6 ms·

I have a new personal hypothesis on Elon and his companies. Elon's companies are not necessarily better run than other companies, and in some cases are worse r

by api 8y ago

I have a new personal hypothesis on Elon and his companies. Elon's companies are not necessarily better run than other companies, and in some cases are worse run. Their success and Elon's cult status as an innovator is a result not of above-average managerial competence but of a willingness to unilaterally defy the Nash equilibria of industries. Automobiles, space flight, and energy are industries that have been stagnant for some time. Stagnation of an industry means that it's found some kind of Nash equilibrium where it's not really in anyone's short term best interest to innovate much or otherwise deviate from the norm. Elon doesn't give a rat's you-know-what and innovates anyway. Game theoretically he defects. This results in companies that are loss-making in the short term, but if successful they will define a new Nash equilibrium where they are positioned to lead or at least to have carved out a significant chunk. Another way of putting this is that Elon is willing to try to cross fitness valleys between local maxima. It's a gamble of course: can you reach the next fitness peak / equilibrium point before you run out of cash? This is very hard, and is why Nash equilibria / fitness local maxima are so stubborn.

s2g 8y ago
It's also an indicator of the massive amount of energy put into marketing Elon.
- rich-and-poor 8y ago
  Haha... The only marketing Elon has is word of mouth and the press interviewing him.
arijun 8y ago
But the fact that he's done it twice with SpaceX and at least once with Tesla seems to indicate he's better average at running those races.
- api 8y ago
  Perhaps I wasn't nuanced enough. I think Elon is better than average at the art of defying Nash equilibria -- both in the raising of funds to "disrupt" industries and in the execution of disruption. This is not necessarily the same skill as boring old "ops."
- sp332 8y ago
  Tesla isn't actually making money yet. Edit: I'm actually not sure what you're counting. What happened once with Tesla and twice with SpaceX?
  - nickik 8y ago
    Bad way to measure success. Tons of companies don't make profit for a long term. Look at capital and sales growth. He did something that any other company could have done but didn't and now he has a growing valuable company with lots of waiting costumers and ahead of the technology curve.
  - arijun 8y ago
    What op described, changing the Nash equilibrium. For SpaceX, there was a status quo, SpaceX came in with radically different manufacturing ideas and changed the game. And then when they were done with that, with a profitable model, they did it again with reuse. For Tesla, the Model S was sold at a profit, per unit. If they'd stopped there that would still have been a game changer (see all the companies working on EV).
    - buvanshak 8y ago
      > SpaceX came in with radically different manufacturing ideas and changed the game. This never really happened. If this really happened, please provide a good article about the same, that describe what radically different manufacturing ideas and how they "changed the game"...
bitL 8y ago
Elon had clever VCs/advisors that were scouting old technology that was uneconomical in the past, but became trivial/economical these days. Many of the battery-related things or NASA stuff were difficult/expensive/next-to-impossible in the 60s, but totally doable in the 2010s, but nobody was doing them.
- jeffreyrogers 8y ago
  I don't think Tesla is doing anything novel with their batteries. Aren't they made by Panasonic? I guess they're packaging them in novel ways, but I don't think there are any fundamental breakthroughs.
  - gliboc 8y ago
    They took advantage of the lithium-ion battery newly improved performances in their first Roadster as early as 2008. Before that, they spent their first years researching how to arrange clusters of batteries in a viable way, which is probably what lead to their remaining advantage in autonomy. At SpaceX, key inventions include soldering sheets of metal together instead of using rivets, and other stuff that made their building process much cheaper than competitors. This is surely what parent meant. They used to buy lithium-ion cells directly from Panasonic, and now they operate together at the Gigafactory. Overall I don't think these could qualify as fundamental breakthroughs, but it is surely an important work, and what are fundamental breakthroughs anyway? I'd venture so far as to say that here the breakthrough is in the result: electric cars are coming, whether it's theirs or their competitors.
    - jeffreyrogers 8y ago
      Yeah, I agree with that, and I doubt we'd even be talking about electric cars today if Tesla hadn't been created. But I don't see any Tesla technology that can't easily be replicated by any other car manufacturer. Plus the other car manufacturer's don't need to learn to run an assembly line.
      - 8y ago
st26 8y ago
I'd put it even simpler. He's betting on uncertain future technologies, where it's completely unclear if the technology he is pursuing will work out. Ten years ago nobody was particularly certain electric cars could ever be feasible, and currently nobody is sure that hyperloop will ever be feasible either. In other words, is that next fitness peak even there? Or is it a mirage? I don't think the current major players are lazily sitting on their hands, they just tend to focus more on the march of incremental improvement than blue sky research. Which can be incredibly valuable- the last hundred years of automobiles and fifty years of semiconductor manufacturing has been mostly the march of incremental improvement.
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- nkoren 8y ago
  No, I think the parent has the right of it. I'm not equipped to analyse Tesla as well as I am for SpaceX, but I can say that the latter was not a bet on uncertain future technologies. While they have certainly deployed some pretty nifty technologies along the way, those have been in service of comparatively marginal improvements (improving payload margins). The more fundamental innovations in cost-reduction and reusability have not been particularly technology-driven, and could have been accomplished in the 1980s if not earlier.[1] For example: putting most of your operations under the same roof, with engineering right next to manufacturing, and employing common fuel, engines, and tank manufacturing techniques for all stages. Nothing about that was at all technologically risky -- but SpaceX was able to get maybe the first 50% of its cost-savings simply by doing that. What prevented this from happening in the past wasn't technology, but a Nash equilibrium, as the parent rightly says. Existing rocket makers couldn't put all their operations in one place because that would mean eliminating jobs in scores of congressional districts while only creating jobs in one or two. Would make too many enemies in congress that way, and because the government is the primary customer, you'd never get another launch contract again. And there isn't enough private demand demand to make up the difference, because the cost of spaceflight is so high. The cost of spaceflight is too high, because rocket R&D and manufacturing is split up over hundreds of facilities in dozens of states, creating insane inefficiencies. (Back in the 90s, one fellow I met who worked on the Atlas program told me that they had 7 managers for every engineer). And you can't reduce those inefficiencies because that would mean eliminating jobs in scores of congressional districts, etc... See, the logic of the industry was self-supporting and entirely circular. Elon Musk's genius was in simply breaking this logic, and aiming for a new equilibrium where rockets are cheap, there's a strong market for private launch services, and contracts aren't awarded on the basis of how many jobs they'll create. Cool technology wasn't the key to this. Like I say, I'm less well-equipped to analyze Tesla, but I can already detect a similar pattern of equilibrium-disrupting innovation with how he's approaching The Boring Company. 1: The Delta Clipper (https://en.wikipedia.org/wiki/McDonnell_Douglas_DC-X https://en.wikipedia.org/wiki/McDonnell_Douglas_DC-X) demonstrated all the critical tech that you need for a reusable Falcon 9, in the early 1990s. It was preceded by some classified programs that accomplished broadly similar feats as much as a decade earlier.
chemmail 8y ago
Elon's thinking goes back to college in areas he felt would affect humanity the most. These are Internet, sustainable energy (production/consumption), and space exploration and habitation. He eventually would have companies for all of these: Solar City for production, Tesla for consumption, Space X for space and internet. It is amazing that he is able to get a moonshot chance at all of these.

by api 8y ago

s2g 8y ago

It's also an indicator of the massive amount of energy put into marketing Elon.

rich-and-poor 8y ago
Haha... The only marketing Elon has is word of mouth and the press interviewing him.

arijun 8y ago

But the fact that he's done it twice with SpaceX and at least once with Tesla seems to indicate he's better average at running those races.

api 8y ago
Perhaps I wasn't nuanced enough. I think Elon is better than average at the art of defying Nash equilibria -- both in the raising of funds to "disrupt" industries and in the execution of disruption. This is not necessarily the same skill as boring old "ops."
sp332 8y ago
Tesla isn't actually making money yet. Edit: I'm actually not sure what you're counting. What happened once with Tesla and twice with SpaceX?
- nickik 8y ago
  Bad way to measure success. Tons of companies don't make profit for a long term. Look at capital and sales growth. He did something that any other company could have done but didn't and now he has a growing valuable company with lots of waiting costumers and ahead of the technology curve.
- arijun 8y ago
  What op described, changing the Nash equilibrium. For SpaceX, there was a status quo, SpaceX came in with radically different manufacturing ideas and changed the game. And then when they were done with that, with a profitable model, they did it again with reuse. For Tesla, the Model S was sold at a profit, per unit. If they'd stopped there that would still have been a game changer (see all the companies working on EV).
  - buvanshak 8y ago
    > SpaceX came in with radically different manufacturing ideas and changed the game. This never really happened. If this really happened, please provide a good article about the same, that describe what radically different manufacturing ideas and how they "changed the game"...

bitL 8y ago

Elon had clever VCs/advisors that were scouting old technology that was uneconomical in the past, but became trivial/economical these days. Many of the battery-related things or NASA stuff were difficult/expensive/next-to-impossible in the 60s, but totally doable in the 2010s, but nobody was doing them.

jeffreyrogers 8y ago
I don't think Tesla is doing anything novel with their batteries. Aren't they made by Panasonic? I guess they're packaging them in novel ways, but I don't think there are any fundamental breakthroughs.
- gliboc 8y ago
  They took advantage of the lithium-ion battery newly improved performances in their first Roadster as early as 2008. Before that, they spent their first years researching how to arrange clusters of batteries in a viable way, which is probably what lead to their remaining advantage in autonomy. At SpaceX, key inventions include soldering sheets of metal together instead of using rivets, and other stuff that made their building process much cheaper than competitors. This is surely what parent meant. They used to buy lithium-ion cells directly from Panasonic, and now they operate together at the Gigafactory. Overall I don't think these could qualify as fundamental breakthroughs, but it is surely an important work, and what are fundamental breakthroughs anyway? I'd venture so far as to say that here the breakthrough is in the result: electric cars are coming, whether it's theirs or their competitors.
  - jeffreyrogers 8y ago
    Yeah, I agree with that, and I doubt we'd even be talking about electric cars today if Tesla hadn't been created. But I don't see any Tesla technology that can't easily be replicated by any other car manufacturer. Plus the other car manufacturer's don't need to learn to run an assembly line.
    - 8y ago

st26 8y ago

I'd put it even simpler. He's betting on uncertain future technologies, where it's completely unclear if the technology he is pursuing will work out. Ten years ago nobody was particularly certain electric cars could ever be feasible, and currently nobody is sure that hyperloop will ever be feasible either. In other words, is that next fitness peak even there? Or is it a mirage? I don't think the current major players are lazily sitting on their hands, they just tend to focus more on the march of incremental improvement than blue sky research. Which can be incredibly valuable- the last hundred years of automobiles and fifty years of semiconductor manufacturing has been mostly the march of incremental improvement.

deleted 8y ago
[deleted]
deleted 8y ago
[deleted]
nkoren 8y ago
No, I think the parent has the right of it. I'm not equipped to analyse Tesla as well as I am for SpaceX, but I can say that the latter was not a bet on uncertain future technologies. While they have certainly deployed some pretty nifty technologies along the way, those have been in service of comparatively marginal improvements (improving payload margins). The more fundamental innovations in cost-reduction and reusability have not been particularly technology-driven, and could have been accomplished in the 1980s if not earlier.[1] For example: putting most of your operations under the same roof, with engineering right next to manufacturing, and employing common fuel, engines, and tank manufacturing techniques for all stages. Nothing about that was at all technologically risky -- but SpaceX was able to get maybe the first 50% of its cost-savings simply by doing that. What prevented this from happening in the past wasn't technology, but a Nash equilibrium, as the parent rightly says. Existing rocket makers couldn't put all their operations in one place because that would mean eliminating jobs in scores of congressional districts while only creating jobs in one or two. Would make too many enemies in congress that way, and because the government is the primary customer, you'd never get another launch contract again. And there isn't enough private demand demand to make up the difference, because the cost of spaceflight is so high. The cost of spaceflight is too high, because rocket R&D and manufacturing is split up over hundreds of facilities in dozens of states, creating insane inefficiencies. (Back in the 90s, one fellow I met who worked on the Atlas program told me that they had 7 managers for every engineer). And you can't reduce those inefficiencies because that would mean eliminating jobs in scores of congressional districts, etc... See, the logic of the industry was self-supporting and entirely circular. Elon Musk's genius was in simply breaking this logic, and aiming for a new equilibrium where rockets are cheap, there's a strong market for private launch services, and contracts aren't awarded on the basis of how many jobs they'll create. Cool technology wasn't the key to this. Like I say, I'm less well-equipped to analyze Tesla, but I can already detect a similar pattern of equilibrium-disrupting innovation with how he's approaching The Boring Company. 1: The Delta Clipper (https://en.wikipedia.org/wiki/McDonnell_Douglas_DC-X https://en.wikipedia.org/wiki/McDonnell_Douglas_DC-X) demonstrated all the critical tech that you need for a reusable Falcon 9, in the early 1990s. It was preceded by some classified programs that accomplished broadly similar feats as much as a decade earlier.

chemmail 8y ago

Elon's thinking goes back to college in areas he felt would affect humanity the most. These are Internet, sustainable energy (production/consumption), and space exploration and habitation. He eventually would have companies for all of these: Solar City for production, Tesla for consumption, Space X for space and internet. It is amazing that he is able to get a moonshot chance at all of these.