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John Collison on three things founders can learn from Elon Musk
Stripe co-founder John Collison says he found the Walter Isaacson biography of Elon Musk to be a useful resource for studying “The Elon Method.” John came away with three important learnings from it:
#1 Pick the right high-level metric to optimize for
John observes that Elon always picked a sensible metric to optimize for with every business he ran. With SpaceX, for example, Elon focused the company on “dollars per kilogram to orbit.” Tesla’s focus on “deliveries per week” is another non-obvious example:
“You could’ve focused on revenue, profitability, or deliveries per year,” John observes. “The focus on the number of deliveries per week rolling off the factory line was itself an interesting choice for a high-level metric.”
#2 Create a sense of urgency
“People talk about this as ‘inventing crises,’” John explains. “But I think the generous version is shortening the time horizons. Elon was talking about (when he was sleeping on the gigafactory floor) how ‘Tesla will go bankrupt if we don’t do this and figure out Model 3 production.’ Tesla was a $200 billion company by market cap at that time . . . but he created a sense of urgency with sleeping on the factory floor, which clearly shortens the timeline.”
#3 Be capital efficient
“I think hardware companies can be really self-indulgent with capital, where they say, ‘Venture capitalists will fund my vision of exploration for five or ten years.’”
John gives robotics as an example:
“It’s like, ‘I’ll do my science project for ages and then I’ll maybe figure out a product and how to commercialize it,’ . . . but Elon’s companies have always been very capital efficient. They build a bad one and then build a good one. The Boring Company bought commercial tunnel-boring machines before they started developing their own. Tesla had the masterplan where they built the low-volume roadster before they got to the high-volume stuff. SpaceX, for what they do, has never actually burned that much capital.”