Skip to content

Podcast

#415 How Elon Thinks

Founders

Source ↗ ← All highlights
  • Quantify Product Impact
    • Do measure impact as number of people helped multiplied by average improvement per person.
    • Elon frames product usefulness as (utility improvement) × (number of people), valuing big impact for few or small impact for many. Transcript: David Senra Do useful things for your fellow human beings. It is hard to be useful, to contribute more than you consume. Can you have a positive net contribution to society? Aim for that. I have a lot of respect for someone who puts in an honest day’s work to do useful things. I admire anyone making a positive contribution to humanity. And then Elon was asked the question, like, how do you know if you’re helping? And I liked his answer here. How many people did you help multiplied by how much help you provided each person on average for any product you’re trying to create? Ask yourself the utility improvement compared to the current state of the art multiplied by how many people it would affect. (Time 0:01:30)
  • Start For Usefulness Not Status
    • Do start companies to build something useful you wish existed, not for entrepreneurship or money.
    • Elon says he picked projects he believed needed doing and was willing to lose his investment to try. Transcript: David Senra To make money. It is better to approach from this angle. What is the useful thing you could build that you wish existed in the world? I did not start companies from the standpoint of what’s the best risk adjusted rate of return or what I think could be successful. I just find things that need to happen and try to make them happen. I thought these things needed to get done. If my money was lost, okay, it was still worth trying. And then once you figure out what to work on, he says, then try to get other people to work with you to create that thing. Keep making it better and better. If you create something useful, money will be the result. A properly working (Time 0:03:02)
  • Be Obsessive About Product Quality
    • Do obsess over product quality; obsessiveness is effectively an advantage.
    • Elon says an obsessive nature about product quality and really liking the work makes founders think about it off-hours. Transcript: David Senra To make money. It is better to approach from this angle. What is the useful thing you could build that you wish existed in the world? I did not start companies from the standpoint of what’s the best risk adjusted rate of return or what I think could be successful. I just find things that need to happen and try to make them happen. I thought these things needed to get done. If my money was lost, okay, it was still worth trying. And then once you figure out what to work on, he says, then try to get other people to work with you to create that thing. Keep making it better and better. If you create something useful, money will be the result. A properly working economy rewards the creation of useful goods and services. Successful entrepreneurs come in all sizes, shapes, and flavors. I’m not sure there’s any one particular trait that makes them. If there is only one, have an obsessive nature about the quality of the product. In this context, being obsessive compulsive is a good thing. (Time 0:03:02)
  • Act Despite Fear
    • Do act despite fear when the mission is important; look fear in the eye to diminish it.
    • Elon: feel fear normally, then let mission importance drive you to proceed anyway. Transcript: David Senra He talks about the fact that you’re always going to feel fear. You have to do it anyways. I don’t remember if it’s in this book or another book, but one of my favorite quotes from Elon about this, he says, don’t fear losing. It hurts the first 50 times, but then you’re able to play with less emotion. You will be able to take more risks. In this book, he says, look fear straight in the eye and it will disappear. The nature of fear is that people don’t look at it. Look at it directly and it will be gone. When something is important enough to you and you believe in it enough, you do it in spite of the fear. It is normal to feel fear. If you don’t feel fear, you definitely have something mentally wrong. Just feel it and let the importance of your mission drive you to do it anyway. And he was asked a follow-up question. How do you persevere through these hard challenges? Where do you find the strength? And I loved his answer. That’s not how I think. I think this is simply something important. It must get done. We will keep doing it or we will die trying. (Time 0:05:50)
  • First Principles Beat Analogy Thinking
    • Reason from first principles by breaking a problem to its foundational truths and building up from axioms.
    • Elon used this to re-evaluate battery costs by pricing raw materials on exchanges and finding $80/kWh potential. Transcript: David Senra To get to the truth. He repeats this a lot. The truth matters to me a lot. Pathologically, it matters to me. In business and personal life, wishful thinking causes a lot of mistakes. You have to ask whether something is true or not. Wishful thinking is a natural human tendency. It is a challenge to tell the difference between believing in a new idea and persevering or pursuing an unrealistic dream. The real test of any startup is how well it responds to adversity and adapts. When most things start out, they don’t make much sense. But as long as you adapt quickly, you can make the company work. A few weeks ago, I just did this episode called How SpaceX Works. Huge chunks of that episode is about this idea. If you haven’t listened to it, I’d highly recommend going back and listen to it after this. Being tenacious and super focused on the truth is extremely important. Look for feedback from all sources. If you have beliefs that are incompatible with a rocket getting to orbit, that rocket will not get to orbit. Physics is a harsh judge. He repeats over and over again, physics is law, everything else is a recommendation. Wishful thinking is innate in the human brain. You want things to be the way you wish them to be, so you tend to filter out information you shouldn’t. That’s why I always assume we’re losing, even when it looks like we might win. That line’s too good not to repeat. That’s why I always assume we’re losing, even when it looks like we might win. And he mentioned something that he’s been repeating for a decade and a half, the importance of using first principles. Thinking the normal way we conduct our lives is reasoning by analogy. That means we do something because it’s similar to something else or what other people are doing. It is easier to reason by analogy rather than from first principles. So that’s what we do most of the time. But for important things, that kind of thinking is too bound by convention or prior experiences. You will hear, it’s always been done this way, or no one’s ever done it. That is a ridiculous way to think. First principles is a powerful, powerful method for life. And before (Time 0:06:52)
  • Physics Is The Ultimate Reality Check
    • Treat physical laws as immutable constraints while treating business assumptions as negotiable.
    • Elon repeats “physics is law, everything else is a recommendation” to cut wishful thinking. Transcript: David Senra On the truth is extremely important. Look for feedback from all sources. If you have beliefs that are incompatible with a rocket getting to orbit, that rocket will not get to orbit. Physics is a harsh judge. He repeats over and over again, physics is law, everything else is a recommendation. Wishful thinking is innate in the human brain. (Time 0:07:35)
  • Use The Idiot Index To Cut Costs
    • Do compute the idiot index: finished product cost divided by raw material cost to find high-cost opportunities.
    • Elon expects engineers to know which parts have high idiot indexes for potential cost cuts. Transcript: David Senra How much more does a finished product cost than the cost of its materials? If a part or product had a high idiot index, we could cut the cost with more efficient manufacturing techniques. If the ratio is high, you’re an idiot. I expect all of my engineers to know all the best and worst parts in their systems, as judged by the idiot index at all times. (Time 0:11:53)
  • Work Backwards From The Perfect Product
    • Do design from the theoretically perfect product and work backwards to identify necessary tools and materials.
    • Elon encourages thinking in limits and asking “what would it take?” to open minds to solutions. Transcript: David Senra It’s this idea of starting with what is the theoretically perfect product look like? Start from there, work backwards. The idea of the theoretically perfect is going to be a moving target because as you learn more, the definition for that perfect product will change. You don’t actually know what the perfect product is, but you can approximate a more perfect product. Then ask what tools, methods, or materials do we need to create to get the atoms in that shape? People rarely think this way. (Time 0:12:35)
  • Self Teach Technical Skills Fast
    • Do teach yourself by reading widely and talking to experts to acquire unfamiliar technical skills quickly.
    • Elon learned CNC, carbon fiber, and hardware by books and experts when founding SpaceX and Tesla. Transcript: David Senra Diving into SpaceX and Tesla, I had to learn how to make hardware. I had never seen a CNC machine or laid out carbon fiber. I didn’t know about any of these things. But if you read books and talk to experts, you can pick them up quickly. Most people self-limit their ability to learn. It’s pretty straightforward. Just read books and talk to people. (Time 0:13:48)
  • Merge Engineering And Budget Decisions
    • Do combine engineering and spending decisions in one brain to speed tradeoffs and avoid mutual distrust.
    • Elon says being both engineer and spender let SpaceX move quickly because one brain judged both costs and technical choices. Transcript: David Senra If conventional thinking makes your mission impossible, then unconventional thinking is necessary. I am the CEO of these companies because I feel I’m responsible for them, not because it’s the best thing for the quality of my life. What you actually get as CEO is a distillation of the worst things going on in the company. If you’re the CEO, you work on the worst problems in the company. You only spend time on things which are going wrong, the things other people can’t fix, the most pernicious and painful problems. And so he talks about, he’s asked the follow-up question, how do you manage through failure? Managing through big failures is painful and difficult. It feels terrible. The company looks at me to rally them. So I do, but I feel terrible. Failure is a punch in the gut. And then he talks about the importance of earning a deep understanding inside your own company. He says, one reason SpaceX could move so quickly is that I made both the engineering decisions and the spending decisions together in one brain. In most companies, those are at least two different people. There’s some engineering guy who’s trying to convince a finance guy that this money should be spent, but the finance guy doesn’t understand engineering, so he can’t tell if this is A good way to spend money or not. Plus, they may not trust each other. I’m making the engineering and the spending decisions together with all the information in one place. My brain trusts itself. (Time 0:16:19)
  • Lead On The Front Line
    • Do lead from the front and share hardship to motivate teams; eliminate executive privileges.
    • Elon slept on factory floors, ate with workers, and removed special offices to show shared sacrifice. Transcript: David Senra When the team is being asked to work super hard, I have to be right there with them and they have to see it. If I fall asleep in the middle of the factory floor at four in the morning and wake up four hours later, they see that. They’re like, if the CO is willing to take that level of pain, I can do it too. The troops fight harder if they see the general on the front lines. Nobody bleeds for the prince in the palace. Get out there on the front line. Show them that you care and you’re not in some plush office somewhere. If they the general out on the battlefield, the troops are going to be motivated. Wherever Napoleon was, that’s where his armies would be at their best. It is my firm belief that the separation of the workplace into executives and employees does not create a good working environment. We eliminate all special privileges of executives. Everyone has equal access to parking, eating at the same tables, and there’s no management offices. Managers should always take care of their team before they take care of themselves. The supervisor is there to serve his team, not the other way around. All technical managers must have hands-on experience. Otherwise, they’re like a cavalry leader who can’t ride a horse. Do whatever the task is, whether grand or humble. (Time 0:17:39)
  • Feedback Over Feelings
    • Prioritize feedback and truth over feelings to avoid softening critical information.
    • Elon mandates loud and frequent bad news and warns that camaraderie can inhibit challenge. Transcript: David Senra This section is called feedback over feelings. Physics does not care about hurt feelings. It cares about whether you got the says, All bad news should be given loudly and often. Good news can be said quietly and once. It is not your job to make people on your team love you. In fact, that’s counterproductive. Camaraderie is dangerous. It makes it hard for people to challenge each other’s work. (Time 0:24:04)
  • Cut Organizational Friction
    • Do remove organizational boundaries and shorten communication paths so design, engineering, and manufacturing collaborate directly.
    • Elon insists assembly workers must be able to grab designers and fix mistakes immediately. Transcript: David Senra He does in every one of his companies. In any product, you can see the errors in the organization structure. They will manifest themselves in the product. A major source of issues is poor communication between departments. The way to solve this is to allow free flow of information between all levels. Communication should travel via the shortest path necessary to get the job done, not through the chain of command. Any manager who attempts to enforce a chain of command will soon find themselves working elsewhere. Connect designers and manufacturers to make sure they communicate often. The people on the assembly line should be able to immediately grab a designer and engineer and say, why did you make it this way? And he says why this is important. If your hand is on the stove and it gets hot, between all levels. You pull it right off. But if it’s someone else’s hand on the stove, it’ll take you longer to do something about it. You cannot separate design, engineering, and manufacturing. They need to be together because you’re going to make mistakes. You want to identify and fix those mistakes today, right now. And if you separate them, the mistakes will fester. And then this is great advice. Physically, go to where the problem is immediately. One of my rules is go as close to the source as possible. And then he enforces this idea of simple communication. (Time 0:24:50)
  • Defend Time Relentlessly
    • Do protect time as the only irreplaceable currency and avoid wasting it on unnecessary meetings.
    • Elon says scrap money or equipment if needed, but never scrap time; meeting frequency should drop once urgency passes. Transcript: David Senra He has a great idea here. He says you always have to look at the incentive structure of an organization and ask, is that organization properly incentivizing innovation? And before we get back into this and speaking of incentivizing for innovation, I want to tell you about my partner, Vanta. Elon says that the only true currency is time. The one thing you cannot replace is time. He says, I often tell the Tesla team, it’s okay to scrap equipment or money. It is not okay to scrap time. (Time 0:26:51)
  • Let Innovation Evolve Darwinianally
    • Do run many parallel experiments and accept failure as iteration; failure indicates learning.
    • Elon told engineers to list ways they broke something before getting it right and to blow up engines on test stands. Transcript: David Senra And he says, it’s important to create an environment that fosters innovation and you want to let it evolve in a Darwinian way. You don’t want to pick one technology or path and decide that it will win because it may not be the best option. You need to let things evolve. Failure is a side effect of iteration. I once told a discouraged engineer, if you can’t tell me the four ways you fucked something up before you got it right, you weren’t the one doing the real work. (Time 0:28:23)
  • Relentless Simplicity Wins
    • Do simplify relentlessly because fewer parts mean higher reliability and lower cost.
    • Elon removed turntables from Tesla lines and reduced steps to cut breakdowns and mass. Transcript: David Senra He says simplicity wins. He says never use a cruise missile to kill a fly. Just use a fly swatter. Every decision we made in early SpaceX had been with simplicity in mind. Simplicity both improves reliability and reduces cost. Fewer components means fewer components to buy and fewer components that can go wrong. There’s a great maxim on this that says, genius has the fewest moving parts. Simplicity is our mantra. It creates both reliability and low cost. Simplicity comes from hundreds of little changes. (Time 0:28:55)
  • Follow The Algorithm In Order
    • Do follow the five-step algorithm in order: question requirements, delete parts, simplify, accelerate, then automate.
    • Elon warns automating early cost Tesla hundreds of robots removed later when steps were out of order. Transcript: David Senra I became a broken record on the algorithm, but it’s helpful to say it to an annoying degree. I have everyone in my companies rigorously implement a five-step process for engineering. I call it the algorithm. The order is very important. Number one, make your requirements less dumb. Number two, try very hard to delete the part or process. Number three, simplify or optimize. Number four, accelerate. Number five, automate. And then he’s asked the question, why is the order of the steps so important? I’ve personally made the mistake of going backwards on all five steps multiple times. Many things at Tesla were automated, accelerated, simplified, and then deleted. And so he walks us through the steps. The first step is to question the requirements and make your requirements less dumb. You have to start there because otherwise you could get the perfect answer to the wrong question. Your requirements are definitely dumb. It does not matter who gave them to you. Whatever requirements you do have must come from a person, not a department. You have to be able to ask a person, and the person putting forth the requirement must take responsibility for that requirement. Many times we’ve had dumb requirements, dug into them, and discovered no one currently working in the department agrees with that requirement. Step two, try very hard to delete the part or process. It sounds obvious, but people often forget to try deleting something entirely. If you’re not adding deleted things back in 10% of the time, you’re not deleting enough. I tell them in advance, look, we’re deliberately going to delete more than we should. Some of the things we delete, we’re going to put back in at least one in 10 things. We’re going to add back in. People get a little shook by that. But if you’re so conservative in deleting that you never have to put anything back in, you obviously have a lot of stuff that isn’t needed. At SpaceX, I would tell the team, we’re on a deletion rampage. Nothing is sacred. Please go ultra hardcore on deletion and simplification. We put immense effort into reducing mass. Then once you have deleted as much as you can, the third step is to simplify or optimize. The third step. The third step. Not the first step. Why? Because if not, you’re working on optimizing a thing that should simply not exist. Then, and only then, step four, accelerate cycle time. Once you’re moving in the right direction and moving efficiently, you’re moving too slow. Go faster. You can always make things go faster, but do not go faster until you have worked on the other three things first. I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted. Speeding up something that shouldn’t exist is absurd. If you’re digging your grave, don’t dig it faster. Stop digging. And then the final step is to automate. The big mistake in the Tesla factories was I began by trying to automate every step. To fix that, we had to tear hundreds of expensive robots out of the production line. We put a hole in the side of the building just to remove all that equipment. Always wait until the end of designing a process. After you have questioned all the requirements and deleted unnecessary parts before you introduce automation. (Time 0:30:23)
  • Use Speed As Offense And Defense
    • Do operate with a maniacal sense of urgency and cut meeting waste; speed is competitive advantage.
    • Elon compares faster factories to extra capacity and cites SR-71 surviving by speed alone. Transcript: David Senra Get rid of all large meetings unless you’re certain they’re providing value to the whole audience, in which case keep them short. Also get rid of frequent meetings unless you’re dealing with an extremely urgent matter. Meeting frequency should drop rapidly once the urgent matter is resolved. Walk out of a meeting or drop off a call as soon as it’s obvious you aren’t adding value. It is not rude to leave. It is rude to make someone else stay and waste their time. The only true currency is time. The only true currency is time. The best offense, this is incredible, it talks about speed is both offense and defense. The best offense and defense is speed. The SR-71 Blackbird is a military plane with almost no defense except acceleration. It was never shot down, not even once. Over 3,000 missiles were shot at the SR-71 Blackbird and none hit. All it did was go faster. The power of speed is underappreciated as a competitive factor. A factory moving at twice the speed of another factory is basically equivalent to two factories. I have, this is so great, when he talks about how he’s operating on a day-to basis, it’s related to speed. I have a running triage of what I do at each company, constantly thinking, what is the most useful thing I could do now? In early SpaceX, I told the team, everything we did was a function of our burn rate. We were burning through $100,000 a day in the same way I expected the revenue in 10 years to be $10 million a day. Every day we were slower to achieve our goals was a day of missing out on that revenue. And then he goes back to the idea of this only true currency is time. It’s so valuable. Tesla is getting to the point where every high quality minute of thinking has a million dollar impact. That is insane. If Tesla is doing 2 billion a week in revenue, that’s about 300 million a day, seven days a week. There are many instances where a half-hour meeting improved the company’s financial outcomes by $100 million. The one thing you cannot replace is time. I often tell the Tesla team, it’s okay to scrap equipment or money. (Time 0:33:34)
  • Manufacturing Is Underrated Value Creation
    • Manufacturing is foundational value creation and underappreciated compared with finance.
    • Elon warns too much talent flows to finance and urges more people to make real products like cars and hardware. Transcript: David Senra Elon is sharing these ideas. He’s encouraging you to make things. Manufacturing is underrated. It is hard. We must make stuff. Some people have an absurd view of the economy as a magic thing that just produces stuff. Let me break it to the fools out there. If we don’t make stuff, there’s no stuff. Some people have become detached from reality. This notion that the government can just send checks out to everyone and everything will be fine is not true. You can’t just legislate money to solve things. If you don’t make stuff, there is no stuff. Humans make technology. If we don’t do it, it will not happen. Somebody has to do the real work. There is an over allocation of talent in finance. Too many smart people go into finance. We should have fewer people doing finance and more people making stuff. Manufacturing used to be highly valued in the United States. These days, it hasn’t been as much, which I think is wrong. Making cars is an honest day’s living, that’s for sure. (Time 0:36:04)
  • Toy Car Idea Led To Giant Castings
    • Elon tested casting a single-piece car body after seeing how cheap toy cars are made.
    • He contacted six suppliers; five said no and one said maybe, which allowed Tesla to pursue large casting presses. Transcript: David Senra That’s why plants are so freaking giant. And he talks about some of the innovations at Tesla. We have also introduced a major innovation, which is to cast the car as a single piece. I got this idea from toy cars. I wondered, toys are cheap. How do they make toys? They just cast them. I was like, well, can you build a casting machine big enough for a car? They said no one has ever done that before. I said, are we breaking the laws of physics? They said no. So I said, let’s just ask them. There were six major casting machine suppliers in the world. Five of them said no. And the sixth said, maybe I said, I’ll take that as a yes. (Time 0:37:33)
  • Put Your Chips Back On The Table
    • Do put your own money and chips on the table to signal commitment and push projects forward.
    • Elon invested virtually everything after PayPal, sleeping in friends’ rooms while fundraising for Tesla in 2008. Transcript: David Senra It starts with a question and answer from Elon question. What fuels your creativity? Answer pressure necessity. And in this section, you just got a lot of practical advice. Like you want to sell your product straight to the end consumer. You don’t want somebody sending in between your, what you’re making and what you’re selling. He talks about the fact that, you know, you should be putting your own money into your companies. I always wanted to push my chips back on the table or play the next level of the game. I’m not good at sitting back. And he tells a hilarious story about starting X.com back in the 90s. Mike Morris joined the company board. He told me, dude, you should not invest basically everything except your house and car in your startup. But I kept my chips on the table. And then he just goes back to this idea of this constant iteration, trying to get essentially using reality as a validation tool is the way I think about this. I’m trying to create an accurate mental model of reality. If I have a wrong view on something or if there’s an improvement that can be made, I say I used to think this, which turned out to be wrong. Thank goodness I don’t have that wrong belief anymore. I’m a huge believer in feedback. (Time 0:38:12)
  • Terrible Demos Taught Hard Lessons
    • Tesla’s early prototypes were disaster-filled but taught lessons; prototypes are easy, production is brutal.
    • Elon recalls a demo where the car only reached 10 mph and the company had negative gross margins during 2008. Transcript: David Senra He goes back to the idea, don’t celebrate the prototype, celebrate production. Prototypes are easy. Production, especially profitable production, is insanely hard, insanely painful. He says, we made so many mistakes in the beginning of Tesla, almost every decision we made was wrong. We made a finically, individually made, super expensive prototype. I remember in the early days giving a test ride to Larry Page and Sergey Brin, the founders of Google. There was some bug in the system, and damn it, the car would only go 10 miles an hour. I was in the passenger seat saying, guys, I swear, it goes a lot faster than this. They were kind enough to put a little investment into the company despite the world’s worst demo. It was flat out burning. I gotta read that again. It was just a flat out burning dumpster fire of stupidity. It would have been much, much smarter to start with a clean sheet design and not try to modify something else. I was going to start an EV company with JB Straubel based on the AC propulsion prototype. When I asked AC propulsion, if it was okay to do that, they said, there’s some other people who want to create an EV company. Would you like to join forces with them? I said, okay, that was a huge mistake. JB and I should have just started the company ourselves. (Time 0:40:04)
  • Prioritize By Existential Pain
    • Do prioritize by desperation: focus everything on the single project whose failure would sink the company.
    • Elon dedicated all staff to fixing Model 3 production until the company would survive. Transcript: David Senra Prioritizing has usually been out of desperation, not selection. It’s not, oh, let’s sit back and leisurely decide how we should spend these resources. It’s this isn’t working. If we don’t make it work, we’re going to go bankrupt. So we better make it work. We messed up almost every aspect of the Model 3 production line. There were so many mistakes the entire company had to be devoted to fixing them. We took everyone off every other project. We all started working on the Model 3. (Time 0:42:29)
  • Starship Started In A Tent Without Doors
    • SpaceX built early Starship hardware in tents and omitted doors to reduce complexity and focus on orbit.
    • Elon accepted initial ship losses and emphasized learning iterations over polished first units. Transcript: David Senra You want to maximize the amount of iterations you do. You want to use reality as your validation tool. He says the first goal is to make the damn thing work. We’ll optimize it later. Initial production was simply a learning exercise. None of the initial designs will be long-term. We’re just trying to learn in the shortest period of time. The early Starship assembly yard looked like a garage shop. We have super advanced technology being built in a tent in a parking lot. And then he has a maxim here, eliminate what isn’t necessary to solve the key problem. And he gives an example. Early versions of Starship didn’t even have doors. We didn’t need doors. We did need to be super focused on getting to orbit. Doors were just unnecessary complexity. The first 10 ships or more, we won’t get back from orbit. (Time 0:47:57)
  • Think To The Limits Of Physics
    • Design decisions should push to physics limits to find novel solutions, like catching rockets on a tower instead of landing legs.
    • Elon reasoned landing legs add mass and catching on launch arms could enable faster reusability. Transcript: David Senra Talks about the fact that they removed the landing legs. And he was asked, why did you do this? Again, here, we try to think to the limit of physics. The problem with landing legs is they add mass. We have to protect them during reentry, and we have to get a giant rocket from wherever it landed back onto the launch stand. That is tricky. I was trying to think of the limit. What’s the fastest way to achieve reusability? It would be to land on the launch stand. Why not just have it land on the arms of the tower it launches from? When we first talked about it, it sounded batshit crazy. To custom build a giant tower to catch the heaviest flying object ever made with mechanical arms? Pluck it out of the air? (Time 0:49:09)