#170 What I Learned From Elon Musk
What I learned from reading “The Book of Elon: A Guide to Purpose and Success” by Eric Jorgenson.
Today’s Chapter is based on the book “The Book of Elon: A Guide to Purpose and Success” by Eric Jorgenson.
Elon Musk is an entrepreneur renowned for leading major tech companies, such as Tesla, Space X and xAI. He is well-known for thinking in first principles and for his success as an intelligent fanatic. He is considered as one of the greatest entrepreneurs of our time and is one of the wealthiest person alive.
Here’s what I learned:
First Principles Thinking
“As to methods, there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.”
— Harrington Emerson
Elon Musk is a perfect example of how innovation comes from thinking like a physicist. He mentions that “When you want to do something new, you have to apply the physics approach. Physicists discover counterintuitive new things, like quantum mechanics. They do that by thinking from “first principles”: building their reasoning from the ground up.” By using first principles thinking, he can break down problems to their most fundamental truths which helps in solving complex issues. He believes that if an idea aligns with the laws of physics and does not violate core principles, it is worth pursuing even if the chances of success are low. As he once said, “If the reasoning fits, and you’re not violating the laws of physics, that’s the thing you should try to do.”
As a matter of fact, first-principles thinking comes from physics and Elon Musk urges everyone to adopt it when thinking about complex problems. He mentions, “Break something down to the most fundamental principles. Start by asking: What am I most confident is true at a foundational level? That sets your axiomatic base. Then you reason up from there. Then you check your conclusions against the axiomatic truths.”
Tesla’s success in commoditizing EV vehicles comes from Elon Musk’s first principles thinking. He was able to overcome the conventional thinking that batteries would remain expensive forever based on historical costs. By dismantling batteries into its raw materials, Musk was able to find a way to make them cheaper.
“Here’s an example from early in building Tesla. People said battery packs were too expensive to make cheap electric cars. They assumed they would always be expensive, because they had been in the past. That’s pretty dumb. … The first-principles approach to battery costs is this: What are the batteries made of? What are the materials that make up the batteries? What is the market value of those material constituents? It’s got cobalt, nickel, aluminum, carbon, some polymers for separation, and a steel can. Okay, what if we bought that amount of material at the London Metal Exchange? What would each of those things cost? Oh, geez, it’s only $80 per kilowatt hour. So clearly, we just need to think of clever ways to take those materials and combine them into the shape of a battery cell. That’s how I knew it was possible to build batteries much much cheaper than anyone else realized.”
— Elon Musk
First principles thinking was also used at SpaceX in order to make rocket prices cheaper. Musk explains that, “First-principles thinking built SpaceX. Most people think, “Historically, all rockets have been expensive. Therefore, in the future, all rockets will be expensive.” But that’s not true.” He first understood that a rocket was made from aluminium, titanium, copper and carbon fiber and researched on what was the cost of all these raw components. The conclusion was telling, the price of raw materials to build a rocket was relatively small, well under 5% of the current cost of rockets. Musk decided that it would be much cheaper for him to build rockets himself, as he believed that “The manufacturing must be very inefficient if the raw material cost is only 1 or 2 percent of the finished product.”
As a matter of fact, Musk coined the term “The Idiot Index”. The higher a finished product cost compared to the cost of its materials, the higher the Idiot Index. When faced with a part or a product with a high Idiot Index, Musk would cut cost with more efficient manufacturing techniques, often doing it internally. On the Idiot Index, he once said, “If the ratio is high, you’re an idiot.”
First-principles thinking is uncomfortable because it forces you to question assumptions that everyone else has accepted. But that discomfort is precisely the point. If you want to achieve what others cannot, you must think in ways that others will not.
“I would encourage people to use the mental tools of physics and apply them broadly in life. They are the best tools.”
— Elon Musk
This reminds me of Sam Zell’s concept of keeping things simple. Whenever he faced a complex deal, he made sure to understand all the risks involved and to focus on solving the one that would make or break the deal. He explains, “I realized that the basics of business are straightforward. It’s largely about risk. If you’ve got a big downside and a small upside, run the other way. If you’ve got a big upside and a small downside, do the deal. Always make sure you’re getting paid for the risk you take, and never risk what you cannot afford to lose. Keep it simple. A scenario that takes four steps instead of one means there are three additional opportunities to fail.”
As such, he understood that by simplifying the problems into simple goals and steps, it is much more likely to be successful. He learned this from his mentor Jay Pritzker who taught him how to look at real estate deals.
“Jay taught me to use simplicity as a strategy. He had an uncanny ability to grasp an extremely complex situation and immediately locate the weakness. He always said that if there were twelve steps in a deal, the whole thing depended on just one of them. The others would either work themselves out or were less important. He had a laser focus on risk. I like to say my father taught me how to be, law school taught me how to think, Jay taught me how to understand risk.”
— Sam Zell
Maniacal Urgency
“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.”
— Steve Jobs
Ideas are cheap. Execution is what is worth millions. Musk mentions that he has “more ideas than I could possibly execute. Innovation is not the problem. Execution is the problem.” What separates successful people from dreams is not the quality of their ideas but their ability to turn those ideas into reality. And turning ideas into reality requires a level of intensity that most people find uncomfortable. Elon Musk once said, “A maniacal sense of urgency is our operating principle.” In fact, from reflecting on how Musk ran his companies, it is clear that real progress demands extreme effort, focus and a sense of urgency that borders on the obsessive side. He believes that “You must be extremely tenacious. Work like hell. You have to put in eighty-to one-hundred-hour weeks every week. This will improve your odds of success.”
As such, it is not surprising that Musk isn’t too found of the idea of a balanced work week. He mentions that “Nobody ever changed the world on forty hours a week.”, and he clearly puts this principle to the test. As a matter of fact, Musk was well known for setting aggressive timelines using it as a motivation for his employees to work harder and more efficiently.
“You need to work. Work hard. Like every waking hour. Particularly if you’re starting a company, you need to work super hard. Do the simple math: Somebody else is working fifty hours a week and you’re working one hundred. You’ll get twice as much done in a year. 54 If other people are putting in forty-hour workweeks and you’re putting in one hundred, what takes them a year, you will achieve in four months.”
— Elon Musk
Furthermore, in order for his companies to achieve the deadlines set by his maniacal approach, Musk had to implement a system for them to work fast and efficiently. To do so, he elaborated an Algorithm inspired from engineering in order to speed things up. He mentions, “I have everyone at my companies rigorously implement a five-step process for engineering. I call it The Algorithm. I’ll list the steps, then explain. The order is very important. Make your requirements less dumb. Try very hard to delete the part or process. Simplify or optimize. Accelerate. Automate.”
First, he believes that most of the requirements are dumb and that it is primordial to question them and see why they were set in the first place. He explains, “Whatever requirements or constraints you do have must come from a person, not a department. You can’t actually ask a department. You have to be able to ask a person, and the person putting forth the requirement must take responsibility for that requirement. Otherwise, you could have a requirement made up by an intern two years ago off the cuff, or someone who isn’t even at the company anymore. You must know the name of the real person who made every requirement. Many times we’ve had dumb requirements, dug into them, and discovered no one currently working in that department agrees with the requirement. These things are often way more silly than you think. So step one is make your requirements less dumb.”
Second, you often need to eliminate some steps to make things faster. As a matter of fact, Musk was well-known among his employees to often go through a rampage of deleting things. He was never conservative about these things as he believed that “If you’re not adding deleted things back in 10 percent of the time, you’re clearly not deleting enough.”
Third, you need to optimize every single steps that are essential. And once that is done, you can start on step four and five which are to accelerate and automate. Musk warns to not skip over the steps. As he explains, “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.”
Elon Musk’s approach is eerily similar to Chung Ju-Yung’s motto of “shorten the time”. The founder of Hyundai believed that this is the surest way to encourage innovation and improvement among the company. He would often take tours of his projects and would always seek to find ways to shorten construction times in unconventional ways. He once said, “I am someone who believes that if a person limits themselves to the fixed ideas inherent in common sense, they will not be very creative.”
Chung believed that finding clever solutions would never come from people with conventional thinking. As a matter of fact, he mentions that “if you only think in accordance with what you learned through books, your imagination will be limited to that.”
“When we worked on the Jubail project, we had to make 160,000 drill bits to build the breakwater and shore protection structures. If we built 200 every day, it would take us 800 days to make 160,000. But at the site, the workers were making them one at a time instead of using a mold to mass produce them. Their sorry excuse for this wasteful effort was that the molds weren’t the right height to fix onto the end of the cement trucks.
When I saw this, I was furious. Why did these people have brains if they weren’t going to use them? It didn’t take a genius to realize that the outflow ramp for the concrete on the trucks needed to be raised to fit the molds. If they just followed this simple solution, they wouldn’t need a crane, and they wouldn’t waste time and energy. They couldn’t think to adjust the concrete mixer truck, thinking it was unchangeable. Would the gods punish them for making some small adjustments? After I made the changes, we went from 200 per day to 350 per day.”
— Chung Ju-Yung
Attract Great Talent
“If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.”
— David Ogilvy
No one builds a rocket or a car company alone. Elon Musk would be the first to admit this. His job as the CEO is not to take credit but to create an environment where his employees can do their best work. That means recruiting well, removing bureaucratic barriers, and leading by example. As he once said, “I want to emphasize that sometimes—in fact, most of the time—I get way too much credit or attention for what I do. I’m just the visible element. The reason these companies are successful is because we have extremely talented people at all levels making it happen.”
Moreover, he advocates for a “Special Forces” culture where only excellent performers are welcomed. In fact, he is ruthless about quality. He explains that only exceptional performance constitutes a passing grade. Mediocrity is not acceptable, not because he is cruel, but because the problems he is trying to solve are genuinely hard. A company that tolerates average work will produce average results, and average results will not get humanity to Mars or transition the world to sustainable energy. He says, “When hiring, I look for evidence of exceptional ability, or at least exceptional aspiration.”
“Wherever the smartest, most driven people are choosing to work, that company is going to win.”
— Elon Musk
Furthermore, creating a culture of excellence requires more than just hiring well. It also requires leaders who are willing to lead by example and who are willing to get their hands dirty. Elon Musk is often seen sleeping on factory floors and working alongside his teams during crises. He understood that his employees would work harder if they saw him working alongside of them. He mentions, “Think about war. Do you want the general in some ivory tower or on the front lines? 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 that you’re not in some plush office somewhere.”
Similarly, Musk believed in removing any barriers that may separate senior executives from employees. As a matter of fact, he expects his managers to have hands-on experience in the work they oversee. For example, software managers must be able to code and solar roof managers must be able to install roofs. If you cannot do the work yourself, you have no business telling others how to do it. He elaborates that, “All technical managers must have hands- on experience. For example, managers of software teams must spend at least 20 percent of their time coding. Solar roof managers must spend time on the roofs doing installations. Otherwise, they are like a cavalry leader who can’t ride a horse or a general who can’t use a sword.”
“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 are like, “If the CEO is willing to take that level of pain, I can do it too.””
— Elon Musk
This reminds me of what we have learned from Steve Jobs and on the importance of hiring A-players. As a matter of fact, Jobs was also a master at recognizing talent and surrounding himself with exceptional people. He had an almost uncanny ability to locate and convince talented individuals into joining his team, often convincing them to take on roles they might otherwise have avoided. Steve Jobs was well known for working with only A-Players.
“So I’ve built a lot of my success on finding these truly gifted people, and not settling for “B” and “C” players, but really going for the “A” players. And I found something… I found that when you get enough “A” players together, when you go through the incredible work to find these “A” players, they really like working with each other. Because most have never had the chance to do that before. And they don’t work with “B” and “C” players, so it’s self-policing. They only want to hire “A” players. So you build these pockets of “A” players and it just propagates.”
— Steve Jobs
Furthermore, one of Steve Jobs’ biggest quality as a leader is his ability to connect with people who had the skills he lacked. As a matter of fact, when Jobs first started Apple, it was his partner Steve Wozniak, often referred to as the technical genius behind Apple, who was responsible for designing the hardware that made the company famous. Jobs, on the other hand, took care of the business aspects, from securing funding to negotiating deals. Together, they formed a partnership that would change the world.
Jobs’ ability to recognize Wozniak’s genius and harness it for the company’s benefit was one of his greatest strengths. He understood that Wozniak’s designs were not just technically impressive—they were revolutionary. This realization helped Jobs see the potential for turning Wozniak’s creations into profitable products.
Beyond the Book
Listen to "The Book of Elon with Eric Jorgenson" by David Senra