Andalucia Steve

...living the dream

Some thoughts the Tesla/Space-X boss.

 

We all know who Elon Musk is, Tesla, Space-X yada yada, yet he seems underrated by the press and positively despised in the comment section of tabloid newspapers. I'd like to address that here by highlighting some of his thought processes. Normally I aim to blog about 1000 words for a nice bite-sized read, however to cover Musk's brain in such limited space will be a zesty challenge so please forgive if I overrun!
 
Musk is seen by some as a nutcase who smokes dope on the Joe Rogan show, makes unfortunate Tweets about the 'pedo guy' and who got into a very public altercation with rap artist Azealia Banks about acid-taking etc. Only last Friday (1st May 2020) he made a seven word tweet that devalued Tesla stock by $14 billion dollars. Yet despite his maverick social media profile he is capable of thoughts of the loftiest brilliance.
 
I can't for the life of me remember where I originally read it (and I've been unable to find a source - doing a weekly blog doesn't allow as much time to research as I'd like), but the thing I first heard about Elon Musk that really impressed me was the simple idea he had to validate the ownership of bank accounts for use with PayPal. I was a web developer back in the 1990s involved in building e-commerce websites. We used to do them from scratch in those days before generic e-commerce platforms had matured, so I was familiar with the problems involved in taking and making payments online. Systems soon evolved to take payments by credit cards since the card companies had a more modern infrastructure, expiry dates, CV codes etc. Banks however, with their systems rooted in the dark ages had no way to validate the ownership of an account online. Say a client sent you an email with his bank account and you needed to send him some money for the exchange of goods, how did you know the bank account was actually his and not that of some hacker? 
 
Elon came up with the simple yet brilliant idea of paying two micro-payments to the account, say $0.34 and $0.83. The client had to read these numbers from his bank statement and enter them in the PayPal website. Musk had therefore generated the equivalent of a PIN number to verify the account. At first I thought how dumb, to give money away to verify a bank account, but as I thought more about it I realised it was genius. The two numbers would never cost PayPal more than $1.98, an expense which would easily be offset by the reduction in fraud and that would enable PayPal to transact directly with bank accounts, which had much cheaper transaction costs than anything else. You could for example send cash via say Western Union, but then the Western Union agent, usually the post office, would need to be paid to validate the identity of the payee by physically checking the passport which is a costly process in comparison. So from then on, I hailed Musk as a genius capable of conceiving ideas the like of which I could not. 
 
PayPal was not even Musk's first multi-million dollar venture. He'd already founded an online city guide, Zip-2 with his brother Kimbal in 1995 which was sold in 1999 with Musk getting $22million for his 7% share. Prior to that, while in college, Musk has spoken about his musings on the essential matters which would most affect the future of humanity and came up with five things. These were:
 
The Internet
Sustainable energy (both production and consumption)
Space exploration (more specifically the extension of life beyond earth on a permanent basis)
Artificial Intelligence.
Rewriting human genetics
 
Clearly the guy thinks big. Unlike other students with big ideas however, Musk is realising them one by one. With the founding of Tesla in 2014 Musk helped create the first successful new car manufacturer in America in over 90 years. Right now, as CEO, Musk is on the verge of winning a 3/4 billion dollar remuneration payout as part of compensation plan that depended on the company achieving a six-month period of $100 million dollar market capitalisation. This would make him the most highly paid executive in US history. The incredible thing about this is that when Musk negotiated this contract, such a target was unthinkable. The company was only worth $60 billion at $250 per share back then. Musk made it happen, even though he's a part-timer dividing his hours between several other companies. The other somewhat unsung truth about Tesla's success is the way it is transforming the automotive industry away from the dealership model that has pervaded for over a century to a direct model where cars can be bought online. The low maintenance of electric vehicles is also challenging an industry that fed off consumers need for servicing and repair. Musk doesn't just compete in a market, he smashes it to pieces.
 
Musk also heads Space-X, the rocket-company he founded in 2002. In case you've been living under a rock, Space-X has been successful too, winning a number of private and public US defence contracts. By making as much of his rocket technology as reusable as possible, he has undercut the price of all competition for launching satellites. Musk has said many times he sees the future of mankind as multi-planetary. The idea is that by sticking only on planet earth, mankind could (in fact probably will) succumb to some sort of extinction event. Only by having colonies on other worlds can the human race escape such events and survive into the future. This is a lofty goal but one which Musk is edging towards. Again, one of the things that most impresses me here is how Musk is funding Space-X. One of the key planks of the strategy is the Starlink Internet programme, a network of satellites designed to bring Internet connectivity to all parts of the globe. As well as the much publicised plan to bring affordable Internet to poorer countries in Africa and so forth, Musk has another trick up his sleeve. The satellites will exchange data using line-of-sight lasers. Because space is a near vacuum and there is no medium in space to slow the light signals down, transmission of information will be even faster than the fibre optic cable used on the ground. This lack of latency is expected to be of extremely high value to certain commercial sectors that depend on timely information such as stock brokers. The premium service is expected to provide big bucks for Space-X to fund its future developments.
 
Somewhat crazily, these achievements in themselves would be remarkable enough, yet Musk continually applies his brain to disrupt other industries. Tesla's energy grid batteries are beginning to change the way electricity companies handle the storage of electricity, while boosting the future of fledgling solar and wind-power industries. The Boring Company is set to revolutionise travel by establishing a tunnel network that promises to reduce congestion and journey times. Tesla has recently entered the car insurance industry. By using the data from its own network of cars, Tesla can fine tune risk assessments allowing it to offer insurance at up to thirty percent less than its competitors who themselves are tentative about insuring Tesla automobiles because they have only been on the roads for a decade so the old school actuarial data they use is insufficiently mature. Neuralink is Musk's foray into the world of medicine, developing high bandwidth brain to computer interfaces. He also founded and Artificial Intelligence organisation called Open AI. (He's done all this and yet I have trouble finding something to blog about once a week!)
 
Doubtless in all these other industries, Musk has probably figured out the way to get them to pay for themselves, and has envisaged a sneaky way to undercut competition leading to a big disruption in an existing market.
 
The thing that most impresses me about Musk is that his innovations, which drive market change and arguably the direction society is taking, all take place from within the private sector. I'm a dyed-in-the-wool lefty who believes at some level, the state should be planning the future of society through policy, either with a totalitarian boardroom strategy like China or with a presidential "let's get man on the moon" approach like Kennedy. Musk is proving to me that isn't necessary. He's teaching this old dog (and many like me) new tricks! 
 

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