Imagine for a moment that we have gone back in time some 20 years or so; back to around the turn of the century. Now suppose that you are a young entrepreneur who has just made a fairly appreciable fortune during the dot-com boom that closed out the 1990s. You hitched a ride on the bucking bronco of “irrational exuberance” powering the meteoric rise of the stock market. You held on tight while a considerable number of your compatriots imploded in the abrupt economic bust that followed. Through foresight, hard work, and and plain good fortune, you weathered the storm, and came out the other side with sizeable amount of your wealth still intact.
Now you have an important decision to make, and there are a couple of competing possibilities. Do you sit tight and try to fortify your fortune, so that it is protected for the long term? Do you indulge yourself and buy something extravagant like a professional sports franchise, or a TV show, or both–and then live it up? Or do you attempt an entrepreneurial encore? Do you double down, and invest your new wealth in an even grander scheme and then go for the gold? Do you choose to try and change the world by taking on some of the most powerful, established, and influential institutions in the world? Do you literally shoot for the stars?
If you are Elon Musk, it’s the grand follow up business venture for you. A daring second act is what you decide to pursue. For Elon, resting on his laurels was not an option. It wasn’t enough to build one successful company, now he wanted to really change the world–and he made this choice not just once, but twice. At the beginning of the new millennium, Elon invested in two bold and ambitious new companies. For him prior success was simply motivation to dream even bigger!
So, now the question is… if you were in Elon’s place, in the early days of the new century, would you have made the same decisions? After doing your due diligence, would you have been persuaded to attempt similar ventures? Let’s take a closer look at how a strategic assessment might have appeared at the beginning of the new century…
In the early 2000s, Elon saw a chance to be a part of a daring and grand new enterprise. He had a plan to privatized space flight. Elon envisioned a new company that would make commercial rocket launches more affordable and practical. His immediate objective was to lower the costs of space flight in order to make it profitable. Elon’s ultimate goal for this company was even more ambitious. He intended it to pave the way for a sustainable manned colony on the planet Mars.
But Elon was not the first to attempt this sort of thing. When evaluating the likelihood for success in such an endeavor, Elon might have first looked to the history of an earlier company called, Space Services Inc. for clues.
Space Services Inc. was founded in 1980 and conducted rocket launches on Matagorda Island in Texas. On September 9, 1982 their Conestoga I rocket was the first privately funded space vehicle to reach space. To achieve this important milestone, Space Services leveraged existing rocket technology–its Conestoga rocket was based on the Minute Man intercontinental ballistic missile first developed for the US Air Force.
The launch of the Conestoga I in 1982 was big news at the time, and there was speculation by some that the Space Age had begun an exciting new chapter centered around commercial space flight for profit. But then a strange thing happened… nothing. Mysteriously and without explanation, Space Services Inc. and their Conestoga I rocket disappeared from the headlines–for years.
It was not until 1995 that an attempt to launch a new, updated version of the Conestoga rocket took place. This effort ended in an explosive failure, and the Conestoga program was unceremoniously cancelled. An disappointing and discouraging result to say the least.
How must the story of Space Service’s failure influenced Elon Musk? How would it have impacted your decision making process if you were considering a similar business venture?
Now imagine that it’s a few years later and you have another idea for a ground breaking company. In 2003 Elon took ownership of Tesla Inc. His objective this time was to build a viable mass produced electric vehicle, and perhaps revolutionize one of the largest and most influential industries in the world.
If you were in Elon’s place in the early days of the new century you might have considered carefully whether this was a good idea or not. As part of your due diligence your research might have led you to take a look at an earlier electric car known as the General Motors EV1.
The EV1 was a battery powered automobile produced by General Motors Inc during the second half of the 1990s. At the time, General Motors (GM) was the largest and most influential automobile manufacturer in the world. GM launched the EV1 program in response to looming new and restrictive emissions requirements–particularly out of California.
By the mid 1990s, General Motors–while still a large and powerful company–had grown stodgy. Innovation had become difficult for them. There were real concerns that the company had lost its edge. The management at General Motors saw the EV1 as an opportunity to correct this problem, and get ahead of the curve on what appeared to be a very important prospect for the future of the automotive industry.
The EV1 made it to market with sleek and modern aerodynamic styling. In its initial incarnation, the new electric vehicle was powered by a lead-acid battery, and had a range of around 79 miles. These cars were offered for lease only, with the rate based on a per vehicle price of around $34,000–a sizeable price tag in the 1990s.
A few years later, GM brought a second generation of the EV1 to market with updated technology. This version came with a new lead-acid battery rated for up to 100 miles. Optionally, a nickel-metal hydride (NiMH) battery was available, increasing the EV1’s range to 140 miles.
The EV1 was on the market from 1996 to 1999, with just over 1000 units being produced. But the ahead-of-its-time automobile was never profitable for GM, and in 2003 the company notified all remaining lessees that their EV1 would be recalled and their lease options terminated. All EV1s were to be returned to GM. By August 2004–and in spite of some customer protestations–the era of the GM electric car was over. Like Space Services Conestoga rocket, the EV1 turned out to be another disappointing failure.
Looking back on this discouraging outcome, Elon might have judged that if the largest car company in the world could not successfully produce and market an electric vehicle, what chance would he have? Would you have sized up the situation any differently?
It would also be understandable if Elon ruminated on the obstacles encountered by Space Services with their Conestoga I rocket, and decided that commercial spaceflight was also not meant to be. He might have reasonably concluded that without the vast resources available to government entities, space would forever remain out of reach for private companies.
But in both cases, and in spite of all of the warning signs, Elon got it wrong. Any rational person would have looked at the history of failure in both of these endeavors and rightly decided to steer clear. But Elon missed the mark on each of these critical decisions. The warning signs were obvious, the correct choices were unmistakable, and somehow Elon Musk still managed to make the wrong decisions. Instead of avoiding these ill-advised misadventures, Elon dived in head first.
Surely there would be a dire price to pay for making a pair of such obvious and colossal mistakes. What would be the consequence of such remarkable misjudgments?
Well, for Elon, the misguided decisions he made resulted in the stunning and unexpected creation of two of the most extraordinary, audacious, and successful companies in history. In 2001 Elon created SpaceX, which has gone on to become the most prolific private space launch organization in the world. They currently conduct more launches than any other entity–private or governmental–including the USA, Russia, and China. SpaceX garnered its advantage by pioneering groundbreaking developments in rocket technology, including important advances in reusability. Their cost effective Falcon family of rockets have set records for launch frequency, and SpaceX’s mighty Starship rocket is the largest and most powerful rocket ever constructed.
And since 2003 when Elon first became involved with Tesla, that company has gone on to become the most successful EV manufacturer in history. Tesla currently produces six different model, with more coming soon. The company also develops and markets other related clean-energy technologies. As of late 2024, Tesla Inc. has the highest market valuation of any car company anywhere in the world.
In his own remarkable way, Elon chose against the obvious conventional wisdom. Elon knew thirty years ago that the technology just wasn’t quite ready, but he also knew that the situation can rapidly evolve–what is out of reach today, may be completely achievable tomorrow. Elon also recognized that there were some very important intangibles involved. He likely judged that the intangibles were just as critical as the maturation of the technology–he may even have felt that the intangibles were the most important part of the equation. So Elon went for it, and in the process of building these two ground breaking companies Elon made himself into the world’s wealthiest man.
Just imagine what he might have accomplished with more prudent judgment!