PoP: Elon Musk & His Rising Importance

A Dive into Elon Musk's Businesses & His Role in Shaping the Future

TOPIC: Elon Musk & His Rising Importance

This week we take a look at an increasingly relevant and unique topic - Elon Musk - and his rising importance, notably to National Security. Connecting the dots across his businesses and spheres of influence further highlights how the Pillars of Power framework can be utilized to better understand not just countries or places, but also people and things…

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TECHNOLOGY

Starting with Technology. Elon may very well be the ‘Einstein’ of our generation. His accomplishments are unequivocally transformational – from catching a rocket returning from Space to recently rescuing astronauts stranded in Space to enabling a quadriplegic to play chess with only his mind.

While this particular piece will not be focused specifically on his Work Ethic, Leadership Style and/or his Thinking Framework, it’s clear his impact has been far-reaching beyond just the businesses he’s led and/or created.

Looking at his businesses – all revolve around Technology at the core. And when you take a step back, you see all are pieces in a larger puzzle.

TESLA - a company he has essentially led since its founding - is a modern Manufacturing, Robotics, and Energy company. The base initial premise was (seemingly) that electric motors are more efficient and effective than internal combustion engines (ICE) – simply a better mouse trap, proved out by First Principles physics. With the main early bottleneck being Battery (aka Energy) Technology – from the cost to the storage capabilities. Who cares if it's “better” if it's too expensive and can’t drive me back/forth from work?

But he (implicitly or explicitly) recognized where Battery Technology was going – the Power of Technology scaling, notably Wright’s Law in this case. Fast forward to today and BYD (Tesla’s primary Chinese rival) just launched a Battery that can be charged in 5 minutes, has a range of over 250 miles (on that charge), and comes in a car cheaper than most ICE vehicles.

Because they are now effectively cheaper, faster, and more efficient, Electric Vehicles (EV) are overtaking ICE Vehicles at an accelerated rate (see graphs below). And as of now, no one can sustainably compete with Tesla (in the West) and BYD (in the East). Why?

Tesla and BYD are both First Principles, Process Oriented Manufacturing companies at their core. Leaders of both companies recognize that the player with the lowest cost structure typically is best positioned to win – a lot of overlap with Jeff Bezos and how he built Amazon (along with Costco and other similar case studies). This is (partially) why both companies are so focused on Robotics and Automation (Technology) – Labor that does not sleep and keeps getting cheaper with scale (deep dive for another day). Remember, as we laid out in our inaugural post, Technology is simply a means to an end - ‘any innovation that increases effectiveness and efficiency.’ In this case, Automation (using Robots to build cars) is how you drive down your cost to produce anything.

A brief intermission summary on EV vs. ICE from the lens of BYD and Tesla (deeper dive on Tesla vs. BYD to come):

1. Both companies recognized the underlying Technology shift – Electric Motors are inherently more efficient than ICE.

2. Both saw where Battery (Energy Storage) Technology could go – cheaper, longer, better, faster.

3. And both focused relentlessly on bringing down the cost to produce a marginal vehicle – enter Robotics and Automation.

And so now you have Tesla vehicles quickly coming down the cost curve (scale begets scale) and BYD selling EVs for $10-15K that are better than their ICE counterparts. Bye bye GM, Ford, etc.

But it does not stop there. In fact, it’s just getting started.

Now that we’ve hit escape velocity on the Hardware sales side (i.e., Tesla vehicles), the number of Tesla vehicles on the road has begun to explode – with over 7 million today and growing at an exponential rate. And each of those vehicles is constantly collecting data. And given every vehicle is connected to the Internet, that data is constantly being sent back to Tesla’s data centers – flowing into the pipeline as training data to improve the Software/Algorithm. The more high-quality data, the better the Algorithm, the faster the deployment of Full Self Driving (FSD) across the fleet of vehicles, the more money that flows in which enables the reduction in upfront vehicle cost (more affordable) and expands the addressable market (and number of cars on the road)... an end-to-end self-reinforcing flywheel – in fact, one of many interconnected flywheels (which Bezos made popular).

Flywheels are a powerful thing. The original and best of which are found in Nature – for example, the Water Cycle and the Oxygen Cycle. There is Simplicity, Beauty, and Power in mimicking Nature (Biomimicry) – founding principles at the foundation of AquaVis.

Back to Tesla. Now replace the word ‘Vehicle’ with the word ‘Robot.’ They are fundamentally the same thing. Whether it's a Robot with wheels or a bi-pedal Humanoid, they both are powered by electric motors, they both have similar underlying systems (Dojo chips, etc.), they both are connected to the Internet, they both are collecting real-world data, and they both are guided by continuously learning Algorithms. So now Tesla has over 7 million Robots on the road (and growing) collecting high quality real-world data that is being fed back into the Algorithm (see flywheel above). The more out in the wild, the more data, the better the Algorithm.

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And because Tesla is fundamentally a Manufacturing company, Tesla should be able to add (or swap) Production lines for Humanoid Robots – enter Optimus. With generalized capabilities (not just focused on Transportation like Vehicles) these Humanoid Robots can transform many industries (including Manufacturing) – driving the Automation of Labor flywheel. Which makes it pretty clear why Tesla would want these both for internal use (Labor and Scale flywheel) as well as external sale (Data and Money flywheel). And given the vertical integration – which does cut both ways¹ – the same scaling flywheel applies.

Looking at what is already happening, it's pretty incredible what these Humanoids are capable of (and China appears to be in the lead)...

And on the Vehicle Robot front, Robotaxis – fleets of vehicles that drive themselves (no human driver) and pick up paying passengers (like Uber) – are essentially here. The entire Transportation industry – and notably Vehicle Ownership – is likely to transform over the coming decade. Imagine the productivity boost if you no longer had to drive your vehicle — instead it drives you…

Tesla began with a mission of transforming Transportation and Energy – two of the biggest Industries in the World that have barely been touched by Technology for the last century (still primarily Internal Combustion Engine and Petroleum Energy from the early 1900s). But the vision (check out the young Elon) has expanded into a broader focus on transforming Labor. And Sustainability is a nice potential byproduct – mirroring Nature’s flywheel to better harness Natural Energy.

Fleets of Electrically-powered Autonomous Robots are coming… think the Military may be interested?

But without constant connectivity, these Robots are much less reliable. Which brings us to our next company…

SPACEX – founded by Elon Musk around the same time he took over Tesla – was created with the mission of transforming Space Technology and Travel. With a specific goal of essentially lowering the cost of Space Travel (Transportation subset?) by assessing the current structure and landscape – filled primarily with incumbents with little incentive to innovate – from First Principles… and maybe enabling Multiplanetary Life.

Similar to Tesla, SpaceX was built with an engineering-first mindset with the understanding that the lowest cost structure companies tend to have a significant advantage. And products designed and built from First Principles with Simplicity in mind tend to be best (e.g., iPhone on the consumer front) – exemplified by SpaceX’s Raptor engine evolution from complexity to simplicity over time.

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SpaceX has innovated across many spheres – from reusable rockets and components (transforming the cost structure) to engine design to human spaceflight and multiplanetary living. And as we noted in our Arctic piece, the control over Space – from Rockets to Satellites to Planets and more – is critical for National Security purposes. And to control Space, you must have a physical presence in the Arctic (see Arctic piece for details; Space piece to come).

Jumping back to the connectivity angle, which is almost a byproduct of the broader mission. Starlink – SpaceX’s Low Earth Orbit Satellite-based high-speed Internet service – was borne out of an innovative approach to Satellite and Constellation design and has a vision of enabling constant Connectivity anywhere.

As noted above, Robots (whether a Vehicle, Humanoid, or your Phone) are not all that useful if they are not connected – both to the Internet and each other. A lone, isolated ant in a colony is not particularly useful – it must be connected and plugged into the colony to best optimize the broader organism. Starlink is that communication network solution that interconnects everything – most notably Tesla Vehicles and Humanoid Robots – to enable a fully Autonomous coordinated system of ‘ants.’

Overall, SpaceX - similar to Tesla - has multiple purposes across a variety of timelines: from the High Speed Communication Network and Connectivity of Robots, to the Control of Space, to the Exploration of Minerals and Life on other Planets.

Moving on to human intelligence (don’t worry, the business descriptions get progressively shorter)...

X (formerly Twitter) – purchased by Elon in late 2022 – is a social media platform with the stated goal of promoting free speech. In this piece we won’t delve into how all of these social media platforms have been utilized by those in Power over the last decade+ (and notably in the last few years) to control the flow of ‘information,’ but suffice it to say that the control over the Media (historically Newspapers, Radio, TV, and now the Internet/Social Media today) is a major Power vector.

The focus here is that a platform with a constant feed of real-time data from humans all around the World is quite Powerful. Most notably if you have an AI Pipeline to plug that data into to train and continuously learn from…

Enter XAI – a company Elon founded in 2023 to build generalized intelligence. Elon had co-founded OpenAI in 2015 – with the vision of creating Artificial General Intelligence (AGI). But after deeming it ‘not open,’ among other things, Elon moved on to found xAI to fill that gap.

Grok – xAI’s AI chatbot/LLM (i.e., how you interface with its AI model) – is partially powered by the aforementioned decentralized data from humans all around the World (via the X platform) – natural human conversations on top of the likely typical sources (i.e., the Internet) for foundational models. Further if Tesla, SpaceX and/or other related company data ever flows here this has the potential to become the ‘ultimate’ algorithm. And notice the reoccurrence of interconnected Flywheels here and how each part fits into and strengthens a broader whole. High quality, proprietary direct (1P) data is becoming increasingly valuable in the World of AI – as it is the critical input for differentiated, high quality models. Similar to high quality food for your body, and thoughts for your mind, models need high quality data to be healthy and useful.

And what better training data for a human intelligence algorithm than humans – X is one source…

And NEURALINK – a human brain-computer interface company founded by Elon in 2016 – is another. Simplistically the company is focused on creating a high-speed interface implanted in the human brain to enable humans (notably quadriplegics, to start) to control machines with their thoughts. Large language models (i.e., OpenAI’s GPT-4 which powers ChatGPT) are one route to enabling and improving human-to-machine and machine-to-human communication (focus of xAI, mentioned above). And Neuralink is pioneering another – using a direct brain implant rather than written prompts.

As we work to improve our communication between Robots (for our purposes, used interchangeably with computers, machines, etc.) and Humans, Neuralink provides that physical ‘link’ – acting as an effective communication layer between the two parties. This process both helps us better understand how the human brain works, as well as how to better translate human thoughts and actions into machine language. And it’s pretty incredible what they’ve already accomplished – check out this video of a man playing chess using his mind. You do not need to learn how to code, you can literally tell a machine what to do with your mind alone...

If you wanted to program a Humanoid Robot (e.g., Tesla’s Optimus) to complete any array of generalized tasks (i.e., Human Labor), you’d ideally have a foundational layer of knowledge for how the World works (e.g., xAI’s Grok) combined with a direct human-machine communication layer and training data (e.g., Neuralink’s interface) and constant connectivity (e.g., SpaceX’s Starlink). Puzzle pieces are connecting...

Finally, we’ll wrap up this lengthy section with a ‘mundane’ topic - THE BORING COMPANY: founded by Musk in 2016 and focused on transforming Transportation and Cities via underground tunnels (i.e., another networking layer, this time physical). Primarily an infrastructure company, I’d include this as a piece in the broader puzzle of rethinking Transportation and Energy – which, as mentioned above, are two of the biggest industries and tend to be at the heart of the most impactful Technological Revolutions (e.g., Steam Engine/Boat, Coal/Train, Petroleum/ICE Vehicle). A side purpose may be around mineral mining capabilities (i.e., for resources critical for batteries), but that’s TBD.

Overall, the overarching themes (so far) are: Transportation (Tesla/SpaceX/Boring), Communication (SpaceX, X, xAI, Neuralink), and Labor (~all) – all massive components of Human Society as a whole. Putting them all in one place, you see how the puzzle pieces start to fit together. And it's also pretty straightforward to see the dual-use – commercial and military – applications here. While we are really just skimming the surface here to get the broader interconnected point across, this background also helps lay the foundation for future deep-dives (notably, Robotics/Automation and Technological & Energy Revolutions over time). As the World changes, I’m sure these businesses will evolve. But the focus areas are likely to remain centered around Technology and…

ENERGY

… the Energy to Power it. Elon is keenly focused on Natural (often labeled Sustainable) sources of Energy. And unsurprisingly, using First-Principles, he goes straight to the source: the Sun. The Sun is the source of Energy that enables Life on Earth, and it's essentially a massive nuclear fusion reactor. If you want to harness the Sun’s Energy, you need a way to capture it and then store it. For design ideas, observe a human or a plant – in our view and in line with our foundational principles, Nature has the answers…

The main bottleneck as it pertains to Solar (Sun) Energy – which we mentioned above – is Battery Technology. The Sun (source) is not always shining (i.e., intermittent), so you need a way to capture it (i.e., Solar Panels) and then a way to store the Energy to use at a future time (where Battery Technology comes into play).

Elon’s main company as it pertains directly to Energy is Tesla, which acquired SolarCity (founded by Elon’s cousins) in 2016. SolarCity (now in Tesla’s Energy Generation & Storage segment) was/is primarily focused on capturing the Sun’s Energy with Solar Panels – done with decent efficiency, as industry designs come closer to mirroring a plant (the penultimate design). Pair the Solar Panels with Tesla’s focus on Battery (Storage) Technology (and related Software) – for Vehicles, Homes, and bigger Commercial Projects – and you have a full Energy solution, potentially entirely off-grid.

Overall, Elon believes the Sun is the long-term solution to essentially infinite, cheap Energy – citing the Kardashev scale as the ‘simplistic’ support. To bridge to that future, we will certainly continue to need Nuclear, Petroleum, Geothermal and other solutions. But Tesla’s primary current bet on source Energy is the Sun, paired with increasingly efficient Battery Technology to store it.

And to get even closer to that source to potentially harness the Sun’s Energy more efficiently, start-ups are innovating (using SpaceX’s Starship reusable rocket Technology as an innovation trigger) to develop space-based-solar-power – essentially capturing the Sun’s Energy closer to the source, and beaming it back to Earth. Elon and co are not directly focused on this, but you could see how Tesla + SpaceX would be critical in enabling future advancements in this realm.

And while inventions like this may seem sci-fi-esque (most ‘innovations’ start in sci-fi-land), Elon lives in the future and most early ideas start off uncompetitive (expensive vs. alternates) given the limited scale. But to get scale, you must start with…

MONEY

… Money to finance it. Amazon, Tesla, and many of the most revolutionary businesses of the 21st century started off as sub-scale (losing a lot of money). But with the right Idea, Leadership, and Capital – anything is possible. And Elon may be the most successful fundraiser of our generation…

And he also has some experience around Technology as it relates to Money. Elon founded X.com – an online financial services company – in 1999. And subsequently merged it with Confinity to form PayPal in 2000. While PayPal had an initial bigger vision of more fully decentralizing Money, they ended up plugging into the more centralized, ad-based Internet to create the World’s first digital payments platform. Simplistically, they helped improve the security and ease of moving Money around via the Internet (i.e., Money Technology) – which helped spur the growth of e-commerce as we know it. People are a lot more comfortable transacting online when they understand there is an intermediary guaranteeing/securing each transaction between two unknown parties. eBay acquired PayPal in 2002, and Elon ended up harnessing the proceeds from the Paypal sale to help seed the cadre of companies noted above.

Fast forward to today, and Elon has generally embraced Bitcoin (along with Dogecoin...) and is working on a way to integrate payments directly into the X platform – with a vision of a more decentralized secure peer-to-peer Money network. We shall see where this goes (X Money recently launched with Visa), but it is clear that Money has been and continues to be on his massive-opportunity-for-disruption radar.

And maybe most important (or at least topical) of all, he is spearheading the DOGE – Department of Government Efficiency – commission. We’ll do a deeper dive here but suffice it to say that DOGE is squarely focused on evaluating the entire US Government (and its now ‘related’ parties) – first for fraud/corruption (lower hanging fruit), and eventually for efficiency (i.e., actually harnessing modern Technology) – to ultimately lay the groundwork for a more sustainable foundation off of which to grow. It is a heavy, Money-focused task that is garnering a lot of hate – notably from those who have been key recipients of government funds – but it is also critical for the future of the US to get it right…

CONFLUENCE

When you peel back all of the layers, there is a vision and plan that almost magically distills into a focus squarely on the Pillars of Power – whether it was done intentionally or not.

We moved this topic up on the content list given everyone seems to have lost perspective so quickly – unsurprising as centralized media (who now dislikes Elon for taking away the punch bowl) controls the narrative and dictates what most people focus on and thus what they think (another topic, another time – but the loss of control here is a key contributor to the root of the anxiety crisis plaguing the West).

Whether you like a person (or place or thing) or not is not relevant to whether he/she is impactful. Whether you like someone or not, it often pays to understand why and how someone like Elon became successful. You do not need to like him, but you should learn from him — both his successes and failures.

There is a reason he is one of the wealthiest people in the World – he challenged the status quo; he built things others have been afraid to even attempt.

He sets seemingly impossible targets that often garner ridicule (typically masked jealousy). He rallies the best talent around these visions. And he works from first principles to achieve them.

See the World the way it is. Remove your biases.

• Separate your view of the human from his/her accomplishments

• Separate your emotions from objective reality

• Separate your stock analysis from your company view

These can all be re-integrated for your personal perspective. But for the Pillars of Power framework, Investment analyses, and general critical thinking – it typically pays to be dispassionate.

Elon is unequivocally one of the most important assets to the USA and a cornerstone of National Security.

Dislike him if you want.

But respect what he’s built.

And likely thank him for your Security.

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Thanks for reading. If it was useful, share it. If it could be more useful – let me know how (info@aquavisadvisors.com). If you have any questions, comments, or want some resource suggestions to learn more – let me know.

Change your mindset – scarcity to growth. Let’s build a positive-sum world of abundance.

Order your Mind. Harness your Money. Shape your Future.

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1. Vertical integration is often necessary early in a Technology transition as the ecosystem typically does not yet exist. But it's often less efficient later in a Technology cycle as the ecosystem evolves and low-cost specialists arise – potentially where we’ll be in a few years. Summary being - always focus on where you can best add Value.