Elon Musk: Starting SpaceX and Tesla were ‘the dumbest things to do’
Elon Musk isn’t afraid of a bad idea. In fact, the billionaire CEO recently tweeted, “Creating a rocket company has to be one of the dumbest and hardest ways to ‘make money’.”
And as USA Today pointed out, the billionaire CEO recently described starting SpaceX and Tesla, the two companies he’s best known for founding, as possibly “the dumbest things to do” in terms of new ventures.
That’s surprising, to say the least, especially considering that Tesla has a market cap over $52 billion, while Forbes values the private rocket company SpaceX at more than $20 billion.
“If you were to do a risk-adjusted rate of return estimate on various industry opportunities, I would put building rockets and cars pretty close to the bottom of the list. They would have to be the dumbest things to do,” Musk told Jonathan Nolan, the co-creator of HBO’s “Westworld,” during a SXSW Interactive panel in Austin in March.
Musk said he founded SpaceX and became CEO of Tesla because he believed in the companies’ abilities to change the world for the better.
“I gave basically both SpaceX and Tesla from the beginning a probability of less than 10 percent likelihood to succeed,” Musk said, citing the wide array of challenges associated with building rocket ships within the private sector. He also noted the difficulty of launching a mass-market electric car in the ultra-competitive auto industry, where he said there is a “graveyard of companies” that went bankrupt trying to do so.
Despite the risks, Musk said he wanted to find solutions for “things that don’t seem to be working that are important for our life and for the future to be good.”
And Musk’s career shows that he is nothing if not a risk-taker.
Musk has said that a “crazy” number of people tried talking him out of going into the rocket business before he founded SpaceX in 2002. “One good friend of mine collected a whole series of videos of rockets blowing up and made me watch those. He just didn’t want me to lose all my money,” Musk said on CBS’s “60 Minutes” in 2014.
Musk reportedly earned $180 million in 2002 from eBay’s $1.5 billion purchase of PayPal. Musk had been the largest shareholder of the money-transfer service after it merged with his own online payments company, X.com, in 2000.
Musk said during his talk at SXSW, that after the sale of PayPal, he was trying to decide between new ventures involving either electric cars (he had planned to study “advanced energy storage techniques for electric vehicles” at Stanford before dropping out of his PhD program at age 24) or space. He felt that space ventures were the least likely to attract a lot of entrepreneurs.
“I thought, ‘nobody is going to be crazy enough to do space, so I’d better do space,'” said Musk.
But instead of focusing solely on what was already an ambitious venture in SpaceX, Musk decided two years later, in 2004, to get involved with Tesla, leading a Series A investment round and joining the company’s board as chairman.
At SXSW, Musk said it was the “biggest mistake of my career” to think that he could easily balance his time between SpaceX and Tesla.
Instead, Musk noted, SpaceX had to endure a series of failures before becoming a viable private rocket manufacturer. In 2008, SpaceX nearly died completely, as the company’s first three launches of its first rocket, the Falcon 1, failed. A fourth failure “would have been absolutely game over,” Musk said, speaking about that period at the International Astronautical Congress (IAC) conference in Adelaide, Australia in 2017. Luckily, the fourth launch attempt was successful, and the company then landed a government contract from NASA worth about $1.6 billion.
Tesla also nearly went bankrupt in 2008, Musk has said, and the company continues to face challenges that include current production delays on the company’s Model 3 sedan. Nevertheless, Tesla’s shareholders recently approved a $2.6 billion stock compensation plan for Musk.
Meanwhile, Musk is still not shying away from taking on further risky ventures, such as the cheekily named The Boring Company’s plan to dig tunnels and build an ambitious high-speed, underground transportation system. (Musk has even sold more than 50,000 branded hats at $20 each, as well as 20,000 flamethrowers for $500 a pop, to raise money for The Boring Company.)
Musk also confirmed to CNBC Make It that he’s looking to get into the media business with a new venture called “Thud,” which he’s reportedly staffing with former writers for the satirical publication The Onion.
“It’s pretty obvious that comedy is the next frontier after electric vehicles, space exploration and brain-computer interfaces,” Musk recently told CNBC Make It via a Tesla spokesperson. “Don’t know how anyone’s not seeing this.”
If Musk is concerned about any of his multiple risky ventures, he isn’t letting on. At SXSW, Jonathan Nolan asked the billionaire if he tries to plan around failures based on his experience dealing with SpaceX and Tesla obstacles in the past.
“I don’t really have a business plan,” Musk said at SXSW, noting that he hasn’t had a formal business plan since he launched Zip2, his first successful startup in 1995.
“These things are just always wrong, so I didn’t bother with business plans after that.”