#399 How Elon Works

The biography of Elon Musk that was written by Walter Isaacson came out a few years ago, it's 615 pages long, and so I read the book for the first time when it came out, and I didn't think I can make a great episode about it, and I think I've now finally figured out what I really want to talk to you about. It's going to sound crazy because Elon is the richest person on the planet and the most famous entrepreneur alive, but I think that all of the other stuff, the politics, the tweets, the constant appearance in the news, or there's new controversies all the time, it just really distracts and takes away from the fact that Elon has a set of timeless and brilliant and insanely valuable principles on how to build companies, how to invent new technology, and how to make an impact on the world around you. And so this is what I did. I have spent at least 60 hours reading and rereading this book. This book is written in chronological order, so I would say it's more akin to reading a series of news reports over a few decades than the typical way a biography is written. And so as it turns out, that's going to be a major asset for you and I because what you'll see and what I exclusively want to focus on is the enduring set of company building principles Elon has used over three decades and across at least seven companies. So it may be apocryphal, but there is a quote from Michael Angelo when he was asked like how he created the statue of David and he replied, I just chipped away everything that was not David. So what I've done is edited down my 40 pages of notes and highlights in the book into just the way that Elon works. I want to focus on the ideas that he used to build his companies and to build what I think is a truly singular career. I don't think there's anyone else like him living or dead. And so I'm going to go through his ideas in chronological order so you can see how they appear reappear and how they are edited and iterated on over time. And so at the end of the episode, or by the end of episode, it will be impossible for you not to understand how Elon works. And then what I think we both should do is we should sit with these ideas, write them down, and then think deeply about how we can apply to some of them to our work. I think one of the superpowers of this project that has been going on for almost a decade where you and I get together every week and we talk about another one of history's greatest founders is that we see that somehow people that didn't know each other were alive at different points in history worked in different industries, lived in different parts of the world, all arrived at very similar conclusions on how to build themselves and their company into something great. So I want to start when Elon's in college right before he starts his first company, Zip 2. This is something that's mentioned. Every single thing I want to tell you is repeated over and over again. This is why I think they're so powerful. So one thing that's repeated over and over again is the fact that Elon loves strategy games. Whether they're board games are their video games. In this case in college, he was obsessed with this board game, this classic strategy board game called diplomacy. And it says that immersing himself in these games for hours became the way he relaxed, escaped stress and honed his tactical skills and strategic thinking for business. He was drawn to these games from an early age when he was asked why he told one of his friends, I am wired for war. That sentence, I am wired for war, Elon will repeat across decades. When he was in his early 20s, he had an internship, says Elon did not like nor was he good at working for other people. It was not in his nature to be deferential or to assume that others might know more than he did. Again, he was like this in his early 20s. He's still like that today when they start Zip 2. One of the things that he repeats over and over again is the importance of being hard core of working every single waking hour. When they started Zip 2, they slept in the office and showered at the YMCA. Another one of Elon's core principles, this is the way I describe it, this is not the way he describes it, is that Elon understands that showmanship is salesmanship. So they would bring people into the Zip 2 office. It says they bought a big frame for a computer rack and put one of their small computers inside so that visitors would think they had a giant server. Every time investors would come in, we showed them that tower. It made them think we were doing hard core stuff. You will see him use that over and over again. Elon understands the power of one dramatic demonstration. From the very beginning of his career, Elon was a demanding manager, contemptuous of the concept of work life balance. He drove himself relentlessly all day and night without vacations and he expected others to do the same. His only indulgence was allowing breaks for intense video game benches. That's a description of Elon in his 20s. I don't think he can be any other way. One thing he says when he's building Zip 2 and uses it for the rest of his life, he is not a fan of camaraderie or being overly collegial with the people you work with. He says over and over again, it's both doing so, it's both counterproductive and dangerous, and it gets in the way of actually putting the mission first. So he says he genuinely did not care if you offended or intimidated the people he worked with. As long as he drove them to accomplish feats that they thought were impossible. It's not your job to make people on your team love you, he would say years later at a SpaceX executive session. In fact, that's counterproductive. One thing that he did not like early in his career and he never likes, he hates middlemen. A good way to think about Elon is Elon wants full control over everything. Always true product people have a compulsion to sell directly to consumers without middlemen mudding things up. Elon was that way. Less than four years after Zip 2, Elon and his brother, they went up selling the company to compact computer, compact, bought it for $307 million in cash. So by the time Elon was 27 years old, he had $22 million from the sale of his company. And what's fascinating is there's all these interviews he was doing when he was 27 and we see that he's not, it's not the money that's the motivator. The true sense of satisfaction, the true sense of accomplishment is building a real company. And so he says I could go buy an island, but I'm much more interested in trying to build and create a new company. I haven't spent all of my winnings. I'm going to put almost all of it back into a new game. He said the real payoff is the sense of satisfaction in having created a company. And so this is the note I left after I read the book and I go back and I reread my highlights and notes compulsively before I sit down and talk to you. And so this is what I said, make money and put it back into another company. That is a trait of his that he repeats for decades more than 20 years later. When he had a bunch of cash from selling Tesla stock, he put it into Twitter. He hates having money just sitting there. And so that's a theme that's going to appear over and over again is the fact that the money is for putting it into company and solving a problem. What interested him was the problems that he wanted to solve. And he was willing to have a insanely high risk tolerance, even when he's younger, because he said, I mean, they're going to be wealthy or broke, but it's not going to be anything in between. And so another enduring principle of the islands that he used to start his career is the fact that belief is irresistible. You will hear quotes like this across decades from different companies and from all kinds of different people than new Elon, even when it seemed like crazy talk, you would believe him because he believed it. Elon has the ability to transfer his belief to other people. He is contemptuous of work, life, balance. His management style has not changed from zip to nor would it ever. I am by nature, obsessive compulsive. Elon said, what matters to me is winning and not in a small way. So Elon starts his next company. And it's the exact same management style that he had at his first company, and he will have forever. One of Elon's management tactics was to set an insane deadline and drive colleagues to meet it. Elon slept under his desk most nights. Elon is intense in all things. This is a description of him when he's playing video games. He was sweating, and you can see that he has a bundle of energy and intensity. One of the most shocking things of this book, especially if you eliminate everything that's not how Elon works, is Elon's obsession with simplification and deleting. Half the book is him just yelling at people to delete, to edit, and to simplify. He does this relentlessly. He had a passion for simplicity when it came to designing user interfaces. I honed the user interface to get the fewest numbers of keystrokes to open an account. Elon said one of the conflicts he had with his co-founders of PayPal was the fact that he was not interested in making niche products. And you see a drastic difference in the size of his ambition after selling PayPal. It says it was not in Elon's nature to make niche products. He wants to remake entire industries. We are 79 pages into this book, and you will see one of his most repeated principles. He has to mention this, I don't know, 25 times for this book. Elon restructured the company so that there was not a separate engineering department. Instead, engineers would team up with project managers. It was a philosophy that he would carry through to Tesla, SpaceX, and Twitter. Separating the design of a product from its engineering was a recipe for dysfunction. Designers had to feel the immediate pain if something they devised was hard to engineer. Engineers rather than product managers should lead the team. One of my favorite maxims from the History of Entrepreneurship is that if you know your business from A to Z, there's no problem you can't solve. Over and over again, starting with PayPal and all the way up until present day, people are shocked at how much detail Elon knows about their area of the company. So we have one of his co-founders, Max Lovechin, back in the PayPal days for saying, "Elon will say crazy stuff, but every once in a while who's surprised you by knowing way more than you do about your own specialty. I think a huge part of the way he motivates people are these displays of sharpness." Another principle that he identified, in my opinion, very correctly, from young age is the fact that the CEO, the founder, should be the public face of the company, and that he really believed he was the best spokesperson for his company. Here's a collection of descriptions of Elon when he was building PayPal. The reason I include this is because Elon is still like this three decades later and you'll have people on all of his other companies say the exact same thing about him. He has a relentless and rough personal style. He has a desire to take risks. He was into amplifying risk and burning the boats so that we could never retreat from it. He has a level of certainty that causes him to put all of his chips on the table. And then what I would say is they talked about the fact that he got kicked out of PayPal as CEO. He does something really smart, which I'll get to later, which he doesn't destroy the relationships with his co-founders, which actually winds up saving SpaceX about a decade later. But I think it's very obvious and it's very important. Elon has superhuman levels of self-confidence. He was being interviewed by the author by Walter Eisen, many decades later. And he says this, if I had stayed, PayPal would be a trillion dollar company. I think he truly believes that in his heart and soul. So when he gets kicked out of PayPal, he's got to pick what do I want to work on next? And this is where his ambition just skyrockets. And so he's going to start a rocket company. This is what he does. He went to the Palo Alto Public Library to read about rocket engineering and started calling experts asking to borrow their old engine manuals. There would be many times where people said Elon read everything. This is something that reappears with the history of entrepreneurship. The shorthand I have for this is they devoured entire shelves. Thomas Edison, Winston Churchill, Michael Dell, Edwin Land, they would read every single thing in the library on their subject of interest. One of my favorite stories about this is Edwin Land goes to Harvard is obsessed with the science of light and optics, reads every single book on light and optics in Harvard's library. Once he gets to the end, realizes I've learned everything I can learn here, drops out, moves to New York City, goes to the New York City Public Library, does the exact same thing? They devour entire shelves. And so in between PayPal and starting SpaceX, he's asked, what are you going to do? I'm going to colonize Mars. My mission in life is to make mankind a multi-planetary civilization. He was talking to somebody and they're like, wait, how is this a business? Then the person he's talking to is like, oh, Elon doesn't think that way. Elon starts with a mission. This is very important. This will be repeated over and over and over again. Elon starts with a mission and later finds a way to backfill in order to make it work financially. And I think the following sentence is one of the most important sentences in the book. It is useful to pause for a moment and note how wild it was for a 30-year-old entrepreneur who had been ousted from two tech startups to decide to build rockets that could go to Mars. Another principle that he starts to repeat around this time, you can still hear this till today is the fact that technological progress is not inevitable. It's not some kind of abstract concept. Humans make technology. If we don't do it, it will not happen. It just doesn't march forward on its own. In many cases, it could even backslide. He says, people are mistaken when they think that technology just automatically improves. It only improves if a lot of people work very hard to make it better. This is directly tied to one of his most used principles. Elon has the ability to see his endeavors as having epoch making significance. One of Elon's greatest skills is the ability to pass off his vision as a mandate from heaven. He understands the importance of inspiring people, that we must have inspiring things in the world, that we must pursue great dreams. This is what he says, to have a base on Mars would be incredibly difficult and people will probably die along the way just as happen in the settling of the United States. But it will be incredibly inspiring and we must have inspiring things in the world. Life cannot be merely about solving problems. It also has to be about pursuing great dreams. That is what will get us up in the morning. And this next part is like the kernel of an idea that he'll use over and over again that you need to go where you have the highest chance of succeeding. And later on the version that he uses over and over again is you need to go to where the problem is. He's constantly searching for bottlenecks across his entire empire. And then once he identifies them, he just gets on the plane immediately and goes right to the problem and stays there until that problem is solved. He decided if he's going to start a rocket company, it was best to move to Los Angeles. The probability of success for a rocket company was quite low Elon said. And it was even lower if I did not move to Southern California where the critical mass of aerospace engineering talent was at the time. Now the next sentence, I truly believe that sometimes a single sentence can tell an entire story. This next sentence is an example of that. Keep in mind the fact that his first wife's name is Justine. He didn't even explain the move to Justine. That is another thing that will reappear over and over again in Elon's life. In fact, it says Elon was not bred for domestic tranquility. You cannot work as much as Elon works. You cannot dedicate as large part of your waking existence to your work as Elon does and expect to have relationships. So then as he's trying to figure out how the hell do I build my own rocket, he comes up with one of his greatest ideas and something he's going to use for the rest of his career. He names things really well too. He calls this the idiot index. So it says Elon employed first principles thinking drilling down to the basic physics of the situation and building up from there. That is again something you and I are going to talk about a hundred times today. This led him to develop what he called an idiot index, which calculated how much more costly a finished product was than the cost of its basic materials. If a product had a high idiot index, its cost could be reduced significantly by devising more efficient manufacturing techniques. Rockets had an extremely high idiot index. Elon became calculating the cost of carbon fiber, metal, fuel and other materials that went into them. The finished product using the current manufacturing methods cost at least 50 times more than that. The word cost appears 158 times in this book. Elon is obsessed with controlling costs. I have a note to myself from later in the book that says he surrounded himself with biographies. Of course, he's obsessed with cost control. There are many examples in other books that I've read on Elon of Elon obsessively reading biographies. This is something that he is in common with all of his huge greatest entrepreneurs from Elon today, all the way to Carnegie and Rockefeller and everyone in between. If you are great, you stay in the details on costs. That is why ramp is the presenting sponsor of this podcast. I've gotten to know all the co-founders of ramp and I spent a ton of time with them over the last two years. They all listen to the podcast and they picked up on the fact the main theme from the podcast is on the importance of watching your costs and controlling your spend. How doing so will give you a massive competitive advantage. You're going to see this with Elon's companies over and over and over again as we keep going through this book. One of my favorite ways to illustrate this and why it's so important is actually from a biography of Andrew Carnegie. Who keep in mind, when Carnegie sold his company to JP Morgan, Carnegie had the world's largest liquid fortune. The quote from his biography says, Carnegie repeat this mantra time and time again. Elon, as you'll see today, he repeats mantras again and again and again. I'm like screaming about this. I'm telling you if Carnegie says this, if Elon says this, that is, it's like a bright flashing red light to you and I, hey, this is probably a good idea. This is what Carnegie, this is Carnegie's mantra. Profits in prices are cyclical, subject to any number of transient forces of the marketplace. Costs, however, could be strictly controlled and any savings achieved in the costs of goods were permanent. Costs control became nearly an obsession for Andrew Carnegie. It is an obsession with Elon too and that is a main theme for ramp. The reason that ramp exists is to give you everything you need to control your spend. Ram gives you everything you need to control your costs. Ram gives you easy to use corporate cards for your entire team. Automated extent supporting bill payments, accounting and cost control and they do this on a single platform. The greats all study the greats and the easiest way to study the greats today is by listening to founders. So many of the top founders and CEOs listen to founders and I hear from them all the time. Most of the excellent operators I know run their business on ramp. If you're not running your business yet on ramp, you should be make history's greatest entrepreneurs proud by going to ramp.com to learn how they can help your business today. That is ramp.com. Now back to a principle that Elon repeats a lot and laying out the factory, Elon followed his philosophy that the design engineering and manufacturing teams would all be cluster together. The people on the assembly line should be able to immediately collar a designer or engineer and say, why the fuck did you make it this way? Elon explained. This is really brilliant. What he's about to say. It's like it's like a simple genius. If your hand is on a stove and it gets hot, you pull it right off. But if it's someone else's hand on the stove, it'll take you longer to do something. And so he will constantly repeat. You cannot separate design, engineering and manufacturing. They need to be together because you are going to make mistakes and you want to identify and fix some mistakes today, right now. And if you separate them, the mistakes will fester. There's a term that's used in the book that says Elon likes fresh blood. He will churn through people rapidly. If you were negative or thought something couldn't be done, you would not be invited to the next meeting. In any case, you were fired. He wanted people who would make things happen. On to the next highlight. Elon was laser focused on keeping costs down. Cost effectiveness was critical. He challenged to the prices that aerospace suppliers charge for components, which were usually 10 times higher than similar parts in the auto industry. He'll constantly go back. What is the idiot index on this? He'll drill into your meetings. If you don't know, his focus on costs as well as his natural controlling instincts led him to want to manufacture as many components as possible in house. Remember, Elon wants control over everything always rather than buy them from suppliers, which was then the standard practice in the rocket and car industries. He does not give a damn what the standard practices of any industry. He will constantly challenge himself and other people around him. Go down to first principles thinking. Here's an example of the idiot index. A supplier quoted a price of $120,000. Elon said that the part was no more complicated than a garage door opener and told one of his engineers to make the part. His engineer made it and it only cost $5,000. This directly leads into another one of his most repeated principles and one thing that he repeats over and over again, you need to question every single requirement. He probably says that 25 times in the book. He made his engineers question all specifications. This would later become step one in a five point checklist dubbed the algorithm. They became an off repeated mantra when developing products whenever one of his engineers cited a requirement as a reason for doing something. Elon would grill them who made the requirement and answering the military or the legal department was not good enough. This is brilliant. Elon would insist that they know the name of the actual person who made the requirement. All requirements should be treated as recommendations. Elon repeatedly instructed. The only immutable ones were those decreed by the laws of physics, he said. Another one of his core operating principles that he will repeat over and over again is that a maniacal sense of urgency is our operating principle. A maniacal sense of urgency is our operating principle. Here's an example of that. How in the fuck can it take so long, Elon asked? This is stupid. Cut it in half. Muehler bought. You can't just take a schedule that we already cut in half and then cut it in half again. Elon looked at him coldly and told him to stay behind after the meeting. He then asked Muehler whether he wanted to remain in charge of engines. When Muehler said yes, Elon replied. Then when I asked for something, you fucking give it to me. Half of this book is Elon telling people to go faster. This is why he does this. Even though we failed to meet most schedules or cost targets that Elon laid out, we still beat all of our peers' mule or admits. That is the result of having a maniacal sense of urgency as your operating principle. Another thing he repeats to everybody around him, he expects you to know all the details of your part of the business and he will erupt in anger if you don't. Elon peppered them with technical questions. He would erupt with searing theory when an engineer did not know an answer. He considers herself a front line general. He will repeat over and over again how important it is to be a front line general. He's on the factory floor. He's climbing on top of roofs. He's underneath rockets. And so as a result that he's constantly there talking directly to the people doing work, says Elon's willingness to work all night at the factory pursuing innovations inspired his engineers. Another thing it's important to understand and repeat is Elon wants total control all the time, always he does not like partnering with other companies. He will turn through people. There is an exception to this. Says Elon does not naturally partner with people. Colligiality was not part of his skill set and deference, not in his nature. He does not like to share power. One of the few exceptions was his relationship with Gwen Shotwell. She has worked with Elon for more than 20 years, longer than anyone else. And so she has a bunch of advice on how do you actually work with people like this. Says Shotwell thought the team was clueless. This is when she first met Elon. Shotwell thought the team was clueless about how to sell services. The guy you have doing discussions with possible customers is a loser. She told Elon bluntly the next day she got a call asking her to be vice president of business development. This is very obvious if you read a bunch of books on Elon also pops out in a bunch of books on Steve Jobs. I would say the principal applies across when you're dealing with these maniacal people like this. The worst thing you can do is knuckle under. The worst thing you do is back down. They only respect strength. And over time is to become more powerful and more famous. Very few people actually tell them the truth. And so what Gwen did there is perfect. Like no, this guy's a loser and here's why I could do this better. And then at the very beginning of Tesla, we see the exact same idea used over and over again. Again, this is repeated over a decade. Elon focused on the importance of the mission rather than the potential of the business. Here's an example of his obsession with cost control and with control in general. One of the most important decisions that Elon made about Tesla was that it should make its own key components rather than piecing together a car with hundreds of components from independent suppliers. Tesla would control its own destiny and quality and costs and supply chain by being vertically integrated. Creating a good car was important. Even more important was crafting the manufacturing processes and factories that could mass produce them from the battery cells to the body. In the early days of the industry, Henry Ford and other pioneer car makers did most of the work in house. When I got to the section that no other myself is Ford was so obsessed with control, he owned a fucking railroad and he did that so he could ensure all the source materials that he needed for his car, which he also owned got to him when he wanted them. And so that's the way the industry starts then in America deviates and they wonder why the quality falls off a cliff. And then 50 years later, you have Elon started another car coming. He's like, no, I'm just going to go back and control everything. This is one of the things I personally admire most about Elon. He's anti outsourcing. And over the following pages, there's just a few lines that give you an idea why he has to be this way. It is in his nature. Elon had to have ultimate authority. It was not in his nature to defer few pages later. He could not refrain from getting involved in design and engineering decisions. Now one area that Elon is very different from most of the people that you and I study is the fact that he's running all these companies simultaneously. Usually the people you and I talk about are focused inside one company. Now what I realize is one of the benefits of running multiple companies simultaneously is this transfer of ideas and lessons learned in one to other ones. And so I'm going to bring that to your attention a few times today. So to hopefully to for that lesson to like really stick in your brain. But here's the first example over the years. Elon was able to use techniques learned at SpaceX and apply them to Tesla and vice versa. Whenever hard push back on the cast of carbon fiber. This is at Tesla. Elon sent him an email. Dude, you could make the body panels for at least 500 cars per year. If you bought the soft oven, we have it SpaceX. If someone tells you this is hard, they are full of shit. Let's go to one trade of his that ties everything together. This guy's got superhuman levels of determination and there's just the only way that he's ever going to quit is when he dies. And what's fascinating is even people that made money off of him in the past still underestimated his level of dedication. And so he's pitching Michael Moritz at Sequoia to invest in Tesla even though they made a bunch of money in PayPal. And so Moritz calls Elon. He's like, hey, I'm not going to invest. We're not going to compete against Toyota. That is mission impossible years later. Moritz conceded. I didn't appreciate the strength of Elon's determination. Another principle I've already mentioned once it's over and over again in the book. The maximum I have on this is showmanship is salesmanship. Elon had an enthusiastic attraction to publicity. Elon believed an important element in launching a new product is an event. So they're building the very first Tesla Roadster. I think they only made like 2500 of these things. When the prototype Roadster was ready, Elon put on the event. And then this also ties in the fact that he's a showman, but he's obsessed with details. All of his ideas, you'll see he uses the nerve again, but they interact well with each other. This is the magic. So when the the event for the prototype Roadster was being planned, Elon planned the event. Elon personally took over planning the event. If it's I guess my, what I'm trying to say here is if it's important, he's doing it. He oversulled the guest list, chose the menu and even approved the cost and design of the napkins. Another thing that's repeated over and over again in the book by Elon is the importance of making sure that you have failures. He says something later on. He's like, yeah, your first 50 failures are going to be really painful and they're going to really hurt. But eventually over time, you're less emotional. And if you're less emotional, you could take more calculated risk. What I would say is one of the most important things about this book is the book is full of Elon making decisions that he'll come to regret later. That is inevitable if you're trying to succeed anything especially trying to innovate and create something new. And then I think one of the most important concepts of this book that really sat in my mind after is like, oh, the people that succeed the most also have the most failures. And part of what makes him most successful and also fail a lot is the fact that he doesn't have any patience. It's a virtue that he lacks. And so he's talking about the fact that they try to build and launch the first SpaceX rockets from this remote island called Quash. And he says, Elon would later admit that moving to Quash was a mistake. He should have waited for Vandenberg to become available, but that would have required patience and that's a virtue he lacked. This is what Elon said. Every now and then you shoot yourself in the foot. If you had to pick a path that reduced the probability of success, it would be to launch from an inaccessible tropical island. And so then they tell a story about just how difficult it was because of this remote location, just to get the supplies they needed for the rockets there. And so this is a great little story don't worry about remembering the names of the story. The capacitors were available in an electronics supplyhouse in Minnesota. So an intern that was in Texas was dispatched there. So send the intern from Texas to Minneapolis to pick that up, right? Meanwhile, Altan removed the power boxes from the rocket on Omuleck, which is this island in the Pacific, jumped on a boat to Quash, slept on a concrete slab outside the airport waiting for an early morning flight to Honolulu, and then made the connection to Los Angeles and then drove to SpaceX headquarters. There, he met the intern who had gone from Texas to Minnesota. Now he's in LA who had arrived from Minnesota with the new capacitors. He swapped them into the faulty power boxes. Then he and Elon jumped into Elon's jet for the dash back to Quash. Keep in mind at this point, they had SpaceX had yet to successfully launch a single rocket on the plane. Elon bombarded him with questions on every detail of the circuitry. So that part reminds me of this excerpt from the Elon biography that was written many years ago by Ashley Vance. And the way I think about this excerpt I want to read to you is this is how Elon thinks about the relationship between time and money, and it's one of my favorite ideas I've ever come across. So it says Elon would always be at work on Sunday, and we had some chats where he laid out his philosophy. So this is an early SpaceX employee that is telling us this story. He would say that everything we did was a function of our burn rate, and that we were burning through a hundred thousand dollars per day. It was this very entrepreneurial Silicon Valley way of thinking that none of the aerospace engineers in Los Angeles were dialed into. Sometimes he wouldn't let you buy a part for two thousand dollars because he expected you to find it cheaper or to invent something cheaper. Other times he wouldn't flinch at running a plane for ninety thousand dollars to get something to the quage because it saves an entire work day. So it was worth it. This is my favorite part in the main point. He would place this urgency that he expected the revenue in ten years to be ten million dollars a day, and that every day we were slower to achieve our goals was a day of missing out on that money. And then I absolutely love Elon's response to failure, to a rocket blowing up to not having a successful mission. Later that day, he posted a statement. SpaceX is in this for the long haul, come hell or high water. We are going to make this work. I think those kind of statements are important. We're in this for long haul. We'll never give up. We take our work deadly seriously. And another way you can demonstrate this type of commitment and dedication to excellence is by proving to your customers that you're keeping their data secure by using Vanta. Vanta's value prop is very clear. Vanta helps your company prove that you're secure. So more customers will use your product or service. Many companies will not sign contracts unless you're certified. And this is causing you to lose out on sales. That is why the average Vanta customer reports a five hundred and twenty-six percent return on investment after becoming a Vanta customer. Vanta helps your company automate compliance, security and trust. Think of Vanta like an intelligent security assistant that helps your company pass audits without tons of manual work. So not only do you make more money with Vanta, but you also save more time. Manual compliance is slow and painful. Doing everything by hand takes months. The best companies will not tolerate wasting valuable company time, doing something with labor when technology can automate it. Half this book is Elon telling his company to speed up and to go faster. And Vanta helps you do just that. Vanta will help you win trust, close deals and stay secure faster and with less effort. Go to vanta.com/founders to learn more and you'll get a thousand dollars off. That is vanta.com/founders. So then we get right into another one of Elon's principles that he will use over and over again. Go to the problem, fly to the source, go to the exact location in the factory. Go to where the problem is. So they're trying to build a roadster cost or drastically expanded. The target cost of the roadster goes from they thought it's going to be $50,000 to make each one. The cost has now swelled to 83,000. And so as soon as Elon hears this, he calls one of his employees is I'm getting in my plane. I'm going to pick you up in Chicago and we're going to sort this out in England. He flies directly to the factory. This is Lotus Factory to try to figure out what's going on. Go to the problem, fly to the source, go to the exact location in the factory, go to the problem physically. You'll be amazed how many times Elon uses that principle over and over and over again. And so Elon will talk later on about how he just repeats the same things over and over again. And he's constantly teaching and training everybody around him. And one of the ideas that he repeats over and over again is you were not friends with people on your team wanting to be everyone's friend lead you to care too much about the emotions of the individual in front of you rather than caring about the success of the entire enterprise. Now I'm going to pause there. I could see how other people are like, hey, I don't want to be harsh with people around me. The next sense of this is really explains. I think in the best way possible why he's like this. He says that approach can lead to a far greater number of people being hurt. His point is you have to demand demand demand excellence from everybody in your team that the mission is over the personal feelings. But if you let these, you know, instead of having A players, you have this B or C player, they can jeopardize the entire mission. So instead of hurting one person's feelings, when we all go to business, you're going to hurt thousands of people's feelings. And one thing Elon picked up on and there's a great line in the book about this. It says A players don't want to be around fuzzy thinkers. Elon is always very easy to understand. He may be asking for things that are what you think are possible, but you definitely understand what he wants. He's not, I don't think you can describe him at all. He's very clear thinker. The opposite of a fuzzy thinker. And then he also tells people around him what's important to him. I'm not willing to share ultimate responsibility and power. He says I've got to have both hands on the steering wheel. I can't have two of us driving. And in the book, there's many examples of just like how powerful his presence is, how intense he can be. In fact, I thought this description, his first wife has a great description of Elon in the book. And there's actually a lot of people in the book that says Elon has multiple personalities in the same head. And I think Justine describes this wonderfully. She says he's strong, willed and powerful like a bear. He can be playful and funny and romper around with you. But in the end, you're still dealing with a bear. And then we see several more examples of what Megamore said. Elon is relentless. Elon will not give up. It's very hard to beat somebody that just will not give up. SpaceX had crashed three rockets in a roll. Elon was not ready to give up. He would go for broke literally. He said, I will never give up. And I mean never optimism pessimism. Fuck that. We're going to make it happen as God is my bloody witness. I'm hell bent on making it work. And so it's nice to say that. It's nice to believe that. Are you actually willing to do it? Do you and I know maybe the greatest maximum in history of entrepreneurship? Ever excellence is the capacity to take pain. Elon has infinite levels. He has unlimited capacity to take pain. This is a description of him when he's 37 years old and both SpaceX and Tesla are about to die. He is now with I think his second wife, Talula Riley. And this is what she described. Talula watched in horror. As night after night, Elon had mumbling conversations with himself. Sometimes flailing his arms and screaming. He was having night terrors and just screaming in his sleep. He would wake up, go to the bathroom and start vomiting. Elon's tolerance for stress is high. But 2008 almost pushed him past his limit. I was working every day all day and night in a situation that required me to pull a rabbit out of the hat. Now do it again. Now do it again. Elon says. This is what I mentioned earlier. I don't even understand why I can just tell you that this happened. I don't understand why it was very wise on his part when there was a coup and he was kicked out of PayPal by his co-founders. He moved on and he didn't let his relationship with his PayPal co-founders die. Six to seven years later, they helped save SpaceX. Elon had stayed friendly with the coup leaders from PayPal. Peter Till agreed that his fund could put 20 million dollars into SpaceX. Elon says after I got assassinated by the PayPal co-leaders like Caesar being stabbed in the Senate, I could have said you guys suck, but I didn't. If I had done that, founders fund wouldn't have come through in 2008 and SpaceX would be dead. That is one of the ways he saves SpaceX. One of the ways he saves Tesla is by convincing a giant car company, Daimler, to invest. Now this story is going to combine two of his operating principles that he repeats over and over again. It's this idea that a maniacal sense of urgency is operating. He can combine that with dramatic demonstrations, which again the way I would describe the maximum for his dramatic demonstrations. Showmanship is salesmanship and it can take many forms. Here's an example. Daimler executives told Elon that they were interested in creating an electric car and they had a team that was planning to visit the US soon. They invited Tesla to show them a proposal for an electric version of Daimler's smart car. Tesla scrambled to put together an electric smart car prototype by the time the Daimler team had arrived. So they bought a smart car and then put a roadster electric motor and battery pack in it. This is so great. When the Daimler executives arrived at Tesla, they were expecting some lame powerpoint presentation. Then Elon asked them if they wanted to drive the car. Tesla had created a working model. Daimler executives were shocked. So they put the Daimler executives inside the car. The car bolted forward in an instant and reached 60 miles per hours in four seconds. It blew them away. Elon then asked Daimler to invest. Daimler agreed to take a $50 million equity stake in Tesla. This is what Elon said about this. If Daimler had not invested in Tesla at that time, we would have died. Before we get back into the book, I need to tell you more about this idea. This idea that showmanship is salesmanship is extremely important. Steve Jobs said that the storyteller is the most powerful person in the world. Don Valentine found her Sequoia. He has this great line about this too. He says the art of storytelling is critically important. Most of the entrepreneurs who come talk to us can't tell a story. Learning to tell a story is incredibly important because that's how the money works. The money flows as a function of the stories. That is exactly what my new partner collateral does. Collateral transforms your complex ideas into compelling narratives. I need you to remember the website, which is easy to remember, because it's collateral.com. Collateral crafts, institutional grade marketing collateral. And they do this for private equity, private credit, real estate, venture capital, family offices, hedge funds, oil and gas companies, all kinds of corporations. I have friends that have used collateral for their marketing collateral and have raised billions of dollars of capital and have made hundreds of millions of dollars. I will leave a link down below but make sure you go to collateral.com and improve the way that your company tells its own story. Storytelling is one of the highest forms of leverage and you should invest heavily in it. And you can do that by going to collateral.com. Now another thing that Elon's going to repeat and he learns this to pain. Do the capacity to keep going through immense amounts of pain is if your design is hard to manufacture in large numbers, then your design is flawed. He says design is not just about aesthetics. The true industrial design must connect the looks of a product to its engineering. There's actually a great quote about design from Steve Jobs in this book that I think is exactly the way Elon thinks about it. And this is what Steve said. In most people's vocabularies, design means veneer. Nothing could be further from the meaning of design. Design is the fundamental soul of a man-made creation that ends up expressing itself in successive outer layers. One of the things I love about Elon and that he'll use the same idea throughout all these different companies. He's going to prioritize personality and fun and unexpectedness in his products. So in early examples, if you saw one of the early model S sedans, the Tesla makes. The head designer Tesla came up with an idea where it's like, okay, the door handles, we're going to keep them flush the car. And then when you walk up to it, they would pop out and they would light up. And he described this like the car having a happy handshake when the driver approached with a key. And so everybody told Elon around and was like, yeah, but a door handle like just a regular door handle would work just as well. But it says Elon immediately embraced the idea. It would send a chirpy signal of friendliness. The handle senses your approach. Lights up pops out to greet you. And it's magical. Elon said. And it's also fun and unexpected. And I think it's tied to showmanship as a form of showmanship is salesmanship. When you surprise your customers, when you delight them, they form a deeper emotional bond with your company, but they also tell other people it's inhuman nature to share things that surprise us. So then we see another example of him combining a few principles together. The fact that he's just absolutely relentless about reducing costs. And he's relentless about constantly questioning requirements and regulations. He doesn't believe the world is static. He definitely believes he can bend it to his will. He'll get laws changed on his behalf later on in the book. We'll get there. It says Elon saved money by questioning requirements. When he asked his team, why would cost two million dollars to build a pair of cranes? These are cranes, there's just little rockets. He was shown all the safety regulations imposed by the Air Force. Most were obsolete. So SpaceX then goes to the Air Force. And they start questioning them. And it says SpaceX was able to convince the military to revise them. The cranes ended up costing $300,000 instead. He does this over and over again, but the way he does it too. It's just really, really smart. He's just constantly comparing costs for parts materials. To other industries and other use cases. Here's an example. Elon constantly presses team to source components from non aerospace companies. The latches used by NASA cost $1,500 each. A SpaceX engineer was able to modify a latch used in a bathroom stall and create a locking mechanism that only costs $30. So there's one example. Here's another one. When an engineer told Elon the air cooling system for the Falcon 9 would cost $3 million, he shouted over to Gwen Shotwell to ask her what an air conditioning system for a house cost. About $6,000, she said. So the SpaceX team bought some commercial air conditioning units and modified their pumps so they could work atop the rocket. And then we see him again apply that principle that a maniacal sense of urgency is our operating principle. The day before launch, a final inspection revealed two small cracks in the engine skirt of the rocket's second state. Everyone at NASA assumed we'd be standing down from the launch for a few weeks. The usual plan would then be to replace the entire engine. What if we just cut the skirt Elon said? Like literally, cut around it. Why not just trim off a tiny bit of the bottom that had the two cracks? Using a big pair of shears, the skirt was trimmed and the rocket launched the next day. It took less than an hour to make the decision. Three more principles combined that repeat over and over again. Elon's anti-out sourcing, pro control and pro daily iteration by sending their factories abroad, American companies save labor costs, but they lost the daily feel for ways to improve their products. Elon bucked this trend. He wanted to have tight control of the manufacturing process. He believed that designing the factory to build the car. The machine that builds the machine was as important as designing the car itself. Tesla's design manufacturing feedback loop gave it a competitive advantage, allowing it to innovate on a daily basis. He has a great way of describing why this is so important, why this is where he spends most of his time. Elon took on the manufacturing, the materials, the huge factories. He spent more time walking assembly lines than he did walking around the design studio. This is why this is what he said. The brain strain of designing the car is tiny compared to the brain strain of designing the factory. And then we see over and over again, he's going to use that same idea. Make sure that your team feels the immediate pain and feedback of their work. When redesigning the factory, Elon put the cubicles for the engineers right on the edge of the assembly lines so that they would see the flashing lights and hear the complaints whenever one of their design elements caused a slowdown. Elon often corralled the engineers to walk up and down the lines with him, and he combines that with the fact that he is going to demand, to demand, to demand excellence. So he gets one of the first model S's that come off the assembly line and he is, he's like, this sucks. And what is he going to do? When Elon gets angry, he is quick to pull the trigger. So he gets the model S, he thinks the product sucks. So he fired three production quality chiefs in quick succession. His focus was always on root causes. What in the design was to blame for the production line problem? Think about that. You get a car off an assembly line like what in the assembly line caused this poor quality? He goes all the way back to the root cause. And so I don't know if Elon has any tattoos, but if he did, I would imagine he's got the word hard core tattooed somewhere on his body because that is one of his favorite words. It's one of his favorite concepts. This idea of hard core. He used it to describe the workplace culture that he wanted. As the model S production line ramped up, he spelled out his creed in an email to employees titled ultra hard core. It read, please prepare yourself for a level of intensity that is greater than anything most of you have experienced before. Revolutionizing industries is not for the fate of heart. And so this next part is a great description of why I've just identified this handful of principles that you see appear over and over again in chronological order applied cross decades in multiple companies because everything is connected. He's maniacal about repeating himself. He's maniacal about simplifying. He's maniacal about reducing costs. He's maniacal about deleting. He's maniacal about framing his endeavors as having epoch making significance in four sentences. You see all of these at play like a mountain climber pairing the contents of his knapsack. Elon obsessed over reducing the weight of his rockets. That has a multiplier effect removing a bit of weight by deleting a part using a lighter material making simpler welds results in less fuel needed which further reduces the mass the engines have to lift. When he walked through the space excess assembly lines, Elon would pause at each station, stare silently and challenge the team to delete or trim some part. At almost every encounter, he maniacally hammered home the message, a fully reusable rocket, is the difference between being a single planet civilization and being a multi-planetary one. I think the implication of everything that you and I are talking about is really important, the unrelenting application of his core principles over decades. That is how greatness is built in his relentless quest to conquer gravity. Elon kept hammering at us to eek out a tiny percent more efficiency. A few times when an employee pushed back saying it would present challenges with valves and leaks, Elon was unrelenting. There is no first principles reason this cannot work. It's extraordinary difficult, I know, but you have to muscle through. Elon liked to focus on work. He treated the rest of his life as an unpleasant distraction. The sheer amount of time that I spend at work was so extreme that any relationship was very difficult to maintain. SpaceX and Tesla were difficult individually. Doing them both at the same time was almost impossible, so it was all just work all of the time. Again, Elon was not bred for domestic tranquility. Another one of his ideas that I think is very interesting and it was not obvious to me until I went back and reread certain parts over and over again. He will compare the products he's building to how things work in the natural world, like how a gopher digs a hole or how humans drive. So this is the first thing I mentioned. You'll see this a few times. Elon resisted the use of LiDAR, insisting that a self-driving system should only use visual data from cameras. The reason he said is because humans drove only using visual data. Therefore, machines should be able to, too. He thought there was no first principles reason that machines couldn't drive just like humans did. And so you see this later on. Even though what they're trying to achieve is almost impossible, he distills it down into a sentence that you understand. Make the car drive like we do or dig this hole like the gopher my front yard does. Our manufacturer, the bottom of Tesla, just like this toy car does. Or when working on autonomy, why can't the car drive itself from my home to work? So again, inventing all the technology, actually do that is insanely difficult, but you understand where he's trying to go to. And so at this point, he's starting all these other companies. But again, he just takes that same principles that that he was using as other companies and applies them to the new companies. This is an example that a maniacal sense of urgency is our operating principle. You start now, and he's having this conversation. Did you ever notice that cities are built in 3D, but roads are only built in 2D, Elon said? You could build roads in 3D by building tunnels under cities, he said. So he called Steve Davis, a trusted engineer at SpaceX. That's another thing that I need to point out to you because he's running so many companies. He's constantly taking like talent from other companies and when they're, and when there's problems, he like air drops him in, like almost like a, like a Navy SEAL unit or something. So here's an example. He called Steve Davis, now he's about to start the boring company, okay? He called Steve Davis, a trusted engineer at SpaceX. It was 2am, but Davis agreed to study ways to build tunnels quickly and inexpensively. And again, I'm going to pause here and interrupt myself. One of the things that's obvious if you read the book is Elon's full use of time. It doesn't matter what day it is, what time it is. The right time would be right now. I guess this is the way to think about it. So it's 2am. I'm going to call this guy, you need to start studying how to build tunnels quickly and inexpensively. And then Elon goes, and I'll call you back in three hours. Again, you start now, maniacal sense of urgency is our operating principle. When Elon called him back, Davis had figured out a few ideas for using a standard tunneling machine to bore a simple 40 foot diameter round hole and not have to reinforce it with concrete. How much do these machines cost, Elon asked? Davis told him 5 million by two of them and have them when I get back. And so even though it's a new company, it's the same Elon. He's going to go to where the work is actually done. And he's going to teach you his algorithm. You're going to move mechanically fast. You're going to delete. You're going to simplify and you're going to compare. And this is what I mean. Elon would frequently check on the progress. How can we move faster? What are the impediments? He spent a lot of time giving us lessons about the importance of deleting steps and simplifying. For example, they were drilling a vertical shaft at the beginning of the tunnel to lower in the tunneling machine. The gopher in my yard doesn't do that, Elon said. So they ended up redesigning the tunneling machine so that it could simply be aimed nose down and start bearing into the ground. As you can imagine, this 24/7 all consuming work schedule that he maintains is incredibly stressful. And so there's a few times, not even a few, there's many times where he will zone out even if you're around him and go deep into thought. But many times he has to isolate himself and that's where he'll do his best thinking. So I'm going to read this to you and then I'm going to read my note. And so this is what he said, I've got to lay down. I've got to shut off the lights. I need some time alone. So Jim Simons, the founder of Renaissance Technologies, I read his biography twice. The first time I read it was like five years ago. The idea that he used in that book is one of the most effective ideas I've ever found in a book because I started using it since then. So what Jim Simons would do, he would lay down in the dark, in silence, no stimuli at all and think through problems. Elon does the same. And it's interesting. He said, I've got to shut off the lights. So what I learned from Jim Simons is you lay flat on a couch or on the bed on the floor. It has to be completely silent. I put in like a little soft like foam ear plugs and then I put a sleep mask on. So I can't hear or see anything. I don't try to control my thoughts. I just listen to my mind. And because you have no stimuli for 20, 30 minutes an hour, however long you do this, it's remarkable how you find solutions to something you're thinking about and then how energized you feel after that. And there's some examples later in the book where Elon will sit silently staring at the wall for an entire night. So let's go back to his desire. Remember I'm wired for war. I think he likes chaos. I think when things are going well, it's not he's just not suited for that. He wants to be hardcore all the time. This is when they're ramping up production. They have to build 5,000 Model 3s per week or they die. The major challenge for us over the next six to nine months is how do we build a huge number of cars? Frankly, we're going to be in production hell. This is Elon talking to his employees. He told all of his employees, I look forward to working alongside you journey through hell. As the saying goes, if you're going through hell, just keep going. And again, we see amazing how consistent even when he's on the precipice of death on the president of bankruptcy, how consistent his operating principles are. Big goals, tight deadlines up to the edge of bankruptcy. Him living at the company until the job is done with constant repetition of their organizing principle in an easy to understand way. And so in this case, he distills it down 5,000 cars a week or were dead. Elon had one primary focus ramping up production so that Tesla was turning out 5,000 Model 3s per week. He had done the calculations of the company's costs overhead and cash flow. If it hit that rate, Tesla would survive. If not, it would run out of money. He repeated like a mantra. There's that word again to every executive. And he installed monitors at the factory showing the up to the minute output of cars and components. Elon decided he had to move himself literally into the factory floor and lead an all-in search. And he expects you to work just like he does. He will never ask you to do something he's not doing, but he expects you to do this. He calls up one of his employees and he says, "Hey, meet me at the van noise air stripping an hour. We flew to Reno and I end up staying there for four months. The way I've described what just happened. When? Now." And so this is when he's starting to develop and really refine the algorithm, which is again, I think of the probably the most important idea in the entire book. I'm going to read you my note first. Find the bottleneck, keep asking why until you get to the root cause, then delete and simplify. You don't have to be a genius to do this. You just have to constantly apply these ideas over a long period of time. They go against human nature even for smart people. Our nature is to overcomplicate and go along with the flow. What do I mean by that? Elon noticed the assembly line was being slowed at a station where strips of fiber glass were glued to the battery packs by an expensive but slow robot. I realized that the first error was trying to automate the process, which was my fault because I pushed for a lot of automation, he says. Elon asked a basic question, "What the hell are these strips for?" The engineering team told them that it had been specified by the noise reduction team to cut down on vibrations. So Elon called the noise reduction team, which told him that the specification came from the engineering team to reduce the risk of fire. It was like being in a Dilbert cartoon, Elon says. So he ordered them to record the sound inside the car without the fiber glass and then with the fiber glass. See if you can tell the difference he told them. They couldn't. Step one should be to question the requirements, Elon said. Make them less wrong and dumb because all requirements are somewhat wrong and dumb and then delete, delete, delete. The same approach worked even on the smallest details. For example, when the battery packs were completed in Nevada, little plastic caps were put on the prongs that would plug it into the car. When the battery got to the Fremont factory, the plastic caps were removed and discarded. Sometimes they would run out of caps in Nevada and have to hold up shipment for the batteries. When Elon asked why the caps existed, he was told that they had been specified to make sure the pins did not get bent. Who specified that requirement, he said. The factory team scrambled to find out but they weren't able to come up with a name. So delete them, Elon said. They did and it turned out that they never had a problem with bent pins. So I think those two stories are great examples of why he's just saying you have to constantly question requirements and you're going to be surprised at how much you can delete and simplify. And so as you can imagine, as he's going to production hell, he's also firing a lot of people. And so he repeats himself here. By trying to be nice to people, you're actually not being nice to the dozens of other people who are doing their jobs well and will get hurt if I don't fix the problem spots. So if you remember earlier, when we were talking about the fact that the most successful people also have the most failures and the great thing is you see all these examples of Elon making a decision that he'll come to regret later. So he's constantly learning and updating. So he was obsessed with automation. This is when he starts updating the Elon algorithm and he goes all in on de-automation. And there's probably 300 pages left in the book from where we are and he's just relentless about this. This is excessively excessively important to him. One of the most important ideas that he learned and it came 25 years into his career. So we had this enormously automated production line that used tons of robots. There was one problem. It didn't work. Elon flipped from being an apostle of automation to a new mission that he pursued with similar zeal. Find any part of the line where there was a hold up and see if de-automation would make it go faster. We began sawing robots out of the production line and throwing them into the parking lot. We had to put a hole in the side of the building just to remove all the equipment Elon said. The experience became a lesson that would become part of Elon's production algorithm. Always wait until the end of designing a process after you have questioned all the requirements and deleted unnecessary parts before you introduce automation. And so we see another one of his great ideas. You need to have an easy way to see data that allows you to identify a problem. And then once you do, you need to get your ass straight to that problem. So he calls this walk to the red. There was a monitor that showed each station on the assembly line with a green or red light indicating whether it was flowing properly. So Elon was able to walk the floor and hone in on the trouble spots. He called this walking to the red. He would head straight to any red light he saw. What's the problem? A part was missing. Well, who's in charge of the part? Get him over here. A sensor keeps tripping. Who calibrated it? Find someone who could open the console. Can we adjust the settings? Why do we even need that fucking sensor? Elon would then resume his procession through the factory looking for the red lights. And so he's just constantly questioning things and trying to find the limit. Why do we have to have four bolts there? Who set that specification? Can we do it with two? They would say no. We'll try it. See if it fails. And then on and on and on. He just moves down the line. So this is what I mentioned earlier. You need to be decisive. Are you going to be dead? Elon calculated that he made 100 command decisions the day as he walked the floor. At least 20% are going to be wrong, he said. And we're going to alter them later. But if I don't make decisions, we die. He then turns it into a game. Elon started walking the conveyor line, wielding a can of orange spray paint. Go or stay. He'd ask his vice president of engineering. If the answer was go, the robot would be marked with an orange X and workers would tear it off the line. Elon took response, but this is another thing he does over and over again. He accepts full responsibility and blame. Elon took responsibility for the over automation. He even announced it publicly. Excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated. And so they're still in production hell. They still have not hit the goal that would keep Tesla alive, which is we have to make 5,000 Model 3s a week. Now one of the most fascinating things that have already said once to you, but I think we'll keep being more and more obvious as we go through. This is that Elon takes lessons from everything around him. How humans use eyes to drive. How gofers dig holes. How toys are manufactured. He will get countless ideas from science fiction books, from science fiction games and movies. He will also take examples from history. He loves military history and he will apply that to car production. Elon likes military history. He recounted a story about World War II. When the government needed to rush the making of bombers, it set up production lines in the parking lots of the aerospace companies in California. Start building a huge tent in the parking lot, he said. Just three weeks after Elon came up with the idea, the new assembly line was rolling Model 3 sedans out of a makeshift tent in Tesla's parking lot. And then he says one of the best lines in the book describing this. If conventional thinking makes your mission impossible, then unconventional thinking is necessary. A few weeks later, Tesla starts manufacturing 5,000 cars a week. And that brings us to what I think is the most important part of this entire book, Elon's algorithm. At any given production meeting, there is a non-truvial chance that Elon will in tone, like a mantra, what he calls the algorithm. It was shaped by the lessons he learned during the production health surges at the Nevada and Fremont factories. His executives sometimes move their lips and mouth the words. I would argue that you know, I tell you again, that repetition is persuasive. If you're executives and you're the other leaders on your team, don't already know what you're about to say. You're not saying it enough. And I think Elon would agree with me because listen to what Elon says. I became a broken record on the algorithm. I think it's helpful to say it to an annoyingly degree. So we're going to run through this and then we're going to run some additions to the algorithm. The algorithm had five commandments. Number one, question every requirement. Each should come with the name of the person who made it. You should never accept that a requirement came from a department such as the legal department or the safety department. You need to know the name of the real person who made the requirement. Then you should question it no matter how smart that person is. Requirements from smart people are the most dangerous because people are less likely to question them. Always do so, even if the requirement came from me. Then you need to make the requirements less dumb. Number two, delete any part of the process you can. You may have to add them back later. In fact, if you do not end up adding back at least 10% of them, then you didn't delete enough. Number three, simplify and organize. This should come after step two. A common mistake is to simplify and optimize a part or a process that should never exist. Number four, accelerate cycle time. Every process can be sped up. But only do this after you're followed the first three steps. In the test of factory, I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted. Number five, automate. This comes last. The big mistake in Nevada and at Fremont was that it began by trying to automate every step. We should have waited until all the requirements had been questioned. Parts and processes deleted and the bugs were shaken out. So there's a few other additional ideas that are related and accompany the algorithm. These are, I consider these like the postscripts to the algorithm. Number one, all technical managers must have hands-on experience. For example, managers of software teams must spend at least 20% of their time coding. Solar roof managers must spend time on the roofs doing installations. Otherwise, they're like a calvary leader who can't write a horse or a general who can't use a sword. Number two, camaraderie is dangerous. It makes it hard for people to challenge each other's work. There is a tendency to not want to throw a colleague under the bus. That needs to be avoided. Number three, it's okay to be wrong. Just don't be confident and wrong. Number four, never ask your troops to do something you're not willing to do. Number five, whenever there are problems to solve, don't just meet with your managers. Do a skip level where you meet with the level right below your managers. You'll see many times emailing just goes to the people who are actually doing the actual work. Number six, when hiring look for people with the right attitude, skills can be taught attitude change requires a brain transplant. Seven, a maniacal sense of urgency is our operating principle. Eight, the only rules are the ones dictated by the laws of physics. Everything else is a recommendation. And so as you can imagine, many of Elon's top executives fled during the 2018 production hell. Elon is not sentimental about people leaving. He likes fresh blood. He is more concerned with a phenomenon. He calls phoning in rich, meaning people have worked at the company for a long time. And because they have enough money and vacation homes no longer hunger to stay all night on the factory floor. So Elon likes fresh blood. If he's focused on a particular thing, he will not get stimulation nor consume any inputs from the outside. Stuff can be right in front of his eyes and he won't see it. So he can be lost deep in thought and not receive outside stimuli. I've only read that to you. Maybe handful times. It's in the book over and over and over again. But I think you get it by now. Here's another thing. Laws can be changed. If you think laws can be changed, it's just another way of saying question every requirement. Elon was allergic to joint ventures. He did not share control well. Tesla had a big challenge. How are we going to manufacture in China? Because at the time, the Chinese government insisted that you have to do a joint venture. But Elon was resistant to have Tesla form a joint venture. Every other car company though had done just that. So he had to convince China's top leaders to change a law that had defined Chinese manufacturing growth for three decades. So month after month after month, they lobbied the Chinese government. China finally agreed in 2018 to let Tesla build a factory without having to enter a joint venture. Again, that's another example of question every requirement. Go back to this idea that a maniacal sense of urgency is our operating principle. Well, what does Elon do if you move too slow? One Sunday night without much warning, Elon flew to Seattle to fire the entire top starlink team. He brought with him eight of his most senior SpaceX rocket engineers. None of them knew much about satellites, but they all knew how to solve engineering problems and apply Elon's algorithm. They threw away the existing design and started back at first principles level and questioned every requirement based on fundamental physics. Another thing that you'll see Elon do it over again. We have to find the limit. Let's find the limit. I want to delete as much as possible. And we can't do that unless we find the limit. So it says SpaceX contracted with a company that erected stainless steel water towers. Elon talked to the workers. So those actually doing the welding, not the company executives, the people doing the welding. And he's asking him, well, what do you think is safe? He's asking like, how thin can we make these walls? And one of Elon's rules is go as close to the source as possible for information. So the line workers said that they thought the tank walls could get as thin as 4.8 millimeters. I think you already know what Elon's going to say here. What about four? Elon asked. That would make us pretty nervous. One of the workers replied, okay, Elon said, let's do four millimeters. Let's give it a try. It worked. And again, I think what he's doing there is like, well, I know one of my principles. I wanted to delete as much as possible. I think he says the best part is no part later on. So I want to delete as much as possible. I can't do that unless I actually know where the limit is. I have to find the line. And I think the fact that I've spent, I don't know, 10 days now, like in Elon's brain thinking about this rereading everything, editing it down, deleting. I think my own personal takeaway is stop thinking that you have limits, stop giving into imaginary delays. And I think one of the smartest ways that Elon teaches that is is to just start with whatever you have in front of you, whatever is available right now and go. Resist your innate urge to overcomplicate things. Elon became frustrated at the slow pace. The crew had still not even made one dome that would fit perfectly on starship. He issued a challenge, build a dome by dawn. That was not feasible. He was told because they didn't have the equipment to calibrate the precise size. This is what Elon said when you heard that. We're going to make a dome by dawn if it fucking kills us slice off the end of that rocket barrel and use that as your fitting tool. They did so and he this is this is key though. He stays there with them. He's in the factories. He's on the roofs. He's under the cars. They did so and he stayed with the team of four engineers and welders until the dome was finished. We didn't actually have a dome by dawn. It took us until about nine a.m. Stop thinking you have limits. Stop giving into imaginary delays. Start with whatever you have in front of you. Whatever is available to you right now and go. Resist the urge to overcomplicate. Elon sat. This is again, it's it's fascinating to me. Long time spent in silent thought. This is the opposite of our modern world. Right. He spent an insane amount of time in silent thought. Elon sat upright on the edge of his bed next to Grimes. This was his girlfriend at the time. Unable to sleep. Some nights he did not move until dawn. One night he left the light on and just stared into space silently. Every couple of hours I would wake up and he was just still sitting there completely still in the thinking man statue posts just completely silent on the edge of the bed. And so this next part I've already mentioned a few times, but I didn't tell you how he actually did this. He has this really interesting appreciation for the toy industry. And then he's just got this relentless dedication to questioning requirements and working from first principles. Elon was playing with a toy version of the Model S. He noticed that the entire underbody of the car had been die cast as one piece of metal. Why can't we do that? One of his engineers pointed out that there's no casting machines to handle something that size. That answer did not satisfy Elon. Go figure out how to do it. As for a bigger casting machine, it's not as if this would break the laws of physics. They then called six major casting companies and five of them dismissed the concept. But one company agreed to take on the challenge and built the world's largest casting machine. The process reinforced Elon's appreciation for the toy industry. They have to produce things very quickly and cheaply without flaws and manufacture them all by Christmas or there will be sad faces he said. He repeatedly pushed his teams to get ideas from toys such as robots and Legos. He spoke about the high precision molding of Lego pieces. They are accurate and identical to within 10 microns of each other, which means any part can be easily replaced by another car components should be that way. Precision is not expensive. Elon said it is mostly about caring. Do you care to make it precise? Then you can make it precise. And so we see another quick story. Combines a bunch of these operating principles. The fact that you're going to maintain them in medical sense of urgency. You're going to work all the hours. You're going to be hardcore. You will move into the, Elon will move into the company and that he insists on being a frontline general. He has a great quote about this later. Elon feared complacency. Unless he maintained a maniacal sense of urgency, SpaceX could end up flabby and slow. He paid a late night visit to pad 39a, which is a launch pad. There were only two people working. He expected everyone to work with an unrelenting intensity. We have 783 employees working at the Cape. He said in a cold rage. Why are there only two of them working now? He went into hardcore all-in mode. He moved into the hangar Cape Canaveral and went to work around the clock. And so Elon has that intense desire to work with me hard and one way to make sure that everybody around him has that he doesn't delegate the hiring decisions. And so at this point in SpaceX history, he's still interviewing every engineer hired. And so it says when hiring or promoting, he made a point of prioritizing attitude over resume. And his definition of a good attitude was he desired to work maniacally hard. And so he's constantly bringing in new people, but he will also, remember he's like, I'm worried about people phoning in rich. He will also push old people out. He is remorseless. He is mission first. So he is sending an email. He's going to wind up pushing out one of the first engineers that worked on SpaceX. This guy worked there for 18 years. Remember, he said that camaraderie is dangerous and makes it hard for people to challenge each other's work. There's ten seniors and I want to throw a colleague under the bus. And they should be avoiding it. So he sends this email to this guy. It's been working with him for 18 years. He did an awesome job over many years. But eventually, everyone's time comes to retire. Yours is now. Back to Elon comparing his work to other industries again and being easy to understand. Rocket should be like airplanes. They should take off land and then take off again as soon as possible. Another repeated saying of Elon's. The best part is no part. Delete, delete, delete. Remember, we're working through this book in chronological order. The repetition is intentional. Do not get too close to your employees. Emotions blur judgment. Comradery is dangerous. Elon began with a lecture on collegiality. I want to be super clear. You are not a friend of the engineers. You are the judge. If you're popular among your engineers, this is bad. If you don't step on toes, I will fire you. Is that clear? And Elon is absolutely unrelenting. You must know your area of the company down to the ground. So he's going to quiz you on the idiot index. If the ratio is high, you are an idiot. He's going to drill his employees on this. So he says, what are the best parts in Raptor as judged by the idiot index? He's talking to this guy named Hughes. I'm not sure I will find out. Elon says, you better fucking be sure in the future that you know these things off the top of your head. If you ever come into a meeting and do not know what the idiot parts are, then your resignation will be accepted immediately. How the fuck can you not know what the best and the worst parts are? He continues, what are the five worst parts? Hughes says, there is the half nozzle jacket. I think it costs $13,000. Elon replies, it's made of a single piece of steel. How much does that material cost? Hughes responds, I think a few thousand dollars. Elon, of course, because he's obsessed maniacal about costs. He knows the answer. No, it's just steel. It's $200. If you don't improve, your resignation will be accepted. And so after this happened, the author is asking him, like, don't you think you were too harsh with this guy? And Elon's response was, I give people hard core feedback. I try to criticize the action, not the person. Physics does not care about hurt feelings. It cares about whether you got the rocket right. And then we see more repetition on repetition. Repetition is persuasive. You're not repeating yourself enough. You have to say it again. Elon often repeats himself in meetings. He wants to know that you've listened. His employees learn to repeat his feedback. And one of these things that he repeats is you need to be a frontline general. You have to stay as close to the work as possible. He loves being a battlefield general on the front lines. He repeats it over and over again. He's going to reference Napoleon a little bit. But what he says is when Elon asked him, how many solar roofs he installed? Tony explained, he was an engineer and had not actually been doing, had not actually been on the roof doing the installation. Then you don't fucking know what you're fucking talking about. Elon said, that's why your roofs are shit and takes so long to install. So then this guy spends the entire next day installing roofs. And then what Elon will do to is, if something's important, he sees the problem. He will make sure that you're meeting about that problem every 24 hours him with him until it's fixed. And so just making this engineer install of roofs was a very valuable form of education for the engineer. So even within the next 24 hours, the next meeting they had went a lot better. And then he makes sure that the guy keeps installing, what he said, 20% of the time, he should actually be doing the actual work. And one of the reasons this is so important is because they'll see the problem with the design and the engineering when they actually try to manufacture it to make it. And then you also notice that his adherence to the mission, his dedication to the mission. It's why he works, you know, maniacally hard, but it's also why he has a problem with developing personal relationships. So his ex-girlfriend Grimes actually writes a song about him. And the song, when you read the lyrics, I think it's really illustrative of Elon as a person. It's called the player of games. And I think the most important line in the song is he'll always love the game more than he loves me. And I think that's why a lot of the founders that you and I cover on the podcast, and we talk about is like they have such, they're not bred for domestic tranquility. They have a lot of problems, maintaining long-term relationships. And then just in this random conversation he was having, it was interested to hear Elon's take. I'm like, okay, you're running all these companies. We're like, which one is actually most important? And he said something that was very fascinating to me. He says, building mass market electric cars was inevitable. It would have happened without me. But becoming a space-faring civilization is not inevitable. To me, it's like he's saying, SpaceX is the most important. In fact, one of my favorite investment firms has a very simple thesis, invest only in things that wouldn't happen without us. If we don't make this investment, it's not going to happen. And what's fascinating is if you look at their portfolio, it's insanely highly concentrated, tiny number of bets, but those bets are massive. And I love the idea of us deciding on like, what are we going to work on? Like what do we want to dedicate our life to? Dedicated to something that wouldn't happen without you is a very interesting organizing principle to me. Back to Elon's idea that if we are slow, we are dead. Again, just very straightforward, clear thinking. It was better to try and fail rather than analyze the issue for months. If you make this thing fast, you can find out fast. And then you can fix it fast. And so at the time, he's trying to drastically simplify the Raptor engine design, which there's this great picture. You can just Google, you know, Raptor design over time. And you see the actual application of his algorithm and his simplification is deleting. It's just absolutely beautiful. But again, it goes back to like, if it's important, Elon's going to do it himself. Elon interviews and picks the talent himself. Elon was looking for someone who might be able to oversee Raptor design. So he started having one on one sessions, peppering mid-level engineers with questions. After a few weeks, a young engineer began to stand out. And when you pick the person, what does he do? He starts to teach the person. He starts to indoctrinate the person to the algorithm. He's going to repeat over and over again. You need to keep everything together so the feedback is immediate. He says, "I created separate design and production groups a long time ago, and that was a bullshit mistake. You are responsible for the production process. You cannot hand this off to someone else. If the design is expensive to produce, you changed the design. You move your desk next to the assembly line." And so he says later on that the people on the assembly line, she'd be able to immediately collar a designer or an engineer and say, "Why the fuck did you make it this way?" It goes back to that idea, what he said. If your hand is on the stove and it gets hot, you pull it off right away. But if it's someone else's hand on the stove, it's going to take you longer to do something, which goes against the fact that he says, and repeats, ad nauseam over and over again, a maniacal sense of urgency is our operating principle. And so as they're working on the engine design for one of his rockets, he sends this giant email with exclamation points. We are on a deletion rampage. Nothing is sacred. Any remotely questionable tubes, sensors, manifolds, etc. will be deleted tonight. But I just love this go. Please go ultra-hard core on deletion and simplification. And it's obvious. He's very difficult to deal with, but I think this next quote under it illustrates why you would want to do this. And I think very few people are going to be able to spend their life working with them. You know, he's churning through people. There's a lot of people especially when they're like, they're 20s. They do really great. And they're like, well, man, I got I need some like more balance here as I get older. But I just love this description of him. It says, I noticed that I learned more unique lessons from Elon per minute than any other human have met. It would be dumb to not spend some of your life with such a person. So again, you may not be able to last through all this, but you're going to learn a hell of a lot working with them. And then you can use those ideas and lessons for the rest of your life. Again, going back to this ultra-hard core on deletion and simplification. I, this sounds crazy. The very first episode of Ever Data Founders. September 2016, it's a biography of Elon. I was obviously a big fan of this guy. And the idea for Founders came from Elon. I was watching an interview in 2012 that he did with this guy named Kevin Rose. And it's on the factory floor at Tesla. I think they were, they had like barely producing the model at the time. And he was asked the question that I was fascinating. And he was like, you know, how the hell did you learn how to build companies? Did you read a lot of business books? Did you have a lot of mentors? And he says, no, I didn't read business books and didn't have any mentors. I looked for mentors in historical context. And the way I did it is I read a lot of biographies. He starts naming off the biography. He's been Franklin Henry Ford, Nicholas Tesla, et cetera. And I was like, oh, shit. That's a really good idea. I should read more biographies. And didn't realize that now, because of that, you know, we'll see how it goes, but I might read more biographies in the world. But the reason I bring that up is because obviously read a lot of books on Elon. I've spent a lot of time studying them. I don't know why something about, you know, the 10th book. I think this is probably the 10th book I've read on him or 10 time I read a book on him. It just, I didn't understand his evangelism. And he's just dedication to just simplification. I don't know why that wasn't in my head before in a way that now that idea is lodged in there, like delete, delete, delete, simplify, simplify, simplify. This guy is obsessed with it. And it makes perfect sense because it affects everything, single, everything else, especially as he scales. Complexity is the enemy of scaling. So since Elon paused signalling for two minutes, he's looking at, I think this is a neural link device if I'm not mistaken. Since Elon paused signalling for two minutes, then he delivered his verdict. He hated it. It was too complex. Too many wires and connections. He was in the process of deleting connections from SpaceX's Raptor engines. Each was a possible failure point. There has to be a single device. Yeah, it is neural link. He told the deflated neural link engineers a single, elegant package with no wires, no connections, no router. There was no law of physics that prevented all the functionality from being in one device. When engineers tried to explain the need for the router, Elon's face turned stony. And he said, delete, delete, delete, delete. And so that I want to go back to the fact that Elon is constantly learning from everything around him, everything he experiences. He comes up with a, he was obsessed with this game called Polytopia, and he comes up with a list of Polytopia life lessons. And he actually thinks playing the game will make you a better CEO. Says one key to understanding his intensity is focus, his competitiveness, his die-hard attitudes, and love of strategy is through his passion for video games. Hours of immersion became the way he let off steam and honed his tactical skills and strategic thinking for business. He became obsessed with a multiplayer strategy game on his iPhone called Polytopia. In the game, players compete to develop technology, corner resources, and wage battles in order to build an empire. What did his passion for the game say about him? I am just wired for war, he answers. Remember, he's been repeating that maximum for decades. I am wired for war. Elon told his brother to play Polytopia because it would teach him how to be a CEO like he was. They came up with a list of Polytopia life lessons, so I just pulled out a couple here and put them into a list for you and I. Number one, empathy is not an asset. Number two, play life like a game. Number three, do not fear losing. You will lose, Elon said. It will hurt the first 50 times. When you get used to losing, you will play each game with less emotion. You will be more fearless, take more risks. Number four, be proactive. You will never win unless you take charge of setting the strategy. Number five, optimize every turn. In Polytopia, you only get 30 turns, so you need to optimize each one. Like in Polytopia, you only get a set number of turns in life. If you let a few of them slide, we will never get to Mars. Number six, double down, put everything back into the game to grow and grow. And so I think I mentioned a few times that, you know, this is the way Elon was in his 20s, his weights and his 30s. I don't think he'll ever change. I don't think he wants to change, but you'll have several examples in the book where people are like, you know, just calm down. You don't have to do this. And so I think this is just one great example and how he thinks about himself. So someone says to him, you don't have to be in a state of war at all times. And his response was, it's part of my default settings. Extended periods of calm are unnerving to him. And he does say something that's, I believe, I wouldn't take, obviously not as intense as he is. And he says that life needs to be interesting and edgy. And that the way that he wants to spend his life is heads down focus on doing useful things for civilization, which also ties to what he was saying earlier in the book that, you know, we need, it can't just be about solving problems. We're like, we have to be, we have to do things that are inspiring. We have to do things that even if we think they're, you know, semi impossible, that spending our lives working on things that inspire you and that are good for civilization is a life well lived. And so there's this meeting they're having in SpaceX that I think combines a lot of those ideas, you know, number one, work on things that inspire you in a good for civilization. Number two, that you have to maintain a maniacal search dependency. When something is important has to be in quickly, you should have meetings every 24 hours to run the algorithm and then check on the previous days progress. That's another idea that he uses over and over again. And you'll be shocked at actually how fast the speed's things up. And then number three, the fact that Elon just frames his endeavors as having epoch making significance. So here's an example that there have to be things that inspire you that move your heart being a space bearing civilization and making science fiction not fiction is one of those. As they walked him through the slides, he got increasingly angry. These timelines are bullshit. A mega fail. Like no fucking way, these should take so long, he said. He decreed that they would start having meetings on starship every night, seven days a week. We are going to go through first principles algorithm every night, questioning requirements and deleting. That's what we did to unfuck the bullshit that was raptor. How soon he asked would it take to get the booster on the launch pad to test the engines 10 days he was told that's too long. This is critical for all human destiny. It's hard to change destiny. You can't do it from nine to five. And so this idea that he's going to move into where the problem is he's going to be one doing the meetings every 24 hours. He talks about the fact that being a front line general is key to being effective. And this is what he says, if they see the general out on the battlefield, the troops are going to be motivated. Elon said wherever Napoleon was, that's where his armies would do best. And I think that's one of the things I most admire about him. You know, the fact that he's on the job sites. He is leading from the front. He is hyper focused on the problem areas. He's actually got a great line about this. I love all bad news should be given loudly and often. Good news can be said quietly and once another way that he works as if an idea worked once. He'll use it again later and in a different company. So this time, I guess it's the same company with a different product. So they were building cars earlier, right? Now Tesla is building the Optimus robots. So what does Elon do? He goes to meeting and he brings a bunch of toys. It says he believe that toys could offer lessons. A little model car had inspired him to make real cars using big casting presses and Legos helped him understand the importance of precision manufacturing. This idea worked when making cars. It can work when we were making robots. And then what does he do? He ties what they're working on to having epoch making significance. Our goal is to make a useful humanoid robot as quickly as possible. This means a future of abundance, a future where there is no poverty. It really is a fundamental transformation of civilization. And so he's driving the team to develop the robot as fast as possible. Because again, if you really believe what he is saying that we have the opportunity to create a technology that would be a fundamental transformation of civilization you want to get there as fast as possible. And so he says the future will not get here fast enough unless we force it. Again, that's another line that Elon repeats. The fact that technological progress is not inevitable. It can stop. It can even backslide technology only goes forward if a lot of people work very hard to make it do so. And so then he tells the team that's working on the robot taxi. Same thing. We are all in on autonomy. This will be a historically mega revolutionary product. It will transform everything. People will be talking about this moment in a hundred years. And so again, if you believe that, what are you going to do? This is only going to work if we're able to manufacture tens of millions of these. So I'm going to work with you developing the manufacturing process. This is Elon spent hours each week working with his team to design each station on the line, finding waves to shave milliseconds off each step and process. He starts with the end in mind. Might a millisecond off of this process might not make a difference today. It makes a hell of a big difference when we're making tens of millions of these things a year. Don't think about what we're doing as tiny improvements or tiny improvements today in reality. They're massive improvements over time. And so then when he buys Twitter, we see he does the exact same thing. He takes all these engineers. He kind of just drops them in from his other companies and he starts trying to remold the culture to how Elon likes his companies to run. If you could figure out, I think if you're like, Hey, can I design a culture that is directly opposite of an Elon company? What would that be? It sounds like it was Twitter. I'm just going to read a couple of this. I wrote Elon finds this complete opposite company culture. Twitter prided itself on being a friendly place where coddling was considered a virtue. Everyone needs to feel safe here says Leslie Berlin or Berlin, who was chief marketing and people officer. She was fired by Elon. Twitter has instituted had instituted a permanent work from home option and allowed a mental day of rest each month. One of the commonly used buzzwords at the company was psychological safety. Care was taken not to discomfort. Elon laughed when he heard the phrase psychological safety. It made him recoil. He considered it to be the enemy of urgency and progress. His preferred word was hard core. Discomfort, he believed, was a good thing. It was a weapon against complacency. Vacations, flower smelling, work-life balance, and days of mental rest were not his thing. And so he starts making changes to the product immediately. He wants to explore change, explore page changed. And so they send a message to the engineer. Of course, the engineer is not in the office. So they send a message to the engineer that was in charge of the explore page. And he sent back a message saying, I will make that fix when I get to the office on Monday. Do it right now is what he was told. And what was fascinating is this went on for a little bit, but the engineer actually liked this decisiveness. He says we worked on many possible new features for years, but no one ever made decisions about them. And suddenly we had this guy making rapid decisions. And so that Elon immediately starts implementing that core belief that you cannot separate engineering from product design. That product design should be driven by the engineers. And he wants his product managers to understand code. He says product managers who don't know anything about coding keep ordering up features they don't know how to create. This is like Calvary generals who don't know how to ride a horse. You must stay as close to the actual work as possible. Do not separate yourself from the pain of your decisions. And remember if a timeline is long, it's wrong. And then finally, there's just a single sentence I want to end on. I think we should keep in mind. Hopefully Elon has decades of work in front of him. And I think it's smart for us to resist the other distractions and just hone in on the company building principles that we can learn from him. And that sentence to keep in mind is both his accomplishments and his failures are epic.