Today is the third installment of the Elon Musk story.
Last time, we talked about Musk getting Canadian citizenship and marrying his first wife at Queen's University. Then he went to the University of Pennsylvania to continue his studies. In the end, he chose to pursue a doctorate at Stanford University or start a business because there were opportunities for Internet entrepreneurship at that time. So he took his younger brother Kimball and the $28,000 given by his father to start his first company, Zip2.
This is a website similar to Dianping.com. Unexpectedly, in less than 4 years, this website was acquired by Compaq for $307 million. Musk cashed out $22 million and became a multimillionaire. At the age of 28, Elon Musk bought a mansion, a luxury car, married a beautiful woman, and his life seemed to be at its peak. But in fact, his story has just begun. In a few years, billionaire will be just a label for him.
Although Musk spent millions of dollars on luxury homes and cars, he still had more than 10 million dollars on hand and didn't know what to do with it. So he wanted to use the money to start his next business, and he would pay for it all out of his own pocket. At this time, his experience working in college helped him again. Do you remember that Nicholson, a business columnist for The Globe and Mail, introduced Musk to a bank internship as mentioned in our last show?
During his internship, Musk met many leaders of the banking system and witnessed the bloated and inefficient banking system. Musk broadened his horizons through a successful Internet startup. Now, when he recalls his internship experience at the bank, he feels that Internet finance is definitely the trend of the future and that the traditional financial industry will be subverted by the Internet.
But when he told his friends in the banking system about these ideas, they all thought it was a fantasy. They all thought that it would be impossible to do this unless you acquired a bank and then transformed it. Besides, the current Internet security is not yet at a level that people can trust 100%. You asked merchants to upload their addresses and business scope, and they reluctantly agreed.
But asking individual users to upload their credit card and bank account numbers is simply a fantasy. But Musk thought that he had to do it even if it was a fantasy, because Internet finance is 100% the trend of the future. Therefore, he decided to invest 12 million US dollars personally to establish a company called X.com. To be honest, even if this company does not make money, the domain name of this letter is worth a lot of money when it is sold later.
As the saying goes, money brings people together and money brings people together. As long as the founder is willing to bet his life, it is very easy to recruit talents to work together. In the past, there were many young people who succeeded in starting a business in Silicon Valley. Most of them put the money from selling their first company into their own pockets, and then made up a PPT to find investment, using the fame of their first success to raise more money.
Even if he fails in the end, he will only lose a few years at most. Therefore, people like Musk who go all in are different from most entrepreneurs. To put it bluntly, if he fails, he will be penniless, and then make a comeback. If he succeeds, he can not only gain huge wealth, but also gain fascinating fame.
X.COM's founding team consists of four people. One is Eddie Ho, a former Zip2 engineer who used to work for his boss, Musk, and is now his partner. The other two are executives in the financial field, Frick and Payne. Frick was someone Musk met during his internship at university, and Payne was pulled in by Frick to start a business together. In this way, an Internet company that is ready to subvert the financial industry officially began to operate.
But the good times didn't last long. Less than five months after the company was founded, a "coup" took place in the company. Frick demanded that Musk step down and become the CEO, otherwise he would resign immediately and take a group of company executives with him. Why did this mess happen when the company was just established? It turned out that Frick and Musk had very big differences in business philosophy, although the general direction was to subvert the traditional financial industry. But running a company requires a long-term process, and a small move can affect the whole body. Musk's ideas are relatively radical, and he uses Internet thinking. What he wants is a thorough revolution. But Frick is a professional in the financial industry after all. He will take into account the interests of all parties in the existing financial system. What he wants is a slow reform.
The two sides eventually broke down, and Frick took Payne and Eddy away, meaning that he was the only one left out of the four founders. Fortunately, Musk had a successful entrepreneurial experience before, and soon he found support from Sequoia Capital. Seeing that he was betting his life and property, Sequoia Capital thought that this guy should be able to achieve something, so they tried to invest a little.
With the money, Musk began to recruit talents everywhere. As more and more engineers joined, the company's prospects became clearer and clearer. During this period, the company also obtained a banking license and a mutual fund license, and reached a partnership with Barclays Bank. In November 1999, X.COM created the world's first online bank. But in 1999, ordinary people had just learned to use the Internet for a few years, and it was harder than climbing to the sky to get them to pay online.
At this time, Musk thought of using some radical ways to stimulate netizens to use his business. For example, as long as you register for the service, you will be credited with $20. If you introduce a friend to register successfully, you will be credited with another $10. Anyway, if you use this software to consume, you will be given various subsidies.
X.COM also developed a payment system between individuals. You only need to enter the other party's email address to transfer money to the other party. So, now you understand why Alipay can transfer money by email. The prototype of Alipay is actually here. In the United States, it took several days to transfer money between individuals. But with this platform, it can be done with a few clicks of the mouse. Soon, X.COM welcomed more than 200,000 registered users.
But the good times didn't last for a few days, and suddenly a competitor emerged. This was Confinity, a company co-founded by Max Levkin and Peter Thiel. Peter Thiel is a big shot in the American investment circle. I believe that all of our listeners who are engaged in Internet entrepreneurship have heard of a book called "From 0 to 1", which was written by Peter Thiel.
This guy is definitely as smart as Musk. He is a genius chess player. When he was 12 years old, Musk earned $500 by programming, which was already amazing. When Peter Thiel was 12 years old, he was ranked seventh in the United States in chess.
When Peter Thiel first founded Confinity, he rented a utility room from Musk's company. Musk probably never thought that the tenant would eventually acquire the landlord's company. Confinity's initial entrepreneurial direction was more advanced, hoping to use the infrared port of the Palm Pilot handheld computer to realize mobile payment. Later, it was found that this approach was not feasible at all, because by the time the handheld computer became popular, the company would have closed down. So they also started to do web and email payment.
When Musk discovered one day that this company called Confinity actually subsidized more than himself and its customers were gradually lost, Musk began to increase subsidies and suppress competitors in a targeted manner. Especially at that time, Internet shopping began to rise. Online shopping platforms such as eBay and Amazon actually had the same payment channels, so they were happy to see the two compete.
Perhaps because they were once landlords and tenants, Musk and Peter Thiel met several times, and the general meaning was that they should stop attacking each other and merge. In March 2000, X.COM and Confinity officially merged. In fact, Confinity was already on its last legs at that time, because in order to maintain the advantage of the eBay platform and prevent X.COM from occupying the market, Confinity had to subsidize 100,000 US dollars a day. As long as Musk continued to fight with him, Confinity would basically be finished. I don't know if Musk will regret it after the merger and knowing the truth. So, how important is business intelligence.
After the two companies merged, they encountered a series of problems. First, the engineers disliked each other. X.COM used Microsoft's development software, while Confinity used Linux open source software. The power struggle between the top management never stopped.
Two months after the merger, Peter Heidi and Levkin both proposed to resign. They really couldn't accept Musk's radical ideas in running the company. At that time, the company was facing a surge in new users, website crashes every few days, rampant online fraud, and the company was losing money at an alarming rate. Investment companies also became less and less trusting of Musk.
Sure enough, in the sixth month after the merger, Musk was going to Sydney with his wife Justine for their honeymoon. As soon as he boarded the plane, the company executives sent a petition to the board of directors, hoping to remove Musk and let Peter Thiel be the CEO. As a result, Musk received an email from his confidant as soon as he landed, so he left his wife behind and immediately took the next flight back to the company. But it was too late, the board of directors had already made a decision, and no matter how Musk explained, almost no one in the meeting room supported him.
In June 2001, Peter Thiel became the CEO, and the first thing he did was to change the company's name to Paypal. After that, many people felt that Musk was not the founder of Paypal, and the main reason was this. When Paypal was born, Musk was actually no longer a core member of the management, he was just a consultant to the company. But Musk firmly disagreed with this view. He felt that without the merger of his company with Confinity, and without his leading the team to trial and error in the early stage, how could Paypal be what it is today? And he has always been a major shareholder of Paypal.
Paypal, the dominant company, soon achieved annual revenue of $240 million. In July 2002, eBay offered $1.5 billion to acquire Paypal. Musk cashed out $250 million from the deal, and after paying taxes, he still had $180 million. It seems that he is indeed a major shareholder. However, for this entrepreneurial venture, many people commented that Musk actually did nothing but got lucky. And from the entrepreneurial experience of Zip2 and Paypal, everyone agrees that Musk is not CEO material.
He is more like an exaggerated rock star who likes to exaggerate his strength and brag about his technology. These comments are certainly correct, but we have to deny that Musk has an extraordinary insight into the big trends. And he dared to enter the market early and bet his life and property. For this reason, I think most people are not as good as him.
Here is a side note. Musk and Peter Thiel are actually good friends. They are both recognized as the Internet industry's mentors. When PayPal was recruiting employees, they both personally interviewed each one, and their vision was quite sharp. Among the employees who left PayPal to start their own businesses, there are the founders of Youtube, Linkedin, and Yelp. There are also several who later became top investors in the technology industry. These people later formed a group and became the underground emperors who could influence Silicon Valley, and Musk was of course the most famous one among them.
In 2002, Musk had both good news and bad news. The good news was that the company was successfully sold and he became a billionaire. The bad news was that his first child died at just 10 weeks old. Two months later, he began to try IVF. As we mentioned before, his wife Justine gave birth to twins and triplets through IVF, all of whom were sons.
In fact, when Musk was squeezed out of the top management of Paypal, his mind was basically not in the field of Internet finance. At that time, he was already thinking about what field he should start his next business in? He probably felt that Internet entrepreneurship had no substantive meaning except making some dirty money. It would be better to do something big and leave his name in the world. So he thought of rocket ships and space travel.
Musk signed up for a non-profit organization called the Mars Society, which was composed of space enthusiasts. The threshold for joining was to buy a $500 ticket, which was not cheap at the time. As a result, Musk directly gave the head of the association a check for $5,000, and the head immediately looked at this guy differently.
That night, he was arranged to sit in the VIP seat. Director Cameron and NASA scientist Stock were also arranged to sit at the same table with Musk. So, if you want to achieve your goal, you have to be like Musk, who doesn't sacrifice the lamb to catch the wolf. Not long after, Musk donated another $100,000 to the association. Suddenly, Musk's popularity in the circle increased greatly. Everyone knew that there was a rich man in the Internet circle who regarded studying Mars as his hobby.
During this period, Musk also used his fame to get in touch with various great people in the aviation field. Everyone was also moved by the studious spirit of this Internet tycoon and amateur space enthusiast, and they also gave him lessons as a teacher. No one thought that this guy would become their boss in the future.
The more Musk learned about space exploration, the more he felt that NASA was a waste. It took so much money from the government every year, but it did so little, and NASA seemed to have no interest in Mars exploration. So he had a bold idea to start a company and subvert NASA. He told people around him about this idea, and everyone thought he was crazy. Musk said he wanted to send mice to Mars and let them reproduce.
His buddy brought him some cheese the next day. Musk was puzzled as to what this meant. His buddy said, this is for your Mars mice. How can they have the energy to create the next generation if they are not well fed? Another time, Musk was in a salon and heard a group of space enthusiasts bragging that we can build an oasis on Mars and plant flowers and grass. Musk patted his chest and said, this is a good idea, I am willing to invest 30 million US dollars to realize this plan. Everyone on the spot looked at him like a fool. At this time, an expert stood up and said, don't be silly, young man, this plan will not even make a sound without 300 million US dollars.
Musk was like a stubborn donkey. He was a little too obsessed with building a rocket. Thinking alone was not enough, he had to take action. Anyway, Paypal didn't need him to manage it. So he thought about going to Russia and getting a refurbished intercontinental ballistic missile to use as a launch vehicle. He immediately did it and used his connections to get the phone number of someone.
This man is called Jim. He used to work for the US government and was engaged in some confidential work. He was once accused of espionage by the Russian government and was placed under house arrest for several weeks. Finally, the US Vice President came forward to guarantee his release. Musk didn't know him, so he called him directly. He started by saying, "Stop pretending, I'm a billionaire, and I want to implement a space program." The other party thought he had received a scam call and was about to hang up when the person on the other end of the phone finally gave his name, "My name is Elon Musk." The other party heard that he was a small local tycoon in Silicon Valley, so he agreed to meet him.
At the Salt Lake City airport, Musk convinced Jim that he would go to Russia with him to try to get an intercontinental ballistic missile. At the end of October 2001, they flew to Moscow, but the talks were not going well. The Russians were ready to take advantage of this American tycoon. The other party asked for 8 million for one missile, but Musk insisted on 20 million for three missiles, or 8 million for two missiles. The Russians looked at them with disdain, meaning that if you don't have money, get out of here and don't mess around on my territory.
They spent more than four months and negotiated with the Russians four times, but still failed to reach an agreement. The news that Musk flew to Russia to buy missiles quickly spread in the space research circle. The president who had introduced him to the club found out and hurried to find Musk and said, "Don't make trouble, kid. Let me tell you something: Do you know how to become a millionaire?"
Let a billionaire invest in building a rocket to explore space, and he will soon become a millionaire. Musk laughed, it's just a few bucks, millionaires and billionaires are all rich anyway, just do it. Seeing this man was so crazy, the president decided to help him in the end, so he introduced him to Miller, an equally crazy weirdo in the association, and left with a sentence, "Old Ma, if you can fool this guy, maybe you can really build a rocket."
In January 2002, Musk drove his car around and finally arrived at a factory near Huntington Beach. He was stunned when he entered the door. A group of people in the factory were tinkering with an 80-pound rocket thruster. This thing could generate 13,000 pounds of thrust and was the largest liquid-fuel rocket thruster made by amateurs in the world at that time.
Miller told Musk that this was just one of them, and he had several more in his warehouse, but they were a little smaller. Musk was dumbfounded and asked him, "Can you really build a rocket?" Miller said, "I used to work in satellite research, and my income was not low, but I had too many ideas and was always scolded by my boss. So I simply quit my job and started researching rockets." Musk said, "That's great, I have money, let's build a rocket together." But your 13,000-pound thrust is too small. How much does it cost to make a 650,000-pound rocket thruster?"
Miller said, "I used to be the project manager of rocket propulsion at TRW. I know every detail. If TRW builds it, it will cost about $12 million." Musk thought, the Russians are too ruthless. A second-hand missile costs $8 million, and it needs to be modified after it is bought. If I build it myself, it will only cost $12 million. If I save a little, it may be the price of a second-hand missile. So, Musk decided to start a space exploration company with Miller without saying anything.
In June 2002, SpaceX was officially established. One month later, Musk's Paypal was successfully sold, cashing in $180 million. Without saying a word, he immediately invested the $180 million in SpaceX, and then patted his partner Miller on the shoulder, saying, "I told you a long time ago, buddy, I have money, so you can build rockets with confidence." Miller's team lived up to expectations. At that time, the cost of launching a 550-pound payload rocket was at least $30 million. As a result, the first "Falcon 1" rocket they built carried a 1,400-pound payload and only cost $6.9 million. Musk was even more certain that building rockets was a possibility, and NASA in the United States was just a bunch of rubbish.
In November 2005, the Falcon 1 was ready to launch, but it had to be postponed due to an oxygen leak. The next two launches were also postponed due to malfunctions. It was not until March 2006 that the Falcon 1 was finally launched, but it lost control and crashed 26 seconds later. One year later, the Falcon 1 tried to launch again, but it lost control again after the first stage disintegrated, disintegrated, and then exploded.
After four years of burning through money, Musk’s family fortune was almost exhausted. Investment companies at that time did not dare to play with this madman. If the launch failed two more times, Musk would really turn from a billionaire to a millionaire. Two years later, SpaceX tried the third launch, and 30 seconds later, the launch failed again. Some people joked that Musk was not a rocket manufacturer, but a fireworks manufacturer, and every one or two years he would spend tens of millions of dollars to let everyone play with fireworks.
Musk felt that the third launch was close to success, and that the industry's average success rate for rocket launches was only about 25%. We had already tried 75% of the failures, so the last 25% must be a 100% success rate. I felt that something was wrong with this statement, but I couldn't refute it. Anyway, you pay the money, so you are right. So everyone worked overtime to prepare for the fourth launch.
On September 28, 2008, Falcon 1 attempted its fourth launch. If it failed again, SpaceX would have basically closed down. Of course, even if it succeeded, it was unclear whether the company would have a future. For this launch, Musk also requested a live broadcast of the entire process. It was either a success or a complete failure. In a word, he just did it.
After the ignition, the rocket climbed higher and higher. After the first stage separated, the second stage started to fly after 90 seconds. Amid the employees' ecstatic shouts, the world's first privately built rocket was successfully launched! This is an epoch-making success, a success that will drive the future of the entire human race. Before this, only the six most powerful countries in the world could do it. And they are just a private company.
After Musk took SpaceX employees to a wild party, he looked at the balance in the company's account and frowned. Although the rocket launch was successful, the money in the account could not support the employees' salaries for several months. If the company could not get the money, it would still close down. So who gave SpaceX a hand at the critical moment and brought it back to life?
Why would a boss who built rockets suddenly want to build electric cars? What other crazy moves will Elon Musk make in the future? Let's talk about it in the next episode.
