Elon Musk: With Jobs Gone, Google Will Win Mobile (And Look Out For The Hyperloop)

World-renowned entrepreneur Elon Musk held a roundtable session at the Foreign and Commonwealth Office last Thursday in London. It was the kind of event the UK government has seen much more of lately. Two years ago the Prime Minister David Cameron set aside budget for a special office to fan the flames of London’s burgeoning tech cluster with the “Tech City” initiative and re-invigorated its online strategy with an open source and data approach to Gov.uk.

It was appropriate then that several Valley players took part in Silicon Valley Comes To The UK events last week. But Musk was not there to sing their praises, but merely to expand on his general worldview. Interviewed by Number 10 special adviser Rohan Silva, Musk opened up on a number of issues, some he’s touched on in the past, and others he expanded upon more fully.

Silva opened by asking how rare it was these days to see companies created which were worth more than $50bn, and yet Musk himself had helped to create at least four so far.

After noting that the UK is smaller than the U.S., Musk said the UK was probably doing “better than most” in creating large companies. But his concern remained sustainable energy and getting away from the use of hydrocarbons and that this remained an enormous opportunity.

He said it’s easy to mine and burn oil and gas, but that then that “creates an enormous amount of CO2” and this gradually heating of the oceans and affecting the climate. So this is a place where government has an important role, and it is a potential “tragedy of the commons” if governments cannot set the right price on carbon to create “the correct market behaviour”. He said it was “up to governments to institute a tax” and dial it up or down to induce the right behaviour in the market and help companies to solve this problem.

Musk said that to Europe’s credit there is a tax on petrol, which favours fuel-efficient cars. “I wish that were the case in the U.S.”

Asked how SpaceX fits with his vision of sustainability, he admitted that “not everything” fitted within those confines, but that “SpaceX is about advancing rocket technology” and it “put us on the path of extending life beyond earth and making it multi-planetary.” Once that is in place the “probable lifespan of human consciousness is much greater.”

After meeting an academic in Oxford that week who had told him that there was a 12% chance of humanity ending this century, he said he hoped this figure was wrong but even if it was only greater than 0.1% it still “makes sense to ‘back up’ the biosphere” by colonising other planets.

Speaking about his contest to win the SpaceX contract with NASA, Musk said winning the contract had been an upset to traditional players like Lockheed and Boeing. “NASA only had a certain amount of money to do this. Lockheed and others didn’t think we would win.”

He praised NASA for taking the approach to go for a fixed price contract on resupplying the international space station.

Silva pointed out that most government contracts tend to be handed to larger companies. Did Musk think the US.. government was doing well in its own procurement policy?

Musk echoed the view that most U.S. government contracts go to large companies, in part because there was a tendency, in the way things are set up, to incentivise the contractor to maximise the return. But “what matters is not the contract but what is costs the tax payer,” he said. Instead, it would be wise for governments to move away from “Cost, Plus” contracts and move to the absolute amount and the quality of service. And also to tie payment to performance. He said the contract SpaceX won was “unusual” in that it was fixed price and milestone based.

On the subject of government regulation, he noted that PayPal initially did not fit under normal regulators, leading to some government agencies competing to regulate them “which is was funny”.

Should Visa and MasterCard be disrupted, asked Silva?

Musk said that there remains too much cost in the credit card system, and security “is not where it should be”, noting how PayPal saw fraud come through credit cards.

Would it have been impossible to start SpaceX without PayPal?

He said yes, given that a car company and a rocket company “requires a large amount of atoms to be assembled” which takes a lot of money.

At a societal level he said many more people should go into science and manufacturing than high finance and the legal system. He also said it was good for people to go back and forth between government and the private sector, as it was something that created a “good feedback loop” and could lead to sensible decisions.

His management philosophy was also something he touched on. He incentivises his managers to contribute at least 10-20% of their time to projects which they directly work on, similar to Google’s famous 20% time. “If they don’t do that then they won’t make the right decision for the other 90% of their time,” he said.

What are the other challenges for would-be entrepreneurs, asked Silva?

Musk said there remained lots of opportunities in sustainable energy, such as making transport electric. He was bullish about the prospects for solar energy: “t’s going to be mostly solar, it’s the top source of energy. Maybe not in the UK, but clouds obscure only a small amount of solar energy.”

He said there should be stronger incentives for Solar energy, alongside wind, geothermal and hydro energy in general. “In the UK it’s not about super long distances so it’s quite a suitable country for electric cars. So this should be favoured.”

For places not susceptible to natural disasters, nuclear can be an option and is better than coal or gas. “It’s the lesser of the evils – not ultimately the best. but it’s better. But not wise for California,” he noted.

Asked where, if he was starting from scratch, he would start a business today, he wryly recalled that his “tough upbringing” in the South African schools system “was possibly pretty helpful”. But – given he left at 17 for Canada and ultimately the U.S. – he said the environment in Silicon Valley is “conducive to creating startups. Everyone will take a chance on you.”

“If you want to grow a giant redwood you need to make sure the seeds are ok, nurture the sapling, and work out what might potentially stop it from growing all the way along. Anything that breaks it at any point stops that growth.”

He said it was up to governments to work out where were those friction points existed when companies might get stopped or killed, and to make sure they exist in a fertile environment. That said, “You don’t want it to be in too much of a walled garden.”

Musk admitted that Silicon Valley bankruptcy rates are very high – “It’s the killing fields out there” – noting that PayPal got its Series C funding at the end of March 2000 as NASDAQ went into free-fall. “Only companies with a real value proposition got though. Pets.com should not have existed. ”

“The Valley is very quick to strip the carcass and move on. As soon as a company falters it’s like piranha coming in. The company is eviscerated and people move.”

Asked when he thinks man might make it to Mars, he gave a 10-15 year time crime, and that it was “important it occur”. He predicted a joint government and private effort would “probably be easier”.

But would Mars have an American flag? “It don’t know if it would have an American flag. We’re just trying to get there and stay out of the politics as much as possible.”

One audience member asked, how could we get more Elon Musks? Is the entrepreneurial mindset and skills transferable?

It isn’t about risk taking, he said: “I don’t really want to take risks.”

“I read a lot of Science Fiction as a kid and tried to think about the future and the problems that needed to be solved to make it a bright future, and I tried to get involved in that. I don’t create companies for the sake of creating companies, but to get things done. I have to get other people involved – otherwise it would be just me.”

Is the ecosystem of Silicon Valley helped by the proximity of the universities?

Musk said Stanford stood out as being quite helpful in that early on it developed a lenient IP policy which at first sounded counter-intuitive in that it rarely tried to gain IP from a student using its labs, unlike most universities.

“Stanford took the opposite approach. So what happened was they helped create very valuable companies and then those companies gave a lot of money back in donations.” That approach has helped Stanford gain more donations than Oxford and Imperial College combined.

What about the education system – can you teach people to be creative?

Musk said it was important that societies create an environment where it’s “important it’s seen as a socially desirable thing to be an entrepreneur.”

He pointed out that in the U.S. it’s seen as better to earn your wealth, and, in fact, inherited wealth is looked down upon. It’s harder to prove yourself if you inherited it.”

At the same time he bemoaned the numbers of people who have gone into the “Hedge Funds and the law” and not into science and engineering.

Finally, I asked Musk who he thought would come out on top, out of Apple, Microsoft, Google, and Facebook?

“It’s the grudge match,” he said. “It’s good for consumers that there is this battle. I think probably Google will win on the phone because Jobs is out of the picture. It matters quite a lot who runs the company. Years ago they were lowering Apple into the grave. But like that scene from Kill Bill, they punched through the coffin. it really makes a difference who runs the company. Larry Page is quite good and probably in the long run will come out on top.

“Facebook is quite entrenched and has a network effect. It’s hard to break into a network once it’s formed. But I’m quite glad there is Twitter there as well. Twitter’s growth is astounding and I slightly trust Twitter a little more. I don’t use Facebook,” he said.

Lastly he revealed he was working on something he calls the “Hyperloop” which will be a “cross between a rail-gun and a Concorde.”

He said this was be a new kind of mass transport system. “I want something that is faster than a plane, costs less, can’t crash, and is immune to weather.” It also can’t have a right of way issue, where people have to give up their homes.

But he would reveal more details later, after he’d completed more calculations.