CHAPTER 3
TYPING VS. WALKING
As Elon and Kimbal settled into Silicon Valley, ready to tackle the Internet, Elon started thinking back to his internship. There was this super awkward moment that stood out. A guy showed up at the office. He was a Yellow Pages salesman.
So, Elon watched the Yellow Pages sales rep fumble his way through a pitch on all the different options for listings, ads, and rates. And then a sort of verbal train wreck unfolded when the guy had to get through his spiel about a brand-new option, an online listing.
Sorcery! This was the 1990s. The web was in its infancy. Even national news outlets struggled to explain it to their viewers. And this salesman clearly didn’t understand it either. But Elon got it.
Sure, there may not have been a lot of web pages yet. And connecting to the web was super clunky, usually over a hard-wired phone line. But as Elon and Kimbal were talking about this Yellow Pages incident, they suddenly had an idea.
What if you could offer businesses online listings that were connected directly to a map? That way, customers could find a business, see where the business was located, and get turn-by-turn directions. Remember, this was long before Google Maps, so it was a very forward-thinking concept.
Ready to make their mark on the Internet, Elon and Kimbal started with the Yellow Pages—by replacing them online.
They needed a name for their new company and came up with Global Link Information Network. It wasn’t exactly catchy. And Internet companies of the 1990s needed a catchy name. After all, this was cutting-edge technology, not a two-hundred-year-old company. So as soon as they had money, they hired a marketing firm to help brainstorm a better name and settled on Zip2.
Elon would work on coding the project while Kimbal took on sales and marketing. They had the expertise to pitch the idea and the ability to explain it to people who were just beginning to understand what the Internet was and how it could help get more customers.
So in 1995, Zip2 became an official, real live start-up. Elon and Kimbal approached the business with limitless devotion, often working through the night and spending as little money as possible. Their office was a total nightmare. It was a small cube. No elevator. The toilets were not reliable. And they had one computer. One. During the day it was Zip2’s dedicated web server. At night, Elon used it to program.
It was a bit of a challenge, especially since the Musk boys also lived in this tiny office. Luckily it was walking distance to a YMCA where they could shower every day. It also meant they didn’t have to rely on their car—which could not be relied on!
“When we first started out, I think our ambitions were really quite low. It was really to make enough money to pay the rent,”47 Elon said.
“For me the worst part,” Kimbal said, “was eating at Jack in the Box three times a day.”48 They tried to rotate which items they ordered from the menu to achieve some variety. According to Kimbal, during a 3 a.m. Jack in the Box run, exhausted, he was downing a milkshake. That’s when he spotted something funky in it. But he wasn’t about to give up the milkshake or go out and get another. He reached into the cup, pulled out the unidentified ickiness and tossed it over his shoulder, and—wait for it—kept drinking the shake.
Still, their start-up costs would quickly outpace the early money they’d managed to get from angel investors.
“More than half of the venture capitalists we met with did not know what the Internet was and had not used it,”50 he said. “They would literally ask, ‘Isn’t that something the government and universities use?’”
Elon’s response? “Uh, for now.”
At one point, an executive picked up a hefty copy of the Yellow Pages and hurled it at Elon and Kimbal, shouting, “Do you ever really think the Internet is going to replace this?” Kimbal remembered looking at him and thinking, “This guy is screwed.”51
The Musk brothers really understood and saw something few people did. And they would not give up.
Knocking on door after door to drum up business, Zip2’s newly expanded sales team heard “no” after “no” after “no.” No one was signing up. But they kept hitting the streets, perfecting their presentation and pitch, and eventually some car dealerships bought Zip2’s service.
What was the special something that finally made the difference? It was Elon. Business owners weren’t just buying into any online business directory, they were buying into Elon, into his superhuman drive to will the business into success.
It didn’t hurt, either, that people were starting to figure out the possibilities of the Internet.
Remember that web browser company Netscape we talked about earlier? Well, Netscape went public in August 1995 and its share price had skyrocketed by the end of the year.
“And then whether or not somebody knew what the Internet was, they knew that you could make money on the Internet somehow, even if it’s on the greater fool theory,”52 Elon explained.
The Musk brothers went looking for another round of funding in early 1996. A week later, Zip2 attracted a $3 million investment from the venture capital firm Mohr, Davidow. Three million dollars.
“We thought they were crazy. Like why would they do that?” Elon said, laughing with Kimbal years later. “They obviously did not realize we were sleeping at the office!”53
Zip2.com on January 3, 1997 (via Internet Archive’s Wayback Machine).
But that money came with strings attached. Strings that would dictate who ran the company, and it wasn’t going to be Elon. Instead of being CEO, Elon was named the chief technology officer.
Justine and Maye soon paid a visit to the new offices, and as Maye listened to employees talk about the business, she offered up a great idea of her own: Why not offer reverse directions as well! So they did. And it was a hit with users. (It was good they visited when they did. Eventually, the company would grow so fast that they crammed too many desks into the office—inadvertently blocking the women’s restroom.)
As the company grew, the team came up with a game-changing plan. They would target newspaper companies.
Newspapers were at the top of the media food chain at that time. There were only a couple of twenty-four-hour news channels. Most people either subscribed to a newspaper that was delivered to their home every morning or they picked one up on the way to work. If you wanted in-depth reporting, this is where you turned. And many people read several newspapers a day.
But the papers weren’t just about news. In the back, they had listings, called classified ads, where you could list your car for sale, post a job opening, offer piano lessons, etc. These ads were a key reason to buy the paper, and the money generated from them was a major source of revenue for newspapers a day.
That entire business model was about to be turned on its head.
The Internet had huge potential for telling people what was going on in the world. You didn’t have to print a paper. You did not have to physically edit news video together and air it on television. The Internet offered immediacy in a way the world had never seen.
And while people were still trying to figure out how to use the Internet back then, it was clear: This new technology posed a major threat to newspapers. If you wanted to know what was happening at 2:00 p. m. around the world, why would you wait until tomorrow morning to find out?
If newspapers didn’t figure out how to take advantage of the Internet, they were going to be history. The first thing newspapers needed to fix was their own websites. They needed to shift from thinking of them as little more than virtual business cards and more of a virtual newspaper, including the listings.
Elon recognized this. He and Kimbal knew their technology could help.
Zip2 sold their software directly to newspaper companies—which would allow newspapers around the country to create their own listings for their advertisers. This would make the online versions of newspapers relevant. And best of all, newspapers didn’t have to reinvent the wheel. Zip2 did it for them.
It was a smashing success. Zip2 added customers like the New York Times and large media companies like Hearst and Knight Ridder, which owned newspapers across the country.
In 1999, Zip2 was sold to Compaq Computer for $307 million. Elon bagged a whopping $22 million from the deal, and Kimbal got a $15 million payday.
The four years leading up to that sale had been grueling. The hours, the effort, the problem-solving—all of it grueling.
“The way I like to think about it is, I was like a dog in a cage getting beaten for four years, and then they let me out, and here are all the T-bones you can eat. So it was a very weird experience,” Kimbal explained, saying that he had thought he was building a company for life. “And then they give you lots and lots of money in easy-to-carry bags.”54 Kimbal was ready to make his exit from Silicon Valley.
Packing up his belongings, Kimbal headed for the East Coast. “What else do you do when you have enough financial resources to do whatever you want?” he said. “I always wanted to learn to cook, so I enrolled in a cooking school, one of the top schools in the country, in New York City.”55
While happy the company ultimately did so well, Elon, too, had endured a grueling experience. For one, looking back on the financing deal that made him chief technology officer instead of CEO, Elon decided he would not let that happen again. He simply had to be in charge going forward. He was not content to simply oversee and drive the technology. He wanted to run the show.
And now he had the confidence to make such demands. After all, he and his brother had started Zip2 from nothing, and now they were multimillionaires. Not only that, the Musk brothers had shaped the way people used the Internet.
A Silver McLaren F1. (Photo by Joe Cheng.)
And now with his bank account in pretty good shape, twenty-seven-year-old Elon needed to answer a big question: What next?
NO ISLAND PARADISE
I know what I’ll do with my millions. I’ll start a company with a fantastic idea: online banking. Like banking, only over the Internet.
This idea was completely out of left field. Banking was something you did in person at a physical building. It was part of your daily or weekly errands. You pulled up to the bank and walked in with your paper check in hand. Then you smiled at the people who worked there, who you saw multiple times a week. When it was your turn to talk to one of them, they called you up to the counter by name. And then they began moving your paper-based money around. That’s how things worked. In person. Based on trust. Based on reputation. While ATMs were in use, allowing you easy access to your money, this technology was not yet universally accepted. And you still had to physically walk or drive to an ATM. If there was a problem, you headed inside the bank to get it quickly resolved by a real, live human.
This was money after all, nothing to take crazy risks with.
But something else was also happening in 1999: That new thing called the Internet was starting to really become a Thing. A year earlier Larry Page and Sergey Brin launched Google. Amazon had been selling books online for four years. And other e-commerce shops were popping up everywhere.
Even so, paying for things that you bought online was difficult and a little spooky—a far cry from the brick and mortar experience. First, your options were limited. You could write a check and put it in the mail. You could give someone your credit card number over the phone—which felt risky. You just hoped you were talking to someone who wasn’t going to steal it.
Or the biggie: You could type your credit card number into your computer and check out online. No people involved at all. That was a leap many were not ready to take.
Even the banks themselves were not sure how to solve this problem for customers.
This was no surprise to Elon.
Remember his college internship where he learned not to use the executive coffeepot? That was where he picked up his opinion that the banking industry was not on the cutting edge of new technology or new thinking. What had been incredibly frustrating as an intern suddenly seemed like an enormous opportunity.
And now, with his bank account full of cash, he was ready to bet $12 million, more than half of his Zip2 payday, on the idea that the Internet could revolutionize banking.
In 1999, Elon decided to start a new company, a fully online self-service bank. People could open checking and savings accounts, make deposits and withdrawals, and move money around—without leaving home or the office. As long as you had a computer with an Internet connection, you could log on to your bank account.
Elon named his new company X.com. People thought he was nuts. If folks were not comfortable making even the smallest of purchases over the Internet, how on earth were they going to hand over their entire bank accounts? To the doubters, there was simply no way anyone was going to bank online. Not to mention that Elon’s banking experience was as an intern. But Elon did not let the complexity of the banking industry scare him off. He believed in his ability to make this company a success and revolutionize the entire industry.
Elon began tackling the banking learning curve by reading as much as he could. He attracted a top-notch engineer and two finance guys as cofounders and hired an experienced team to get the company off the ground. Before the site went live, though, just five months after he started the company, personality clashes and philosophical differences caused his cofounders to walk out the door.
Scrambling, Elon rebuilt the company, hired new engineers, and poured himself into the task at hand. Finally, on November 25, 1999—the night before Thanksgiving—the site went live. X.com became one of the first online banks on the planet. For Elon, heading home to eat turkey and spend time with his family was not an option. No, a meal with all the trimmings would have to wait. Elon spent the next forty- eight hours at the office. He had to make sure that everything ran smoothly and that any problems were quickly solved. Silver lining? Elon’s around-the-clock presence allowed his engineers a few hours at home with their families.
X.com on March 1, 2000 (via Internet Archive’s Wayback Machine).
As for that gamble about whether people would actually hand over their money to an online bank? Well, as it turns out, Elon was right. People could, would, and still do bank online. The company underwent explosive growth and shaping, adding a modern twist on an ancient custom: electronic person-to-person payment. Before then, when someone wrote you a check, and you deposited it into the bank, it took days to process and show up in your account. This was different. This was instant.
“After the first month or so of the website being active,” Elon explained to Sal Khan during a talk at Khan Academy, “we had a hundred thousand customers.”57
While Elon had been busy with his companies, Justine had focused on writing novels that would soon be snapped up by publishers. She and Elon had managed their long-distance relationship, and now she joined him in Silicon Valley. They were sharing a home, building a future together.
And in January 2000, Elon and Justine got married. While others saw Elon as brilliant, hard-charging, and relentless—Justine had additional insight into who he was.
“I don’t think people understand how tough he had it growing up,” she explained to journalist Tom Junod. “I was a really lonely kid and he was a really lonely kid and that’s one of the things that attracted me to him. I thought he had this understanding of loneliness—how to create yourself in that.”59
Back at work, the intensity stepped up to a whole new level. Two other Silicon Valley entrepreneurs, Peter Thiel and Max Levchin, had been working on a similar concept at a different company called Confinity. The two companies became fierce competitors. But that spring, in March 2000, they agreed to join forces, and the companies merged.
Elon remained the largest shareholder of the now expanded X.com and also became the CEO. Even though the company soon had more than one million customers, the office culture was in deep trouble. The merger may have produced one company. But in terms of how the employees got along, it was like trying to make two rival high schools put aside their differences and become one big happy family. It didn’t go well. They disagreed on just about everything—including the best software to run the business. It was so bad that Confinity cofounder Peter Thiel walked away from the company altogether.
Elon may have been running a company that had huge internal issues, but he also had a new bride whom he had yet to take on a honeymoon. Nine months had passed since they said, “I do.” So in September, the newlyweds boarded a plane to Sydney, Australia.
And while the plane was in the air for the long-haul flight, a group of Elon’s employees made their move. They pushed him out as CEO and brought back Peter Thiel to run the company. The honeymoon ended as soon as Justine and Elon landed and learned what happened. But Elon couldn’t change it.
Peter gave the company a new name: PayPal. Elon remained an adviser to PayPal as a board member and continued to invest his money in the company.
Peter Thiel and Elon Musk at the X.com corporate headquarters on Oct. 20, 2000. (Photo by AP Photo/Paul Sakuma.)
In July 2002, eBay bought PayPal for $1.5 billion. Elon pocketed $180 million after taxes.
People were asking Elon what he was going to do next.
Remote island, palm trees? No.
String of islands and mega yacht to trot between them? No.
Spend his money on his every whim? No.
Years later he explained his choice like this. “The idea of lying on a beach as my main thing sounds like the worst. That sounds horrible to me. I would go bonkers,” he said. “I’d be super-duper bored.”60 He didn’t need to retreat into early retirement. Nor did he need a job. He needed to make a difference to humanity. Again.
Kimbal Musk (second from left) and his wife, Christiana Musk (third from left), at the World Economic Forum 2018. (Photo by Foundations World Economic Forum/Boris Baldinger.)
NAME: Kimbal Musk, Elon’s brother
DATE OF BIRTH: September 20, 1972
PLACE: Pretoria, South Africa
After the sale of Zip2, Kimbal moved to New York to pursue his passion: food. He enrolled in the French Culinary Institute, and shortly after graduating, Kimbal witnessed the horror of the 9/11 attacks.
He lived near the World Trade Center, and quickly began cooking for the firefighters, keeping them fed as they searched the rubble for survivors and worked to extinguish the inferno. “These firefighters would come from the most traumatic places you can imagine and they would sit down and eat and come back to the real world,”63 he said. Kimbal showed up day after day for six weeks. It was a pivotal experience because he saw firsthand the critical connection between community and food—a link he views as vital. Creating that connection in other places became his mission.
The common thread in his approach is locally grown food, prepared and shared with a strong sense of community.
Kimbal’s efforts to spark a food revolution also mean bringing farm-to-table concepts directly into schools, providing schoolyard gardens to teach science and to feed the students. He has started a chain of restaurants that create connections to the community through locally sourced foods and regular support of schools, as opposed to impersonal eateries that serve food that’s trucked in. His idea is that garden, restaurant, farmer, and customer are all connected.
Today, Kimbal lives in Colorado and is a father of three. He also sits on the board of Tesla and SpaceX.
Kimbal’s advice for entrepreneurs centers on something a friend of his and Elon’s said: Starting a business is like chewing glass and staring into the abyss. So, it’s wise to choose something you really enjoy, Kimbal says. “It’s a very important lesson. Do what you are passionate about because no matter what you do, if it’s making a difference, it’s super hard to do it. So you had better be passionate about it.”64