Elon Musk’s 4 rules for entrepreneurship

Whilst reading the new Walter Isaacson biography on the fascinating life of Elon Musk, I found the chapter talking of his approach to building businesses interesting and something I could relate to, in my experience in working with entrepreneurs building businesses.

1. Question every cost

Entrepreneurs often have a significant amount of their own money invested in building businesses, especially at the start-up phase. As a result, they are naturally incentivised to reduce costs as much as possible. This is in contrast to employees who are incentivised to get as much out of the business as possible. As a result, good businesses have systems in place to incentivise employees to reduce costs as much as possible.

“Cost-effectiveness was critical for Musk’s ultimate goal of colonizing Mars. His focus on minimizing costs and having control over the supply chain led Musk to manufacture as many components as possible in-house rather than buy them from suppliers.”

Elon Musk, by Walter Isaacson

Rocket components were subject to numerous specifications and requirements which was mandated by the US military and NASA. At big aerospace companies, engineers tended to follow these religiously, however Musk made his engineers question all specifications. In fact, Musk would insist they know the name of the actual person who made the requirement, rather than them say “the military or legal department” required the particular specification.

Musk’s view is that any requirement should be treated as a recommendation, rather than as a rule to be followed precisely. He identified the Vandenberg Air Force base off the coast of California as a location to launch rockets from. However, there was a culture clash, since the Air Force tends to treat rules and recommendations as sacred, in contrast to Musk who was instilling a culture of questioning every rule and assuming every requirement was dumb until proven otherwise. SpaceX eventually located their base on the Kwaj atoll in the Pacific.

Similar to the 1000 Day CEO course, we were taught that policies are guidelines, procedures are rules to be followed strictly.

Control over the supply chain – Innscor as a case study

This focus on having control over the supply chain is what has made the Innscor group of companies the force it is in Zimbabwe. The group and its related companies virtually have control over the entire food supply chain in Zimbabwe. Simbisa, the QSR company, has some 300 counters in Zimbabwe serving the classic chicken and chips, pizza and ice-cream. They have recently invested in money remittance business Innbucks, where customers can send and receive money from any of the Simbisa outlets around the country. PHI, the farming business is partly owned by Innscor which produce potatoes en-masse which are used by the outlets for chip production. Innscor own Afrigrain, which import grains into the country which are then milled by National Foods, (controlled by Innscor), subsequently used to produce and distribute bread (Bakers Inn), and other products, such as flour, biscuits and stock-feed (distributed by Gain, in turn owned by SSC). The chickens served in Simbisa outlets are produced by Irvines, an associate of Innscor. The list goes on and on.

Whenever an Innscor business is started, it eventually invests in and seeks to control the supply chain which. Some years ago, National Foods was going to sell its packaging unit. What eventually happened was that it was unbundled into a separate company, an executive from the company went to run the business, partly owned by National Foods, and it is now a significant player in the packaging industry in Zimbabwe, and key packing supplier to Innscor businesses.

2. Have a maniacal sense of urgency

Musk insisted on setting unrealistic deadlines even when they weren’t necessary, a trait shared by Steve Jobs from Apple. Meta have “moving quickly” as one of their core values.  

Entrepreneurs I have worked with have a similar philosophy of working to unrealistic timelines and espousing a sense of urgency in their business. Because they realise that time is money, and they need to move quickly in order to finish projects, generate cash and reinvest that cash. In building construction projects, the sooner a building is completed, the sooner it can generate cash-flows which can then be reinvested in future buildings.

But there is a fine line here, between setting unrealistic deadlines which can demoralize and demotivate workers if they believe it cannot be achieved, and setting realistic, but “stretch” timelines that push teams to complete goals far ahead of schedule.

3. Learn by failing

Musk had an iterative approach to design – rockets and engines would be quickly prototyped, tested, blown up, revised, and tried again until something worked. Move fast, blow things up, repeat. The same philosophy was applied to Tesla cars.

Innscor have a philosophy of “speeding tickets rather than parking fines”. In other words, it is fine to make mistakes by taking action, where you can learn from the mistakes, rather than to make mistakes of inaction.

Companies with healthy cultures have a culture of it being acceptable to make mistakes, but unacceptable to not learn from them.

4. Improvise

One of Elon’s principles is that he believes every situation is manageable, even when problems occur. He was always pushing his engineers to try makeshift solutions. One night when lightning struck a rocket test stand, it knocked out the pressurization system for the fuel tank, that led to a bulge and rip in one of the tank’s membranes. Isaacson writes that a normal company would have replaced the tanks, taking months and costing money to resolve the issue. Musk’s approach was to just fix it, by taking some hammers, and pounding the metal back out, weld it and keep going.

Ray Dalio has a similar philosophy of designing improvements to the “machine” to get around the problems. His central philosophy of evolution, both in personal and professional situations, is to set audacious goals, accept there will be failures on the way, learn the principles of why the failure took place, improve the process, and continue to set more audacious goals.