WHAT YOU WILL LEARN
Elon Musk – CHAPTER 1
Current net worth US$13 billion
The solar system is the limit for Elon Musk
Billionaire Elon Musk works on the stuff of dreams: rockets that will land themselves after servicing a space station, the Hyperloop tube that will transport people across the planet at extremely high speeds, an innovative battery that will allow homeowners to store solar power and get off the power grid permanently – after a while it’s easy to see why some call him the REAL Tony Stark!
Some of these projects have been criticised, but Musk says, “When Henry Ford made cheap, reliable cars people said, ‘Nah, what’s wrong with a horse?’ That was a huge bet he made, and it worked.” Currently, his company Tesla Motors builds electric sports cars.
Musk made a fortune as a founder of PayPal, and he now runs SpaceX, which designs vehicles that take off and travel into outer space – his company has a contract with NASA to send supplies to the International Space Station.
Musk has a clear ability to make money by starting up unique businesses or by getting involved at the ground floor and then cashing in when the businesses have succeeded. For example, Musk started a company called Zip2, an application to help newspapers, with his brother. A salesman by nature, Musk persuaded the directors of the New York Times and the Chicago Tribune to take on his software. They did, and not long after Compaq bought the business for more than $307 million – as a result, Musk pocketed a cool $22 million.
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Musk’s interest in technology started young. Barely out of primary school, he taught himself programming. At age 12, he wrote an application and sold it, beginning his entrepreneurial career. “I usually describe myself as an engineer; that’s basically what I’ve been doing since I was a kid,” he says. He attended high school in South Africa, and later studied computers and economics at universities in both Canada and the United States. He enrolled at Stanford University in California to pursue his studies as a PhD student but lasted only two days before moving into business.
We can learn a great deal about entrepreneurship from Elon Musk. Let’s now turn to some of the principles that have made him a success.
Filling a hole
One of Musk’s golden rules is that he only starts a company when it is in a new or emerging field. Even if somebody comes to him with a brilliant idea, if that idea involves starting up a company in an industry that’s been around for many years, Musk is not interested. If you are yet to launch your entrepreneurial career, then how confident are you in starting in an emerging field? You must be able to balance the prospects of getting in on a new movement at the ground floor with finding backing or investment in an unproven project. This doesn’t mean you have to be an expert on that emerging field. As Musk says, “The odds of me coming into the rocket business, not knowing anything about rockets, not having ever built anything, I mean, I would have to be insane if I thought the odds were in my favour.” Nonetheless, he was able to make it work.
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Put the customer first
It doesn’t matter how great an idea is and how enthusiastic you might be. If you lose concentration and leave out the important factors of product quality and customer needs, according to Musk, you’re in trouble. “I’d stay focused on the quality of the product,” he says. “People get really wrapped up in all sorts of esoteric notions of how to manage etc., [but] I think people should get much more focused on the product itself – how do you make the product incredibly compelling to a customer – just become maniacally focused on building it better. I think people get distracted from that.”
Move but don’t move
Musk talks about the ability of the entrepreneur to change direction without changing direction. By that, Musk means that to pivot in business enables you to switch direction but at the same time keep one foot firmly planted on the ground. Some entrepreneurs think that if their current direction is a failure, it is better to cut their losses and start again. According to Musk, this is not the only option. By all means change direction, but there’s no need to throw the ‘baby out with the bathwater’ as they say. A classic example is X.com. X.com was an online bank that Musk turned into PayPal, now a popular system for making payments online around the world. As he puts it, “Some people don’t like change, but you need to embrace change if the alternative is disaster.”
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Always have a Plan B
One of Musk’s interesting characteristics is that he is involved in a wide variety of businesses. Some entrepreneurs concentrate on just one industry or one business, while others have their fingers in dozens of pies. Musk is in the latter category. He has not been afraid to walk away from a business in order to increase his involvement in another. And by walk away, I mean sell. Musk has always sold extremely well. He was only 28 years old when he sold Zip2. Being able to walk away from PayPal allowed him to turn his attention to electric cars, solar panels and outer space travel.
What do you do with your profits?
Musk strongly believes that money made should immediately be invested into something brand new. For example, out of the $22 million he made from the sale of Zip2, he invested $10 million – almost half – into X.com. Likewise, when he sold PayPal for $165 million, he invested $100 million to create SpaceX. Reinvesting in the next venture when one works well is Musk’s advice.
Measure twice, cut once
It’s a bit of advice for anyone doing some home carpentry, but the principle applies when hiring and firing people as well. Musk believes you should not be in a hurry to expand. That’s not to say that you shouldn’t look to expand, but warns against doing so too quickly. And when it comes to staff members, Musk advises that one should be slow to hire and quick to fire. “One lesson I learned [at PayPal] is to fire people faster,” he said.