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Elon Musk dreams big. In this post, we’ll look at Elon Musk’s leadership style, the many missed delivery deadlines it has caused, and why (at the same time) it is the key to Tesla’s (and SpaceX’s) success. We’ll also look at how his leadership style has polarized Musk’s fans and critics as well as Wall Street analysts’ responses.
Among Musk’s list of big dreams are to populate Mars; transition all forms of land, air, and sea transportation to electric; create a highspeed human-computer interface; create cars that can drive better than humans; dig tunnels and move vehicle traffic underground; whisk people from any major city to any other major city on the planet in less than an hour (by rocket of course).
Among these big dreams are also many things that Musk has committed to deliver and then failed to meet the commitment. Bloomberg even has a page dedicated to tracking Musk’s projects; be they successesful, delayed, or failures. These product promises include AutoPilot 2 features, Model 3 deliveries, and much more.
Musk Standard Time (MST)
For those of us that have been following Musk for a considerable time, we’ve learned not to trust his estimated project timelines. Ashley Vance wrote about it in his biography of Musk. Perhaps Musk assumes everyone working for him can clear their life of all distractions and work 18 hour days for months at a time as he did during his programming years. Another possibility is that it’s a form of the Dunning–Kruger effect where he assumes things are far simpler than they really are? Unlikely. Are the delivery dates from Musk blatant lies to dupe people to buy into the ideas and get employees to work super hard? Some of Musk’s critics may think so, but again, unlikely.
Rather, these timelines are likely the ones Musk wants to be true. He has thought long and hard about the solution, how it works, and its impact on the world. After such a thorough roseate visualization, it seems like something that should exist as soon as possible. This explains his optimistic estimates, but it is not an estimation method that you are likely to find in one of Steve McConnell’s project management books.
Let’s look at some of these missed deadlines in a little more detail and then look at why this (despite missed commitments) is one of Tesla’s greatest methods of delivering breakthrough products.
Note, the point of this article is not to point out the failures, there are plenty of critics that write such articles. Please don’t stop reading in the middle of the next section and assume you know the article’s full content. The discussion of these “failures” is for context, to make a point; they are not the point.
Model 3 Delivery Failures
In the Q1 2016 earnings report, when asked about Model 3 production, Musk said, “So as a rough guess, I would say we would aim to produce 100,000 to 200,000 Model 3s in the second half of next year.”
Musk did call this a rough guess, but it was optimistic by an order magnitude. Instead of delivering massive quantities of the Model 3, Tesla spent the second half of 2017 in “production hell” and deliveries are far below this rough guess. At the time of this writing, we still don’t know what the final delivery numbers for 2017, but they are likely to be closer to 20,000 than to 200,000.
Our final issue in the Model 3 space is the delivery of a $35,000 variant of the car. The initial configuration included the large battery pack, the premium package, and more. This puts the price well over $50,000. If you want (and can afford) the upgrades, that’s fine. But many people are on the list for a Model 3 because they cannot afford a $50,000+ car. They are waiting for the $35,000 option (with maybe a few upgrades). This was scheduled to be available in November of 2017. Now, given the production problems currently with the Model 3, Tesla is not likely to add to the manufacturing complexity by allowing more configuration varieties any time soon; those waiting for a $35,000 car will be waiting until sometime in 2018.
Other Missed Optimistic Commitments
Tesla Network: In October 2016, Musk announced the Tesla Network. This is the idea that the owner of a Tesla would be able to place their car into a Tesla operated ride-share network when they didn’t need it personally. You could drive to work, then release your car to the network to autonomously chauffeur people around until you need it again. Going on vacation for a week? Your car could stay home and work to help you pay for it. The Tesla Network could be used to earn money and reduce your car payment. Musk said that the network was targeted to begin in 2017.
Autopilot 2: New Autopilot hardware was introduced in October of 2016. When the new hardware was deployed, it was missing many features that the previous hardware 1 systems had. Not only could the new system not autosteer initially, it didn’t have rain sensing wipers or auto high beam headlights. Musk said that hardware 2 would reach parity with hardware 1 within 3 months. Many features have been added to hardware 2 since its introduction, but now in late 2017, it is still not yet at parity with hardware 1 systems. This is about 11 months late.
Model X Launch: The Model X was announced in February of 2012 with a targeted launch date of 2013. The target year of 2013 came and went and no Model Xs were delivered. 2014 rolled by without a delivery. Finally, in September of 2015, the first key fob was handed to a new owner. But Model X was plagued by production issues for another 6 months before any significant volume of deliveries began.
Full Self-Driving: Soon after the introduction of Autopilot hardware 2, buyers have had the option to pre-pay for full self-driving. In January 2017, Musk said self-driving features would begin to roll out in “3 months maybe, 6 months definitely.” Six months after January would be July. July has come and gone and you can still pre-pay for the feature, but, as of today, you still cannot use it.
Responses to Missed Commitments
When so many promised deliveries have been missed, why do Musk’s words still carry so much weight? If Musk was viewed as just a wild dreamer, he would not have the following that he does. Musk is trying to do something that is important, something that’s never been done before, and that many people would like to see succeed. When this is the case, many are likely to give you some slack on the schedule, as long as you are working hard and showing progress.
There is no question that Musk is personally working very hard towards these goals and pushing his teams to do the same. For example, during the recent Model 3 production constraint, Musk was working at the Gigafactory at 2 a.m. on a Sunday and sleeping on the roof to save time driving to a hotel.
In a recent note, an analyst from Cowen and Company said, “Tesla needs to slow down and more narrowly focus its vision and come up for a breath of fresh air. Elon Musk needs to stop overpromising and under delivering.” This is a typical response from an analyst. They are attempting to value the company and figure out how it will do in this quarter or the next. They want predictability.
The mistake that Cowen & Company and other analysts are making is to judge Tesla by the aggressive goals and missed timelines, rather than by results. Seeking Alpha writer, Trent Eady, said it well when he wrote, “If Musk promises you the moon in six months and delivers it in three years, keep things in perspective: you’ve got the moon.”
Musk has said that if investors want to buy into a car company that does things the traditional way, they should buy Ford. He has no intention of changing Tesla’s behavior or culture to meet analysts’ expectations.
Musk and the Moonshot
Modern businesses focus on meeting quarterly expectations. If you miss the Street’s expectations, your stock is punished. When the stock drops, the board starts looking for new management. This had led many C-suite executives to think small. Looking for things that can be done in three months and things that can show a quick upside.
As we’ve shown, Musk does not think small. Rather, he uses what others have referred to as Big Hairy Audacious Goals (BHAGs). These are Moonshots or go big or go home ideas. They are not guaranteed to succeed and they are not something that can be done on a fixed 3-month schedule. To accomplish something of magnitude, you have to be willing to fail and you have to be willing to disappoint the Street. This is not an option that most CEOs of publicly traded companies are willing to attempt. Discussing the culture of innovation at SpaceX, Musk said, “Failure is an option here. If things are not failing, you are not innovating enough.”
The Power of Optimism
If these audacious goals are likely to fail or at least result in unforeseeable delays, why does Musk put such an optimistic timeline on them? Why not state the goal with no promise of delivering it next year?
Danny Kahneman, the Nobel prize-winning economist, has an answer to this question. In an episode of Freakonomics Radio (How To Launch a Behavior-Change Revolution, dated October 25, 2017) he says, “If you realistically present to people what can be achieved to solve a problem, they will find that uninteresting. You have to overpromise in order to get anything done. You take a problem like poverty. If you say I am going to reduce it by 12%, that may be realistic but no one will be interested. People want to solve the problem. Change is very unlikely otherwise. When you look at big successes, the people that carried out those big successes were unrealistically optimistic typically. This may be necessary to get the initial resources and it may be necessary to get the enthusiasm that is needed to achieve anything at all, because there is so much inertia that realistic promises are at a major disadvantage.”
“When you look at big successes, the people that carried out those big successes were unrealistically optimistic.” – Danny Kahneman
Kahneman’s comment was not about Musk, but it is very applicable. Musk is trying to do things that have never been done before.
“By striving to do the impossible, man has always achieved what is possible.” – Mikhail Bakunin
Musk’s use of a short timeline gives a sense of urgency to the effort. It might mean the actual delivery will be late, but it arrives sooner than it ever would have if it had initially been given a realistic timeline. If you want to move people off the status quo, you have to present them with something exciting. A promise of something 10 years from now will be discounted to the point of insignificance and ignored by most.
Whenever Musk makes a new proclamation, you will find people that claim that it is impossible. This was true about the Tesla Roadster and every car that Tesla has delivered since. It was true about SpaceX landing rockets on drone barges at sea (or anywhere actually). Musk’s use of big aspirational goals is an example of the “Kahneman overpromise” and it has been effective.
Musk is often wrong about the timeline, but never in doubt about the goal. The deadlines come and go, but the commitment to the results are still there. These are not empty promises, but don’t expect them to happen on a predictable timeline.
Those proclaiming something is impossible should not stand in the way of those that are doing it.
When you are doing the impossible, it is hard to deliver on a predictable schedule.
Fanboys or Cult?
Musk has become a divisive figure. Criticism or praise of him will bring about counterpoints and ensuing arguments between fans and critics.
The critics wonder how anyone can idealize someone with such outlandish ideas. While the fans wonder why anyone would be a detractor to someone that is trying to make our existence so much more interesting.
Considering the recent Model 3 delays, Model 3 reservation holders are not thrilled that they have to wait longer for their vehicles, but they are not likely to cancel their orders en masse. Edmunds auto analyst Jessica Caldwell recently said, “Many Model 3 customers put deposits down on the vehicle more than a year ago before they even saw the vehicle, so it’s clear Tesla buyers don’t follow the usual logic-driven car-buying process.” That Model 3 reservation is not just to get a car. For many of them, it’s a statement about who they are, what they believe, and the future they want to help bring about.
People are not inspired by the something easily doable, nor by something obviously preposterous. The right place to inspire is to do something just out of reach, like Kennedy’s Moonshot. That is the place where Musk has targeted his publicly shared goals, at things that are hard, and it has captured the imagination of many.
These just-out-of-reach goals mean that there are many unknowns. And there are things that are currently not possible. These are engineering problems that are yet to be solved.
I am eagerly waiting for the future to arrive. You have to want more and settle for what you get.