Last time we talked about Musk founding the Internet financial company X.COM, which then merged with its competitor Confinity to create the famous Paypal, which is the American version of Alipay.
In July 2002, eBay acquired Paypal for $1.5 billion, and Musk cashed out $250 million, earning $180 million after tax. He then invested the $100 million he had just earned into his next new company, SpaceX, to develop rockets for space exploration.
He initially planned to buy a second-hand intercontinental ballistic missile from Russia for modification, but the Russians asked for 8 million dollars for one. Musk was furious and vowed to build one from scratch. At this time, he was introduced to the rocket god Miller. With Miller's help, he built a 550-pound payload rocket that originally cost 30 million dollars for 6.9 million dollars. But then, SpaceX failed in three launches in four consecutive years. Just when the company was about to go bankrupt, the fourth launch was finally successful.
Before Musk had time to be happy, the finance department informed him that the company's funds would not last for a few months. At this time, who pulled SpaceX, which was on the verge of bankruptcy, back to shore? The answer is NASA.
Some people may be curious. Didn’t we mention in the last episode that Musk did some research and found that NASA had a bunch of idiots, so he decided to start SpaceX to subvert NASA? How come NASA finally brought him ashore?
Here, let me first explain to you what NASA is, and then clarify the relationship between NASA and Musk's SpaceX. NASA is the abbreviation of the National Aeronautics and Space Administration, an administrative agency of the U.S. federal government. It is responsible for formulating and implementing the U.S. civil space program and conducting research in aerospace science.
NASA does not build rockets itself. It is only responsible for proposing space programs and providing a development plan, and then outsourcing the work to third-party companies for negotiation. NASA is not a profit-making organization. They get their money from the budget requested by the U.S. Congress. According to the progress of the project, NASA pays contractors for spacecraft and launch services. Simply put, this model is called "government sets the stage, and enterprises perform."
In September 2008, after the fourth successful launch of SpaceX's Falcon 1 rocket, the company's account was almost empty. At this time, Musk's first thought was to find investors for financing, but building rockets is extremely risky and has a very low rate of return. It is almost a bottomless pit of money. Even if Musk has a strong ability to deceive people, it is difficult for him to raise money from investors.
But at this time, NASA suddenly threw an olive branch and gave SpaceX a large order of 1.6 billion US dollars, requiring them to provide 12 supply services to the International Space Station. We can understand that SpaceX is like a courier company. As long as it completes one task of delivering supplies to the International Space Station, it can get more than 100 million yuan in courier fees. Of course, if you fail to launch your rocket several times in order to deliver one courier, then sorry, not only will you not get the money, but you will also have to compensate for the supplies.
But anyway, with the $1.6 billion, the company is at least not short of money for the time being. And at this time, Musk has another bold idea: how about upgrading the launch vehicle and changing it to a reusable version? In this way, on the one hand, the cost of each launch can be greatly reduced, and more money can be earned (actual verification shows that it only speeds up the launch rhythm and does not save much).
On the other hand, with this technology, we will be more competitive in engineering projects. In fact, since SpaceX launched its first rocket in 2005, NASA has been paying attention to the company's every move. Of course, there is another person who is also concerned about the development of this company, and that person is former US President Obama.
Coincidentally, Obama was elected as the President of the United States in 2008. It was also in 2008 that NASA suddenly put the previously closed market out for public bidding, and SpaceX was very lucky to win the bid. Do you think Musk is lucky, or is there a mysterious boss secretly supporting him?
But then again, NASA is Musk's mentor, but Musk is also very hardworking. Later, the rocket recovery technology was also successful, the Dragon spacecraft was also built, and the Starlink technology shocked the world. But there are also many people who hate Musk, the most famous of whom is the former world's richest man, Amazon founder Bezos, who founded the space exploration company "Blue Origin" two years earlier than Musk. Every year, he would sell some Amazon stocks and cash in more than 1 billion to invest in this company. He is not short of money at all.
NASA has always been optimistic about him. As a result, Musk's SpaceX was born, and NASA immediately loved this little son, assigning all kinds of orders to Musk. Bezos publicly protested NASA's partiality many times. The competition between these two big guys in the field of private aviation is also very interesting. If you are interested, you can search their stories on the Internet, which is very exciting.
That’s all about Musk’s space exploration. Next is the story of Musk and his Tesla company that everyone is most interested in. In fact, Tesla electric cars were not invented by Musk, and even Tesla was not founded by Musk.
For a long time, Musk was just a star on stage, with a group of technical experts behind him supporting the development of the company. When Musk was in college, he studied how to use supercapacitors as energy storage devices for electric vehicles. He was originally going to Stanford to study for a doctorate, and he also wanted to continue studying advanced energy storage technology. So, he had the idea of studying electric vehicles in his mind very early, but building rockets seemed cooler.
In the fall of 2003, not long after SpaceX was founded, two engineers came to talk to Musk and wanted to see if the rich man could invest in them because they were researching hybrid aircraft. But Musk was obviously not very interested in aircraft. He had already built rockets, so why would he bother with aircraft?
When the three of them were about to finish their dinner, one of the engineers named Straubel casually said, "We actually have another plan, which is to build electric cars, but I don't think you are interested." At this time, Musk suddenly said, "I am interested in talking about this topic. Tell me about it." Straubel also became excited at this time, cleared his throat, and started talking about his childhood.
He said that he was a well-known inventor when he was young, probably because he inherited the genes from his grandfather, who built the first internal combustion engines in American history to power ships. He could dismantle and restore engines when he was 13 years old. When he was in college, he dismantled a Porsche and first converted it into an electric car, and then into a hybrid car.
After graduating from Stanford University in 2002, I went to work for Harold Rosen's company next door to develop hybrid and electric vehicles. After the company went bankrupt, Rosen and I started another company to develop hybrid and electric aircraft. So today I came to your company with him to raise funds.
Musk thought, these two people are even less reliable than me. However, they are absolutely right in their research on electric cars, so he asked them how much money they wanted to raise. Straubel looked at Rosen and thought that since he didn't spend a penny on airplanes, he probably wouldn't be willing to spend too much on electric cars. So he asked for $100,000. Musk thought about it, raised a finger and said, I'll invest that much. Rosen and Straubel were surprised. Are you willing to invest $1 million? Musk shook his head and said, No, I'll try $10,000 first.
Straubel thought Musk's attitude was good, but the investment was small. He thought Musk's $10,000 was too much to handle, but if he didn't take it, they wouldn't be friends. So he went to find his good friend Tom Gage, who was working at AC Propulsion Electric Vehicle Company, and told him that a friend of his was going to invest in electric vehicles, and that part of the first investment had already been received. They should go and persuade him again, and maybe the deal would work.
AC propulsion was founded by a group of engineers who had left GM. In 1996, GM's first electric car, EV1, was launched. It was equipped with two 42kw motors and powered by 32 lead-acid batteries, with a theoretical range of only 100km. Unfortunately, EV1 was a short-lived model and was discontinued in 2002. A total of 1,117 units were produced, and most of them were leased to the market instead of being sold publicly. The discontinuation of this project was partly due to the immature technology at the time and partly due to the constant suppression by oil giants such as Mobil.
After the failure of the EV1 project, many GM engineers resigned and joined AC Propulsion, which built the "T-ZERO" electric sports car in 1997, but never officially put it into mass production. The car uses a lithium-ion battery pack, has a range of 300 miles, and accelerates from 0 to 60 km/h in just 3.6 seconds. When Straubel found out that Musk was so interested in electric cars, of course the first person he thought of was AC Propulsion's president, his good friend Gage.
Straubel and Gage drove the T-ZERO to meet Musk. Musk was very interested in the car and asked Gage if it could be mass-produced as soon as possible. However, Gage was a technology geek and felt that it was too early for the car to be mass-produced. Moreover, their company only planned to make the vehicle's drive and battery management system, not to build the car.
No matter how he talked, he refused to accept Musk's commercialization plan. Finally, Gage said, "How about this, I will introduce you to two people. They are also very interested in making electric cars. Like you, they have talked to me many times but I have refused. I heard that they are preparing to set up a company called Te something. You can talk to them later and maybe we can cooperate." Musk smiled when he saw the contact information of these two people. One was Martin Eberhard and the other was Mark Tarpenning. It turned out that they were both from the old Ma family.
These two are also legends. In 1997, their company developed the world's first batch of e-readers, named Rocket eBook, which is almost identical to the Kindle we use now. The first generation of Kindle was officially released in 2007, but their Rocket eBook sold more than 20,000 units in 1999, and the company was acquired for US$187 million in March 2000.
So Eberhard and Tarpenning were two wealthy people who had no worries about food and clothing and wanted to continue to do something. When developing e-books, they found that the 18650 lithium-ion batteries used in this low-power device had a very long standby time. When they saw the American EV1 electric car from birth to death, they kept wondering, why can't electric cars use lithium-ion batteries?
So in 2001 they searched online for companies in the United States that made electric cars, and they found AC propulsion. They flew over to have a talk with the company's leaders, saying, "I'll give you $500,000 as an investment, and you have to make me a lithium-ion battery electric car."
The leader of AC Propulsion, probably the same Gage who had met Musk, thought that these two people were crazy. They came to ask for investment without knowing anything, and said they wanted to build lithium-ion electric cars. At that time, lithium-ion batteries were only used in laptops and some small electronic devices. If you put them in cars, aren’t you afraid of explosions and spontaneous combustion? AC Company decisively refused and was unwilling to build cars. After being rejected, Eberhard and Tarpenning decided to go back and set up their own company to build electric cars.
In July 2003, Eberhard and Tarpenning formed their new company and named it Tesla. On the one hand, it was to commemorate the great inventor and electric motor pioneer Nikola Tesla, and on the other hand, T is the cross-section of an electric motor. They thought that making a car was not that difficult. They could make the core three-electric system themselves, and find other models to provide the exterior, interior and chassis.
They wanted their electric cars to be different from those "old man's cars", so they found Lotus and used their Elise coupe as a base to build their own electric cars. They thought that high-end electric cars would definitely be bought by people, and after research, they found that if they wanted their products to be more competitive, they had to sell them directly instead of through dealers. By January 2004, they felt that they were fully prepared and began to look for venture capital financing.
They looked for investors, but no one was interested. They thought that GM couldn't make EV1, so how could you two small companies make good electric cars? Finally, an investor who had invested in their e-book company before invested a little because of their character. When they were desperately looking for investment, Gage, the president of AC propulsion, brought good news, saying that a guy named Elon Musk was looking for investment in an electric car project. Without saying a word, they bought tickets and flew to Los Angeles to meet Musk.
When Musk met Eberhard and Tarpenning, he didn't seem to be very interested in the performance parameters of the car. He just kept asking what the company's future profit model would be. In front of a big liar like Musk, the two engineers could only bite the bullet and try their best to deceive. Musk did not express his opinion on whether to invest or not during the first meeting. A week later, Musk asked them to meet again. This time, Musk did not talk much with them, and quickly gave a reply, not only do I want to invest in you, I also want to join your team and build electric cars together. Eberhard and Tarpenning suppressed their inner excitement and said excitedly, welcome to join our team.
Musk kept his word and invested $6.5 million in Tesla, becoming the largest shareholder and chairman. Eberhard and Tarpenning were probably too short of money at the time, and they forgot to research Musk, who had a strong desire for control and unlimited ambition. Sure enough, in 2008, Musk found a random reason for not controlling costs and kicked them both out of the company. Tesla has since changed its owner. Today, everyone knows that Tesla is Musk's company, but few people know the names of the two founders, Eberhard and Tarpenning.
After Musk joined Tesla, he found that the car they built, called Roadster, was not that complicated. It used the appearance and interior of Lotus and transplanted the power system of AC propulsion company T-ZERO. In other words, they had some innovations of their own in the battery pack (don't realize the technical potential of 18650 lithium-ion batteries earlier than others), and that's all.
Musk felt that Eberhard and Tarpenning did not understand electric cars at all, so he called Straubel to join his company. In May 2004, Straubel was hired as technical director with a high salary of $95,000, and worked there for 15 years. It was not until July 2019 that Straubel officially left the company, but he still retained the title of technical consultant.
On the day he resigned, Tesla's stock price plummeted by 14%, and its market value evaporated by $6.3 billion. At that time, the media rumored that Tesla began to cut corners in order to increase production and turn losses into profits, resulting in multiple vehicle out-of-control and spontaneous combustion accidents, but Musk still insisted on meeting performance targets. As the technical director, Straubel couldn't stand it anymore and decided to resign. But no matter what, Straubel is recognized as the man behind Musk.
In January 2005, the Roadster prototype was finally built. Musk immediately took the project to find investors and led the investment of $9 million. He also raised another $4 million from other investment institutions, raising a total of $13 million. With this money, they planned to mass-produce the Roadster in 2006.
But Tesla engineers have no confidence in mass production in such a short time. Because more than 7,000 lithium-ion batteries put together are like a time bomb, and no one has ever tried to do this before. If a rich man bought a Tesla Roadster and drove it, and then bang, he exploded into the sky like a firework, this news would definitely be on the front page, and Tesla could declare bankruptcy that day. This is different from making rockets and setting off fireworks, which is more expensive, but there is no one on top.
Musk was certainly worried about this, so when the second prototype car EP1 was born in May 2006, he led an investment of $12 million, then went out to find investment institutions and brought back another $28 million. The total amount added up to $40 million, and this matter seemed more and more reliable.
Two months later, the EP2 prototype was born, and Musk felt that it finally looked like a drivable car. So he couldn't wait to start large-scale publicity, and he used his connections to invite many celebrities, including Governor Schwarzenegger, former Disney CEO Eisner, big stars Leonardo and George Clooney, Google co-founders Brin and Page, and so on.
For safety reasons, each person could not test drive the Roadster for more than 5 minutes to prevent overheating, malfunctions, or even spontaneous combustion. The Roadster was priced at $90,000 and could travel 250 miles on a single charge. Musk would certainly brag about Tesla's technology at the press conference, but there was a real car in front of him, and so many celebrities were there to support it. Musk later announced that more than 30 people had ordered the Roadster that day.
Today, 15 years later, this routine is still common in China, isn't it? Musk's last words surprised everyone. He said that in the next three years, a cheaper sedan will be launched, with an estimated price of $50,000. Of course, the most surprised people must be the Tesla engineers on the scene. Even this Roadster is a semi-finished product that has not been put on the market. How dare they announce in public that they will launch a new car in three years? Crazy, this guy is really crazy.
However, this wave of celebrity endorsements has made Tesla famous overnight. People have discovered that electric cars are no longer the ugly and slow grocery shopping cars like the EV1. They are supercars with a cool appearance and faster acceleration than fuel cars. Compared to supercars costing hundreds of thousands of dollars, owning a new electric supercar for less than 100,000 is also a good choice. After all, I have never driven one. Now that these celebrities have started to drive one, we can't fall behind, right?
Therefore, Tesla Roadster attracted the attention of many wealthy people under the hype of American media. Dozens of them were ordered before the car was launched, and millions of dollars in deposits were received. At that time, Eberhard also revealed the delivery time of the car in a media interview, which could be as early as the end of 2007.
As a result, various problems arose during the process of preparing for mass production of the Roadster. First, Musk always had sudden ideas and asked for various changes. Sometimes he asked for the door handles to be changed to automatic sensing, sometimes he asked for the weight of the vehicle to be reduced, and sometimes he asked for more configurations. It was at this time that the conflict between Eberhard and Tarpenning and Musk intensified.
But judging from the results, they still have to take the blame. The most serious problem encountered during mass production was the failure of the transmission. Although electric cars do not have transmissions, they still need a reducer. Tesla engineers originally thought that they could just purchase one and use it. As a result, each work vehicle would have problems after driving more than 100 miles or more than 2,000 miles.
Until January 2008, the transmission problem was not solved. The local tycoons who were eager to take the car home as a new toy began to complain. Rich people are not easy to serve, especially when you fail to deliver on your promises to them. This is not the worst news. A research company helped Tesla calculate that according to their current manufacturing cost assessment, the cost of a Roadster should be around $170,000, but they only sell it for $85,000. So they lose nearly $100,000 for each car? Moreover, Tesla's current production capacity cannot guarantee that every car is a qualified product. In this way, the loss is even greater.
After this report came out, on the one hand, the confidence of Tesla employees was severely hit, and on the other hand, it also directly affected Tesla's financing. Investment institutions found that this was completely different from Musk's boasting. Did they think that the money they invested was just a waste of money?
In fact, the loss of each Roadster after mass production was about $10,000, which was not as exaggerated as the media reported. However, this incident became the fuse of the conflict between CEO Eberhard and Musk. Musk quickly used his status as a major shareholder to remove Eberhard from the position of CEO, and then the two began to fight openly.
Musk also deleted all the content about Eberhard on his Twitter. In the latter's view, he just wanted to erase the traces of being the founder of Tesla. Unsurprisingly, Eberhard chose to resign. Musk immediately replaced him with the CEO he appointed, Drori. This person has one advantage: he is obedient. He has no prestige in Tesla, and all major decisions are made by Musk.
In February 2008, Tesla held a delivery ceremony for the first Roadster, symbolically informing the outside world that the car had been put into production. In fact, the car had a lot of problems and had not been completely solved. By the end of 2008, the cost of developing the Roadster was about $140 million, far exceeding the estimated $25 million in the 2004 business plan. Investors no longer believed Musk's nonsense. Not only that, around 2008, the United States experienced a very serious subprime mortgage crisis. At this time, not only was it difficult to raise money, but ordinary people also had a hatred for bankers and wealthy people.
Tesla was surrounded by enemies at this time, and the media coverage also changed. Some people estimated that Musk's Tesla company would soon go bankrupt, and made a countdown timer to let everyone look forward to the arrival of that day. The famous car program Top Gear also criticized Tesla. Some media mocked that Tesla's Roadster transmission problem would never be solved and the vehicle would never be mass-produced.
Some media also dug up Musk's dark history, saying that he was kicked out of the two companies he founded, Zip2 and Paypal, and that he was a liar. Some media even rated Tesla Roadster as the most failed project of a technology company in 2007. (When Chinese media wrote "NIO's Li Bin, the most miserable person in 2019", most of the inspiration came from this)
Worse still, Musk had no time to take care of his first marriage because he was busy fighting fires between SpaceX and Tesla. His wife Justine gave birth to triplets in late 2006. Having to raise five children at once, Justine suffered from severe postpartum depression. That year, cracks appeared in their marriage, and their divorce was widely reported by the media. Most people sympathized with Justine, and Musk's personal image plummeted again.
In June 2008, the two officially divorced, and Justin received real estate, $2 million in cash (excluding attorney fees), $80,000 in alimony per month, 17 years of child support, and a Tesla Roadster. In 2008, Musk suffered a double blow to his career and family.
Don't forget, 2008 was another big year for Musk. His Falcon 1 rocket failed for the third time. He had no idea whether the fourth launch two months later would be successful. If the fourth launch failed, Musk's SpaceX would be completely closed. Considering the progress of Tesla we are talking about today, 2008 was also a year of hanging by a thread. It's no wonder that Musk urged SpaceX employees to carry out the fourth launch as soon as possible. As a result, he really won the gamble and quickly got your NASA order of $1.6 billion. With so much money, did he borrow some to help Tesla solve its urgent needs? I think only Musk himself knows.
Okay, today our story ends here. The next episode will be the final chapter of Elon Musk. How did Tesla turn the corner and how did it continue to grow rapidly? What setbacks did Tesla encounter in building its factory and developing in China? How big is Tesla's impact on the global auto market? The summary and evaluation of Elon Musk will be shared with you in the next episode.