Ron Baron interviews Elon Musk – I

On November 4, 2022, Ron Baron spoke with Elon Musk during the 29th Annual Baron Investment Conference in New York. The first half hour (0:10 – 30:34) of this conversation covers, among other things, Musk’s motivations for taking on the amount of work and pressure, why patents sometimes make sense but not in the case of Tesla, the Dilbert portion to minimize in any company and why a fully reusable orbital rocket is extremely difficult to build and at the same time extremely important for the future of humanity. This transcript is based on the video published by Elon Alerts on YouTube. A summary of the Tesla-related content of this interview has been published by Gail Alfar on her blog „What’s Up Tesla“. If you’re interested in the transcript of the second half hour of this interview, here you are.

The event starts with the “Falcon Heavy & Starman” clip

Ron Baron: (0:10) Every time I see that clip, it kills me. Every single time. I look it a lot. So thank you very much for coming here. I know it’s not convenient, it’s not around the corner. I’m really appreciative.

Elon Musk: (0:24) Absolutely, thank you for having me. I was on a red-eye flight, so I’m a little slower than normal. I didn’t get much sleep.

Ron Baron: (0:35) That’s sort of my first question. So you’re 51?

Elon Musk: (0:40) Yeah. I think I’m safely not a spring chicken anymore. Help me – a late summer chicken, perhaps?

Ron Baron: I’m 79.

Elon Musk: (0:56) But, I mean, you look great.

Ron Baron: So you’re 51, and you do 16-hour days, and you work seven days a week, and you fly all over the place. And you go to these meetings constantly. And people constantly criticize you for everything. It’s amazing to me. I mean, you’re changing the world, and you’re giving yourself. Why do you do this? My wife says to me, “Why are you still working?” Why are you still working? What are you doing here?

I think what I’m working on has an important effect on the future.

Elon Musk

Elon Musk: (1:19) I think what I’m working on has an important effect on the future. In the case of Tesla, I think it’s fair to say that Tesla has significantly accelerated the advent of sustainable energy. Before Tesla, no one was doing electric cars. And now, as a result of Tesla, I think almost every major car company in the world is building electric cars, and I think that’s a pretty big deal. But there’s still a long way to go to transition the world to a sustainable energy economy. And so we still have a lot of work ahead of us at Tesla, but that’s our goal there.

And then, for SpaceX, it’s important for the future to be exciting. And for humanity‘s existence to be assured of in the long term, I think we must become a multi-planet species and a spacefaring civilization. We’re here like four and a half billion years after Earth got started, 13.8 billion years into the age of the universe. And it’s only now recently, in the last 5,000 years, that we even invented writing. I would say, date the first civilization by when there was the first writing, which was in ancient Sumer around five or six thousand years ago. So, we’ve basically just been here for a very brief instant. 

Ron Baron: A blink.

Elon Musk: All of human civilization is a blink of an eye – if there was an eye – on an evolutionary time scale. So, I think it’s important we take the actions to ensure that the light of consciousness continues because we should really view consciousness as a small candle in a vast darkness that could easily go out.

Ron Baron: (3:31) So you have these missions. And somehow, whenever you have a mission, and you have this vision, and you’re a visionary, that somehow whatever you do, you develop other businesses. So when you started SpaceX, you didn’t think about satellites. When you started Tesla, you didn’t think about robots; when you don’t have enough people, you didn’t think about robots. And so you didn’t think about autonomous driving. And without Elon, there would not be electric cars. Nobody who makes cars wants to make electric cars. They’re being forced to make them. In fact, every time they sell electric cars, they sell one fewer car that they make money on. They have all that money invested in plants to make those other cars. So nobody wants to have these cars except for him. And everybody thought it was going to fail. One of the things you said is that patents are for the weak. And you share your patents with other companies. Of course, on the other hand, when they get your patents, you’re two or three years ahead of them.

There are definitely roles for patents. In the case of Tesla, our goal is to advance sustainable energy, and we can’t just do it by ourselves. We need the whole industry to go that way, so we gave them our patents for free.

Elon Musk

Elon Musk: (4:39) Well, I’m joking about patents are for the weak. I think there is a role for patents. Let’s say if some company has spent a lot of money developing a particular medicine and had to go through expensive stage three medical trials, and then they finally get some medicine that is approved, but where the drug itself is cheap to manufacture, then I think a patent, in that case, makes sense. Otherwise, no one would go to the trouble of doing stage three medical trials. So there are definitely roles for patents. In the case of Tesla, our goal is to advance sustainable energy, and we can’t just do it by ourselves. We need the whole industry to go that way, so we gave them our patents for free in order to help them accelerate electric vehicles.

Ron Baron: (5:27) So it must be terrifying to other companies to realize that we make cars. It’s $39,000 in cost the car, and we’re making $15,000, $16,000 in profit a car. So we invest $7 billion, and we make $15 billion a year. I’m sorry, $15 million a year on a $7 million investment. Shocking. So no one else does that. And here, you’re telling us how you want to make cars for $20,000 a piece? How do you do that?

Elon Musk: (6:07) Well, we’ve not formally announced our next car program. So I can’t talk too much about our upcoming vehicle program or programs that have not been announced. But we do expect to make cars that are more affordable than the current Model 3 or Model Y. I think, by far, the biggest factor is autonomy in terms of value of the car because right now, cars get driven for about 10 or 12 hours a week, like maybe one and a half hours a day. But there are 168 hours in a week. And so, if they were autonomous, the cars could drive for 50 or 60 hours, so we’d see a five-fold increase in the utility of the car that could be autonomy. This is a really gigantic thing. It would also mean that we wouldn’t need anywhere near as many parking lots. And this would also be helpful for the environment because you would need far fewer cars.

Ron Baron: (7:30) So I misspoke, it was a $7 billion investment for a plant that makes a million cars a year that makes $15 billion a year in profit. So you invest 7 billion, and you make $15 billion dollars a year. Who does that? And for a plant that makes things, manufacturing. And so the way this is accomplished is… so you’re doing it with casting right now. Casting half of the car and soon cast the other half of the car. And other companies – why don’t they try? Why don’t they try to do what we’re doing? In fact, one of the executives of another automobile company wanted me to introduce her to you. And you did that once in a meeting and now she wants to come visit with her Director of Engineering the plant in Austin. And I presume when I asked you, you’re going to say: “Yeah, bring her on.” Because you innovate so fast, by the time anyone copies what we’re doing, we’re on to something else. When you’re casting, what else is there that enables us to make it cheaper? We eliminated a lot of other parts, we eliminated functions. What are we doing to do that? How would we sell a car that’s so cheap?

Elon Musk: (8:46) Well, I think the full explanation, or at least an accurate explanation, would take a long time. Because the first approximation, a car is made of 10,000 unique parts and process steps. Tesla is, at this point, probably the best at manufacturing in the auto industry, which I think nobody was expecting.

Ron Baron: (9:11) Probably in history of the world.

Elon Musk: (9:13) Probably. Well, I’ve got this first principles algorithm that I find to be very helpful in the design and manufacturing of anything. People here may find it helpful. The first thing that you should do is make the requirements that you’ve been given less dumb. Whatever constraints and requirements you were given, they were, to some degree, dumb, and you want to make them less dumb. If you don’t start with this, then you get the right answer to the wrong question. And the requirements must be given from a person who can explain the requirements, not from a department, because then you don’t know who to talk to. Then step two is to delete the part or delete the process step.  This sounds extremely obvious, and yet, over and over again, we have found that parts were not needed, they were put in there, just in case, or by mistake. Or there was a step that someone thought was needed but was not actually needed. This sounds insanely obvious, but we have deleted so many parts from the car that did nothing.

Ron Baron: (10:46) They were just there?

So honestly, a bunch of these things just feel like you’re living in a Dilbert cartoon. I mean, at any given company, you should ask, “What’s your Dilbert ratio?”

Elon Musk

Elon Musk: (10:48) Well, yeah, I mean, I can give you so many examples. One example was, there were three fiberglass mats, on top of the battery pack. They partially covered the battery pack. I was on the battery pack production line, and the number one thing choking battery pack production was gluing on these three fiberglass mats to the top of the battery pack. So the reason I repeat this algorithm is because myself first did things backwards. First, I tried to automate it, then I tried to accelerate it, just go faster, then I tried to simplify it, and only then did I delete it. Because it turned out that the team at Tesla that does noise and vibration minimization, so making the car quiet, thought that the fiberglass mats were there because of the battery safety team for battery fire prevention. And then I asked the battery fire prevention team what they were needed for, and they said, “Oh, noise and vibration.” And I’m like, “Okay!” So then we had two cars drive, with a microphone in each car, and you could not tell the difference. So, we went to all that trouble for a part that should not exist.

And then another example was, there was… these were chokepoints in the entire production system. That’s why they, you know… I’m running around the production line, trying to fix the production line, just like a maniac, like a Tasmanian devil, just running around the factory, like a lunatic. And let’s see… the body production line for Model 3 was at one point stuck because we had a laser welding cell to weld a small cross-car beam in the passenger footwell of the front seats. And I’m looking at this beam, and I’m like, “What the heck does that do?“ Because the entire factory is stopped trying to get this laser weld cell to work. And I’m like, “I can’t imagine what a useful thing it could do.” And the production team said, “Oh, that’s for crash safety.” So then I called the crash safety team, and I said, “Is this for crash safety?” And they said, “Oh no, this didn’t do anything, we should delete it.” It turned out to be totally useless. They forgot to tell the production team! So honestly, a bunch of these things just feel like you’re living in a Dilbert cartoon. I mean, at any given company, you should ask, “What’s your Dilbert ratio?” Okay. It’s not zero. The Dilbert quotient – try to keep it low.

Ron Baron: (13:54) So, is this you? You do all these different things…

Elon Musk: (13:59) Yeah, well, it’s literally me, it’s not someone else who did this. I was living in the factory in Fremont and the one in Nevada for three years straight. That was my primary residence. I’m not kidding, literally.

Ron Baron: Did you keep the couch?

Elon Musk: I actually slept on a couch, at one point in a tent on the roof. And then, for a while there, I was just sleeping under my desk, which is out in the open in the factory. And for an important reason. And it was damn uncomfortable on that floor, and always when I woke up, I would smell like metal dust.

Ron Baron: (14:37) We went to visit, and they bought him a new couch.

I’m not actually a masochist, I think. But the thing is that since the team could see me sleeping on the floor during shift change, they knew I was there. And that made a huge difference. And then they gave it their all.

Elon Musk

Elon Musk: (14:40) Yeah, but actually, I stopped using the couch. There’s a little conference room and a couch there. I stopped using the couch. I just slept on the floor under my desk so that during shift change, the entire team could see me. And that’s important because if they think that their leader is off somewhere, having a good time, you know, drinking Mai Tais on a tropical island, which I could definitely have been doing and would much have preferred to do. I’m not actually a masochist, I think. But the thing is that since the team could see me sleeping on the floor during shift change, they knew I was there. And that made a huge difference. And then they gave it their all.

Ron Baron: (15:35) So the focus is on always lowering cost and providing leadership. And this company, we’re doing a million and a half cars a year, but you expect to do 20. What happens in 10 years if you’re not there? What happens in five years if you’re not there? How does that work? In all the engineering schools, the top engineering schools, the top choice of where everybody wants to work is Tesla and SpaceX, those two places. So we do have all these people coming up and fighting each other for the job, or they’re working together. How do you get people to say, “Gee, I could buy that real expensive house, but I’m not going to do that. Or I could go on vacation. I’m not.”

Elon Musk: (16:23) We do have that problem a little bit. So as a company has prosperity, and then people become wealthy, then for a lot of people, you know, once they become sort of independently wealthy, they just can’t bring themselves to work, or they just don’t want to work. And that’s totally understandable, no judgment. I mean, I have a lot of friends who are extremely talented. They had some success earlier in life, and they just decided that was enough trauma. I remember a good friend of mine saying, starting a company is like eating glass and staring into the abyss. So when people say, “Tell me, what can you do to encourage entrepreneurs to start companies?”, I’m like, “If you need encouragement, don’t start a company.”

Ron Baron: (17:35) In SpaceX, we have no competitors, sort of, I guess. (…) Just Boeing, Northrop, and Lockheed. And with those guys, when they built the launching pad, it took them like 10 years and billions of dollars. And we had to build a launching pad, and it cost a few 100 million dollars and did it in six months. And then I was interested in how that was done, and the woman I’m talking to says, “Ron, didn’t you see the plumbing when you went there?” and I said, “Why should it cost hundreds of millions of dollars? It looks like it’s a landing field.” And she says, “Would you see what’s underneath, would you see the plumbing?” I said, “No, they didn’t show that to me.” And she said, “Well, you should be aware that there’s all these pipes that take away the heat, and then they all deliver fuel to the rocket, and it has to be there at the exact right amount at the exact right time. And if that doesn’t happen, it blows up.” And I say, “Well, how does Elon know this?” Because you hire these great people, and then you ask them all these questions, and then somehow you remember everything I tell you. Is that true?

The thing that’s the Holy Grail, like the critical breakthrough needed to make life multi-planetary and for humanity to be a spacefaring civilization, is a fully and rapidly reusable orbital rocket.

Elon Musk

Elon Musk: (18:55) Well, my memory for technical matters is very good. But I think probably a lot of people don’t realize like what I do 80% of the time is engineering. It’s actually quite rare for me to give a talk and my day-to-day work at SpaceX and Tesla is almost entirely engineering and design. And also Production. Production is key. But although I consider that to be part of engineering.

Starship is something special. The thing that’s the Holy Grail, like the critical breakthrough needed to make life multi-planetary and for humanity to be a spacefaring civilization, is a fully and rapidly reusable orbital rocket. We’ve gone most of the way there with Falcon 9. You may have seen the rocket booster come back and land. And we also recover the nose cone or fairing. But we do not recover the upper stage. So we’ve gotten to the point where we’re about, you know, 70 to 80% reusable with Falcon 9. With Starship, we’re going for 100% reusable. I cannot say how profound a change this will be. But a fully and rapidly reusable orbital rocket has the potential to drop the cost of access to space by a factor of 1,000.

(20:49) And I should say also, Starship is a very big rocket. It’s more than twice the thrust of a Saturn 5, and about twice the mass. And also the entire ship is designed to land propulsively. It can land on its engines. So it can land on any solid surface in the solar system. If we can make Starship work, then it enables us to, over time, get anywhere in the solar system.

Ron Baron: (21:25) So why is it so hard? Why don’t other people do the same thing? Everyone says it’s impossible. And how much harder is it to do what we’re trying to do than we’re doing with Falcon?

It’s just that in order for a rocket to be reusable, everything has to be perfect. So you have to have exceptionally efficient engines. You have to have an exceptionally efficient structure. You need advanced avionics and software. You need a very lightweight heat shield for orbital reentry.

Elon Musk

Elon Musk: (21:38) Well, so let’s see. Earth’s gravity is actually quite strong, and we have a thick atmosphere. So with known physics, it is only barely possible to make a fully reusable orbital rocket, only barely possible. If this was a video game, the setting is an extreme difficulty. Not impossible, but extreme difficulty. Because it’s not like those who have developed rockets before weren’t aware of reusability. They were fully aware of reusability. Aircraft and cars are reusable.

It’s just that in order for a rocket to be reusable, everything has to be perfect. So you have to have exceptionally efficient engines. You have to have an exceptionally efficient structure. You need advanced avionics and software. You need a very lightweight heat shield for orbital reentry. And then another key factor for traveling to Mars is you need orbital refilling, so that you get the ship to orbit and then you send up tankers to refill the ship in orbit just like is done by the Air Force with aerial refueling. Those are the things that are necessary. And it’s never been achieved before. There have been many attempts to achieve it, and basically, they’ve all failed. And they did usually cancel the program partway through once they thought it was no longer possible. So it’s a very difficult engineering challenge.

Ron Baron: (23:28) So SLS is supposed to get to the Moon, they got a contract in 2010. And it was supposed to be for $10 billion, but it cost plus. It’s now up to $40 billion. And they say it’s going to be $100 billion or $90 billion. And we haven’t gotten anything. Our rocket is 10 meters taller than theirs, and we can reuse ours. How can anyone possibly compete if they’re not doing what we’re doing? How can they compete? I don’t understand. How can they get contracts? I just saw something from NASA. They said, “We’re spending 20 billion a year, and, oh, by the way, that’s 360,000 jobs in all these congressional districts.”

In the case of Starship, the goal is to lower the cost of access to orbit and ultimately to Mars and the Moon and elsewhere, to the point where humanity can actually afford to become a multi-planet species.

Elon Musk

Elon Musk: (24:18) Well, I think I have to be careful what I say here. You know, I have enough enemies. I would like to have a lot smaller number of companies that want me to die. That would be great.

So I think part of this is like, what’s the goal? In the case of Starship, the goal is to lower the cost of access to orbit and ultimately to Mars and the Moon and elsewhere, to the point where humanity can actually afford to become a multi-planet species, to the point where we can afford to have a permanent base on the Moon, and ultimately far exceed the high watermark of Apollo, which was incredible and, I think, inspiring to all of humanity. Everyone. If you would ask people in any country, not Americans, anyone: “What was humanity’s greatest achievement in the 20th century? Maybe ever?” “Go to the Moon.” And that’s why they say ‘moonshot’ as a metaphor. Because that was incredible. You know, so amazing that that was achieved. In fact, a lot of people asked me, was it real? Yeah, it was real.

Ron Baron: (26:07) That was probably on Twitter. That’s where they asked that.

Elon Musk: (26:17) I mean, that was just an incredible achievement. And I think it’s just one of those things that, you know, going to the Moon makes you proud to be a member of humanity. It’s like, for all mankind. It was for all mankind.

Ron Baron: (26:33) So amazing achievements. And now we have this Webb telescope, they can, you know, I guess the Big Bang was 14 billion years ago, and first light is 13 and a half billion years ago, and our planet is four and a half. So what do we get out of this? So obviously, Starlink is a really big deal. A trillion-dollar opportunity maybe, maybe more. So what do we get out of seeing back 13 and a half billion years? What does that do for us? What technology do we develop? How could we know it? We don’t know until we do it.

Elon Musk: (27:15) There’s two main motivations, I think, for becoming a multi-planet species and a spacefaring civilization, and then ultimately, going beyond that, to go to other star systems and explore the galaxy. And I think we may find that there’s many one-planet civilizations that died out millions of years ago and never made it to the second planet.

Ron Baron: (27:50) Do you think in your lifetime, that happens?

Elon Musk: (27:53) It depends on how long I live.

Ron Baron: Maybe forever.

Elon Musk: If I keep increasing that enemies list, it might not be much longer. It’d be deeply ironic if it’s someone angry on Twitter that takes me out.

So anyway, I think there’s two reasons for life as we know it to become multi-planetary. One is the defensive reason, where we just want the light of consciousness to not be extinguished if something would happen to Earth. In the case of the dinosaurs, they only had to worry about, like, you know, meteors and super volcanoes and other things. But for us humans, we actually have the power to destroy ourselves with nuclear weapons or some sort of crazy bio-terrorism thing. So, there’s some danger that is not zero that could cause the end of life on Earth as we know it. So that’s kind of the defensive reason to ensure that life and consciousness is not only on Earth. That’s the defensive reason to protect the future of consciousness.

Then the other big reason, I think, is that it’s exciting, and it’s adventurous, and it’s inspiring, and it makes you think positively about the future. You know, life can’t just be about solving one problem or another. There need to be reasons to be inspired or reasons that move your heart and say, “Yes, the future is going to be great!” when you get up. When you wake up in the morning, “I can’t wait to see what happens next!” And I think that’s humanity going to Mars. Even if you don’t yourself want to go to Mars – and most people don’t – just watch it. It’s a tough gig, frankly. This will not be a luxury expedition. But you’d be able to watch it happen. And I think it’ll just be incredibly inspiring to the world in the same way that the Apollo program was inspiring to the world. And like I said, life can’t just be about solving one problem or another. We need things that make us excited and inspired about the future. And that would be one of them. (30:34)

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