28 July 2016
Electric Hero
Is Musk the new Victorian?
by J.R.Thomas
The streets and squares of central London show that our Victorian forbears were pretty careful in their choice of heroes. Statues abound, many of great size and of majestic proportions, and most of military, naval, and scientific figures. A few politicians and royals, of course, but very few businessmen: – James Henry Greathead (though located by Bank tube station he was a really a tunnel engineer); Isambard Kingdom Brunel and Sir Nigel Gresley at Paddington and Kings Cross respectively (also primarily engineers -indeed Brunel was no example of a successful businessman); Rowland Hill (inventor of the Penny Black stamp. Him we might just allow).
Now though we seem to raise businesspersons to iconic status, especially if they are cool and non-conformist. That tends in reality to mean that they should not wear ties, or indeed suits, and should pop up at Glastonbury or be seen para-gliding. Richard Branson is the great exponent of this approach; Sir Cool himself, with his long hair and relaxed style, and that essential accessory, a beard. It helps that he has built his empire with wit (“Virgin”) and in fields where the public has directly benefitted from his obsessive young trendy customer focussed approach – holidays, music, films, airlines. James Dyson, another Sir Cool, has much the same style, albeit more reserved, giving us all those useful and stylish, if expensive, household goods. Steve Jobs we will add to our list, the epitome of laidbackness and informality, producing expensive things to add grace and beauty to our desks.
Philip Green, currently sailing the Med on his new super-yacht, though presumably mainly on the phone to his lawyers, could have been added to our pantheon of those adored yet staggeringly rich. He has the open necked shirt, designer stubble, friendship with Kate Moss, a common touch, and supplies us with stylish clothing (if your tastes run to cheap and cheerful). But Sir Philip has really rather blown it, and, unless he suddenly reverses his public standing by writing out a half billion quid cheque, (we are assured that this would not cause him any great difficulty) we cannot see that any statues are likely to be raised to him in the near future.
So where will we find our next business super-hero? California may supply the answer to that question; California, land of mega innovation, the world centre of coolness and the hotplate of green issues and solutions thereto. One of the greatest innovators in this is Elon Musk, born in 1971 in South Africa, of a complex ancestry encompassing Britain, Canada, the USA and the Netherlands. Young Elon showed great aptitude for science and physics and achieved academic distinction in both areas, but at the age of 24 decided that his future was in entrepreneurship.
He turned out to be right, working with his brother to build up a web software company providing software services to the newspaper industry. He sold that within four years and found himself US$22m better off. There was no stopping him. He restarted in software, building up a new business in on-line payment services which merged with something promising called PayPal. Musk became chief executive. One defining characteristic we can see in his career is that he is not a committee man. After a number of disagreements he was ousted from his executive role in 2000, and sold out of the business in 2002 – compensated by the fact that the $10m he had invested had in seven yearsbecome $165m.
But Mr Musk’s aspirations were far higher than just moving money around, even his own. He invested his profits from PayPal into two industries that do deserve the label “cutting edge”, space travel and electric cars. In both, Musk believes he can harness his knowledge of computer technology to businesses which have a natural growth trajectory.
SpaceX is the one boldly going where no man has gone before. Unlike the Branson business – extending Virgin Airlines to outer space – SpaceX is both hip, naming space vehicles after popular icons from space movies such as the Millennium Falcon and Puff the Magic Dragon -stretching the point but humour the guy, and based on sensible commerciality. SpaceX will take your satellite or space transmitter and get it up above us just where you want it. Musk has approached this as a business, looking at costs and efficiencies to make it profitable to run these services. It seems to be working. He has a contract from NASA to carry cargo to the International Space Station; he builds remarkably efficient rocket motors; and he is now working on maximising reuse, trying to get all those bits back to earth to recycle rather than leaving them in space or falling into the ocean. He says SpaceX is on target to land a commercial cargo vessel on Mars in 2018, with manned flights out there within ten years. If capitalism can achieve viable space flights to Mars, when even the American government balked at the cost, that justifies at least one statue for Mr Musk.
He may get one sooner than that if he can get his Tesla Car business operating properly. Tesla builds electric cars, in three models, which are now in mainstream production in a new plant near San Francisco. They are said to be much more efficient than other maker’s electric vehicles, and they are certainly more beautiful than any of the blancmange mould-like offerings so far from mainstream manufacturers – Musk, like Steve Jobs and James Dyson, knows the value of great design in adding premium at the point of sale. Alas, so far the cars have been plagued by delays (their only consistency in relation to delivery targets in that they fail to achieve them), unreliability (a major recall was enforced on Tesla after it had already shipped its first phase launch programme), and a fatal accident with its driverless range. In spite of this the company is said to be working on electric vans and trucks for launch within a couple of years. Tesla is also working with great vigour on the development of more efficient engine systems, combined with building, or procuring, a network of supercharger stations right across the USA. There is no point speeding along in your beautiful TeslaX, your Macbook on the passenger seat, if it runs out of power after ten miles, or if outside metropolitan LA there is nowhere to charge it.
Musk is also into linear propulsion for public transport, artificial intelligence, and solar power systems. Even the economically averse will notice these are all things which require vast amounts of capital over probably very uncertain payback periods. Musk’s most impressive feature is not his vision of how to monetising the future – it is his ability to persuade others to put their cash at his disposal to enable him do so. Tesla has consistently failed to meet financial targets, and, although there are now perhaps some doubters among commentators and investors, the stock continues to trade at remarkable multiples – not of profits (there are none) but of projected forward turnover – 50 times this year’s operating cash flow.
Which probably summons up Musk, a visionary rather than an entrepreneur, with a remarkable ability to anticipate trends and an even more remarkable ability to convince others that he is right. There is always an urge to be cynical about visionaries and when they are ultra-hip, mega-cool, tieless apostles of a free electric world from California, who donate generously to both the Democrats and the Republicans, it is doubly enticing. But there is enough commercial nous underpinning Mr Musk’s electric dreams to suggest that he may not only be onto something, he may just be able to deliver it. If he does, he will truly be one of those people who change the world- and a statue (lit by solar power) will be the least we can provide to mark his passing through our times.
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