Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.
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Martin Eberhard and Marc Tarpenning founded Tesla Motors in 2003. They needed to raise $7,000,000 for a prototype of the Roadster from a leading investor. That investor would be Elon Musk. Elon had already started working on a similar project with JB Straubel. The EP1 Roadster helped attract $40 million for Tesla Motors’ Series C round in May 2006. By 2007, the Roadster hadn’t shipped to customers yet. At the same time, Elon was trying to get SpaceX off the ground (pun intended). The third Falcon 1 launch failed in September 2008. If the fourth launch failed, that could be the end of SpaceX. In 2008, the economy worsened from the subprime lending fallout. Elon was afraid either SpaceX or Tesla was going to run out of funding.
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The following is Methods of Prosperity newsletter number 35. It was originally deployed February 15, 2024. As of October 24, 2024, original subscribers have received up to issue number 71: Phil Knight (conclusion).
Part 35:
Elon Musk (continued)
Tesla and SpaceX Control Freak?
TL;DR
Elon Musk took over as CEO of Tesla Motors in 2008. It was after a series of escalating conflicts and financial difficulties. Elon Musk ousted Martin Eberhard. Musk assumed leadership of the company as CEO and product architect. Tesla’s board of directors appointed Michael Marks as Tesla’s interim CEO, followed by Ze’ev Drori in 2007.
In 2008, Tesla had delivered only 50 Roadsters despite having received more than 1,200 orders. Tesla failed to secure a $100 million investment round in October 2008. Alan E. Salzman allegedly blocked Tesla’s funding round. He was co-founder, CEO, and Managing Partner of VantagePoint. His motive may have been to gain control of Tesla Motors’ assets.
Tesla Motors announced a debt financing round of $40,167,530 in November 2008. On December 23 2008, SpaceX received $1.6 billion as payment for twelve flights to the space station.
Key lessons:
Use debt like a billionaire.
Be a control freak.
Avoid extinction.
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Of all the species that have ever existed on Earth, 99.9 percent are now extinct. This is the estimation of certain environmentalists. Our biosphere is not a thing that cares for any particular species. There are scientists who claim to know the average rate of extinction. Since the beginning of life on Earth, it’s approximately 10 species per year. This rate increases during extreme periods. Paleontologists refer to this as mass extinction events. Genetic evidence suggests that our own species escaped extinction. It was on at least one occasion. Several species related to ours did become extinct. Natural disasters, and climate change wiped them out. It’s possible that the devastating impact of a meteor led to the extinction of dinosaurs. Evolutionary causes killed off Neanderthals. There’s genetic evidence that some of them mated with Homo sapiens. Or else they were a shorter, uglier subset of homo sapiens. Either way, resistance is futile. Humans who blend in to society fare no better than other life forms. How much more dangerous is being an entrepreneur? The harsh reality is that the universe will show no mercy. Especially to any entrepreneur who dares to make a dent in the universe. The universe is hostile. Living things, including humans, all consist of the same things as rocks and stars, and obey the same laws.
When the board of PayPal ousted Elon Musk as CEO, he learned the hard way. You must become a control freak for your dream to become reality.
Elon Musk took over as CEO of Tesla in 2008. He ousted the company’s co-founder, Martin Eberhard. It was after a series of escalating conflicts. The financial crisis of 2007–2008 didn’t make business any easier. Musk assumed leadership of the company as CEO and product architect.
Eberhard had reached the end of his capabilities as a CEO. A fine engineer, it was beyond his skillset to take Tesla from its R&D stage to production. Tesla didn’t ship. Customers became salty when Tesla kept missing delivery dates. Eberhard and Musk threw hands over the design features of the car. Tesla’s Roadster cost too much, and it was Eberhard’s fault. He failed to report accurate figures to the board and was consequently replaced as CEO.
In August 2007, Tesla’s board demoted Eberhard, and named him President of Technology. He was not thrilled. He left the company altogether by December. Tesla’s board of directors appointed Michael Marks as Tesla’s interim CEO. He served from August 2007 to November 2007.
Mark’s intention was to package Tesla as a sellable asset which they could sell to a larger car company. That was a practical plan, but it was at odds with Musk’s grand vision for Tesla. Their product was behind schedule, over budget, and was going wrong.
On December 3 2007, Ze’ev Drori served as President and CEO of Tesla Motors. He’s an Israeli-born American technology entrepreneur. Elon Musk took over in 2008.
Tesla had delivered only 50 Roadsters despite having received more than 1,200 orders.
Tesla burned through around $4,000,000 per month. They needed to close another major round of funding to stay alive. Musk had to borrow money from family and friends to make company payroll from week to week. This was while he negotiated with investors. Tesla had set the prepayments from customers aside. Musk had to dip into that money to stay in business. Soon, operations depleted those funds.
This happened when NASA needed to send supplies to the space station. They had a budget of over $1 billion for a rocket like Falcon 9 to make it happen. Musk reached out through his connections. SpaceX had proved to be able to send a capsule to the ISS. As for Tesla Motors, it only had $9 million left and was about to go bankrupt.
Musk took out a loan from SpaceX which NASA approved, and earmarked the money for Tesla. He sold much of his shares in SolarCity. He put in $20 million of personal funds into Tesla. This included $15 million in proceeds from his shares of a startup he invested in. The name of that startup was Everdream, which sold to Dell in 2007.
Tesla failed to secure a $100 million investment round in October 2008. Musk had to cut 24 percent of the company’s work force. He delayed development work on what would become the Model S.
VantagePoint Capital Partners had signed off on the investment round. All except for one crucial signature. Musk immediately called Alan E. Salzman, co-founder, CEO, and Managing Partner of VantagePoint. Salzman informed Musk about their problem with the investment round. They undervalued Tesla.
Elon Musk characterized Salzman as a “bad faith investor”. He claimed that Salzman tried to block the funding round, which was vital for the company’s survival. Musk alleged that Salzman’s actions were an attempt to bankrupt Tesla. This move would allow him to gain control of its assets. Salzman insisted that Musk come in and make a presentation. He was to plead his case to VantagePoint’s executives the following week. Musk did not have a week to spare. He suspected that Salzman wanted to oust him as CEO. Salzman wanted to recapitalize Tesla and emerge as the major owner of Tesla Motors. VantagePoint could then sell it to the highest bidder.
Elon Musk refused to let Alan Salzman hold him hostage. He outwitted and outmaneuvered Salzman. Rather than an equity round, Tesla took on a debt round. VantagePoint could not interfere. VC firms aren’t structured to do debt deals.
Tesla Motors announced a debt financing round of $40,167,530 in November 2008. On December 23 2008, SpaceX received $1.6 billion as payment for twelve flights to the space station. Elon Musk saved both of his companies.
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One year after the Model S went on sale, the company made a profit. In November 2012, Motor Trend named the Model S Car of the Year. It was the first unanimous vote that anyone at the magazine could remember. It was the first non-combustion engine vehicle ever to win its top award. Consumer Reports soon gave the Model S its highest car rating in history. They proclaimed it likely the best car ever built.
America had not seen a successful car company since Chrysler emerged in 1925. Not only was Tesla Motors successful, it is now the top car company. In 2020, Tesla surpassed Toyota. Tesla has become the world’s most valuable car company. Tesla’s market capitalization is $859.97 billion today. Tesla is a lifestyle, with prestigious brand value.
SpaceX made ambitious plans for 2024. This includes a significant increase in the number of orbital missions. The company aims to increase its flight rate to about 12 flights per month, or 144 flights in total for the year. This includes a variety of missions. Polaris Dawn is a SpaceX mission launched on September 10, 2024. It’s a free-flying mission to low Earth orbit (LEO). It’s part of the Polaris Program, featuring the first commercial spacewalk. The Polaris Dawn mission used the Crew Dragon Resilience spacecraft.
SpaceX has scheduled missions to the International Space Station (ISS). Crew-9 launched on September 28, 2024, and is currently docked at the ISS. Crew-10 is set for for February 2025. SpaceX conducts regular resupply missions to the ISS. SpaceX and NASA expect CRS-31 to launch in early November 2024. It’s identified by NASA as CRS SpX-31. SpaceX will operate this mission under a Commercial Resupply Services contract with NASA. The spacecraft used for CRS-31 is Cargo Dragon 2, capsule C208. NASA and SpaceX have the CRS-32 mission scheduled for December 2024.
Don’t forget about Starship. It’s the largest and most powerful two-stage super heavy lift launch vehicle ever made. Starship Flight 5 launched on October 13, 2024 from Starbase. Starbase is SpaceX’s spaceport, production, and development facility for Starship rockets. It’s located at Boca Chica Texas, USA. Starship Flight 5 landed the booster using the “Mechazilla” pad structure. Giant metal “chopstick” arms caught the rocket. It was spectacular.
Elon Musk founded SpaceX's Starlink project in 2014. The big idea is a constellation of satellites. These satellites provide global broadband internet access. Elon announced deployment of the Starlink constellation on January 16, 2015. SpaceX plans to continue launching batches of Starlink satellites. They’re building out this satellite-internet mega constellation. Part of the Polaris Dawn mission was to test Starlink’s laser-based communications.
If all that is not impressive enough, Neuralink might do it for you. Elon Musk’s company Neuralink has implanted a brain chip into a human. The individual who received the implant is “recovering well”. Elon is restoring independence to quadriplegics and redefining the boundaries of human capability. Anyway, the big picture is that Elon Musk is on his way to save humanity from extinction. This one man will lead us into becoming a multi-planetary species. Protecting freedom of speech is also on his to-do list. No big deal. Next stop: Mars!
Stay tuned for next week!
I like you,
– Sean Allen Fenn
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