Elon Musk: Tesla Shorts, and Why Big Companies Struggle to Innovate
In 2011, Tesla CEO Elon Musk came to Motley Fool HQ to talk about the car industry, the struggles that come with innovation, and why big companies have a hard time adapting.
This is a segment from that interview.
Musk: Generally when I told people who short their shares that they’re not shorting it because of anything they know about Tesla, they’re just shorting it because of historical precedent. Its like oh, there hasn’t been a successful car company in ages, so Tesla is not going to succeed. Well how about looking at the fundamentals, you know? The thing is that whenever there’s a big change in technology, whenever there’s a big technology just near to you that’s when opportunity arises in industry.
And if you look at, say, like the computer industry we had, IBM was extremely dominant in mainframes. And everyone thought, they’ll just be extremely dominant in PCs and everything. And they weren’t, they have a hard time when there’s a sharp change in technology, gradual changes they can deal with but sharp changes they tend to not do well with. And you can look at the internet and say, well, why wasn’t Microsoft, the leader in search? Why don’t they beat Google? Why didn’t Google beat Facebook? It’s just tough to deal with big technology change. And what we’re seeing in the automotive industry is the biggest technology change since the moving production line, and the entire Powertrain is changing.
Part of what Akio Toyoda is trying to do with his company is try to push it to be more entrepreneurial. He remembers the days of his grandfather when it was very entrepreneurial. Toyota made sewing machines in the 30s, and then they just decided one day they’re going to make cars. And people were like, they can possibly make a car that anyone would want to buy. Then they made a great car. But they were very entrepreneurial, and Akio Toyoda’s concerned that they’ve become too convinced in their own rightness. And that’s part of what led to some of the issues that he came in to fix. Akio Toyoda is a really great guy by the way, Toyota is really fortunate to have him at the helm there.
He wants to push his team to try new things, because when he went to his team and said, hey, what about electric vehicles? They said it couldn’t be done. And so it’s like, okay, so let’s see if this little company Tesla can do it. And we’re doing it now, like, oh, okay, I guess it can be done.
Bill Mann: Why don’t you think they could do it? They tried for a long time, they put millions of dollars into developing the technology. What’s different?
Elon Musk: I think they will be able to do it over time. But it’s just not very quick. The mindset of trying something new and radical was just not there. People have written books about this, like crossing the chasm and innovators dilemma and all that, about how it’s difficult to do radical innovation at a big company, because if you try to do radical innovation and you fail, you get a huge ding. And also-
Bill Mann: Especially if you have something to protect to start with.
Elon Musk: Yeah. Right, exactly. You’ve got to decide that you’re going to cannibalize your existing business, and take a big risk, and deal with all the issues that inevitably arise when you’re trying to push a new technology. And not get fired along the way. It’s pretty hard.
Subscribe to The Motley Fool’s YouTube Channel: