Startups · Strategy

Musk Effect or is it possible to start whole industry from scratch?

Alex May Freet(h)inker

March 15th, 2018

From two examples Tesla and SpaceX Elon's strategic approach seems solid. He does'nt fear to go big. Start with BIG GOAL and figure out of how to achieve it.

Is he special or its simptoms of paradigm shift?

David M

March 17th, 2018

Paul, I appreciate your thoughts. You kinda missed the point regarding the industries he took on. People saw he sold one company for a billion dollars..yes that opens doors, but he then had to tell them he was taking on one $500 trillion dollar industry not to mention big automotive....and the fact that his wealth came from completely unrelated industries..at least directly. A billion dollar sell only goes so far. Beyond that you can look to any number of billionaires who have failed to grow their wealth or lost much of it and see that the main reason for Musks success is not that he had a 10 figure business sale. There are plenty of people who would make FAR better examples of money allowing them to have success or get new companies funded in an industry. Megan Ellison's $400M fund to fund movies would be a great one where she has her father fund her films buying the most profitable filmmakers available. Mark Cuban founding a production company (Even though he is one of the least profitable film makers out there). So if you look at someone like Cuban, vs Musk...or any number of the Billionaires that actually grew their wealth ask a question. What makes Musk grow his wealth from a few hundred million to now $21 B where Mark Cuban has barely grown his wealth at all? Or take Jeff Bezos. The difference which relates to the poster's question is that the ones who grow at that level generally shift the playing field..and they do it ultimately not because they had a few hundred million or even a few billion, but rather because they approach the world with a level of brilliance and uniqueness that leads them there. So saying Musk made his success because he had a billion to start with would be like saying Jeff Bezos made Amazon what it is because he initially made money off Amazon. Initial money is irrelevant at some point once a company is operational because it has to actually grow. My point was Musk is WAY beyond people inferring he was able to succeed with Tesla because he sold a prior company. And you can see this when you study other corporations such as Sears that had a billionaire buy Sears and Kmart only to completely tank the two companies. Why? He didn't evolve when he could have shifted the paradigm. Again, I get what you are saying..Im just looking at it more three dimensionally in terms of giving credit where credit is due.

David M

Last updated on March 16th, 2018

Im going to have to call out some of the "hating" of Musk being rich. Guys, yes, he had money, though nowhere near his current worth. Keep in mind when he started SpaceX and Telsa, he had sold Pay Pal for $1.5B, and correct me if I am wrong, but is net worth was still well under a Billion dollars. But for argument sake lets say it was a billion. He chose to take on the automotive industry which is essentially also taking on the oil industry. To put that into context, that would be like someone with 10 dollars trying to take on a company worth about 100M dollars. No I haven't done the math..it may be more like 1 dollar, because the fossil fuel industry is a mult-hundred TRILLION $$ industry heavily reliant on the combustible engine. Putting a visible crack in one of those industries let alone the collusion of both takes FAR more than being a single digit billionaire. These are industries where wars are constantly waged and thousands are killed each year both in war and behind the scenes to keep the powers that be operational.


And Musk essentially said "Screw you. Your way of doing it is wrong." You gotta give him credit and again him being wealthy by our standards with a billion matters not. He was a pauper in the presence of the industries he took on.


Is he special? He is smart, but more importantly tenacious. He doesn't care about people's opinions when they are insufficient to progress. He is the type of guy who rather than talk about how some other entrepreneur made it because he was rich, instead bucks up and makes things happen. That is why he is where he is. Look to this forum. The majority is filled with a lot of small thinking, "Find a pain" "Find a need." It is basic MBA book regurgitation, and yes it is valuable and yes I say that with an MBA. But guys like Steve Jobs or Elon Musk create needs. And yes, despite marketing books and professors saying you can not create a need, only cater to our basic needs, guys like this create needs. There will be a paradigm shift, that he alone causes or at least inspired to the largest degree of motion to date. The technology of the electric car was here over 40 years ago. Oil and big automotive and politicians destroyed that. And they would do the same if not for someone like Elon Musk.


I am not slamming your sentiment. I get it. I just think you are directing it completely incorrectly when you direct Musks success or ability for success because he had almost a billion dollars to start two companies....two extremely niche and high risk...probably the highest risk possible companies.


But I share your sentiment as follows. When I was in grad school, we used to have successful business owners come to class and speak. One individual came in with a gas company that was worth about $4B. But he was selling this sob story about how rough he had it. How he was worried he was going to make his mortgage, and how he had to have fold out tables for his office when he started...he was trying draw everyone in on his "Struggle" as an entrepreneur. At the end of the melo drama, a professor asked, knowing the answer, "And you come from a family of entrepreneurs. Why don't you tell the class who your grandfather is." Reluctantly he shared that his grandfather founded 7-11, the largest retail chain in the world. Yeh...he had it rough. Im sure he would have lost his house. You could hear a murmur of profanities from the students.


So again I get it. But even if musk came from a billion dollar family, I think he has earned the respect to not have his wealth be a reason for his success, an element sure, but by no means the deciding spark, because it isn't. His success is because rather than waiting for a paradigm shift, he moved tectonic plates through passion and will power. And the end result is he is reshaping several industries that probably would have remained stagnant for years to come if not for his charismatic approach to them. My opinion of course.

Paul Garcia marketing exec & business coach

March 16th, 2018

David M., I agree that 'tis not Elon's personal wealth that typically funds his new ventures directly. But, you may have forgotten how the whiff of money opens up other people's wallets, or at least makes for friendly lenders. I point to Donald Trump as an example. How many times was his signature all that was needed to fund new hotel construction or some other mulit-million dollar deal. No credit check. No question about whether the lenders would get their money back (and many times they didn't). It was the whiff of money and public glamour that encouraged others to provide financial support.


In Elon's case, the sale of one company at 10-figures, is enough of a track record for a lot of people to throw in their lot because they smell money. That Elon has had more than one positive outcome makes him an even better bet than other wealthy folks. So, when you can hob-nob with other billionaires and bankers, and have grand ideas, even if expensive, you're considered a lower risk than some startup who has never had $100,000 in the bank.


So no, we're not "hating" on Mr. Musk because he has a big bank account. We're highlighting that people with money make it easier when they think their support will bring them even more money. If Elon had to fund the revived 1909 vacuum train idea from Robert Goddard by himself, it would probably never happen. As a result of his incessant curiosity and reading, he latched onto this idea and instead he made it a game, threw some thought leaders at it, and as a result a collection of venture capitalists and now Richard Branson formed a completely independent company (it's not Musk's project), and are taking the idea and risk to explore this transportation idea with nearly $300million of money that isn't Elon's. And somehow the company is still attributed to Musk. It isn't even his idea, just his assurance that it's possible to do it.


So whether the role is inspiration or investment, the whiff of money around previous successes for Mr. Musk opens a lot of wallets and lowers lots of barriers others would struggle to overcome. He is not personally trying to figure things out in each case, but he is an explorer and he doesn't do his exploration quietly.


Like the adage goes, "It's the first $100,000 that's the hardest to raise. After that you can double any amount of money you receive."



Alex May Freet(h)inker

March 17th, 2018

Guys, thank you for your feedback. It quite good!

wycliffe oloo An aspiring young entrepreneur who is versatile and open-minded.

March 15th, 2018

Hi Alex. In my opinion, I think Elon Musk has figured out a hack. He runs diverse companies that require both diverse sets of knowledge and skills to run effectively.

He advocates that one should view knowledge as a semantic tree where one starts with the basics and understand well before digging deep. This allows him to grasp the basics of diverse sets of knowledge and skills even without having a perfect understanding of the finer details. Musk has also been 'accused' of literally sucking knowledge and experience out of people. He is a smart guy who understands that other people have already 'read' (finer details) for him.

He hires the best of the best for his companies and carries out the interviews himself sifting through candidates. He is the type of guy who would rather know 5% of 1000 sets of knowledge than 90% of 10 sets of knowledge. This is also very important because having diverse sets of knowledge boosts creativity and understanding.

Creativity comes from connecting two or more different or even unrelated sets of skill and/or knowledge and a guy like Musk scores an A grade here since he's got better understanding and many dots to connect and more aha moments for him!

Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

March 16th, 2018

You don't need to fear going big when you have a lot of wealth and connections to fall back on. You can be audacious and bet on your own ability to respond to the unexpected.


When you go big into new markets, your big risk is not existing competitors out pacing you, and not big incumbents, but rather that the reason the market is currently small is that there is not enough demand and it will stay small for a long time. So, you need to have enough money, enough freedom to folllow your own instincts and also enough patience to stay with such a slow to materialize business.


As others have said



Steven Fried Founder, CEO, and General Counsel

March 15th, 2018

He's not special, he's rich. He's made enough that learning curves don't apply to him. He has the flexibility to try hyperloops and space travel and can hire physicists and rocket engineers to figure out how to build them. For the vast majority of entrepreneurs - who have limited budgets and are just trying to get a foot in the door - you start with what you know and enjoy doing. You pound the pavement and struggle to get it up and running, and if and when you've made a zillion dollars, you can work toward the BIG GOAL.

Paul Garcia marketing exec & business coach

March 15th, 2018

He did not start an industry. He's merely exploring a niche within a number of existing industries. And like Steven said, he's rich and has the luxury of being able to spend/lose money without significant consequences. The only difference is that he is not as risk-adverse as most.

Judith Szepesi Founding Partner and Patent Strategist at HIPLegal LLP

March 15th, 2018

He didn't start either industry. Not by a long shot. Both of the businesses (Tesla and SpaceX) were strongly supported by government grants, which should tell you that they were not a paradigm shift or a new idea. There were numerous electric vehicles available in the market prior to the founding of Tesla. There were also numerous competitors for the NASA prize for reducing cost to launch. What Musk did is not create these markets, or come up with new ideas, but to execute in a very smart way.


The biggest difference between his approach and his competitors' is that he is wealthy but not bound by stockholders so he can take unreasonable risks.