Entrepreneur of the Year: Elon Musk

I first spoke with Musk in the fall of 2006, back when the Tesla Roadster was still just a pretty prototype. "I'm a Silicon Valley guy," Musk said at the time. "I just think people from Silicon Valley can do anything." Musk's comment was hardly surprising: Tesla Motors, and, indeed, everything about Musk, has been consistently packaged, presented, and explained as Silicon Valley come calling on old-line industries. "This is how a Silicon Valley start-up does car design," gushed a Wired magazine writer taken out for a test drive. (Having ridden in the car, I'll admit it's hard not to gush.)

But Musk's companies don't look much like the Internet companies Silicon Valley churns out these days. Tesla Motors, like SpaceX, is an ambitious gamble aimed at an established market. Musk spurned early-stage investors and bankrolled the company himself; he has put in $37 million to date. Although Tesla has since accepted more than $68 million from VCs and private equity firms, Musk remains the majority shareholder. This go-it-alone approach represents a challenge to Silicon Valley's assumptions about start-ups, according to John Seely Brown, the former chief scientist at Xerox and a visiting scholar at the University of Southern California. "When I first heard about the space stuff, I said, 'By God, this guy is crazy,'" says Brown. "But that's the point."

When I suggest to Musk that he is being reckless with his fortune, he responds coolly. "It's OK to have your eggs in one basket as long as you control what happens to that basket," he says. "The problem with the Silicon Valley financing model is that you lose control after the first investment round." Control for Musk means making sure that his companies don't turn into niche plays. It also means making day-to-day decisions. At Tesla, Musk has issued directives on seat cushions, the shape of the headlights, even the style of trunk on the company's forthcoming midrange sedan--an odd request given that his engineers have yet to figure out how exactly the thing is going to be powered. The most controversial of Musk's edicts involved the transmission. Martin Eberhard, Tesla's co-founder and then-CEO, argued that it would be quicker and easier to build the car with a single-speed transmission. Musk ordered a two-speed model so that the Roadster would be able reach a top speed of well over 100 miles per hour.

Eberhard found these requests difficult to understand. "I've been successful in my career at constraining problems, at keeping them as manageable as possible," says Eberhard, who sold his previous company, e-book manufacturer NuvoMedia, to Gemstar, in 2000, for $187 million. "Elon has resisted that in a push to make the car better--but at the risk of making it more complex." Musk, who several months ago demoted Eberhard to president of technology and installed an interim CEO, argues that Tesla is a hit precisely because he hasn't sacrificed the car's performance to meet any arbitrary near-term goal. "The noteworthy thing about Tesla," Musk says, "is that it's the first electric car that is competitive with a gasoline car as a product." In other words, Musk's car is faster, cooler, and more fun to drive than a comparably priced gas guzzler. The result is that Tesla has collected deposits from 600 customers, which amounts to a $30 million interest-free loan. Of course, Tesla's customers might have judged the car cool enough with only a single-speed transmission or uncomfortable seats or lame headlights. But there's also a chance they would have balked and bought themselves Ferraris.

Tesla's business plan calls for developing a less expensive sedan, code-named White Star, over the next few years, as well as opening a network of dealerships and service centers. The company is also working to strike a deal with a major car manufacturer (which Musk declines to name) to become a supplier of chassis and drive trains for a mass-market electric vehicle. Meanwhile, Musk is struggling to find a CEO. "We need someone who can build Tesla into the next great car company," he says.

Musk acknowledges that the kind of person he is after--someone who has a start-up mindset but understands how to build hundreds of thousands of automobiles--may not exist, which could force him into the CEO role--something he says he has no interest in doing. When I ask Musk if he'd ever consider hiring a CEO to run SpaceX, he pauses for a few seconds to reflect on the question. "This may be presumptuous, but I have not met anyone who could do this," he says, before revising. "Well, wait, that's not true. Jeff Bezos could do this. Larry Page could do this. Bill Gates could do this. But there's just a really small list of people with the sufficient technical and business ability to do this job."

Musk has taken his jet to Silicon Valley for yet another Tesla CEO interview. So I'm keeping myself busy by climbing onto the roof of a two-story house in Santa Monica, California. I'm here to have a look at SolarCity, Musk's latest--and in some ways, his best--bet. The company is based in an unassuming office park in Foster City, in the heart of Silicon Valley. But if you really want to understand what Musk is up to, the best place to go is a rooftop, far removed from the world of software and stock options and talk of innovation. Two guys in green SolarCity T-shirts, Wade Meier and Johnny Davis, are using power wrenches to attach shiny black solar panels onto the flat roof. They work carefully: Each 5-foot-by-3-foot panel costs $950, and this house looks to be worth well over $2 million. The installation takes six days and costs $35,000, and it will save the homeowners about $250 a month on their electric bill.

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