didn’t exist, they’d have to then recreate The Dark Knight. With like home-sewn costumes and like jumping across the stage. And not really getting their lines quite right. And not really looking like the people in the movie. And no special effects. And I mean, that would suck. It would be terrible.

Sal Khan: That’s right.

Elon Musk: That’s education.

Sal Khan: So with that… and I apologize to all of you guys for hogging up all of the time, because, obviously, I could talk for hours about this stuff. But we do have time, probably 5 or 10 minutes, for a handful of questions. If none of you all have any, I have about nine more. But, yes.

Speaker A: I noticed… I picked up two kinds of themes from what you were discussing. One was somewhat audacious goals. And the other was I don’t think I heard you use the word profit in anything that you spoke about. Each thing is pointed at, like re-invigorating an industry or bringing back space missions. How much of your success do you attribute to having really audacious goals or versus just not being focused on the short term, money coming in, or I don’t know, investors?

Elon Musk: Unfortunately, (40:00) one does have to be focused on the short time and money coming in when creating a company because otherwise, the company will die. So I think that a lot of times people think creating a company is going to be fun. I would say it’s really not that fun. I mean, there are periods of fun. And there are periods where it’s just awful.

And, particularly, if you’re the CEO of the company, you actually have a distillation of all the worst problems in the company. There’s no point in spending your time on things that are going right. So you’re only spending your time on things that are going wrong. And there are things that are going wrong that other people can’t take care of. So you have like the worst. You have a filter for the crappiest problems in the company. The most pernicious and painful problems. So I think you have to feel quite compelled to do it. And have a fairly high pain threshold.

There’s a friend of mine who says starting a company is like staring into the abyss and eating glass. And there’s some truth to that. The staring into the abyss part is that you’re going to be constantly facing the extermination of the company. Because most start-ups fail. It’s like 90%, it could be 99% of start-ups fail. So that’s the staring into the abyss part. You’re constantly saying, “Okay, if I don’t get this right, the company will die,” which can be quite stressful. And then the eating glass part is you’ve got to work on the problems that the company needs you to work on and not the problems you want to work on. And so you end up working on problems that you really wish you weren’t working on. And so that’s the eating glass part. And that goes on for a long time.

Speaker A: So how do you keep your focus on the big picture when you’re constantly faced with, we could be out of business in a month?

Elon Musk: Well, it’s just a very small percentage of mental energy is on the big picture. Like, you know where you’re generally heading for, and the actual path is going to be some sort of zigzaggy thing in that direction. You’re trying not to deviate too far from the path that you want to be on, but you’re going to have to that to some degree. But I don’t want to diminish the… I think the profit motive is a good one if the rules of an industry are properly set up.

There’s nothing fundamentally wrong with profit. In fact, profit just means that people are paying you more for whatever you’re doing than you’re spending to create it. That’s a good thing. And if that’s not the case, then you’ll be out of business. And rightfully so. Because you’re not adding enough value. Now there are cases, of course, where people will do bad things in order to achieve profit, but that’s actually quite unusual. Because usually, the rules are set up mostly correctly. Like not completely, but mostly correctly.

Sal Khan: I think we have time for one more question. Joel.

Joel: Yeah, I have an important one.

Sal Khan: Okay, very good. Yes, please.

Joel: A few months ago, you teased Hyperloop, and we haven’t heard anything since. So, first of all, a few of us engineers were talking about it, and I think we have a few ideas if you need help. But, if you feel comfortable, maybe you could tell us a little bit more.

Elon Musk: I was reading about the California high-speed rail, and it was quite depressing. Because California taxpayers are going to be on the hook to build the most expensive high-speed rail per mile in the world – and the slowest. Those are not the superlatives you want. And, it’s like, damn, we’re in California, we make super high-tech stuff. Why are we going to be spending – now the estimates are around $100 billion – for something that will take two hours to go from LA to San Francisco? I’m like, well, I can get on a plane and do that in 45 minutes. It doesn’t make much sense. And isn’t there some better way to do it than that?

So if you just say, what would you ideally want in a transportation system? You’d want something that relative to existing modes of transportation is faster – let’s say twice as fast – costs half as much per ticket, can’t crash, is immune to weather, and is… you know, can make the whole thing like self-powering with like solar panels or something like that. (45:00) That would be pretty…

Sal Khan: That would be great, yes.

Elon Musk: …a good outcome. And so what would do that? And what’s the fastest way short of inventing teleportation that you could do something like that? And some of the elements of that solution are fairly obvious, and some of them are not so obvious. And then the details…  the devil’s in the details of actually making something like that work. But I came to the conclusion that there is something like that that could work. And would be practical.

Sal Khan: Is this around the evacuated tubes? The vacuum tubes? Like the old bank…

Elon Musk: It’s something like that.

Sal Khan: But you haven’t been more public with what this is?

Elon Musk: No. All I did say that once Tesla was profitable that I would talk more about it. But we haven’t done our earnings call yet. I think I’ll probably do it after the earnings call. And the thing is, I’m kind of strung out on things that I’m already doing. So adding another thing, it’s like doesn’t… it’s a lot.

Sal Khan: Learning the guitar. You could pick up all sorts of things.

Elon Musk: Right. I tried learning the violin. That’s, by the way, a hard thing to learn.

Sal Khan: Yeah. Launching rockets, electric cars, revolutionizing transportation. Yeah, it’s easy.

Elon Musk: I cannot play the violin at all. Very horrible. If you think about the future, you want a future that’s better than the past, and so if we had something like the Hyperloop, I think that would be cool. You’d look forward to the day that that was working. And if something like that, even if it was only in one place – from LA to San Francisco, or New York to DC or something like that – then it would be cool enough that it would be like a tourist attraction. It would be like a ride or something.

So even if some of the initial assumptions didn’t work out, the economics didn’t work out quite as one expected, it would be cool enough that like, “I want to journey to that place just to ride on that thing.” That would be pretty cool. And so that’s I think how… if you come up with a new technology, it should feel like that. You should really… if you told it to an objective person, would they look forward to the day that that thing became available? And it would be pretty exciting to do something like that.

Or an aircraft. Like I thought it was really disappointing when the Concorde was taking out of commission, and there was no supersonic transport available. And, of course, the 787 has had some issues. But the thing is, the 787, even in the best-case scenario, is only a slightly better version of the 777. And it’s like, okay, not that exciting.

Sal Khan: So this is something that you are working on?

Elon Musk: I wouldn’t say working on it.

Sal Khan: And one day in the not-too-far future… – Or there’s some plans or consultants involved or something?

Speaker from the audience: You called Russia.

Sal Khan: You made some phone calls to Russia.

Elon Musk: No, every now and then, it’s sort of percolating away. I’m not actively thinking about it. But then there will be some new element of that I think I will, you know, this would make it better.

Sal Khan: Fascinating. Well, I think I’m speaking for everyone. This is like the most epic possible conversation one could have over about the course of an hour. And I think all of us would love to chat with you for hours on end but thank you so much. I know you have a lot of free time, so it probably wasn’t that big of a deal for you to come here. But it was a huge honor. And I think it’s inspired all of us to go out and change the world and the universe.

Elon Musk: Cool. All right.

Sal Khan: Thank you very much. (48:36)