This week, I listened live to Tesla’s latest earnings call and was gobsmacked at Elon Musk’s audacious new goal to build half a million cars per year by 2018.
“This is based off the tremendous demand received for the Model 3, which I think is actually a fraction of the ultimate demand, when people fully understand what the car’s capable of….Tesla is going to be hell-bent on becoming the best manufacturer on earth.” Elon Musk
But how on earth is Tesla going to perform this ambitious ramp up in production? It’s a 1000% increase in Tesla’s 2015 production level (approx. 50,000 Model S and Xs). Here’s one more clue from Elon Musk, at the end of the conference call:
“We believe that there’s more potential for innovation in manufacturing, than there is in the design of the car by a long shot.” Elon Musk
Tesla’s Alexis Georgeson took me inside the Tesla factory last week to share some insights as to how this “mission impossible” just might be done.
BBC Host, Rory Cellan-Jones: This week, the entrepreneur behind the Tesla cars made an extraordinary promise to his investors. He said his company would manufacture half a million cars a year by 2018. Given the fact that Tesla has missed much smaller production targets in the past this seemed, well, brave. But as Alison van Diggelen reports from Silicon Valley, Elon Musk is confident that this time, things will be different.
Alison van Diggelen: Tesla Motors astounded the auto industry last month when it received over 400,000 reservations (325,000 in the first week) for its new Model 3, an “affordable” all-electric car. In response, CEO Elon Musk just announced a production goal of half a million cars by 2018.
Elon Musk: My desk is at the end of the production line…I have a sleeping bag in the conference room… which I use quite frequently. The whole team is super focused on achieving rate and quality at the target cost, so I feel very confident in us achieving that goal.
Alison van Diggelen: I visited the Tesla factory in Silicon Valley to find out how they can deliver on time and in such huge numbers. Though beloved by fans, Tesla is also notorious for production delays.
Last year, the company spent over 1.5 Billion dollars in capital. Its cash burn-rate looks unsustainable. With General Motors coming out with a longer range electric car later this year and other competitors hot on their wheels, Tesla is under pressure to deliver, and fast.
Alexis Georgeson: There’s already been one major reorg since Model S production started in 2012. The original end of line used to be right here… we straightened out the line so we could expand and increase production.
Alison van Diggelen: That’s Alexis Georgeson, a Tesla spokesperson who explains in great detail the 7-day process that transforms a roll of aluminium into a shiny electric car. The two-week reorg and retooling in 2014 means that Tesla now has over 1000 state of the art robots, which helped ramp-up production by over 100% last year.
A separate production line for the Model 3 is planned and hard lessons from earlier models will help speed up their manufacture, especially more in-house capabilities and more thorough supplier validation. Musk says the new Model 3 will be designed to be easy to make.
Alexis Georgeson: We’re constantly learning and innovating. The great thing about Tesla is that so much is in-house and that we are so nimble.
Alison van Diggelen: I asked about the long delays in the Model X, largely caused by the flashy Falcon Wing doors.
What’s the trade off between hubris and caution at Tesla?
Alexis Georgeson: Our mission is not just to accelerate sustainable energy and transportation …You’re creating new features that haven’t been done before in the auto industry. With that comes natural growing pains…
Georgeson: The thing that’s missed there is the capital-intensive nature of the auto industry. Especially for a company like Tesla that’s ramping production so quickly…
Alison van Diggelen: Here’s Elon Musk…
Elon Musk: Tesla is hellbent on being the best in manufacturing… We believe that there is more potential for innovation in manufacturing than in design of the car, by a long shot.
Alison van Diggelen: Musk says the first Model 3 deliveries will start in late 2017. If he can prove naysayers wrong again, the majority of Model 3 reservation holders might see their cars coming off the production line in Silicon Valley within the next two years…
Read more Fresh Dialogues reports on Tesla here (scroll down for archives back to 2012)
Last night, I had the pleasure of meeting the talented and influential author, Michael Lewis. You probably know he wrote Moneyball, The Big Short and The Blind Side and has been compared favorably to literary genius, Tom Wolfe. Lewis revealed that he’s almost finished a prequel to his huge bestseller, Moneyball and it will be published in December 2016. Although his publishing schedule precluded him from accepting an in-depth interview with me last night, he did agree to one in December. So, not a strike out, just a delay in play.
Details of the prequel are under tight wraps, but I did learn this: it’s been eight years in the making, and he’s completed about 45,000 words (about 150 pages). He’ll send his trusty editor at Norton the remaining chunks every six weeks and is on schedule for a September completion. He says “once it’s on track, it’s like a freight train.”
The topic? It’s about sports (possibly just football) and analyzes the distribution of pay across teams. As with most of his books, it’s a character driven story, featuring people who surprised him and are in a situation that forces them to reveal their true character. The only other clue he shared was that he had access to the “brain trust” of the San Francisco 49ers.
On The Big Short Movie: Lewis described it as “a relief” to see how good the movie was and praised the talent and craftsmanship of the production team. He called out Christian Bale for his exceptional performance as Michael Burry, the Silicon Valley financial whiz, whose character “led us through the jungle of complexity.” Lewis explained that Bale spent a day with Burry and was able to channel his breathing and his awkward mannerisms with incredible accuracy throughout the movie.
Lewis also praised the straight to camera moments, especially Margot Robbie in the bathtub and lamented the production limitations of being a mere writer. He didn’t feel ownership of the movie as he’d sold the rights, and didn’t sit on the set since he considered it “a pointless exercise.” He was, however, involved in promoting the movie with the cast and says they’re really “not that good looking,” with the exception of (gorgeous) Brad Pitt. In Lewis’s opinion, their star appeal is more to do with their force of personality and talent. He added, “I’m not a good judge of male beauty.” That got a huge laugh from the audience.
On Politics: Lewis considers Donald Trump a bully and that the race would now be between Hillary Clinton and Jeb Bush, if Trump hadn’t bullied him so hard during the early Republican debates. He thinks that Donald Trump and Bernie Sanders wouldn’t be candidates today without the financial crisis of 2008 and mass outrage that followed, with the widespread feeling that the financial system is rigged. He asks: “Is this the beginning of something or the end of something?”
It’s a very good question indeed. He even alluded to a dystopian future where fame rules supreme and the Kardashians become viable leaders of the modern world. A true horror indeed.
Lewis doesn’t like to make predictions, but when pushed, he admits that he thinks Trump will get the Republican nomination and he’ll lose spectacularly to Hillary because “he does dumb things.”
On the Panama Papers: Lewis thinks the biggest leak of the century won’t have big reverberations in the US. He added, “You can go to Delaware to hide money…wait for the Delaware Papers!”
On Upcoming Projects: Lewis isworking on a screenplay pilot re Wall Street in the 20’s; a book on President Obama that explores how leaders make decisions (based on the fabulously insightful Vanity Fair profile); and a book for kids about money: how to make it, use it, and the “social power of money.”
Do check back here in December for my interview with Michael Lewis!
Many thanks to Celebrity Forum founder, Dick Henning for the kind invitation backstage.
Last night, I joined the BBC’s Business Matters to discuss the launch of Tesla’s Model 3 and the remarkable 325,000 deposits it garnered in just seven days. Reports suggest that even Tesla CEO, Elon Musk was surprised by the number of people prepared to pay $1000 to get in line for this mass market electric car. It appears that his “Tesla secret masterplan” had been intentionally leaked. Does this mean that the Model 3 represents an iPhone moment for the auto industry?
Here is a transcript of our conversation and a longer version of the report which aired on the BBC World Service. The transcript has been edited for length and clarity. Listen to the podcast here: Tesla discussion starts at 26:46
Roger Hearing: The Tesla 3…is that the way forward for electric cars? Now Alison, you’ve been having a look at the new Tesla…can you enlighten us on that?
Alison van Diggelen: Last Thursday, Tesla finally unveiled its “affordable” mass market car, the Model 3. Hours before it was actually unveiled, thousands of Tesla fans stood in line, sight unseen, to reserve one. This was a phenomenon, especially here in Silicon Valley where Tesla is headquartered and where they actually build the cars. I talked with several people who waited in line, and one Tesla fan who drives a Tesla (Roadster) but is just not interested in the Model 3…The key question now is: can Tesla deliver?
Small business owner, Tom Poppitz was one of thousands in Silicon Valley, to line up at one of Tesla’s six showrooms here. Each customer was prepared to put down a $1000 deposit for a car they’d never seen.
Poppitz:There was a lot of very well educated people in that line…they were going to buy this thing, no matter what it looked like…they were excited about it changing the world, changing the auto industry…
He likened it to an Apple product release, only better because it was sight unseen.
But what motivated Poppitz to get in line?
Poppitz: I’m not generally excited about cars…I’m a self-professed tightwad. The value proposition for this car is so completely different: frees you from buying gas… but my primary motivation: It changes macroeconomics in a major scale. Transitioning to electric cars can cure our trade deficits, it can have a quantum effect on our economy….
But not everyone is so optimistic that Tesla can actually deliver a world-changing product. I spoke with Anton Wahlman, a tech analyst.
He says Tesla’s two greatest challenges will be achieving profitability at $35,000 – where margins are razor thin – and beating some tough competition.
Wahlman: The unsexy factor in the whole equation…the product can be beautiful and all, but getting to an acceptable level of profitability is an extremely significant challenge.
He points to the brutal competition Tesla will face by the time it delivers its first Model 3’s in late 2017/and 2018. The Chevy Bolt hits showrooms later this year, and BMW, Audi, Jaguar, and others are in fast pursuit.
Walhman predicts that Tesla may face the same fate that Nissan did in 2010, when its all-electric Leaf started shipping …Many reservation holders demanded their deposits back.
Wahlman: (Nissan) They had zero competition… Tesla already has some competition …that will intensify greatly in ‘17 and by 2018, it’ll be in full bloom.
He acknowledges Tesla has a more attractive product than Nissan and its charging network is a moat-like barrier to competitors. But the Model 3 is not for every Tesla fan.
Silicon Valley techie, Carlos Morales drives a Roadster, Tesla’s limited edition sports car. He loves the quiet acceleration, and speed of his Roadster, but wasn’t prepared to reserve a Model 3. Why not?
Morals: I see a Roadster once a month… 300,000 Model 3’s have been reserved. There’s going to be a lot of them, that’s wonderful for the planet and Tesla. But it’s not going to be as exclusive.
There’s always going to be a class, a group of people who are looking at that.
Despite questions of reliability and servicing challenges pouring cold water on last week’s euphoria, Tesla true believers feel they were part of automotive history. Will this be an iPhone moment for the auto industry? At least 270,000 people hope so.
[Report ends]
Alison van Diggelen: Carlos speaks for probably a small segment of people who won’t be attracted by the Model 3. But as of this morning they’ve now had over 325,000 willing to put down a $1000 deposit…that level of interest is unprecedented in the auto industry. A lot of people are drawing analogies with the iPhone. There’s a euphoria about this new product…the difference is: people are going to have to wait about two years before the car is actually delivered.
Roger Hearing: That’s a very long time, isn’t it? Isn’t that a lack of attraction in itself?
Alison van Diggelen: The analyst, Anton Wahlman emphasized that it’s not that these hardcore fans aren’t prepared to wait…but in the two year period, they may be tempted off their deposits. Wahlman pointed out all the competition. Jaguar is even coming out with an electric vehicle, Audi…the Chevy Bolt will actually be in dealerships this Christmas. I did speak with one big Tesla fan – Washington Post columnist, Vivek Wadhwa – and asked him if he’d be tempted by the Bolt. He said it was like comparing a rotary phone with the iPhone. That’s the level of fanboy-ism there is in Silicon Valley.
Madhavan Narayanan: We’re not discussing cars anymore. We’re discussing new patented technologies. If Tesla has patented technology that makes it distinguishable and superior to other electric cars, we’re talking about a paradigm shift, not simply a better car.
Roger Hearing: The big thing here in Britain is where you can actually get the charge? It’s fine in big urban areas… and for short journeys. Would that be true in America where there are a lot of very long journeys and presumably not a lot of electrical stopping places along the way?
Alison van Diggelen: Yes, that is a big issue. Anton Wahlman pointed out that Tesla has this (proprietary) network for these long distance drives. They have hundreds of superchargers, (fast chargers) all over the U.S. They’ve introduced them in Europe too for people doing long journeys in their Tesla Model S. Wahlman described this like as a moat around Tesla’s business model and no other electric vehicle has something similar. So that could actually be an advantage (for Tesla). These other companies will have to catch up. With mass market, compared to a luxury car, there is a point: most luxury car buyers own homes and they can charge at home. If you’re living in an apartment, then that’s a whole different thing. That’s definitely a challenge, but Elon Musk is quite the visionary and he is aware of this and they are planning to double or triple their Tesla charging network.
Roger Hearing: That must be a problem in India, Madhavan, where do you charge these electric cars?
Madhavan Narayanan: Let’s look at what happened with cellphones. The paradigm of Tesla is strikingly similar. You have cell towers everywhere and they carry the signals. Why not set up a charging station network? To use Silicon Valley’s favorite expression:I see an electric vehicle ecosystem emerging. There will be new winners and losers in the game.
Roger Hearing: An electric car ecosystem? That’s a concept to carry around, as we go into what does seem to be the electric car era.
Why are women still struggling to reach parity in the Indian and Silicon Valley jobs market? Why is rock star economist Thomas Piketty predicting that revolution could be the great equalizer? And what explains the unexpected and dramatic rise in popularity of Bernie Sanders in the US election? All this and more was discussed last night on the BBC’s Business Matters.
I joined a lively discussion with BBC host Anu Anand who’s based in Delhi, and Jayati Ghosh, Professor of Economics at Jawaharlal Nehru University in Delhi. Listen to the podcast here (Jan 29, 2016)
Here are some highlights from our conversation, (starting at 20:43, edited for length and clarity):
Anu Anand: Alison, you’ve reported from Japan where there’s a real impetus to bring women into the workforce. Any lessons from there?
Alison van Diggelen: Prime Minister Abe has a goal of reaching 30% of women in positions of leadership by 2020. What he’s doing is mandating that large companies reveal their diversity statistics. Someone I interviewed there -Elizabeth Handover – called it a “shaming and blaming” strategy. In other words: release your figures and the shame upon you will incentive you to get more women into positions of power…But as in India, there is a big cultural pressure in Japan for women to stay at home, especially if they’ve had children.
Anu Anand: You’re in the heart of Silicon Valley.Would you say that women have achieved parity in the high tech workforce?
Alison van Diggelen: No, not at all. Women make up only 30% of these tech companies, and then tech jobs within that are only between 12% and 18%. We have a long way to go, but we’re moving in the right direction…
Justin Rowlatt: In India we see very rapid growth, an economy growing at 7%. In a society growing that quickly, surely inequality is less of an issue?
Thomas Piketty:Inequality is an even bigger problem in emerging countries. One important lesson from my historical study of inequality is that it took very big shocks, major shocks – World War I, Wold War II, the Great Depression, the Bolshevik Revolution for the Western elites to accept the kind of social, and fiscal reforms which brought a reduction in inequality and increased economic growth….
The big risk here in India like in other parts of the world, is that extreme inequality tends to lead to sometimes violence, some politicians to try to exploit…that’s why it’s so important to have more transparency about the complex relationship between caste and income and wealth; and address it through adequate reservation systems, adequate social policy…
Anu Anand: Let’s turn to Alison van Diggelen, host of Fresh Dialogues in San Francisco and Jayati Ghosh, Professor of Economics here in Delhi….Women are bearing the burden of growing inequality?
Jayati Ghosh: The proportion of women who get any kind of income from working (in India) is only about 2%. About 90% of women are working and they’re really engaged in unpaid work. Policies and processes don’t even bother to recognize this work so they don’t do anything to reduce it…for e.g. piped water, which would reduce the burden of going to fetch it. Piketty is right: India is one of the higher inequality countries in the world…the elite in India… holds on to most of the assets, grabs the natural resources, concentrates the wealth and shapes policies to make more of this…This leads to violence.
Anu Anand: Alison, inequality in the US has been growing too. It’s certainly a big point of debate at the moment, especially with the presidential candidates sparring with each other?
Alison van Diggelen: Absolutely, it’s a huge issue here. The inequality is the highest today since the 1930’s. The surprise popularity of Bernie Sanders – who has made inequality and poverty one of his number one issues – he calls it “The Great Moral Issue of our Time”…He came from nowhere – it’s to do with his message resonating that income inequality affects us all. A lot of people thought Hillary Clinton had the Democratic nomination in the bag. Sanders has really grasped on that and he’s riding on inequality and really giving Hillary Clinton a run for her money for this Democratic nomination.
Anu Anand: Do you see a world in which we’re not going to have to talk about inequality? Both india and America are very market driven economies?
Alison van Diggelen: I think inequality is rife here however, two studies in 2015 confirmed that people – both rich and poor alike – still believe in a brighter future. It may be misguided, but there is that aspirational idea and the class system in my experience – especially in Silicon Valley full of inspiring entrepreneurs – is less prevalent than I experienced growing up in Britain, where you’re encouraged to stay in the class you’re born. For example, when I was offered a place at Cambridge University, my father, a working-class union man from Glasgow asked me: what do you want to go there for? Aren’t the universities in Scotland good enough? There was that “stay in your place” attitude that I broke away from.
Check back soon for a report on online education and its potential to help close the income divide by increasing access to education and tech jobs.
Last Thursday, I joined a special BBC World Service program hosted by Fergus Nicoll in Ho Chi Minh City, Vietnam. We began by discussing the large community of Vietnamese in Silicon Valley and its connection to Vietnam’s growing tech hub. Listen to the BBC podcast (at 21:00 re. Silicon Valley-Vietnam, and at 31:00 re. The Tech Awards)
We discussed my latest interviews in Silicon Valley on the BBC Business Mattersprogram. Here’s a transcript of our dialogue, edited for length and clarity:
Fergus Nicoll: Alison, you’ve been talking to some of the winners of the Tech Awards in Silicon Valley. What kinds of things are they coming up with and what could Vietnamese developers seek to emulate?
Alison van Diggelen: I spoke with three young entrepreneurs who’re doing incredible things: Tricia Compas-Markman is founder of DayOne Response. What they’ve built is a 10 liter backpack – it’s very low-tech in fact. It provides clean drinking water on day one in a natural disaster. They’ve deployed it in places like Nepal after the earthquake; and what they want to do is pre-position it in places like the Philippines that are subject to natural disasters. It’s a wonderful way for families and individuals to collect and treat and get clean drinking water in disaster areas…
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Fergus Nicoll: We were in the Philippines last week…we could maybe put them in touch with Senator Loren Legarda or the Red Cross in the Philippines? They would be very keen to hear about that kind of initiative. What else have you been hearing about?
Alison van Diggelen: Let’s do that for sure! The other winner is called Open Pediatrics and it’s an online community for pediatricians. It’s almost like a Khan Academy for pediatricians: an online learning community connecting the cutting edge technology of first rate hospitals like Boston’s Children’s Hospital with rural clinics in developing countries, so they get the same expertise. It’s a wonderful, simple idea and there are some top people involved in that. I talked with Traci Wolbrink, one of the key people (pictured at the podium, above).
And the last one I want to mention is a very simple app…It’s called BeeLine Reader, founded by Nick Lum, a corporate lawyer who’s become a tech humanitarian. This BeeLine Reader allows people to read on screens much more easily. If you’re suffering from dyslexia, or vision problems, you can read using a color gradient. So if you can imagine reading a line, and the color of the script changes from blue to red to black but it wraps around, it guides your eye so you can read faster or more clearly. This is available for either a dollar a month or $5 to buy the app.
Alison van Diggelen: All these entrepreneurs were given a good load of money to take it to the next level. It was very inspiring to see that not all techies are out to make a buck. Some of them want to change the world…make the world a better place.
Fergus Nicoll: Brilliant. That sounds fantastic.
Find out more at Fresh Dialogues
What is Tech Award winner Jeff Skoll doing to change the world and make it greener?
On Politics: Lewis considers Donald Trump a bully and that the race would now be between Hillary Clinton and Jeb Bush, if Trump hadn’t bullied him so hard during the early Republican debates. He thinks that Donald Trump and Bernie Sanders wouldn’t be candidates today without the financial crisis of 2008 and mass outrage that followed, with the widespread feeling that the financial system is rigged. He asks: “Is this the beginning of something or the end of something?”
Poppitz: There was a lot of very well educated people in that line…they were going to buy this thing, no matter what it looked like…they were excited about it changing the world, changing the auto industry…
Morals: I see a Roadster once a month… 300,000 Model 3’s have been reserved. There’s going to be a lot of them, that’s wonderful for the planet and Tesla. But it’s not going to be as exclusive.
Madhavan Narayanan: We’re not discussing cars anymore. We’re discussing new patented technologies. If Tesla has patented technology that makes it distinguishable and superior to other electric cars, we’re talking about a paradigm shift, not simply a better car.
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And the last one I want to mention is a very simple app…It’s called 
