Charlie Rose August 11, 2009 Elon Musk's 2009 sit-down with Charlie Rose: leaving South Africa, co-founding PayPal, and the high-stakes early years of Tesla Motors and SpaceX during the financial crisis.
Elon Musk's 2009 sit-down with Charlie Rose: leaving South Africa, co-founding PayPal, and the high-stakes early years of Tesla Motors and SpaceX during the financial crisis.
Transcript Elon Musk is here. He is chief executive of two startup companies with bold missions. He leads Tesla Motors, the electric car company that has attracted attention from both car enthusiasts and environmentalists as well. The company's powerful roadster, which can travel from 0 to 60 in less than 4 seconds, is entirely powered by batteries. The company plans to break into the mainstream auto market with an electric sedan as early as 2011. Musk is also founder and CEO of Space Exploration Technologies, a company trying to slash the cost of space travel. Last year, the company signed an agreement with NASA to send cargo to the International Space Station. And if that is not enough, he's also chairman of a growing company called SolarCity that installs solar panels on homes and businesses. He has thrived in Silicon Valley, one of the co founders of PayPal, the online payments company that eBay bought for $1.5 billion in 2002. I am pleased to have him here at this table for the first time. Welcome.
Thank you. Thanks for having me. I've been a big fan of the show for a long time.
Let's just talk about you first so that if the audience does not know. Growing up in South Africa.
And how did you end up in Canada?
Well, I guess growing up in South Africa, I was actually. It was very technology oriented. And I taught myself how to program computers, mostly because I wanted to program games. And I, when I was about 12, I programmed, sold my first game. And whenever I'd read about technology and great innovation, it was coming from the United States. And so that's where I wanted to be. And I tried to convince my parents to move there and neither of them would, they were divorced. I tried to. My mother, neither would do it. My mother later moved back to initially Canada and then the U.S. and so when I was 17, as soon as I got my Canadian passport, three weeks later, I was in Canada.
So here you are, and you come to Canada and make it to the United States, and then you and several other guys come together and create PayPal and you sell it to eBay for one point, whatever it was. $5 billion.
Yeah. So after PayPal, that gave me a fair bit of capital. And there were three areas. When I was in college, there were three areas that I thought would most affect the future of humanity, and those were the Internet, the transition to a sustainable energy and transportation sector. And the third was space exploration. In particular, the extension of life to multiple planets. Now, I didn't ever expect to be involved in the third one, but that seemed to me that's something that would be very important for the future. And with the capital I got from the sale of PayPal, I was able to go into both those areas. And so hence SpaceX and in the space and then in the sustainable energy and transportation, you've got SolarCity and Tesla.
Let me talk about space exploration just for a moment. How is it going in terms of creating the systems that will engage us in space exploration, not just for governments and not just for NASA, but for private citizens as well?
Well, you have to divide the efforts that are going on into what is an orbit class effort versus a suborbital class effort. And there's really a very big difference. But, but the general public doesn't understand the difference between getting to space and getting to orbit. And so it's important to make that distinction. To do a suborbital flight, you need a terminal velocity of around Mach 3. To get to orbit you need a terminal velocity of Mach 25. It's a huge, huge difference because the energy required to do that scales with the square of the velocity. So suborbital might be 9 units of energy. Orbit is 625 units of energy. So it's only about 1.5% of the energy of orbit is required to get to suborbit. So there's a number of efforts in the suborbital category that certainly could grow one day to orbital. There's Jeff Bezos has an effort and I know that's something that's really.
Is Branson involved in this or not?
Yes, Branson, absolutely. Not so much directly from the technology standpoint, but from his. He's funding that development at Scaled Composites in California.
So we're in the orbit class and it's a lot more capital and that's really where you're sort of pushing the ragged edge of what's physically possible. And last year we got to orbit for the first time with our rocket and that was certainly a huge relief and a milestone.
And so what's the next step? You get a rocket into orbit. Yeah.
So next month we are putting a satellite for Malaysia into orbit and then from Malaysia. For Malaysia. For Malaysia, yes, the Malaysian satellite. But in the rocket business, the rocket company does the launch. It's not like the airline business. So you don't sell the rocket, you sell the launch. And then later this year we'll be launching our big rocket from Cape Canaveral. That's the Falcon 9 and that's the one that's going to be servicing the space station among other things.
Is there a philosophy here that somehow the private sector can do a lot more than it has done in areas that seem. Because of the size reserved for government?
Yeah, definitely. The private sector is very good at optimization and innovation. I mean, private sector is generally better at doing things than the government, I think that's fair to say. But, you know, there are certain things that the government that are suited to the government, like basic research and that sort of thing.
yeah. So as far as SpaceX, the reason that there hasn't been a huge number of a big improvement in the space industry, I think, is because of it's very difficult for SHINPA to create a destruction process to come into effect because there's such a significant amount of capital that's needed to start a rocket company. And it's a very difficult technical challenge. And the number of people that really understand rocketry in the world is a very small number. So it's really huge barriers to entry. And that's why we haven't seen the forcing function of improvement that there should have been over the years.
And your understanding came from sort of. This was not what you studied in college?
Well, studying physics and studying rocket science.
Yeah. No, it gives you the basics. Gives you the basics. Good framework, Good analytical framework. But no, I picked it up along the way.
What is your core competence? You think you.
I think it's technology. Technology, yeah, technology. If something has to be designed and invented and you have to figure out how to ensure that the value of the thing you create is greater than the cost of the inputs, then that's probably my core skill.
Now, bring me to the car. I drove a car this afternoon. So far, so good, which was terrific. It's the roadster. Where does that stand you? Obviously, I've been in the Google parking lot.
You've seen a few there, I've seen
a few there, yeah. I'm sure that's true in other places in Silicon Valley. I don't know whether it's particularly a car that appeals to people in Silicon Valley because of interest in technology and high performance and lots of other things, or what, whether there are a lot of rich people who are willing to spend that kind of money for something they think is on the cutting edge of causes they believe in sustainable energy. Tell me about where you are in this development of this electric car which has most of all this extraordinary sort of power.
Yeah, zero to 60 time at 3.9 segments.
This is extraordinary when you think about sports cars and anything else that's out on the road today.
Yeah. In fact, on the Top Gear test track, our standard roadster beats a Porsche GT3. Exactly. Which is.
And the Roadster Sport will be even better.
But you've also said in terms of where you want to go, that developing a high performance sports car is not what this is about.
This is about something else. And you want to develop a sedan.
Yeah. The whole purpose behind Tesla, the reason I put so much of my time and money into helping create the business is we want to serve as a catalyst for accelerating the electric car revolution. The price of gas at the pump does not reflect the true cost of gasoline because you have a consumption of a public good. It's one of the most. It's really a common problem in economics. You have the same thing in fishing, where because there's no cost to fishing stocks, people just overfish and you have disaster that ensues. And here we're not paying for the cost of the CO2 concentration in the oceans and atmospheres, we're not paying for all these, the ancillary effects of wars and all the other things at the gas pump. So you effectively have a subsidy taking place at the gas pump because of that. So the only way to bridge that is with innovation, is to try to try to make electric cars better sooner than they would otherwise be.
Now, suppose this, this is a hypothetical which may or may not speak to the point. But suppose 15 years ago, right. Let's say Bill Clinton as president, who talked about the road to the 21st century and all of that. Suppose he had said, I believe so much in sustainable energy that I want to make a commitment. And the federal government, using all of its resources, will develop an electric car with appropriate battery power that will change the face of automobile, the automobile industry in the world. Was that very doable? Bill Clinton was elected in 1992, 17 years ago.
Yeah. You could have made a reasonably good electric car around that time for a lot of investment.
And should that have been done, should the US Government have made that kind of change? Otherwise you will not be able to change the driving habits of Americans. Was it a worthwhile expenditure at that time?
I think it probably would have been a worthwhile expenditure. But the thing that really helps electric cars is lithium ion.
Right. And when did that come around? I mean, explain why batteries has always been the great dilemma for developing an electric car.
Sure. Well, the energy contained within a battery is so much less than is contained in gasoline that, I mean, it's really almost. It's hard to quite describe. Another way to put it is the Tesla battery pack in the Roadster, which is the most advanced battery pack in the world. The common reference is to call what is actually a cell a battery. So a cell is the little single can of chemicals, and then if you have multiple cells, that's what actually battery. That's literally what a battery means.
Multiple cells. And as the batteries get bigger and bigger, they get harder and harder to deal with. So the cell that we use is a commodity cell.
You can buy it anywhere, pretty much.
And it's the same sort of thing that's in any one number of laptops. The challenge is combining those cells into. And having thousands of them, making sure they're safe, making sure they'll last for 200,000 miles or 100,000 over bumps and potholes and extremes of temperature and safe in a crash. That compounds the problem massively. And you've got to make sure the charges and temperature is balanced across the whole thing. So the difficulty is really at the pack level, much more than it is at the cell level. And that's really where the single biggest area of Tesla's expertise. Although I should point out that Tesla also has. We designed both the motor and the power electronics and the software that manages the whole thing, so those are important, too. But the battery is the single most important thing. And the Tesla battery pack, to reference it to gasoline, it weighs about 1,000 pounds and. And it has the energy content of two and a half gallons of gasoline. So that means you've got to have
Well, what that means is that. But there's an advantage because the consumption of that energy is much more efficient in an electric car. And this is. I'll get to. Why is the Tesla Road twice as efficient as Toyota Prius, which is obviously not a sports car. And the reason is because an electric motor is fundamentally super efficient at turning energy into motion. So a good electric motor, such as the one that we have in the Tesla rosa, is about 90% efficient at turning the electricity into motion, whereas a gasoline internal combustion engine is somewhere typically in the range of around 17 or 18%. Most of what it does is generate heat. So. So even though it's only two and a half gallons gasoline, that two and a half gallons of energy content goes really far compared with, you know, if you had a.
If that was okay compared to the Prius, but also compared to the new GM Volt.
How does it do in comparison with the Volt?
The Volt is a different architecture it uses, it's a plug in hybrid architecture. So it's I think about a 40 mile or so battery voltage.
And then there's a. An engine with a generator that allows you to go beyond the 40 miles.
And whereas ours is pure electric and the strategy that we've decided to hew to is a pure electric strategy. And I mean, I've been criticized sometimes for responding to questions like yours to explain why we've gone pure electric. And then people have taken that to be an attack on the vault, which is not the case. I, I hope the bolt succeeds and I think it can be a pretty good car. I don't take this as an attack.
No, I totally. It's not. But I just wanted to put that.
What I hope to do in this conversation with you is figure out what it is you've done because you've gotten a fair amount of attention. Figure out why you're not further along than you are, or figure out why you are and what your expectations are to do and where is the game for you.
I think it's taken a while for the industry to come around to this point, but I think it's largely. At this point, it's almost become conventional wisdom that the future is electric cars. The only question is this interim period of this transitional period. But if you look at the pace of battery improvement, it's clear that's why, I mean, it's inevitable the future will be entirely electric.
And the irony of all this conversation is that in the last year, a year before its bankruptcy, General Motors had announced that the Bolt was the key to their future as an automobile company.
Right, yeah, exactly. I mean, one area of criticism I think that is valid regarding Jim, is
Prius have to come to that conclusion, by the way.
Well, they should have probably done a Prius or something like that. But I think if you knew they had the EV1.
Right, right, exactly. Which didn't work. Didn't work, but didn't make it for reasons I'm not clear as a marketing success.
Yeah. Chris Payne did a movie, who Killed the Electric Car? And I was sort of trying to investigate that issue. But I think it's notable that in that movie it shows that the customers who had the EV1, the cars had to be taken away from them and crushed. And they held a candlelit vigil. If you have people that really love a product to the degree that they're willing to hold a candlelit vigil for it that says, hey, Maybe you should make an EV too.
It certainly does say that, you know, so the car that I drove today, the Roadster 2, I think, I mean, I think it was a roadster before this. This is. Right. Second iteration of it. Yeah. Came. Came through production. What year?
The first roadster, number one. The first. First production roadster, which was fully, you know, Department of Transport legal and all
that sort of stuff, met all the standards.
Yeah, yeah, it was February of last year and that was my car.
That was the car. Your car, meaning what? The one you had, Unit one. And so then you decided immediately to make improvements on that.
Yeah, yeah, absolutely. It was a little rough going in the beginning and we had some issues with some of the powertrain components. In fact, not the hard stuff, but the stuff that's sort of theoretically easier. And we were able to fix those and get production ramped up. And now we're at the point where we're delivering about 20 to 25 cars a week.
You know that Tata Motors obviously, you know, in.
I know, right, from Tata, Take for
a moment what he's doing in India. Yeah. Developing a little sedan for $2,300 a non.
Where do you put that in the whole equation of where the future of cars are?
Well, I think it's a good idea to have affordable cars. You know, I think, I think the problem with something like the Nano, which I think, by the way. I'm sorry, problem. I think it's a great idea and rotten is a gentleman in the skyline.
Exactly. All of those I agree with. Yes, it's hard not to.
Yeah, exactly. I think where it's going to become challenging in the future is as the price of gasoline rises, the cost of acquiring the car is much less of an issue than the cost of operating that car. And I think oil is in the
market and it's inevitable. It's already moving back up. And you. Do you have some assumptions in your own calculations as to where oil will level off?
I think it will exceed the numbers we've seen last year, 144. Oh, yeah, sure, absolutely. I think we'll see it sort of approach $200 and beyond by 2010, 1112, somewhere in there, whenever the next boom is. So let's say the next boom is four years from now. It'll be around that point.
Of all your businesses, which one do you care the most about?
Well, right now my time is split roughly evenly between Tesla and SpaceX, so I guess it would be pretty even between the two. And SolarCity is doing great on its own. And the two co founders there, Lyndon and Peter Rive, have done a phenomenal job and thankfully requires very little of
my attention right now. The reason to create a sports car, a roadster, as the first stage of this is because it attracts attention or what?
Oh, so good. Great, Great question. So, because people often misinterpret why we have created a sports car, because they will say, you know, the implication will
be sports cars for rich guys is not a way to solve the energy problem.
Right, Exactly. And they were sort of like, did I feel that there was somehow a shortage of sports cars for rich guys or something like that? And that was the part. If any new technology is expensive when it starts out, and you can point to pretty much anything, because the first thing that engineers are trying to do is make it work. And then when you make it work, then you optimize and you optimize and you optimize. And if you look at the early days of computers or cell phones or almost anything, even the early days of gasoline cars, they used to be toys for rich people until they were made affordable and mass produced and report came along. Yeah. And then you combine that would have been at the car, but then you combine that with the fact that we were just a little startup and there's just no way that we could afford a billion dollars to make a giant car plant that would make hundreds of thousands of cars a year, because that's the kind of volume you have to get to make cheap cars. And it's also the first iteration of technology. So we have both a volume problem and a new technology problem. And so naturally, you have to.
You have to reach scale, and you have to work the bugs out of the system. And so you've got to make. And you want to make your mistakes at a small scale.
Okay, so how's that going? Reaching scale and being able to create, marketing a business plan that will enable you to reach a large audience and create and continue the development of the technology that will make it even more attractive.
It's going really well, actually. So we had a few bumpy years in the beginning, but at this point, we're producing at a steady state of about an annualized production rate of about 1,000 roads to sports cars a year. We unveiled our sedan a few months ago, which is a much more functional car. And it's a $50,000 car. So it's basically, it's about half the
price of the roadster and the production run, say, for the year 2010, for the Roadster will be about 1,000. And for the sedan?
The sedan is only coming out in
two years, so 2011 will be the first year. And what's the projection for that?
We're expected to do 20,000 units a year for the sedan. It's always difficult to predict these things exactly, but our target is we'll produce a total of about 100,000 of them in about 20,000 a year. And there are going to be many variations on that. We'll do an SUV and we'll do, you know, other things, and then we'll do a third generation platform beyond the sedan. The Model A sedan will be a sub $30,000 car. So we're trying to get to mass production as soon as we possibly can. And that's both from the cars that we make ourselves as well as the cars we do in partnership with others, like the Daimler deal you may have heard about.
So how do you measure the odds of success?
Personally, I would say success for me, for Tesla is that we've accelerated the advent of electric cars by at least five years.
So that the goal to accelerate the advent of electric cars or to create a great electric car company, I think
the two are synonymous. Or I mean, you do one, you do the other.
And why is it that it's happening by a guy who created a startup in 2003 rather than a whole range of sort of industrial automobile companies around the world, not just here. Fiat is a successful car company name that, own Chrysler. Right.
Well, disruptive technology, where you really have a big technology discontinuity, it tends to come from new companies. You know, you could ask the same question of why does Google come from. Why did Google come from Larry and Larry Sergey, by the way, I've known Larry since before he got venture funding for Google.
But is he an investor in Tesla?
He is. Larry and Sergey are investors in Tesla
and they drive them or don't drive them.
Yeah, they drive them, absolutely.
Because some of the criticism that comes at you and the company now is that you went out to seek a lot of external financing and did not reach your goals.
Well, it's taking us longer to reach our goals, but we are definitely.
What was it? Raise 100 million to raise 40 or what was the goal?
Well, I think some of the stumbles were silly mistakes we made ourselves. Some of them were market externalities and we were getting ready to raise, or we're in the process of raising about $100 million round that began in sort of the summer of last year. And then Ran into, you know, force five hurricane.
An economic circumstance that took everything inside.
Yeah. And so that forced us to scale back our plans a little bit. We had to do a layoff and we had to raise the money internally from existing investors. I had to put up a lot of the money personally and there was just no money. And so that was, it was sort of a hair raising time for the company. But at this point we're actually in good shape. We expect to be profitable in the third quarter.
And that comes from the success of the Roadster.
Yeah, and the Roadster. Then we also have a powertrain supply business to Daimler as well for an electric Smart that we're doing with them.
Make the Smart car an electric car?
Yeah, you know, the Smart car was always intended to be an electric car, but they could never, they could never get the battery right. So a year and a half ago we met with Daimler and I was trying to convince them to work with us. I mean, we've really tried hard to work with a lot of different car companies.
Well, I guess they think, well, they took the attitude of what does some little startup in Silicon Valley know that we don't know or couldn't do?
What would you say to them?
Well, we drive our car and look at our technology and I don't know, it just never seemed to sort of sink in.
Daimler did actually. So I went through Stuttgart on the way to India actually and met with Dr. Weber, the head of Global R and D and we had a conversation. I said, well, what does it take for us to work together? We'd love to do something. We'd love to do something with an affordable mass market car that we ourselves could, couldn't do right now because we
don't have the capability geared up to Zimmer line. Most of it.
Yeah. And so I said, what about electric Smart? Because the Smart was always intended to be an electric car and what would it take for us to work together? And he said, well, if you could do a prototype, that would really go a long way. So we did, we worked really hard. The powertrain team led by JB Straubel did an awesome job. And 40 days later when, when they came out to visit, we said, here's a car, take a drive. And they really liked what they saw.
And so what did they do then?
They said, ok, well let's take it sort of another step further. And they gave us a little R and D contract and eventually got to the point where we got a contract to supply 1000 cars for them and then if we do well in that, we'll potentially go into tens of thousands of cars. But this is a car that everyone could afford and, and could hopefully come quite soon.
Do you have a profile of the people who you think will want to buy these roadsters?
Yeah, absolutely. It's the kind of person who likes a performance car. Maybe they own a Porsche or Lamborghini or something.
This car is actually faster than Lamborghini 00:60?
Yeah, I think faster than almost anything I know of. Yeah, I mean the really sort of million dollar supercars, obviously those will, those will beat it. Like the Ferrari Enzo is going to be faster, but it's pretty much faster than any normal sports car and it's really easy to drive. If you want a high performance car with a clean conscience, this is the only option the sedan is going to be for someone that wants a great sedan and also clean conscience. And it's also going to be cheaper to operate than.
You are, as you well know, a controversial guy as well.
I try to, I try not to be controversial but it seems, controversy seems to find me.
It finds you. It finds you because you think big. You're a software guy who has been successful in the private sector.
You know, and see no reason you can't do things that other people have not been able to. No other how large the corporate enterprise. Create the best electric car or b put privately astronauts in space, which you say you will do in two years?
Well, yeah, it sort of depends on when NASA asks us to do that. So if NASA turns on access to do that this year, which we're hopeful that they will. The White House has a convene a panel on the future of human spaceflight that that panel is going to make the recommendations in a few months. I hope that some of those recommendations will be favorable to SpaceX because the alternative is if, if Space X doesn't do it, we will be entirely dependent on the Russians to carry our astronauts to the space station after 2010 and billions of dollars will be spent on essentially a sole source situation to the Russians, which I think is outrageous.
And you haven't taken advantage of the opportunity to go in space yourself, have you?
If it was purely a matter of personal interest, I would have done it already. I mean I do want it, I do want it.
Sergey interested in that or. No, Sergey has expressed some interest in that.
Some interest, yes. Yeah, I would like to go at some point, but it's. I'm also in the point where it's difficult for me to take personal risks. I used to take a lot of personal risks because of children. I've got my kids and responsibilities with companies as well. And so if I do things where they have personal risk, at this point, I risk more than my own being.
How many trips? You have one set of triptas and one set of twins.
Yeah, have the twins with me in New York, actually.
Yeah. They can't drive. They can't go on the roadster because it doesn't. It's not very kid friendly. But no, it's not very different.
The sedan will be ideal for them.
Much success to you. Thank you for coming. Thank you for joining us. See you next time.