ENTREPRENEURSHIP

Open Source Entrepreneur

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You can always expect the unexpected from Elon Musk, and this time he has come to the proverbial party with a bigger bang than ever.


In June this year, South African-born super entrepreneur Elon Musk once again did the unexpected. Contrary to centuries of innovators gathering a valuable collection of patents, he announced on the website of his electric car company, Tesla Motors, that Tesla would no longer defend its patents in court. Instead, Musk announced that all their patents now belong to the wider public.


“Yesterday, there was a wall of Tesla patents in the lobby of our headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology,” he said.


Declaring that Tesla now believed it faced almost zero competition in its field from the large car manufacturers (owing to their lack of interest in electric cars), Musk instead requested “a common, rapidly evolving technology platform” for all electric car manufacturers.


“Given that annual new vehicle production is approaching 100 million per year and the global fleet is approximately 2 billion cars, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis.


“Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.”


Musk’s grand assumption is that we have again in the history of the Industrial Revolution entered a period of innovation in which new technologies will simply outstrip the need to protect constantly dating patents. Going open source simply reflects that reality.


“Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.”


Later, in explaining in person to the press the rationale for this bold decision, Musk emphasised that “you want to be innovating so fast that you invalidate your prior patents, in terms of what really matters. It’s the velocity of innovation that matters.”


He also asserted that the issue of climate change has now reached a point whereby it would simply be wrong to treat the quest for environmentally friendly transportation as solely a money-making endeavour.


“I don’t think people quite appreciate the gravity of what is going on [with regard to global warming] or just how much inertia the climate has,” Musk said during a conference call. ”We really need to do something. It would be short-sighted if we try to hold these things close to our chest.”


Some legal experts, however, have cautioned those who would simply assume Tesla’s technologies are now fair game.


William Schultz, a lawyer with Merchant & Gould, a leading intellectual property rights firm in the United States, notes: “While the announcement seems revolutionary, in reality several companies have opened their patents in various forms in the past.”


Schultz cites the examples of Microsoft, Sun Microsystems, IBM, Google and Twitter, all of which have, for varying reasons, allowed some kind of use of their patents.


Schultz believes Tesla may be actually searching for competitors who could help provide it with a network of recharging stations for its cars, which require such stops far more often than regular cars require petrol fuelling.
He does also note that allowing one’s patents to be used in the wider marketplace is not the same thing as sharing trade secrets (which can still be protected by employees’ non-disclosure agreements and non-compete clauses), which are arguably more valuable to Tesla than the patents it holds.


South African patent law expert Keith Brown, of the firm Spoor & Fisher, asserts that Tesla has not in fact ceased playing the patents game:


“The fact of the matter is that Tesla Motors is apparently still filing patent applications. One source I consulted shows that five patent applications were published in July 2014 alone. One might ask why Tesla is spending time and money getting patents if its intention is to make its technology readily available to others to use.


“If the intention is to make the technology public by patenting it (patent applications are published after a certain period of time) and thereby prevent a competitor from getting patent rights for similar, independently conceived technology, which could then potentially be enforced against Tesla, there would be a much easier and less costly way to achieve this objective, for example by simply publishing the details of the technology in a technical journal or the like.”


Brown also points out that, “To the best of my knowledge, there is no legal definition of what is meant by ‘in good faith’. It can hardly be said to be an objective yardstick since, at the end of the day, whether a competitor is acting ‘in good faith’ will depend solely on Tesla’s assessment of what the competitor is doing or planning to do.
“Also, in my view, Tesla’s ‘undertaking’ that it will not initiate patent infringement against others acting ‘in good faith’ can hardly be considered binding, as the ‘undertaking’ could be withdrawn at any time.”


In other words, a slightly more cynical interpretation of Tesla’s patent sharing may be that companies may use Tesla’s patents, but should be expected to share their own innovations with Tesla in turn to avoid a lawsuit for not acting ‘in good faith’.


Such a position could in fact create an anti-competitive legal environment in which smaller companies have to relinquish the advantages of their own innovations in order to benefit from Tesla’s patents.


It is arguable, however, that were Musk to interpret his own position in that way, it would create a marketing disaster for a company that operates in an industry that targets ethically conscientious consumers by design.


A more charitable interpretation of Musk’s decision, noted by Brown, would suggest Tesla is simply serious about innovation that could save the planet.


“One could take the view that Tesla should be congratulated on the basis that its apparent non-reliance on its patent rights will promote competition and increase the profile, popularity and marketplace for electric cars, and be ecologically better for the planet, for the benefit of all, including Tesla itself.”


In this vein, some have compared Musk’s recent actions with the decision of the creator of the World Wide Web, Sir Tim Berners-Lee, to not claim a cent for his invention. Both seemingly realised that for a radical new technology to be profitable, it must first be open and free to some extent to allow a rapid growth in infrastructure.


Other, more poetic defenders of Tesla note that Tesla’s decision is in the spirit of the inspiration for its name, Nikola Tesla, the original ‘mad scientist’ who developed the ideas behind x-ray, radar and radio without any serious attempt to secure his property rights and commercial benefits (unlike the more profiteering Thomas Edison).


The conclusion one can possibly draw from this entire affair is that Elon Musk has two motivators in his professional life, motivators that are not necessarily incongruous: the motivation to run profitable businesses, and the motivation for those business to add value in society’s quest to solve some of our most intractable problems.
In fact, were one to take such an analysis further, one would suggest Musk’s raison d’être as an entrepreneur is to transcend that incongruity—the traditional incongruity between profit and a global ethic.


Perhaps the first clue to be examined in the search for the primal urge of his entire career is the bizarre title of the blog post he wrote to announce the release of Tesla’s patents: “All Our Patent Are Belong To You”.


While initially many commentators were somewhat shocked that a company like Tesla could release a statement headed by such a grammatically awful title, the public soon realised that Musk was in fact referring to one of the very first Internet memes, which came from the poor translation used by an Asian computer game, Zero Wing. At the game’s climax, the villain appears on screen and announces to the protagonist, “All your base are belong to us.”
When one delves into the personal history of Musk, one can see the relevance of such an allusion. Comic books and video games form the backdrop to his innovative career, without which he is not easily understood.


Musk launched his entrepreneurial career as a South African 12-year-old child who, inspired by his love for comic book heroes who saved the world ‘with their underpants on the outside’, wrote a basic video game for his friends.
Musk was born in 1971 in Pretoria to a South African father and a Canadian mother. His mother, Maye, worked as a model, and his father, Errol, worked as an electrical engineer (who had a disdain for computers), but also had interests in emerald mining.


Musk had difficulty fitting in with his peers at school (he attended Pretoria Boys’ High School), apparently because he was known as a ‘smarty-pants’, and so it is no surprise he opted to leave South Africa after school and move to Canada (by virtue of his mother’s Canadian citizenship), thereby avoiding his military service in what he describes as apartheid South Africa’s “fascist army”.


From Canada, he moved to the US, where he completed degrees in Physics and Economics at the University of Pennsylvania. Two days into a doctorate programme in physics at Stanford, he left academia to begin his quest to revolutionise three areas of society and industry: the Internet, space exploration, and renewable energy.
Musk says that in college he realised those three areas represented humanity’s future.


Initially, he founded Zip2, an online financial services company. After he sold that for a profit to Compaq, he founded X.Com, which would merge with a company called Confinity, which in turn had a new product in development called PayPal. Musk decided to make PayPal the centrepiece of the business and, when PayPal became the Internet’s premier payment platform, he sold it to eBay for 1.5 billion dollars, a plurality of which went to Musk personally.
Having played a crucial role in developing the Internet’s basic commercial structure, as well as establishing a large base of capital, Musk turned to the next area on his list: space exploration.


By any account, this was a risky move. No rocket company has ever really succeeded in an industry dominated by the public sector. The smart move for Musk would have been to remain in the Internet industry.


He established the rocket-building company, SpaceX, in 2002 with rocketry engineer, Tom Mueller. It took six years for SpaceX to win a NASA contract.


Up to that point, it was entirely funded by Musk himself. In 2008, after three failed launches, SpaceX’s Falcon 9 rocket and Dragon spacecraft won the NASA contract to provide a commercial replacement for the cargo transport function of the space shuttle.


In 2012, SpaceX became the first commercial company to dock with the International Space Station and return cargo to Earth with the Dragon. SpaceX has also reduced the cost of such space trips by over 90%.


Musk admits now he knew that both Tesla and SpaceX were likely to fail, yet he considered that failure was acceptable in a worthy endeavour. He said during SpaceX’s beginnings, “If nothing else, we are committed to failing in a new way… If something’s important enough, you should try even if theprobable outcome is failure.”

Yet somehow, against the odds, both SpaceX and Tesla are now profitable.


In short, SpaceX has gone where no other private entity has gone before: it now stands above any governmental organisation in terms of providing the innovation needed to further our reach into space. This means Elon Musk is now at the very heart of a new space race to colonise Mars and make humanity a space-faring, multi-planetary species.


Musk believes this is crucial for two reasons: the first being the likelihood of an extinction-causing event on Earth; and the second because the colonisation of Mars would simply be a great adventure for humankind.


SpaceX currently has many other projects on the go besides its NASA. Musk recently unveiled his reusable rocket, the Dragon V2, which he believes will be able to transport up to seven passengers in and out of space with the landing accuracy of a helicopter. It is the re-usability, and the associated savings in cost, that he believes will be the biggest leap forward in terms of one day reaching Mars, while also beginning space tourism in the interim.


In the midst of getting SpaceX off the ground (literally), Musk was impatient to complete his trifecta of pursuits, turning to renewable energy in the form of establishing Tesla Motors in 2004, and launching solar energy company, SolarCity, with his cousins in executive control, in 2006.


If Tesla’s patent sharing signals its current optimism, perhaps even more compelling is that in the midst of the gloom about renewable energy (and a simmering scandal involving the Obama administration and failed loans to green moguls who donated to his campaigns), in May last year Tesla became the first car manufacturer to pay back loans made to it by the US government. Tesla paid back over 450 million dollars nine years before payment was due. After being labelled “a loser company” by Barack Obama’s opponent in the 2012 elections, Mitt Romney, Musk obviously took some glee in making the announcement.


“I would like to thank the Department of Energy and the members of Congress and their staffs… and particularly the American taxpayer from whom these funds originate. I hope we did you proud.”


Like SpaceX, Tesla struggled to gain traction in a highly capital-intensive industry. But as the profits have begun to trickle in, Musk has signalled the general confidence in the company by revealing plans to launch a fantastical ‘gigafactory’ to construct electric car batteries at the rate of 500 000 annually.


The plant, which would require approximately 1 000 acres, would employ more than 6 000 workers in a highly innovative factory setting, reliant totally on renewable energy from wind and solar.


Because all of Musk’s projects have tended to employ only local US workers, he is now in the position to use the possible jobs he can add to any state in the US as leverage for them to overturn outdated regulations that mean, in certain states, cars must be sold through middlemen dealerships, which is prohibitive to Tesla’s direct sales model.


Tesla’s strategy has hitherto involved three phases: “Step one was making the Tesla Roadster, high price, low volume. Then step two, high price, high volume [the Model S]. Then step three is low price, high volume. We’re at step two,” says Musk.


Step three, an affordable electric car, is expected in two to three years.


Undeniably, Tesla is not only changing the technology of the auto industry, but equally its production and marketing models.


Meanwhile, Musk still oversees the US’s largest solar company as chairperson of SolarCity.
SolarCity has built its success on operating within a model of leasing solar panels at affordable rental rates. Its success is even more incredible when one considers the general failure of the industry after China swamped the market with heavily subsidised cheap technology.


Bucking the trend, and remaining true to his green convictions, Musk has doubled down on green technology and is reaping the rewards, with SolarCity now turning to manufacturing.


Musk insists that solar is the future of energy supply and that solar energy will provide the bulk of our energy needs within 20 years.


Speaking at a TED conference last year, Musk noted: “We have this giant fusion generator in the sky called the sun… What most people know but don’t realise they know, is that the world is almost entirely solar-powered already. If the sun wasn’t there, we’d be a frozen ice ball at three degrees Kelvin. The whole ecosystem is solar-powered. What it amounts to is a giant distributed utility.”


While offering visions and realities of electric cars, solar energy and the colonisation of Mars, Musk has also made the headlines for his sketches of a plan to revolutionise high-speed urban transportation in the form of hyperloop travel.


Hyperloop travel, which is basically a theoretical attempt to transcend the inefficiencies of rail, would consist of pods travelling at speeds of higher than 1 000 kilometres per hour within steel tubes elevated across the countryside.


Of course, hyperloops would be solar-powered. Musk, as per Tesla’s patents, released his designs to the public, asking for others to take the idea forward, as he simply does not have the time.


When one surveys this solar system that is Musk’s grand envisioning of a new world of renewable technology, one is not surprised to learn he was in fact the real-life model for Robert Downey Jr’s depiction of Iron Man in the latest iteration of the superhero.


When the director of the franchise, Jon Favreau, began contemplating how he could depict Tony Stark—the inventor who becomes Iron Man—in a realistic fashion, he realised he had no idea how to begin.
It was Downey’s suggestion to sit down with Elon Musk.


And so Musk, once the South African boy who was inspired by comic book heroes to change the world, became the model for Iron Man, even appearing in the sequel of the film in a cameo role, while also allowing portions of the film to be shot at SpaceX’s headquarters.


Favreau was subsequently chosen to write Musk’s entry in TIME magazine’s list of the world’s 100 most influential people: “Downey was right. Elon is a paragon of enthusiasm, good humour and curiosity—a Renaissance man in an era that needs them.”


As Musk blends the dreams of fiction with the realities of modern innovation, one can only reflect that his association with a Hollywood superhero is supremely apt. 

 

Chris Waldburger

 

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