Does Elon Musk Have a Strategy?

Throughout Elon Musk’s dramatic, generally pugnacious, often baffling marketing campaign to amass Twitter, we heard lots of the similar questions from each his followers and his critics. Why did he need to purchase the corporate within the first place, and what was he planning on doing with it? Will he make some huge cash or will he lose all of it? Many questions merely boiled right down to: “What’s he considering?!” Or, put one other means, is Musk on the market simply winging this, or does he have a method? And if that’s the case, what’s the Musk technique?

We will all be taught quite a bit — each good and dangerous — from Musk’s different companies: Tesla, SpaceX, Hyperloop, OpenAI, The Boring Firm, and NeuraLink. Based mostly on our analysis and instructing on technique for innovation, expertise, and development, we see (some) technique to the insanity. Musk’s technique may be characterised by frequent themes throughout three areas: what suits into his imaginative and prescient for issues to unravel, how he designs an group as an answer to these issues, and why he can so successfully mobilize assets in direction of these options.

In understanding the technique throughout his many companies — and the numerous dangers of that technique — executives can apply these classes to launching and rising their very own groundbreaking companies. Buyers may use these concepts to make extra considerate selections when offering assets to entrepreneurs in nascent markets, reminiscent of Web3 and the metaverse. Lastly, this framework offers us a lens to consider the try to amass Twitter — which Musk is now making an attempt to stroll away from — within the context of Musk’s broader technique.

Imaginative and prescient

The simplest methods usually have a standard trait: they construct from a daring and clear imaginative and prescient of the longer term that offers the enterprise a objective at this time. In 1980, Invoice Gates famously articulated a daring, clear imaginative and prescient for “a pc on each desk and in each residence.” Every Musk-affiliated firm has its personal sense of that boldness and readability: Tesla’s is to, “to speed up the world’s transition to sustainable power” and SpaceX’s is to, “make humanity interplanetary.” However to actually perceive Musk, we have to have a way for the general Musk imaginative and prescient that spans his many companies as a complete.

Issues, Not Options

Whereas we conventionally consider a imaginative and prescient as being in pursuit of a selected kind of resolution, Musk appears to take a distinct method: he pursues a selected kind of downside. Particularly, he appears drawn to issues that contain navigating scale and overcoming complexity.

First, navigating scale means he selects issues that may solely be solved by way of the dedication of large fixed-cost investments. Contemplate Tesla’s behemoth “gigafactories.” The concept behind these factories is that mass producing electrical autos at prices that make them viable for a broad industrial market requires large scale. Giga Texas, the fifth Tesla Gigafactory, is the most important manufacturing unit on the planet by flooring space.

Second, overcoming quite a lot of complexity — resolving coping with a number of interdependent transferring elements — requires the dedication of time and stamina for failure. Constructing reusable rockets, like Musk is concentrated on at SpaceX, is extremely exhausting. For a rocket to be reusable, it should be capable of sluggish from practically 3,000 mph to a secure touchdown velocity and nail a bullseye touchdown.

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Most of these issues have a transparent potential for a sustainable aggressive benefit — in the event you can clear up the issue. A protracted stream of analysis by our colleagues and others suggests {that a} dedication to reaching important scale and overcoming complexity can function sustainable sources of aggressive benefit. However fixing these issues just isn’t for the faint of coronary heart: it requires taking “huge bets,” as our colleague David Yoffie paperwork in his intensive analysis about Elon Musk.

Issues because the Resolution

A imaginative and prescient devoted to those high-scale and high-complexity issues gives a number of benefits.

Predictable highway to efficiency.

Despite the fact that fixing high-scale issues is difficult, efficiency and unit prices can predictably lower as you improve manufacturing quantity and construct models over time — mixed results which can be generally known as the “expertise curve.” (Moore’s Legislation, which states that computing energy can double each two years, may be the best-known instance of an expertise curve.)

It’s clear that Musk depends — a minimum of implicitly — on the presumption that the expertise curve will ship. Musk desires to chop battery prices in half by massively ramping up battery manufacturing capability himself, counting on technological economies of scale from improved manufacturing strategies.

Motivation for the lengthy drive.

Pursuing options to huge issues may be motivating for a company, pushing staff to realize wildly bold outcomes. Nonetheless, there’s a cause most individuals discover them prohibitively intimidating. They appear so exhausting that it isn’t even price beginning or making an attempt.

Musk is uniquely keen to go after these, and staff at his firms are properly conscious that they’re making an attempt to realize seemingly not possible stretch targets. Musk famously requested Steve Davis, a SpaceX engineer, to construct an element for the Falcon 1 rocket, which Davis estimated would value $120,000, for $5,000. Davis finally delivered the half for $3,900. But Musk maintains he makes achievable asks. “I definitely don’t attempt to set not possible targets. I feel not possible targets are demotivating,” he’s mentioned.

Issues because the Downside

A imaginative and prescient grounded on the tackling high-scale high-complexity issues brings about its personal issues. Right here, we’ll give attention to simply two.

Bumps within the highway.

Most individuals are fairly dangerous at making correct predictions. People extrapolate linearly, however complexity will increase a lot sooner than that. The end result — as Wu’s analysis with HBS doctoral scholar Aticus Peterson exhibits — is that entrepreneurs persistently battle to set life like timelines, significantly on complicated initiatives.

Musk, by his personal admission, is not any exception. Starlink, a satellite tv for pc web firm operated by SpaceX, remains to be far wanting Musk’s 2015 predictions for the place the corporate might be a decade later. As of March 2022, Starlink had simply 0.625% of its subscriber and 1% of its income purpose for 2025. To date, the markets have given Musk an distinctive quantity of leeway to outlive being persistently inconsistent, however this type of missed projections would spell doom for many managers.

Operating out of gasoline.

The draw back of pursuing a grand downside is that the highway to an answer is lengthy and the setbacks alongside the best way are many. Burnout and disillusionment are actual dangers. A former manufacturing supervisor at Tesla mentioned working 70 hours per week was common and that getting fired from Tesla was the perfect factor that had occurred to his marriage. In line with Ashlee Vance, Musk’s biographer, a hiring supervisor would inform new SpaceX recruits, “In order for you as exhausting because it will get, then nice. If not, then you definitely shouldn’t come right here.”

Finally, the open query is whether or not Musk’s organizations can maintain all these working circumstances over the numerous extra years wanted to achieve the promised land.


Every little thing, By Your self

Essentially the most identifiable and constant attribute of the Musk technique is how he organizes his companies. Particularly, he engages in a method of vertical integration and closed expertise.

Vertical integration.

A agency that’s vertically built-in straight owns and operates the assorted phases of a enterprise worth chain. SpaceX manufactures about 70% of their Falcon 9 rocket in home. As compared, United Launch Alliance, which launches NASA spacecraft, solely gives system integration and launch operations, counting on 1,200 subcontractors for all different operations. Tesla has an ambition to backwards combine into lithium mining. In distinction, conventional automotive OEMs depend on third events within the market to produce important elements.

Closed expertise.

A agency that has a closed expertise technique builds proprietary expertise that’s not interoperable with different corporations. SpaceX’s Starlink satellites use a extremely proprietary expertise that makes them successfully inoperable with different satellite tv for pc dishes. Tesla’s charging community within the U.S. just isn’t interoperable with autos from different producers. In distinction, an open technique seeks to set a typical for the ecosystem by being interoperable with different corporations. Practically all the most important expertise firms on the planet depend on a extra open technique than Musk. For instance, Google is working with HP, Acer, and Intel to launch quick pairing assist between an Android cellphone and a Home windows PC. The benefit of the open technique is the potential for value-creating community results that may result in growing returns and a winner-take-all-market.

Whole Management

These organizational selections have particular benefits that we are able to be taught from.

Launching a brand new ecosystem.

Bringing a brand new expertise to market presents a chicken-or-egg downside: the product wants a provide of complementary choices, however the suppliers and complementors don’t exist but, and no entrepreneur desires to throw their lot in with a expertise that isn’t in the marketplace but.

There are two methods of “fixing” this downside. First, you may time the market and wait till the ecosystem matures — although you threat ready a very long time. Second, you may drive the market, or provide all the required inputs and enhances your self. Contemplate the early days of electrification: it’s exhausting to promote energy generators if there aren’t any gentle bulbs and electrical washing machines. Thus, within the early twentieth-century, Basic Electrical supplied each mills and the merchandise to make use of electrical energy.

With Tesla, Musk selected to drive the market (no pun meant) by supplying each the electrical autos and charging stations that the autos depend upon.

Capturing extra worth.

By controlling the entire ecosystem, corporations can seize extra worth. Apple, as an illustration, could make additional income by making its personal proprietary charging cable, whereas firms that use the open USB customary can’t. Furthermore, somebody with a number of lightning cables within the drawer may discover it handy to maintain shopping for Apple gadgets. Very similar to Apple, the proprietary charging adapters utilized by Tesla autos and charging stations (within the nationwide community and at residence) allow worth seize down the highway. Somebody who has already put in a Tesla charging station at residence may discover it extra handy to stay with a Tesla car on their subsequent buy.

The Danger of Going Solo

Whereas we are able to justify Musk’s technique of doing every thing within the brief time period, in the long run, this technique units him up for critical dangers.

Lacking out on the advantages of the market.

By doing every thing your self, you run the chance of not having the ability to leverage the market when third events finally emerge that may supply inputs and enhances at a greater worth or pioneer new improvements. Whereas GE’s broad choices made sense within the early days, laundry machines and windmills don’t have to be below the identical roof anymore.

Intel suffers from this downside at this time. For many years, Intel maintained a vertically built-in technique of doing each the designing and manufacturing of its processors. This technique places it in a bind at this time: when its manufacturing expertise fell behind manufacturing-specialist TSMC, Intel’s chip designers had been each technically and organizationally restricted as a result of they’re caught with Intel’s in-house manufacturing capabilities.

Musk might run into related points. Ought to a brand new battery breakthrough come from outdoors the corporate, Tesla might incur important pointless long-term prices as a result of it could be caught “shopping for” its personal batteries.

Impairing community results within the ecosystem.

Know-how corporations face a basic trade-off between worth creation within the long-term and worth seize within the brief time period: selecting a proprietary method inherently limits how third events can contribute to the ecosystem. As an example, The Boring Firm’s deliberate 12-foot-wide tunnels are 5 ft narrower than the usual width used for metropolis metros, and thus incompatible with present trains. If the corporate’s personal transit system works, it should lock in reliance on its tech. If it doesn’t, there’s no various use for the tunnels or machines, and no outdoors help out there.


The one solution to pursue high-scale, high-complexity issues with vertically built-in and closed organizational design is to have entry to large quantities of affected person capital. And wow, does Musk have entry to capital. Throughout eight of his firms, he has raised over $34 billion {dollars}. Neuralink alone has raised greater than triple the quantity of capital raised by Amazon.

This relationship between Musk and his buyers is the core issue that permits his technique. It’s additionally the toughest to copy. Most Wall Avenue analysts battle to rationalize the way it works, and most CEOs watch as markets minimize Musk slack they might by no means get themselves.

How does he do it? To know Musk’s mastery of persuasion — and the place the persuasion fails — we flip to Aristotle. Aristotle laid out three modes of persuasion: ethos, pathos, and logos.


Ethos is an enchantment to the authority or honesty of the speaker. “He’s bought $13 million in.” That’s what staff of Musk’s second startup, (finally PayPal), would inform recruits. He had invested a lot of the wealth he had made within the sale of his first firm, and Musk has persistently had quite a bit at stake in his firms. His preliminary funding into SpaceX was $100 million of the $175.8 million earned from the sale of PayPal. He would proceed to speculate his total private wealth into SpaceX and Tesla till 2008, when he ran out of cash and needed to borrow from mates.


Pathos is an enchantment to the viewers’s feelings. What Musk has achieved together with his companies is to develop an inspirational worldview, which Musk’s biographer Vance describes as that of “a mad genius on the grandest quest anybody has ever concocted.” Musk’s showmanship gives him unorthodox abilities to marshal resources. Today, Elon Musk’s tweets can arouse millions of retail investors. One analyst recently noted of Musk’s capacity to stir emotion, “Retail [investors] will follow Elon to the gates of hell and back.”


Logos is an appeal to logic, or at least the simulation of logic. This is where Musk’s Wall Street critics might say he’s weakest. Many of his businesses don’t articulate a clear logic, which is demonstrated by the unpredictable way these businesses ultimately reach solutions or products. For instance, the initial motivation for SpaceX was to get people interested in space by growing the first plant on Mars. The idea was to modify a greenhouse which could be launched to Mars on a Russian rocket. No one in the aerospace industry believed he could get this done. Yet, engineers and investors fascinated with his vision joined the company.

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This example illustrates the logical ambiguity of his approach. Musk has spelled out some of his prior logic in a set of “Master Plans,” but most of the logical basis on exactly how he will succeed remains ambiguous. But this isn’t Musk’s necessarily fault or negligence per se: when pursuing new technologies, particularly ones that open up a new market, there is no one who can anticipate the full set of possibilities of what that technology will be able to do (and what it cannot do). Musk’s investors tend to focus on the future, and are motivated primarily by the appeal of Musk’s authority and their own emotions towards him and their aspirations for the future. Fortunately for Musk, these are the kind of investors you want to have around when pursuing the problems his companies are trying to tackle.

Twitter and Musk’s Strategy?

Back to Musk’s attempt to buy Twitter. We may never know what a Musk-owned Twitter would look like and how it might work. He is trying to abandon the deal, and Twitter has sued, setting the stage for a legal battle. But did Musk buying Twitter ever really make sense given the strategy outlined above?

“We wanted flying cars. Instead, we got 140 characters,” Peter Thiel, PayPal co-founder and venture capitalist, famously quipped about Twitter in 2013. Musk has generally cast himself as more of a flying car guy. What could he possibly want with Twitter? The thing is, over the last decade, the technological landscape has changed, and how and when to moderate speech has become a critical problem — and an existential problem for social media companies. In other words, moderating speech has looked more and more like the kind of big, complex strategic problem that captures Musk’s interest.

That said, it’s also a different kind of problem. For one, there’s little evidence that the experience curve effects apply here. YouTube was founded 17 years ago. Reddit 16 years ago. Facebook employs more content reviewers than there are people working for SpaceX. These companies alone have poured tremendous money and time in an attempt to solve the content moderation problem. And while interest in Twitter jobs jumped more than 250% after Musk’s announcement, Musk has no track record of organizational change. He didn’t build Twitter, and the organization today doesn’t have the extreme work culture of his other companies. It’s unclear whether his ownership would be motivating or just demoralizing.

Then there’s the question of whether a reorganization along the lines of this other companies — taking everything in-house and making it proprietary — would work at Twitter. Most companies decide to insource AI moderation tools, which are scalable, and outsource human content moderation, because it’s grueling and doesn’t require technical skills. But vertically integrating mission critical, non-technical tasks at Musk’s companies — such as welding at SpaceX —has led to improvement in both the task itself, as well as adjacent processes. It’s much less clear how Musk’s tendency in direction of closed programs, then again, may seize additional worth.

What is evident is that Musk’s capability to mobilize assets stays sturdy. He made a considerable private funding in Twitter — about 10% of his web price — reinforcing that he’s aligned with buyers and the long-term way forward for the enterprise (ethos). Then again, Musk’s enchantment to emotion (pathos) has additionally been a bit sophisticated, typically polarizing folks alongside ideological strains. Regardless of providing solely obscure plans and claiming that purchasing Twitter wouldn’t be about earning money (logos), buyers nonetheless appear to defer to his report and his authority.

We might by no means know whether or not Musk’s methods may bear fruit at Twitter. However, the saga gives one other helpful lesson: Many an investor has misplaced cash by following inspirational leaders who in the end didn’t ship, and whose logic might by no means be, and by no means was, defined. In different phrases, the distinction between genius and madness is blurry and infrequently unknowable till it’s too late. What is evident is that this: Musk has achieved already nice issues that nobody thought had been actually attainable, and he’s carried out it by way of his personal constant, audacious technique.

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