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Inside the Mind of the $20 Billion Dollar Man: Elon Musk Internal Letter to Employees

Discussion in 'People Mgmt: Customers, Employees, Investors' started by ApparentHorizon, Apr 18, 2018.

  1. ApparentHorizon
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    ApparentHorizon Gold Contributor Speedway Pass

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    Apparently this just came out from the man himself:

    Progress

    First, congratulations are in order! We have now completed our third full week of producing over 2000 Model 3 vehicles. The first week was 2020, the second was 2070 and we just completed 2250 last week, along with 2000 Model S/X vehicles.

    This is more than double Tesla’s weekly production rate last year and an amazing feat in the face of many challenges! It is extremely rare for an automotive company to grow the production rate by over 100% from one year to the next. Moreover, there has simultaneously been a significant improvement in quality and build accuracy, which is reflected in positive owner feedback.

    Starting today at Giga and tomorrow at Fremont, we will be stopping for three to five days to do a comprehensive set of upgrades. This should set us up for Model 3 production of 3000 to 4000 per week next month.

    Another set of upgrades starting in late May should be enough to unlock production capacity of 6000 Model 3 vehicles per week by the end of June. Please note that all areas of Tesla and our suppliers will be required to demonstrate a Model 3 capacity of ~6000/week by building 850 sets of car parts in 24 hours no later than June 30th.

    Any Tesla department or supplier that is unable to do this will need to have a very good explanation why not, along with a plan for fixing the problem and present that to me directly. If anyone needs help achieving this, please let me know as soon as possible. We are going to find a way or make a way to get there.

    The reason that the burst-build target rate is 6000 and not 5000 per week in June is that we cannot have a number with no margin for error across thousands of internally and externally produced parts and processes, amplified by a complex global logistics chain. Actual production will move as fast as the least lucky and least well-executed part of the entire Tesla production/supply chain system.

    By having a Model 3 subsystem burst-build requirement of 6k by the end of June, we will lay the groundwork for achieving a steady 6k/week across the whole Model 3 system a few months later.

    As part of the drive towards 6k, all Model 3 production at Fremont will move to 24/7operations. This means that we will be adding another shift to general assembly, body and paint. Please refer anyone you know who you think meets the Tesla bar for talent, drive and trust. Between Fremont and Giga, Tesla will be adding about 400 people per week for several weeks.

    Precision

    Most of the design tolerances of the Model 3 are already better than any other car in the world. Soon, they will all be better. This is not enough. We will keep going until the Model 3 build precision is a factor of ten better than any other car in the world. I am not kidding.

    Our car needs to be designed and built with such accuracy and precision that, if an owner measures dimensions, panel gaps and flushness, and their measurements don’t match the Model 3 specs, it just means that their measuring tape is wrong.

    Some parts suppliers will be unwilling or unable to achieve this level of precision. I understand that this will be considered an unreasonable request by some. That’s ok, there are lots of other car companies with much lower standards. They just can’t work with Tesla.

    Profit

    A fair criticism leveled at Tesla by outside critics is that you’re not a real company unless you generate a profit, meaning simply that revenue exceeds costs. It didn’t make sense to do that until reaching economies of scale, but now we are there.

    Going forward, we will be far more rigorous about expenditures. I have asked the Tesla finance team to comb through every expense worldwide, no matter how small, and cut everything that doesn’t have a strong value justification.

    All capital or other expenditures above a million dollars, or where a set of related expenses may accumulate to a million dollars over the next 12 months, should be considered on hold until explicitly approved by me. If you are the manager responsible, please make sure you have a detailed, first principles understanding of the supplier quote, including every line item of parts & labor, before we meet.

    I have been disappointed to discover how many contractor companies are interwoven throughout Tesla. Often, it is like a Russian nesting doll of contractor, subcontractor, sub-subcontractor, etc. before you finally find someone doing actual work. This means a lot of middle-managers adding cost but not doing anything obviously useful. Also, many contracts are essentially open time & materials, not fixed price and duration, which creates an incentive to turn molehills into mountains, as they never want to end the money train.

    There is a very wide range of contractor performance, from excellent to worse than a drunken sloth. All contracting companies should consider the coming week to be a final opportunity to demonstrate excellence. Any that fail to meet the Tesla standard of excellence will have their contracts ended on Monday.

    Btw, here are a few productivity recommendations:

    - Excessive meetings are the blight of big companies and almost always get worse over time. Please get of all large meetings, unless you’re certain they are providing value to the whole audience, in which case keep them very short.

    - Also get rid of frequent meetings, unless you are dealing with an extremely urgent matter. Meeting frequency should drop rapidly once the urgent matter is resolved.

    - Walk out of a meeting or drop off a call as soon as it is obvious you aren’t adding value. It is not rude to leave, it is rude to make someone stay and waste their time.

    - Don’t use acronyms or nonsense words for objects, software or processes at Tesla. In general, anything that requires an explanation inhibits communication. We don’t want people to have to memorize a glossary just to function at Tesla.

    - Communication should travel via the shortest path necessary to get the job done, not through the “chain of command”. Any manager who attempts to enforce chain of command communication will soon find themselves working elsewhere.

    - A major source of issues is poor communication between depts. The way to solve this is allow free flow of information between all levels. If, in order to get something done between depts, an individual contributor has to talk to their manager, who talks to a director, who talks to a VP, who talks to another VP, who talks to a director, who talks to a manager, who talks to someone doing the actual work, then super dumb things will happen. It must be ok for people to talk directly and just make the right thing happen.

    - In general, always pick common sense as your guide. If following a “company rule” is obviously ridiculous in a particular situation, such that it would make for a great Dilbert cartoon, then the rule should change.

    If there is something you think should be done to make Tesla execute better or allow you to look forward to coming to work more (same thing in the long term), please send a note to: email.

    Thanks for being such a kickass team and accomplishing miracles every day. It matters. We are burning the midnight oil to burn the midnight oil.

    Elon
     
  2. Rabieh Hammoud
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    Rabieh Hammoud Luck? Just killed it. Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Thanks for sharing. Is it public?
     
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  3. ApparentHorizon
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    ApparentHorizon Gold Contributor Speedway Pass

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    It is. I picked it up from a tech forum I frequent.

    I wouldn't be surprised if this was a calculated move on his part. Releasing it publicly that is.
     
  4. Rabieh Hammoud
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    Rabieh Hammoud Luck? Just killed it. Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Yep. If it's public it might be a calculated move like you said
     
  5. Late Bloomer
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    Late Bloomer Silver Contributor Read Millionaire Fastlane Speedway Pass

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    This is a powerful and scary truth about ANY business. I have to figure out how it applies to me now. And I have to figure that out again each and every week.
     
  6. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Ha Ha, love it. Totally no nonsense type of guy. A type of letter that I'd write if I ran a company of a gazillion employees. But I don't and never will -- so thanks Elon for allowing me to live vicariously thru you.
     
  7. ApparentHorizon
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    ApparentHorizon Gold Contributor Speedway Pass

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    That is a good question. My first instinct was that it doesn't matter for SMBs. But we take actions which are not in our best interest. Like tiding up the website or ordering new business cards. Does it matter if these are executed well?

    Thing is, a company like Tesla is optimized and implemented precisely. So any new development in their process or supply line has a direct, and measurable impact.

    Perhaps we have to step outside of ourselves to figure out this one. Difficult thing to do, if that's the case: Self-serving bias - Wikipedia
     
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  8. adventureguru
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    Note Elon's frequent use of the term 'adding value' as MJ always says
     
  9. NanoDrake
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    NanoDrake Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    first principles thinking guys, that's the real deal
     
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  10. NuclearPuma
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    Why wasn't Tesla already doing these things regarding cost and vetting suppliers? His attention given to Space X can be viewed as neglect of the fiduciary duty to Tesla shareholders.
     
    Last edited: Apr 19, 2018
  11. csalvato
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    csalvato Platinum Contributor Read Millionaire Fastlane Speedway Pass Summit Attendee

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    Different phases of business require different mindsets
     
  12. ZF Lee
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    ZF Lee Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Well, you run a forum of tens of thousands of entrepreneurs, so I guess you still touch that scale slightly.

    And you did write these heavy hitters as well:

    IMPORTANT! - Are you "that guy"? Great! The door is over there...

    IMPORTANT! - Elon Musk stopped by today...

    RANT - I want to be a world-class X without the world-class effort! Tell me how!

    They came in during VERY important times when the Forum was going through some crap.

    I have always considered the art of the pen to be one of the best tools for business communication, given that it is finely tuned. It is in my best interests to pay a good deal of attention to this area, even though I'm far from worst at it.

    Sadly, looking back at where I have came from, conventional schools and colleges may never catch up with this, even with Masterclass.com popping up.
     
  13. ApparentHorizon
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    ApparentHorizon Gold Contributor Speedway Pass

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    Opportunity cost basically

    If you're referring to the recent dip in stock price, he mentioned a couple of times: TSLA is overvalued. And if you can't handle the volatility, go "Buy Ford Stock" :rofl:
     
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  14. Late Bloomer
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    Late Bloomer Silver Contributor Read Millionaire Fastlane Speedway Pass

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    I think his idea was first that they would find a way to build the cars at all, with a complete supply chain that had to be built from scratch. Which they've done. THEN they would push for efficiency, which is his new focus for the company.
     
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  15. Xeon
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    Xeon Nessuna macchina per me se non una Pagani Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Don't be surprised if the content at Masterclass.com are all generic stuff you can learn from Udemy or any real life class/coach. Big names and big brands, big mentions, big press logos on their website, but let's face it: getting taught by Serena Williams in real life, 1-to-1, with her correcting your serves and smashes, and giving feedback to you, is different from watching a pre-recorded video of her teaching generic stuff to the masses.

    I wonder if the content are even crafted from scratch by these celebs, or is it designed and created by the folks behind Masterclass, then get these celebs to voice it out etc.
     
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  16. WestCoast
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    Disclaimer: I'm a huge fan of Elon and Tesla and Space X and everything. Really, I think what they are doing is awesome, and I keep close tabs on progress.

    That said, I read this memo and was really surprised about the things that it didn't say....

    This reeked to me of a guy who has lost control of the management of his business.
    The super smart idea guy, who is just learning his ship is leaking water everywhere.
    And, yes, he'll fix it, yes, he'll man the buckets all night... but there is a creeping reality in this memo that it's HIS company, and everyone else is along for the ride.

    In my experience, long term, as the luster wears off, and there is more competition for electric vehicles, this sort of 'push push push push' mentality won't motivate the team as much as it did before.

    It sounds like a web of crazy over at Tesla - disorganized and deeply bureaucratic.
    It's good that the President notices this, and it's good that he cares....
    But, one memo, one passionate plea to cut the B.S. - does not a management system make.

    And, also, when ANYONE says things like 'From now on, all expenses over $1M need to get approved by me' - that's terrible management. That is him saying 'I don't trust anyone else, we don't have a system for accountability and reporting, and I'm smarter than everyone else here, so I'll handle it myself.'


    --
    Not to compare myself to Elon AT ALL. But, when I do things like this, and my staff hates it.
    I say: *big ideas, go go go!!! Let's win in this area! Cut the BS! Use good judgement, win win win*

    And last month, my Director of Operations pulled me aside and said 'listen, there is a difference between being an entrepreneur and being an effective manager. They are different skill sets. We don't need you to be an entrepreneur anymore, we need you to be a leader.'

    He was right.

    --
    So I read this letter from Elon, and everyone is saying 'what balls, how cool' - but I read it and thought the opposite. How would it be to work for a guy who doesn't trust you to do your job.
    So, he says 'skip meetings, do whatever you want. We fire the people who don't do what I say'

    Sure, this rallies the troops and investors for a couple days. But, then, next week, while the President is distracted with other things, or a Space X rocket blows up.... then what?
    As the urgency of the memo fades from view... the next memo he sends will be more desperate and less heard by his staff....

    I just don't like that style of management. I think it hides deeper faults - all from a super smart guy who is operating how HE knows best. But, I'm not sure he's in touch how the rest of people below his intelligence actually work...
     
  17. ApparentHorizon
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    ApparentHorizon Gold Contributor Speedway Pass

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    Running a company full of departments and employees is like managing a fleet of ships. Where you're constantly swinging across to make sure each one is going in the same direction.

    You assign captains, but they get sick. They get drunk.

    In keeping the boats from crashing into each other, you need eyes on every captain.

    You suddenly notice the vessel to your right creeping closer.

    You don't know why. Your captain doesn't know why.

    So you investigate, only to find one of the oars below deck is broken.

    You send a small rowboat to the island on the horizon to get more timber. While you wait, you calibrate the adjacent oars to the same speed. Do you remove 1 oar, or do you slow down their row speed? And how much will that drag down the entire fleet?

    At the same time, one of your other captains jumps overboard because he lost his mind. The ship was just too big to handle. Now you either evaluate someone to promote or find a new hire.

    Plus 21 additional emergencies, and 75 hidden problems yet to be uncovered....

    Oh yeah. Don't forget the small leaks from the wear and tear over the rough seas. They're not enough to sink the ship, but you need a bucket every now and then to pail out the water.

    And all of this is with an iron grip on the management.

    It may be painful for some of the employees, but the alternative is going the route of 90% of companies that fail.

    Those are jobs and lives at stake.
     
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  18. ZF Lee
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    ZF Lee Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Could be true.

    I don't expect the masters to let out everything they know. Probably the material has to be 'dumbed down' for conventional users, as yes, some skills like sports have to be trained via years of toil, no skipping that.

    That being said, I'd like to know if they had unique life experiences that drove the need for them to adopt certain techniques or frameworks. The 'why' as opposed to merely 'what'.
     
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  19. biophase
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    biophase Legendary Contributor I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    What is a SMB?
     
  20. ApparentHorizon
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    ApparentHorizon Gold Contributor Speedway Pass

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    small-med sized biz
     
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  21. Tommo
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    Tommo Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    That's why Mr. Musk said to not use acronyms lol.
     
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    What's with the over-the-top high regard for Elon Musk, and Tesla and SpaceX in general?

    If it wasn't for the massive media hype and US gov't (read: tax payer) funding, Tesla and SpaceX wouldn't exist today.

    Tesla consistently overpromises and under-delivers. I like the concept, the cars are cool, but you can't make promise after promise, only to fail to deliver time and time again. Meanwhile, Tesla is squandering tens (hundreds? who knows?) of millions of tax dollars on a never-ending chain of subcontractors, who are, for lack of a better term, milking the corporate government tax payer tit. This has been going on for YEARS, but only now it is coming to light within the company?

    SpaceX has lost ~9% of payloads launched, yet it's persistently hyped in the media and overpromised by Musk. ULA launches are more expensive than SpaceX's, however, ULA has not lost a payload to date since its inception.

    I'm not buying into the hype and godlike aura given to Elon Musk and his companies, and I don't care for the way he markets his products.
     
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  23. ApparentHorizon
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    ApparentHorizon Gold Contributor Speedway Pass

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    Don't hate the player hate the game

    GOLD! - Guru Cults Exposed: The Tactics "Experts" Use To Pull You In & Suck You Dry
     
  24. csalvato
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    csalvato Platinum Contributor Read Millionaire Fastlane Speedway Pass Summit Attendee

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    What are you talking about. Elon hasn’t squandered any tax payer dollars. The only loans he has ever taken from the govt was paid back with interest. What’s your source?
     
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  25. ApparentHorizon
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