3 of Elon Musk's highly unusual leadership principles
The Tesla CEO has a reputation for being unconventional and unpredictable, but his accomplishments are undeniable. These are the leadership tactics he deploys when building and running companies.
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00:00 - Let's get married.
00:01 - Elon Musk is one of the most fascinating
00:05 business people in the world.
00:07 His approach is so unconventional.
00:10 The guy has a very belligerent management style.
00:12 He's very hard to work for.
00:14 Were he not the owner or the lead shareholder
00:17 or the controlling shareholder,
00:19 all of these companies,
00:20 some of which don't even have boards of directors,
00:22 any conventional board of directors,
00:24 were he a hired hand, would have fired him a long time ago.
00:27 But look what he's accomplished.
00:28 Everyone wants to know how he does it, right?
00:31 What are his daily management principles?
00:33 It really made it worthwhile to dig in
00:36 and look at kind of the tools that he uses
00:39 that have built him an empire,
00:40 but also an empire that many question may be built on sand.
00:45 One of the principles,
00:55 I learned about it from one of his engineers
00:58 who spent 10 years with him at SpaceX,
01:00 is that he loves to keep turning over the workforce.
01:05 - There were a lot of people doing things
01:07 that didn't seem to have a lot of value.
01:09 And I think that's true probably
01:11 of most Silicon Valley companies,
01:13 maybe not to the degree to which it was at Twitter,
01:15 but yeah, there's a potential for significant cuts,
01:20 I think, at other companies
01:21 without affecting their productivity,
01:22 in fact, increasing their productivity.
01:25 - His personnel policy is extremely demanding
01:28 and extremely belligerent.
01:30 This engineer was telling me,
01:32 "If I made a mistake in February,
01:35 I'd spend the next 11 months
01:37 worrying about making a second mistake
01:39 because you make two mistakes a year, you're out."
01:42 - At this point, I think I know more about manufacturing
01:45 than anyone currently alive on Earth.
01:47 I can tell you how every damn part in that car is made.
01:50 - He demands that everyone know
01:52 everything there is to know about,
01:53 he calls it the idiot index.
01:54 And the idiot index is knowing
01:57 what the raw materials are that go into every part,
02:00 what their cost of each of them is,
02:02 adding them up,
02:03 and then knowing what that finished part costs.
02:07 And if you don't know that number, twice, you're out.
02:10 Musk's greatest talent may be his ability to sell a vision.
02:16 He doesn't want his shareholders or his investors
02:19 to think too hard about returns on equity
02:22 or what dividends are gonna be
02:24 or any of these kind of conventional metrics.
02:26 'Cause you could never get to a $650 billion market cap
02:30 for Tesla using conventional metrics.
02:32 You really have to believe.
02:33 And he gets people to believe.
02:35 - We're gonna move to just truly massive scale,
02:38 scale that no company has ever achieved
02:42 in the history of humanity.
02:44 - The vision is essentially
02:46 the Teslas that are out on the road
02:48 and the ones he's gonna sell in the future
02:49 are gonna be worth multiples of what you paid for them.
02:53 Here's why.
02:54 He's gonna send you self-driving software
02:57 that you can install in the car.
02:58 You drive the car nine hours a week on average,
03:01 but with this software,
03:02 your car can circulate all day as a robo-taxi.
03:05 50 hours a week,
03:06 you've got this money-making car picking people up.
03:09 Therefore, the Tesla that you paid $40,000 for
03:12 is gonna be worth $200,000.
03:14 Therefore, he's saying,
03:16 who cares about what our margins are?
03:18 Who cares that they're going down?
03:19 The point for us is to sell as many Teslas as possible.
03:24 We're gonna discount.
03:25 We can sell this software for so much money.
03:29 That's where the big money's gonna come from.
03:30 This is a tech company,
03:32 not a metal-bending car company like all the others
03:35 that have market caps that are 10% of Tesla.
03:38 - Frankly, Tesla cars are robots on wheels.
03:41 Anything that's connected to the internet
03:45 is effectively an endpoint actuator
03:46 for artificial intelligence.
03:48 (upbeat music)
03:50 - One of his tactical strengths
03:52 is his ability to spin these situational arguments
03:55 that we'll use completely different points of view
03:58 depending on what he wants to accomplish
04:00 for the same company at the same time.
04:02 For example, in the case of X,
04:05 it's in his interest to paint a very bad short-term portrait
04:09 of what's going on there.
04:11 That philosophy is aimed at his banks.
04:15 The worse they think things are going,
04:17 the better his chance of buying out the debt
04:19 at a huge discount 'cause they can't get rid of the debt
04:21 because the interest rates are too low.
04:23 On the other situational side,
04:25 if he's looking at the future,
04:26 it's another gauzy vision that he's promoting
04:29 about how it's gonna be worth $250 billion,
04:33 be among the biggest market cap companies in the country,
04:36 and that's aimed at satisfying all of his big investors
04:40 who are probably not so happy right now.
04:42 Kind of the good cap, bad cap argument,
04:44 in the short term, we're doing horribly.
04:46 That's aimed at the banks.
04:47 In the long term, we're gonna do great.
04:49 That's aimed at placating the shareholders.
04:51 (upbeat music)
04:54 I think there's a certain music man element to Elon Musk
04:58 and that his arguments have to be taken
05:00 with a lot of skepticism.
05:02 And that has not been the case so far.
05:04 But now you're in a situation
05:06 where a lot of people are getting disappointed.
05:08 Clearly, all of the big names that he pulled into X,
05:12 these folks can't be happy with what's happened
05:16 to the valuation of that company.
05:17 He's got 13 billion in debt.
05:20 The interest rates are eating him alive.
05:22 They're absorbing most of the cash flow.
05:24 A lot of Tesla investors are not happy either
05:27 with the decline in the margins
05:29 and the decline in the share price.
05:31 Who knows how much lower it's gonna go.
05:33 So really, things are not going well for him now.
05:36 And we may be in for something of a revaluation
05:38 of his promises and pledges.
05:40 (upbeat music)
05:43 (upbeat music)
05:45 (upbeat music)