Elon Musk, Tesla CEO gestures as he speaks during a news conference. (Photographer: David Paul Morris/Bloomberg)

‘The Last Bet-the-Company Situation’: Q&A With Elon Musk

(Bloomberg) -- Elon Musk has been tweeting a lot over the past few months.

As Tesla Inc. lurched toward a Musk-imposed deadline to build 5,000 Model 3 electric sedans in a week, the chief executive lashed out against a wide group of people he came to see as his company’s detractors. Journalists, Wall Street analysts, short sellers, labor unions and even federal crash-safety investigators found themselves on the receiving end of his prolific Twitter output. He knows it needs to stop.

“I have made the mistaken assumption—and I will attempt to be better at this—of thinking that because somebody is on Twitter and is attacking me that it is open season,” he said in an hour-long interview with Bloomberg Businessweek for this week's cover story. “That is my mistake. I will correct it.”

Musk’s stress-fueled Twitter barrage peaked in June with 86 posts. It was a stretch he describes as the most excruciating of his life. In a way, his seemingly unfiltered Twitter output became one of the clearest outwards signs of his inner turmoil—and the pressure felt by the entire company. “It's been super-hard,” he says. “Like there is for sure some permanent mental scar tissue here.”

This was the third time Musk felt he had to risk the very existence of Tesla. “Basically, I believe Model 3 is the last bet-the-company situation,” he says. “We will still need to work hard and be vigilant and not be complacent because it is very difficult just to survive as a car company. But it will not be the same level of strain as getting to volume production of Model 3.”

Musk spoke to Bloomberg Businessweek on July 8, taking a break on Sunday from testing a miniature submarine meant to aid the rescue of children trapped in a cave in Thailand and ahead of a trip to Shanghai two days later, where he would announce plans to build a second Tesla factory. He reflected on hitting his weekly production goal of 5,000 Model 3 sedans—5,031, to be exact—as well as his mistakes and the electric automaker’s next projects. What follows is an edited transcript of the conversation.

Tell me about what the last week before reaching 5,000 was like in the factory. Paint a picture for me.

Well, I spent almost the entire time in the factory the final week, and yeah, it was essentially three months with a tiny break of like one day that I wasn't there. I was wearing the same clothes for five days. Yeah, it was really intense. And everybody else was really intense, too.

I think there was quite a good esprit de corps. People were pretty fired up. You can see it in the pictures that people posted. You can tell from looking at people's faces. But everybody was super gung ho to make the number and to make sure that they could do it. We had a lot of challenges.

Like what kind of challenges?

You don't really know that you can actually handle a given rate unless you try to do it. So we successively hit limitations in general assembly, in paint, in body, in module production, pack production, logistics. Even the flow of parts from the warehouse. We've never had that kind of flow before. At one point we would make like 100 cars without the right headlamps, and then subsequently put the right headlamps on because the right headlamps didn't arrive from the warehouse in time. They were put on after general assembly.

Why push so frantically? What did you feel was at stake?

Well, I think we had to prove that we could make 5,000 cars in a week—5,000 Model 3s and at the same time make 2,000 S and X’s, so essentially show that we could make 7,000 cars. We had to prove ourselves. The number of people who thought we would actually make it is very tiny, like vanishingly small. There was suddenly the credibility of the company, my credibility, you know, the credibility of the whole team. It was like, “Can you actually do this or not?”

There were a lot of issues that we had to address in order to do it. You know, we had to create the new general assembly line in basically less than a month—to create it and get to an excess of a 1,000-cars-a-week rate in like four weeks. We had to get the Module Zone 4 [a line of robots] transferred from Germany and installed in two weeks. Both of those things I was told were impossible.

What's the long-term plan for that new assembly line inside the tent? I think the confusing thing for most people is that you now have two apparently different processes producing the same car, one with more humans and one with more automation.

A lot of the hoped-for automation was counterproductive. It's not like we knew it would be bad, because why would we buy a ticket to hell? We don't actually want to go for hell. We just didn't realize it was a ticket to hell. We thought it would be good, but it was not good. That applies to a great deal of the automation. A whole bunch of the robots are turned off, and it was reverted to a manual station because the robots kept faulting out. When the robot faults out—like the vision system can't figure out how to put the object in—then you've got to reset the system. You've got to manually seat the components. It stops the whole production line while you sort out why the robot faults out.

It was like rush hour traffic at a bunch of stop streets and like no highways or anything. It's like you just took all the highways away from L.A. or something. It sounds good on PowerPoint and it was terrible in reality. Everything sounds good on PowerPoint. You could have a great PowerPoint presentation about a teleportation system to the Andromeda galaxy. But guess what? You cannot teleport to the Andromeda galaxy. That is nonsense.

How does that happen?

Because we were huge idiots and didn't know what we were doing. That's why.

Then why not reach out? Detroit was shouting, “That’s not going to work.”

Well, when have they not said that? When was the last time they said it would work? Can you recall at any point in the history of Tesla where they said it would work? Is there like some point I didn't notice? Because from my perspective, for the last 15 years that is all they have said.

What’s next with “the machine that builds the machine.” What’s your current thinking about the “alien dreadnought” [Musk’s term for a hyper-automated factory]?

Let me just give you a tour of the whole giant machine. It will blow your brain right out of your skull, OK? It is so crazy. There are parts of it that are completely automated, no person there at all. And then there are parts of it which are completely manual, no machines there at all. Then there are parts of it that are partly automated and partly manual.

When you talked about automation before, it was kind of like, you know, cars are going to be moving out of the factory faster than humans can move. So you can't have humans involved in the process. Now you've got humans heavily involved.

You can only move as fast as the slowest thing in the system. I didn't say this would be done immediately. I was just saying that is where it needs to be in the future. And there are definitely parts that move too fast for people.

Part of the problem is that the designing heads were naive about manufacturing. Just because we have something that works great in a simulation does not mean that it works great in reality.

I haven't really asked you yet what you think about the Model 3. Is it everything you wanted it to be?

I think it's a great car. And I think it is going to get better as we keep upgrading the software. You know, what I think about as Tesla is kind of like a computer on wheels. It's extremely upgradable. So we're going to just keep adding more and more functionality to the Model 3. So the longer you own the Model 3, the better the car is going to get.

There are little nuances that keep getting better. We have made the seat foam a bit more comfortable. We have made the ride a bit more comfortable. The firmware at the braking is better, and it was pretty helpful that—you know, Consumer Reports, they did kind of come up with a weird corner case where you have to like brake from 60 miles an hour multiple times [Tesla fixed the problem through a wireless update]. It's kind of a weird point case. But still that helps us improve the braking.

Autopilot is going to get quite a bit better in the coming months and still add cool features in functionality and—yeah, I'm very excited about the future. I think it's going to be a great second half of the year for Tesla. The past year has been very difficult, but I feel like the coming year is going to be really quite good.

Do you feel like you're out of hell yet?

I feel like we have got like one foot in hell.

When do you think you get to pull that out? Is that reaching 5,000 sustainably? Is it 6,000?

It's basically 5,000 without requiring a lot of effort. It's still quite painful to produce 5,000 a week. But I think in a month, it will not be. It used to be hell to make 2,000 S's and X's in a week, and now it's normal. In three months, I think 5,000 will feel normal.

I want to ask you about Twitter and fighting back against your detractors. I was talking to someone who said that she had canceled her reservation because of the way you were treating people on Twitter. She said it was toxic. At some point, as your company and influence grows, I think the perception changes from an upstart struggling to defend itself to a bully putting down detractors.

You can't both be a strong bully and about to die. We're either weak and dying or a strong bully. Like which one are we?

Those are different people calling you those different things, though, right?

No, not always. Sometimes it's the same people.

I think you have a good point. Generally the view that I've had on Twitter is if you're on Twitter, you're in like the meme—you're in meme war land. If you're on Twitter, you're in the arena. And so essentially if you attack me, it is therefore OK for me to attack back. Is there a place where you think I launched an attack on someone who has never attacked me?

I'm not sure it's in the end relevant to how people perceive what's happening.

I think you're right. But I would like to make the point that I never launched an attack on anyone who did not attack me first. So the question is: If somebody attacks you on Twitter, should you say nothing? Probably the answer in some cases is yes, I should say nothing. In fact, most of the time I do say nothing. I should probably say nothing more often.

I have made the mistaken assumption—and I will attempt to be better at this—of thinking that because somebody is on Twitter and is attacking me that it is open season. And that is my mistake. I will correct it.

One more criticism I sometimes hear is—

What is this? People are criticizing me? This is outrageous. [LAUGHTER]

Let me put it this way. Back at the dawn of Toyota, their mission included three pillars: to benefit society, to benefit their workers, and to benefit Toyota. One of the biggest openings all of the automakers left Tesla was neglecting the pledge to society in the age of climate change. Tesla has filled that gap, gaining you some serious loyalists.

Yeah.

But, rightly or wrongly, there is a sense that maybe you’re doing it to the detriment of the other two pillars of that mission, which is to employees and to the company. You’re pushing workers to the limits and pushing the company so there is less financial stability.

I think that is an accurate perception. I think the thing that people forget is the only two car companies in the U.S. that have not gone bankrupt are Ford and Tesla. GM went bankrupt. If the expectation is, “Hey, we can live and not work hard and not strain extremely to a great degree,” this is false. That is not true.

In order for us to succeed, in order for us to live, we must work very hard. But the notion that people are not treated well at Tesla is false. The UAW has a strong interest in promoting the idea that people aren't treated well. But, you know, come in and walk around. And I don't mean like a North Korea guided tour. Go anywhere you want, any time. Go left, go right, go anywhere you want. Talk to people. See if they seem unhappy. See if they seem like they're not well treated. Bring others. We won't even escort you. Just walk around. Go any direction you want—no escort.

We're 40,000 people at the company. If you have 40,000 people, you can always find some cases where there has been harassment, discrimination. Like at Bloomberg right now, I guarantee you there is every kind of case against Bloomberg. Does that mean you, Tom Randall, are a bad person? It does not.

I care very deeply about the people at Tesla. I feel like I have a great debt to the people of Tesla who are making the company successful. OK? The reason I sleep on the floor was not because I couldn't go across the road and be at the hotel. It was because I wanted my circumstance to be worse than anyone else at the company on purpose. Like whatever pain they felt, I wanted mine to be worse. That's why I did it. And it makes a huge difference to people.

At GM they've got a special elevator for executives. Like the top floor of GM tower is reserved for the chairperson and CEO. They've got special cutlery. They've got a waitstaff for an executive restaurant. They have special elevators so they don't have to mingle with anyone else. My desk is the smallest desk in the factory—literally. And I am barely there. The reason people in the paint shop were working their ass off is because I was in the paint oven with them. I'm not in some ivory tower. I invite you to come by and ask them.

I'm going to take you up on that.

This is not an idle offer.

You say you’ve gone through hell.

It's been super-hard. Like there is for sure some permanent mental scar tissue here. But I do feel good about the months to come. I think the results will speak for themselves.

You like to borrow and spend. You raise capital and spend quite a bit to launch a new product, and then as soon as you're about to come up for air, you do the same for the next product. You say you're going to be profitable for the second half of this year. Are you just going to go back into the cycle?

There have been three situations where it was necessary to bet the company. Like it was unavoidable to bet the company. The creation of the Roadster. Obviously, we're a brand-new company, it's our only product. From the Model S, we went from like 600 cars a year to 20,000 cars a year and a much more sophisticated car. Obviously, that was a bet-the-company situation.

Model X was painful but not a bet-the-company situation. Model 3, we're going from, you know—like the S or the X program is 1,000 cars a week. Model 3, even to basically be healthy for the Model 3 system, it's 5,000 cars a week. So it's a half order of magnitude increase relative to the S or the X. That is necessarily a bet-the-company decision. You cannot have that much of a step change for a manufacturing company without this being a bet-the-company decision.

But I do not see us doing another thing where we go five times bigger. Once we break through to mass market cars, where mass market is on the order of a quarter million vehicles per year, I cannot see us doing a 1.2 million-vehicle program of one particular model.

Basically, I believe Model 3 is the last bet-the-company situation. It's not like [I have] a desire to bet the company. There is not a choice. If somebody knows how to do it without betting the company, I would love to talk to that person. But I do not foresee future bet-the-company situations.

To the best of my judgment, I do not think we have any future bet-the-company situations. We will still need to work hard and be vigilant and not be complacent because it is very difficult just to survive as a car company. But it will not be the same level of strain as getting to volume production of Model 3.

What's the next project that you’re most excited about?

The Model Y. We've almost finished the design in the studio of Model Y, and we will probably debut the prototype, you know, roughly in March of next year. Maybe I shouldn’t tempt fate, but I did say March 15 as kind of a joke.

Did you finish up the design already?

We're a few months away from finishing the design. You finish the broad brush strokes, but there are still a lot of fine brush strokes. The broad brush strokes, we're maybe a few months away from finishing.

Good luck with that, and good luck getting your last foot out of hell.

I'm looking forward to it.

Next:
Hell for Elon Musk Is a Midsize Sedan

Inside Tesla’s Model 3 Factory
Bloomberg Built Its Own Model to Estimate Tesla’s Output of the Model 3

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