I keep getting asked this question: how do you do more innovation? I think the number one thing is people should just try. An important thing in innovation or creating new things is to try really hard to just do that, which may sound incredibly obvious, but that's what people most often don't do. Literally, just try like did you try yesterday? Did you try today? I think people self-limit more than they realize.
I think what a lot of people don't appreciate is that technology does not automatically improve. You know, we sort-of take it for granted, like it's as though things automatically improve. They do not automatically improve! They only improve with lots of effort and resources. Egyptian civilization got to the point where it could create things like the great pyramid of Cheops but then lost that ability and never got it back there. Roman civilization went through a deep dark period, and there are many examples in history where civilizations have reached a certain technology level and then have fallen well below that and then recovered only millennia later.
The United States is sort of like that comment about democracy, it’s a bad system but it's the least bad. The United States is the least bad at encouraging innovation. Silicon Valley actually I'd say is particular good at encouraging innovation. Silicon Valley is just orders of magnitude better than any place in the world for creating new companies and fostering innovation, it’s quite remarkable. I don't think we necessarily need to worry about some other country out there out-innovating us. I don't think people realize that almost all innovation in the world comes from America, a ridiculous percentage. But that doesn't mean it couldn't be better. It's not a given that things improve. It only improves if a lot of really strong engineering talent is applied to the problem that it improves. There has to be a forcing function. People have to do it.
It is generally true that innovation comes from questioning the way things have been done before. Cross-pollination of industries is helpful. It takes a lot of mental exertion to innovate and I think it is helpful to learn about different industries and try to cross-pollinate, because very often people get silo-ed in a particular industry. If in the education system you're taught not to do that, that will inhibit entrepreneurship. I would encourage someone to do the 101 of almost everything that they find intrinsically interesting, and to think how they might combine things from one discipline to another. I think this is a great way to come up with new ideas. It's been quite difficult to run SpaceX and Tesla but since I got both on my mind there has been good ideas going back and forth. For example the Model S is the only all aluminum body and chassis car in North America. In the aerospace industry that's the default.
You can definitely start a company at any age and be successful, it's really just a question of do you have a good idea, are you working really hard, are you able to attract a great team, and motivate the team that's sort of really what matters.
I think that if you can identify some need in society or some want, if you can see that there something that you really want or your friends really want, and you can sort of find a group of people together to solve that want or need that's really it. The best time to do it is when you're in college or just finished with college, because your obligations are low when you don't have a family to support.
It's not really the idea, the thing of it’s 1% inspiration and 99% perspiration I think is generally true. A lot of times companies start out with an idea that's actually wrong, but they adapt quickly enough to get it to something that is right.
If you're a newcomer product it's really not enough to just be as good as the incumbent product, because people are used to what they're used to - people are set in their ways. In order to get people to change you have to do something that's meaningfully better. Otherwise the gradient of change, you know the change with respect to time, that change is going to happen slowly. If you want it to happen fast it's got to be obviously better. That's why we've tried very hard with the Model S to create a car that's obviously better.
When you consider the system as a whole what matters is: whatever the end thing is built, that people actually use, the cost, the reliability, and the utility have to be as good as possible. The fundamental physics and economics should drive the true solution. This is where I think it is helpful to use the analytical approach in physics– that’s the best framework for understanding things that are counterintuitive. And always taking the position that you are at some degree wrong and your goal is to be less wrong over time. I think a first principles approach is a good way to understand what new things are possible. Try to boil things down to first principles, it’s really a powerful, powerful method. Examining whether you have the correct axioms, are they the most applicable axioms, does the logic necessarily connect, and what are the range of probable outcomes? Outcomes are usually not deterministic, they are a range, so you want to figure out what the probabilities are, and make sure ideally that you're the house. It's fine to gamble as long as you're the house.
One of the biggest mistakes people generally make, and I’m guilty of it too, is wishful thinking. You know like you want something to be true even if it isn’t true; and so you ignore the real truth because of what you want to be true. This is a very difficult trap to avoid and like I said that I find myself in having problems with.It doesn't mean you'll be successful, but it means that you can at least determine if success is one of the possibilities.
I think it is important to be highly adaptive, so you're seeing what happens and adjusting accordingly. And I think it is very important to actively seek out and listen very carefully to negative feedback. This is something people typically tend to avoid because it's painful. But I think this is a very common mistake - to not actively seek out and listen to negative feedback. Solicit critical feedback particularly from friends, particular friends, if somebody loves you they want the best for you; they don’t want to tell you the bad thing. The reason they're reluctant is because most people are hurt when they get negative feedback. It's not an unreasonable expectation. So, you need to actually coax people to give you negative feedback. Encourage negative feedback, and listen to it carefully, and don't react in a bad way when you receive it. That's really important, in fact, when friends get a product I say look, don't tell me what you like, tell me what you don't like, because otherwise your friend is not going to tell you what he doesn't like. He's going to say 'I love this, and that' and leave out the 'this is the stuff I don't like' list because he wants to be your friend and, you know, doesn't want to offend you. You really need to sort of coax negative feedback, and you know if someone is your friend, or at least not your enemy, and they're giving you negative feedback, then - they may be wrong, but it's coming from a good place, so you have to ask them to say it: I really do want to know, and then they’ll tell you. And sometimes even your enemies give you good negative feedback. So I think that's important. You should just be like, positive feedback is like water off a duck's back. That's like, really underweight that and overweight negative feedback.
I think one thing that's important is to try not to serialize dependencies, so if you can put as many elements in parallel as possible. A lot of things have a gestation period and there's really nothing you can do to accelerate; I mean it's very hard to accelerate that gestation period. So if you can have all those things gestating in parallel then that is one way to substantially accelerate your timeline. I think people tend to serialize things too much.
Then, I’d say focus on signal over noise. A lot of companies get confused. They spend a lot of money on things that don’t actually make the product better. For example, at Tesla, we’ve never spent any money on advertising. We’ve put all the money into R&D and manufacturing and design to try and make the car as good as possible, and I think that’s the way to go. For any given company, keep thinking about, “Are these efforts that people are expending, are they resulting in a better product or service?" and if they’re not, stop those efforts.
I think it's worth noting that when somebody has a breakthrough innovation it's rarely one little thing, very rarely is it one little thing. Usually it is a whole bunch of things that collectively amount to a huge innovation.
You should always use your own products to see how you can make it better. I think it's important that you get all the details of any product or service right, it's sort of like there's a huge difference between something that's nearly good or something that's truly great and it's that last 5% that makes a difference. You want people to fall in love with the product you want to make them as happy as possible, but if there's a few things wrong with it, it kills the magic.
We really try to get every detail as perfect as possible and most people won't even notice all the things but we know some people will. Actually most people will, even if they don't know it consciously they will feel it subconsciously. They won't know exactly why they love it if you asked them, they can't say exactly why but it's because the subconscious mind processes all those details and gives them a good feeling.
It's hard to convey a complicated thing to people, the innovator or the innovators PR department will say such and such is the reason why it's better. Innovation is a collection of complex things that are usually difficult to convey, so there is some soundbite that is given. Why is Southwest Airlines one of the most popular airlines in the business? it's not because they only use 737s, if it was that easy everyone could do it. My favorite sort of commercial airliner actually is the 747, I think it's just an awesome design. It's the fastest of the airliners actually. They are quite aerodynamically efficient and I like the look of it honestly, so that's sort of the Hall of Famer right there. It's actually incredible that the first iteration of it was designed in the 60s. I think since then we have not exceeded the 747, which is nutty. The 787 is kind of an improved version of the 777 but I think it's a bit disappointing because it's main attribute is being 10% more efficient per passenger mile then the 777. And eight of those points come from the engine, that seems like a lot of money to spend for being 2% more efficient on the airframe side. Whenever you have a large Industry that is a monopoly or a duopoly the forcing function for innovation is weak, because innovation tends to come from new entrance to an industry. I think it's fairly easy to understand, because if you are a senior executive in that company or the CEO let's say, if you do something incremental it's very hard to be fired. If you do something bold and it doesn't work out you are very likely to be fired, so they do the incremental things. I think for the commercial airliner business you essentially have a duopoly between Airbus and Boeing and these big airplane programs are really long term and they're quite expensive. If you are a senior manager in one of those companies it's a safer bet to go for a little incremental improvement, then trying to aim for a radical improvement. Because generally if you aim for a radical improvement and you are wrong you will get fired. Disruptive technology, where you really have a big technology discontinuity, tends to come from new companies. I'm not actually a fan of disruption for its own sake. I think that if there is a need for something to be disrupted, and it's important to the future of the world, than sure we should disrupt it. I'm not a fan of disruption I'm just a fan of things being better.
Any new technology is expensive when it starts out, and you can point to pretty much anything, because the first thing that you are trying to do is make it work. If you're just trying to make it work you don't have an opportunity to optimize the cost. And when you make it work, then you optimize and you optimize and optimize. Look at the early days of computers, or cell phones, or even the early days of gasoline cars.
Any new technology needs at least three iterations to reach the mass market. Certainly the cell phones had many more than that. I'm sure people remember the Wall Street 1 where he's walking down the beach with a giant brick of a cell phone. The thing was super expensive, and it lasted for like 30 minutes, and the audio quality was terrible. Now you can have a supercomputer in your pocket for a 100 bucks. So cell phones when they first came out, very expensive. Personal computers, very expensive. Even gasoline engine cars in the beginning there were very expensive, and could only be afforded by a few people. They used to toys for rich people until they were made affordable in mass production.
The other factor is economies of scale in order to make something inexpensive, you have to make a lot of it. But to put together a factory deck and make hundreds of thousands of cars cost $1 billion or more. When there are huge capital barriers to entry then it is very difficult for new entrance. It is like being in a forest of giant redwoods.
With electric vehicles it's similar, you are trying to compete with gasoline cars that have had 150 years and trillions of dollars spent on them. With new technologies there does seem to be sort of this ebb and flow of excitement about it. At first it'll seem it's not working and then it will seem like it is, so it's sort of like an upwards sloping sine wave. The nature of new technology adoption tends to follow an S-curve. So long as there are companies that are driving the technology forward that sine wave will continue to be upward sloping. In general at Tesla we try to pioneer new technology. We just want to make products that people love, and then make enough money from that to be able to develop new products, that's it really.
What really gets me excited is when people experience delight with the product. I don't think there's all that many things where you really experience delight, and if you can make the product good enough that it so far exceeds people's expectations that it just makes them happy, I think that's amazing. There's like so few products, like, how many products can you buy that you really love? it’s so rare. I think if you do something like that, people will buy them, they will pay a premium for something that they love. The whole purpose of any company existing is to make compelling products and services. Some people lose sight of why companies should even exist. If you don't have a compelling product at a compelling price you don't have a good company.
The aesthetics are extremely important. I think it's important to combine aesthetic design with functionality. You want to make something beautiful, you want it to trigger whatever fundamental aesthetic algorithms in your brain. You have I think some intrinsic elements that represent beauty, and that trigger the emotion of appreciation of beauty in your mind. I think that these are actually relatively consistent among people. Not completely, not everyone likes the same thing, but there is a lot of commonality.
And really pay attention to little details, the nuances of design and shape, form and function. The way it looks in different lights. You can train yourself to the little details, I believe almost anyone can. But this is a very much double edged sword because you see all the little details, and then the little things drive you crazy. Most people don't consciously see small details, but they do subconsciously see them. Your mind sort of takes on the Gestalt of the overall impression, and you know if something is appealing or not even if you're not able to point out why. It’s a summation of many of the small details. You can train yourself I think, you can make yourself pay attention to why. You essentially bring the subconscious awareness into conscious awareness. Just pay really close attention. Look closely and carefully.
I have to turn it off otherwise I can't go through life because there's always something wrong somewhere all the time. You really have to turn it off otherwise you just get this mental list of things that are wrong and it drives you crazy.
I think really an obsessive nature with respect to the quality of the product is very important and so being an obsessive compulsive is a good thing in this context. Really liking what you do, whatever area that you get into, even if you're the best of the best, there's always a chance of failure, so I think it's important that you really like whatever you're doing. If you don't like it, life is too short. I'd say also, if you like what you're doing you think about it even when you're not working. It's something that your mind is drawn to and if you don't like it, you just really can't make it work I think.
Anything which is significantly innovative is going to come with the significant risk of failure. I don't really like risk for risk's sake or anything, but if you want to try to come up with an innovative breakthrough, that's going to be how it is. You've got to take big chances in order for the potential for a big positive outcome. If the outcome is exciting enough, then taking a big risk is worth while. It's really how I approach it. But then once executing down a path I actually do my absolute best to reduce risk, or to improve the probability of success, because when you're trying to do something that is very risky, you have to spend a lot of effort trying to reduce that risk as you walk down that path.
I think having a purpose is certainly going to attract the very best talent in the world, because if it's something that is intrinsically enjoyable, and it's something that's genuinely going to change the world I think that is a pretty powerful motivator.
But I don't think everything needs to change the world. Honestly,I don't think everyone needs to try to solve some big world changing problem, and there’s lots of useful things that people do. I think it should be about usefulness optimization, like is what I am doing as useful as it could be. If you've done something that is useful to your fellow human being that is great, and people should feel proud of doing that. Even if something is making people's lives slightly better for a large number of people that’s quite good. You could say like is some app making people's lives better? If you make something that has high value to people, whatever this thing is that you're trying to create, what would be the utility delta compared to the current state of the art... and frankly, even if it's just a little game or some improvement in photo sharing or something, if it has a small amount of good for a large number of people, I think that's fine. S1o it's actually really about just trying to be useful and matter. If you are doing something useful, that's great. Stuff doesn't need to change the world to be good.