Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. He there,
Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland.
Speaker 1: I'm an executive producer with iHeart Podcasts and How the
Speaker 1: tech are You? So anyone who listens to this show
Speaker 1: a lot anyway knows that I tend to dunk on
Speaker 1: Elon Musk quite a bit. But it's okay because he
Speaker 1: can take it. He's consistently in the running to be
Speaker 1: the richest person in the world. Last I checked, he
Speaker 1: was number three, behind lvmh CEO Bernard Arnault and Amazon
Speaker 1: founder Jeff Bezos. But anyone who can count their wealth
Speaker 1: using the designation billions is pretty well insulated from a
Speaker 1: lowly podcaster's opinions, and I believe in punching up, ain't
Speaker 1: much higher to go than the third richest person in
Speaker 1: the world. Now, I would argue there are many valid
Speaker 1: reasons to criticize Elon Musk. While I spend a lot
Speaker 1: of time lamenting his choices over at X, you know,
Speaker 1: the platform formerly known as Twitter. Shareholders in his electric
Speaker 1: vehicle company Tesla have other axes to grind. So I
Speaker 1: thought I would do an episode about the origins of
Speaker 1: Tesla because for the first you know year, really they
Speaker 1: didn't involve Musk at all. He was not, despite his
Speaker 1: own designations, a co founder of Tesla, depending upon how
Speaker 1: you want to look at it, And this might come
Speaker 1: as a surprise to you because often either his his
Speaker 1: fan base, or Musk himself will portray himself as kind
Speaker 1: of like the founder of Tesla. But I'm sure a
Speaker 1: lot of you already know that Elon Musk did not
Speaker 1: create the company Tesla. For those who don't know that,
Speaker 1: let's dive into the origins of this company and the
Speaker 1: people who did create it. But first we actually need
Speaker 1: to go back before the company existed at all and
Speaker 1: talk about how the US state of California got the
Speaker 1: ball rolling with some regulations. So California is a very
Speaker 1: large state and it has a huge population, the biggest
Speaker 1: in the United States in fact, with around thirty nine
Speaker 1: million people. Now, lots of those people have cars, and
Speaker 1: many of those folks have fairly long commutes to work
Speaker 1: or to school or whatever. Plus there's all that driving
Speaker 1: to the beach, which, as the documentary series My Crazy
Speaker 1: ex Girlfriend tells me, takes two hours three if there's traffic.
Speaker 1: Well in the twentieth century. All that driving was taking
Speaker 1: a toll on the state's air quality. Right. Yeah, these
Speaker 1: internal combustion vehicles putting out emissions and smog was a
Speaker 1: real issue. In fact, from what I read, it wasn't
Speaker 1: unusual in the nineteen fifties to step outside in Los
Speaker 1: Angeles and not be able to see the tops of
Speaker 1: some of the buildings due to air pollution. Emissions like
Speaker 1: nitrogen oxides and hydrocarbon gas is were the chief culprit
Speaker 1: of the visible stuff. Plus there were other gases that
Speaker 1: were emitted by gas guzzling engines that would pose a
Speaker 1: health risk to citizens. Now, the US as a whole
Speaker 1: passed air quality laws, beginning in nineteen fifty five with
Speaker 1: the Air Pollution Control Act and then in nineteen sixty
Speaker 1: three with the Clean Air Act. But California would need
Speaker 1: to do more to keep air pollution in check, and
Speaker 1: so California's laws go above and beyond what the federal
Speaker 1: regulations require. In the nineteen seventies, California state agencies began
Speaker 1: to really take action. This was right around the time
Speaker 1: there was also a massive oil crisis as well, something
Speaker 1: that would drive home the need for America to develop
Speaker 1: technologies that would either burn fuel far more efficiently or
Speaker 1: preferably rely on some other means to power things like automobiles.
Speaker 1: Now I'm skipping over a lot of details ranging from
Speaker 1: global politics to matters of national security on this because
Speaker 1: we only have so much time, and I've talked about
Speaker 1: it in other episodes too. But anyway, when we get
Speaker 1: up to nineteen ninety, California started to make more demanding
Speaker 1: requirements of auto manufacturers. State regulators with the California Air
Speaker 1: Resources Board or carb CARB passed a requirement called the
Speaker 1: Low Emission Vehicle Regulation. The rules meant that manufacturers had
Speaker 1: to produce light and medium duty vehicles with much lower
Speaker 1: emissions starting in nineteen ninety four. Further, a percentage of
Speaker 1: the vehicles that the companies produced and sold in California
Speaker 1: would have to be zero emission vehicles. So initially, when
Speaker 1: they first passed this in nineteen ninety, that percentage was
Speaker 1: just two percent of all the vehicles that they sold
Speaker 1: in the state. If manufacturers didn't comply, they wouldn't be
Speaker 1: allowed to sell vehicles in California, though more about that
Speaker 1: in a bit, And since California is the most populous
Speaker 1: state in the country, and because so so many people
Speaker 1: in California drive there, that's a market that a car
Speaker 1: company cannot afford to lose. So companies had to figure
Speaker 1: out a way to comply with these regulations. This brings
Speaker 1: us to General Motors or GM. It was one of
Speaker 1: several companies working on complying with California's demands, and in
Speaker 1: nineteen ninety, GM showed off a prototype electric powered concept
Speaker 1: car called the Impact. Funny name for a car like
Speaker 1: I guess they had their reasons. I guess they were
Speaker 1: thinking it was going to make an impact because it's
Speaker 1: an electric vehicle sports car. But when I think of
Speaker 1: a car and I hear the word impact, I think
Speaker 1: things have not turned out the way you had anticipated. Anyway.
Speaker 1: This prototype, in turn, drew inspiration from the work that
Speaker 1: General Motors had done with other companies as part of
Speaker 1: the World Solar Challenge. Now, as that name implies, this
Speaker 1: challenge was a race between solar powered cars. GM collaborated
Speaker 1: to design and build a car called the sun Racer.
Speaker 1: Racer in this case is are a y cer because
Speaker 1: sun rays and driver John Harvey would use this Sunracer
Speaker 1: to win the whole ding dang derned thing. Anyway, electric
Speaker 1: cars were nothing new in nineteen ninety In fact, they
Speaker 1: were more than a century old at this point. In fact,
Speaker 1: electric cars pre date gasoline powered vehicles. Making an electric
Speaker 1: motor powerful enough to propel a vehicle wasn't really the
Speaker 1: biggest problem. Battery technology was a really huge challenge. But anyway,
Speaker 1: The Impact was a little two seater coup that GM
Speaker 1: introduced at the nineteen ninety La Auto Show, kind of
Speaker 1: as a proof of concept for a modern EV. It
Speaker 1: used thirty two lead acid batteries for power rechargeable batteries.
Speaker 1: The Impact would serve as inspiration for a car that
Speaker 1: GM would actually put into mass production a few years later.
Speaker 1: This one was called the EV one. EV of course,
Speaker 1: stands for electric vehicle. The story of the EV one's
Speaker 1: development and production is really interesting, but obviously I'll leave
Speaker 1: that for a different episode because this is really more
Speaker 1: about Tesla. So the important bit for our story is
Speaker 1: that GM made these cars available only for lease, not
Speaker 1: for purchase. You could not buy one, you could only
Speaker 1: lease it, and that started in nineteen ninety six. So
Speaker 1: while GM made a few production runs of this vehicle,
Speaker 1: the company owned all of them the entire time. And
Speaker 1: only leased them to folks in a few states, including
Speaker 1: my home state of Georgia, we had some of these cars.
Speaker 1: The EV one had a limited driving range. Reportedly, according
Speaker 1: to some reviews I read, this was made more confusing
Speaker 1: by the car's alert system, which would sometimes underestimate how
Speaker 1: much further the remaining battery charge would be able to
Speaker 1: take a driver before needing a lengthy recharge session. That's
Speaker 1: not great if your car is telling you, hey, I'm
Speaker 1: going to run out of juice in twenty miles, and
Speaker 1: then fifteen miles later, it's still saying twenty miles that
Speaker 1: just this is the source of a lot of anxiety.
Speaker 1: I would argue, actually, that's one of the big hurdles
Speaker 1: for EV's in general, is this anxiety about driving range.
Speaker 1: But I read a few reviews of the EV one
Speaker 1: experience and it sounded pretty much like what you would
Speaker 1: expect an early modern electric vehicle with predictable limitations. It
Speaker 1: wasn't bad necessarily, but it was the type of car
Speaker 1: that would be suitable only for a subset of auto owners,
Speaker 1: primarily people who would need a vehicle for commuting to
Speaker 1: and from work and for short trips, but nothing else.
Speaker 1: GM ended the EV one program in two thousand and one.
Speaker 1: Presumably the company did this because it was hard to
Speaker 1: make a profit from this particular project, and the company
Speaker 1: viewed electric vehicles as a niche that just wouldn't provide
Speaker 1: enough sales to justify the cost of manufacturing. But the
Speaker 1: program inspired a couple of other entrepreneurs to launch an
Speaker 1: upstart car company with the goal of making electric vehicles
Speaker 1: that folks would actually be able to buy. Now, neither
Speaker 1: of those entrepren we elon Musk. Rather, they were a
Speaker 1: pair of engineers, one named Martin Eberhard and the other
Speaker 1: Mark Tarpening. Now I'll start off by talking about Eberhart. First.
Speaker 1: I absolutely love the title he has given himself on LinkedIn,
Speaker 1: which is occasional visionary entrepreneur engineer, which is great. And
Speaker 1: he also lists his current occupation as enjoying light. So
Speaker 1: I would say that Eberhard is setting a heck of
Speaker 1: an example anyway. He attended college at the University of
Speaker 1: Illinois Urbana Champaigne, where he earned both undergraduate and graduate
Speaker 1: degrees in electrical engineering. The first job that he lists
Speaker 1: on LinkedIn dates to nineteen eighty three, where he served
Speaker 1: as an engineer for a company called Weiss Technology. This
Speaker 1: was a young company in the computer hardware space, and
Speaker 1: while Eberhard was there, was chiefly known for the production
Speaker 1: of computer terminals and personal computers. Eberhard worked there for
Speaker 1: four years, then he promptly began his entrepreneurial phase. He
Speaker 1: co founded a company called Network Computing Devices, Incorporated in
Speaker 1: nineteen eighty seven, and a decade later he would co
Speaker 1: found Nouveaux Media Incorporated, a company that made ebook readers.
Speaker 1: His co founder would end up being Mark Tarpining, whom
Speaker 1: we'll chat about more in just a moment. In an interview,
Speaker 1: Eberhard revealed that he first got interested in making a
Speaker 1: new electric vehicle right around the time GM stopped making them.
Speaker 1: Several factors converged simultaneously to cause this, so, for one thing,
Speaker 1: in nineteen ninety eight, California began to make changes to
Speaker 1: its zero emissions vehicle requirements. The state loosened the rules
Speaker 1: a touch and allowed car manufacturers to earn partial credits
Speaker 1: toward these requirements by selling low emission vehicles. Eberhardt saw
Speaker 1: this as quote unquote gutting the zero emissions rules, and
Speaker 1: it definitely meant that companies like GM had an alternative
Speaker 1: to producing electric or fuel cell vehicles, so instead of
Speaker 1: building zero emission vehicles, they could focus on low emission
Speaker 1: vehicles and meet the requirements that way. That really upset
Speaker 1: Eberhart and would serve as the genesis for the founding
Speaker 1: of Tesla. But before we get to that, let's turn
Speaker 1: to the second founder, Mark Tarpaning. Tarpaning got an undergraduate
Speaker 1: degree in computer science from the University of California, Berkeley.
Speaker 1: He met Eberhart, though I don't know the details of
Speaker 1: how they met, I just know that they met at
Speaker 1: some point, and the first credit he lists on his
Speaker 1: LinkedIn profile is essentially the co founding of Nuvo Media
Speaker 1: with Eberhart. But before that, he worked for a company
Speaker 1: called Textron tex Tron, As that name somewhat implies, Textron
Speaker 1: started off as a textiles company. In fact, its original
Speaker 1: name was the Special Yarns Corporation. These days it does
Speaker 1: a whole lot more than just textiles, including some heavy
Speaker 1: duty work in the aerospace and defense industries. So never
Speaker 1: tick off anyone who knits or crochets. I think that's
Speaker 1: the takeaway lesson I have here. Turpening's work required him
Speaker 1: to travel to Saudi Arabia frequently, and he would often
Speaker 1: take books with him, but he lamented how inconvenient it
Speaker 1: was to lug those books around on his frequent travels,
Speaker 1: and that it sure would be nice if he could just,
Speaker 1: you know, use an e book reader instead and carry
Speaker 1: an entire library around without having to deal with the
Speaker 1: weight and the bulk of hard copy books. He had
Speaker 1: already met Eberhart at this point, and the two decided
Speaker 1: to co found Nuvo Media in order to design and
Speaker 1: produce ebook readers. TV Guide in the form of a
Speaker 1: subsidiary called Gemstar, would acquire Nuvau Media three years after
Speaker 1: it was founded. Interestingly, Nuvo Media would also help inspire
Speaker 1: the two till later co found Tesla, as did Eberhard's
Speaker 1: personal life. So what do I mean by Eberhart's personal
Speaker 1: life informing the founding of Tesla. Well, I'll explain that
Speaker 1: in just a moment, but before we get to that,
Speaker 1: let's take a quick break to thank our sponsors. Okay,
Speaker 1: before the break, I mentioned that Eberhard was having something
Speaker 1: happened in his personal life that would end up in
Speaker 1: a way leading to the founding of Tesla, and that's
Speaker 1: something was a divorce. So in an interview he said
Speaker 1: that the divorce is kind of what prompted him to
Speaker 1: look into getting a sports car. He says, that's what
Speaker 1: guys do when they get a divorce, they go and
Speaker 1: they buy a sports car. He was being a little flippant,
Speaker 1: but tarpeting At was also in this interview and seems
Speaker 1: to be through his facial expressions, confirming what Eberhard was saying. However,
Speaker 1: Eberhard wanted this to be a responsible purchase, you know,
Speaker 1: despite the fact that you could argue that it was
Speaker 1: somewhat on a whim. He didn't want to get some
Speaker 1: sort of gas guzzling sports car, and he said that
Speaker 1: most of the sports cars on the market had absolutely
Speaker 1: terrible mileage and the state of California was obviously struggling
Speaker 1: with this infrastructure that had been deeply affected by gas
Speaker 1: guzzling cars for decades. So he was hoping to get
Speaker 1: something that would be a little more environmentally friendly. So
Speaker 1: he had an interest in the EV one from GM,
Speaker 1: but as I mentioned, GM pretty much nuked that program
Speaker 1: from orbit. He couldn't buy an EV one. Eberhard reached
Speaker 1: out to a much smaller almost like a boutique company
Speaker 1: called AC Propulsion. This company, which launched in nineteen ninety two,
Speaker 1: designed stuff like electric drive train systems for electric vehicles,
Speaker 1: and the company had built three tiny little sports cars,
Speaker 1: almost like an electric go kart. That's how small these
Speaker 1: things were. They're bigger than a go kart, but not
Speaker 1: by much. They called them the Zero t ZrO and
Speaker 1: it made headlines and it was founded by an engineer
Speaker 1: who had actually worked on GM's EV one back in
Speaker 1: the day. Eberhard was hoping that AC Propulsion would move
Speaker 1: the Zero vehicle into production, because again they had only
Speaker 1: ever built three of these things, but AC Propulsion turned
Speaker 1: him down. Instead, the company opted to focus on more
Speaker 1: practical vehicles, not sports cars. One issue that Eberhard noted
Speaker 1: was that the Zero was relying on older battery technology
Speaker 1: like the Impact of nineteen ninety That Zero was using
Speaker 1: lead acid batteries. At Nuvau Media, Eberhard and Tarpening initially
Speaker 1: used nickel metal hydride batteries for the first generation of
Speaker 1: their e readers, but then they switched to lithium ion
Speaker 1: batteries for the second generation, and Eberhard suspected that lithium
Speaker 1: ion battery technology could be a more viable future for
Speaker 1: electric vehicles. So he and Tarpening discussed the idea and
Speaker 1: ultimately this is what would lead them to cofound Tesla
Speaker 1: Motors around two thousand and two two thousand and three.
Speaker 1: Now this was a pretty big decision. Tarpaning felt confident
Speaker 1: that they would be able to make a coumpmpany that
Speaker 1: could solve the issues of designing the computer and electronic
Speaker 1: systems that would actually provide propulsion. Essentially, he said that
Speaker 1: he was pretty sure a Silicon Valleys startup company could
Speaker 1: make the stuff that would make an electric vehicle go
Speaker 1: that that part wouldn't be the hard part. He was
Speaker 1: far less certain about the ability to make a car
Speaker 1: that would actually go around all these components, like the
Speaker 1: actual car thing, the chassis, the body of the car,
Speaker 1: all of that. That was the part where he was like,
Speaker 1: I don't know if we can do the mechanical systems.
Speaker 1: We can definitely do the electronic ones and computer systems,
Speaker 1: but I don't know about the mechanical ones. So how
Speaker 1: do you go about convincing investors to put money in
Speaker 1: your idea when you have no record, nothing to point
Speaker 1: at to say we know how to make vehicles. You
Speaker 1: might say, hey, we know how to make computer systems
Speaker 1: and we know how to work with batteries and stuff,
Speaker 1: but if you can't point to cars, that's kind of
Speaker 1: a non starter. There's gonna be a lot of car
Speaker 1: puns in this episode. And I swear as I was
Speaker 1: writing it, I was like, this is a car pun
Speaker 1: and I didn't even intend it. I just left them in. Anyway,
Speaker 1: our two protagonists would need to secure funding for their
Speaker 1: fledgling company, and that meant they had to seek out investors,
Speaker 1: and that involved a lot of conversations with movers and
Speaker 1: shakers and walk in wallets, and around this time they
Speaker 1: hired employee number three. Employee number three was a guy
Speaker 1: named Ian Wright, not the British soccer player Ian Wright,
Speaker 1: but rather an engineer who had worked as a director
Speaker 1: for Cisco Systems as well as a CTO for all
Speaker 1: Tomar Networks, among other things. And one early decision for
Speaker 1: Eberhart and company was the type of vehicle that they
Speaker 1: wanted to focus on first. So the idea to make
Speaker 1: that ev sports car that Eberhart had wanted in the
Speaker 1: first place kind of became the driving force for Tesla. Again.
Speaker 1: More unintentional Hart puns not to satisfy Eberhart's desire to
Speaker 1: have another sports car. That's not the reason why they
Speaker 1: wanted to go this way, or at least not the
Speaker 1: main one. Instead, it was because the founders felt that
Speaker 1: a sports car would attract early adopters, people with deep
Speaker 1: pockets who wanted something cool like an electric vehicle sports car.
Speaker 1: They knew that the first Tesla vehicles were going to
Speaker 1: be expensive. That was going to be a given. It's
Speaker 1: just it was going to be expensive to make them,
Speaker 1: and so they'd have to be expensive to purchase. A
Speaker 1: company couldn't exist otherwise. Hardware often brand new hardware typically
Speaker 1: is really expensive, like consumer hardware if you were around
Speaker 1: whenever any new technology launched, like Apple Vision Pro is
Speaker 1: a pretty good one. I mean, there are other mixed
Speaker 1: reality headsets out there, but Apple's Vision Pro headsets are
Speaker 1: thirty five hundred dollars to start off. They get more
Speaker 1: expensive from there. That's largely because of all the money
Speaker 1: that went into R and D and manufacturing companies want
Speaker 1: to recapture that stuff. And it's only after a new
Speaker 1: technology reaches a certain level of a adoption that a
Speaker 1: company can switch into sort of a mass production mode
Speaker 1: and bring the costs of manufacturing down, which in turn
Speaker 1: can bring the cost of a product down. But at
Speaker 1: the beginning, it's going to be expensive, So putting out
Speaker 1: a sensible hatchback electric vehicle probably wasn't going to cut it.
Speaker 1: No one would be willing to pay what it was
Speaker 1: going to cost. So the team committed to designing and
Speaker 1: producing a sports car, and they decided ultimately they would
Speaker 1: call it the Tesla Roadster. Now that whole process would
Speaker 1: take five years. The team had a full car to
Speaker 1: design in that five years, and Eberhard and Tarpeening would
Speaker 1: start off by attending an La auto show and they
Speaker 1: met with representatives from Lotus. So Lotus is a car
Speaker 1: company in England. It traces its history back to nineteen
Speaker 1: fifty two. And the Tesla engineers had discovered that it's
Speaker 1: not unusual in auto manufacturing to outsource a lot of
Speaker 1: the stuff that you use to build your cars. You know,
Speaker 1: that might be things like latches or safety equipment, or
Speaker 1: all sorts of different things, and it meant that they
Speaker 1: didn't have to make everything themselves. But they didn't really
Speaker 1: know how to go about creating those relationships with suppliers,
Speaker 1: and so they figured, we'll go to the LA Auto Show.
Speaker 1: We'll see if we can meet with some of the
Speaker 1: representatives from the various car companies and see if we
Speaker 1: can start to form a relationship that will help us
Speaker 1: in our path to making this sports car. So again
Speaker 1: they met with these folks from Lotus and they kind
Speaker 1: of gave an early pitch of what they were trying
Speaker 1: to do to the company. You know, they're like, well,
Speaker 1: why should we reinvent the wheel when we can work
Speaker 1: with a company like Lotus that has already done all this. Plus,
Speaker 1: you know a roadster has to have like four wheels.
Speaker 1: That's way too much inventing. So, according to Tarpaning and Eberhard,
Speaker 1: the folks at Lotus said that the pitch was interesting,
Speaker 1: but they should all have a full meeting about this
Speaker 1: back in England to discuss things further back at Lotus's headquarters.
Speaker 1: Tarpaning cleverly pointed out that this is a great way
Speaker 1: for Lotus to make sure that the pair were actually
Speaker 1: serious about their business venture, because flying to another country
Speaker 1: in order to have a sales pitch meeting, that's a
Speaker 1: big request and a lot of startup folks would potentially
Speaker 1: bulk at that, but by showing up to actually follow
Speaker 1: through on a pitch, that showed that Eberhard and Tarpaning
Speaker 1: were committed to this idea. So they went to England
Speaker 1: and the reps from Lotus said that if the team
Speaker 1: could secure sufficient funding, Lotus might partner with them to
Speaker 1: help with the process of building out an actual vehicle.
Speaker 1: This gave Tesla an early advantage because it meant that
Speaker 1: they could go to potential investors, they could lay out
Speaker 1: their plan and they could even indicate that Lotus was
Speaker 1: a potential partner for them, and that could help build
Speaker 1: confidence in the company and the project and to more
Speaker 1: investors to actually pour some serious money into the operation.
Speaker 1: They could say, yeah, we don't know anything about building
Speaker 1: a car. We know how to build all the electronic systems,
Speaker 1: but our partner is Lotus, and that's a car company
Speaker 1: with more than half a century's worth of experience in
Speaker 1: this space. So that was a big help. When they
Speaker 1: walked into different boardrooms with venture captalysts and were making
Speaker 1: their pitches, well, one of those early conversations was with
Speaker 1: Elon Musk, and Elon Musk was already into his own
Speaker 1: entrepreneurial phase where he was using his already considerable wealth
Speaker 1: to get involved in a lot of different things, and
Speaker 1: he got excited about this idea from Eberhart and Tarpaning.
Speaker 1: And in fact, this was not their first meeting with Musk.
Speaker 1: They had actually met him several years earlier. They were
Speaker 1: founding members of the Mars Society, which is a nonprofit
Speaker 1: organization that advocates for human astronauts to go to Mars.
Speaker 1: Dusk obviously has a very deep interest in this as well,
Speaker 1: and years before he would go on to found SpaceX,
Speaker 1: Musk attended a conference by the Mars Society, and Eberhard
Speaker 1: and Tarpening attended that conference and they went to the talk,
Speaker 1: and after the talk they approached Musk and they talked
Speaker 1: to him for a while. But this was not the
Speaker 1: point where they got him on board as an investor
Speaker 1: for Tesla. They did meet with him again once they
Speaker 1: encountered some other issues with potential investors. They kept running
Speaker 1: into issues where folks just wouldn't commit, and it was
Speaker 1: growing very frustrating. Meanwhile, AC Propulsion, that company I talked
Speaker 1: about earlier that made the relatively small electric sports card
Speaker 1: the zero. They had been trying to court Musk, but
Speaker 1: they gave up on their efforts. The two parties just
Speaker 1: didn't see eye to eye on anything. But this gave
Speaker 1: Eberhard and Tarpening the oppertunity to reach out to Musk instead,
Speaker 1: And at this point, Musk was just around founding SpaceX,
Speaker 1: and so he invited the pair of Tesla engineers to
Speaker 1: his startup HQ. Tarpining then said in an interview that
Speaker 1: pitching to Musk was very different from other venture capitalists
Speaker 1: because most of the folks that they had encountered had
Speaker 1: said that their concept for an electric sports car was
Speaker 1: just bonkers, that it would never work. They couldn't even
Speaker 1: see how you could build it, So they would get
Speaker 1: shut out of a lot of those venture capitalists conversations
Speaker 1: pretty early. But Elon Musk was in the middle of
Speaker 1: launching a startup that was dedicating its efforts toward the
Speaker 1: space industry. And for a startup to be going into
Speaker 1: like creating private space craft, that's such an audacious goal,
Speaker 1: it's such a hard thing to do that, by comparison,
Speaker 1: a company trying to make an electric sports car seemed
Speaker 1: absolutely mundane. So Elon Musk is like, well, of course
Speaker 1: he can do that. I'm trying to go to so
Speaker 1: building an electric car that doesn't seem like that's that
Speaker 1: big a deal. So the two told Musk that their
Speaker 1: plan was to use the sports car as a way
Speaker 1: to convince people that electric vehicles don't need to be tiny,
Speaker 1: they don't need to be ugly. They could be stylish
Speaker 1: and sexy and fast and impressive, as well as practical
Speaker 1: and environmentally friendly, and that this would give Tesla the
Speaker 1: momentum to follow a roadmap that would involve introducing other
Speaker 1: types of cars, including ones more practical for families and such.
Speaker 1: So in April two thousand and four, Musk initially contributed
Speaker 1: around six and a half million dollars of his own
Speaker 1: money as an investment into Tesla in its series A
Speaker 1: round of funding. Now, I've done episodes about funding rounds before,
Speaker 1: but generally speaking, you typically have seed investments early on.
Speaker 1: This is just to get things even moving at all,
Speaker 1: and then you have rounds of fundraising where you get
Speaker 1: investors to put money into a project, and a company
Speaker 1: might have several of these before it ever has any
Speaker 1: other means of generating revenue. Like that's not revenue obviously,
Speaker 1: but generating money so that they can operate because obviously
Speaker 1: otherwise you would just run out of cash and the
Speaker 1: whole thing would go bankrupt. So Musk's contribution was the
Speaker 1: vast majority of the first round of investment, and it
Speaker 1: was around another million dollars provided by other investors, but
Speaker 1: the primary investor was Musk. So Elon Musk became the
Speaker 1: chairman of the board of directors for Tesla. Martin Eberhard
Speaker 1: was named CEO of the company, and the engineers got
Speaker 1: to work designing the roadsters systems. Now, as they would
Speaker 1: say in later interviews, everything was difficult. They had to
Speaker 1: invent all the computer and electronic systems from scratch. There
Speaker 1: was no model to follow. They had done some rough
Speaker 1: estimations and concluded that they should be able to actually
Speaker 1: do what they wanted to do from a purely technical standpoint, like,
Speaker 1: the amount of electricity they could generate using the battery
Speaker 1: packs should be sufficient for running the car. The battery
Speaker 1: packs shouldn't be too large or heavy or bulky to
Speaker 1: impact the design or operation of the vehicle. Right. They
Speaker 1: did all the math to make sure that the approach
Speaker 1: they were going to take was a practical one, but
Speaker 1: that was just math and hypotheticals like actually making the
Speaker 1: physical things. That's got its own set of challenges. So
Speaker 1: to bring their concept to life would take many hours,
Speaker 1: in fact, years of hard work. Okay, we're going to
Speaker 1: take another quick break. When we come back, i'll talk
Speaker 1: more about the early years at Tesla. We're back. So
Speaker 1: while the engineers are actually working on figuring out the
Speaker 1: systems for Tesla, Musk was helping in the efforts to
Speaker 1: secure more rounds of funding. Ultimately he would raise more
Speaker 1: than one hundred million dollars in multiple rounds. In those
Speaker 1: early years, Musk himself contributed millions more dollars in investments,
Speaker 1: like when one of his other investments would pay off,
Speaker 1: he would invest some of that back into Tesla. So
Speaker 1: the already wealthy Musk was securing a growing amount of
Speaker 1: equity in Tesla and that would seriously pay off down
Speaker 1: the road, so to speak. So one early technical challenge
Speaker 1: that the engineers faced had to do with battery safety.
Speaker 1: This was not something that they had anticipated, but in
Speaker 1: the mid two thousands, in that first decade, lithium ion
Speaker 1: batteries were starting to make the news due to some
Speaker 1: spectacular and dangerous failures involving Dell laptops. There were stories
Speaker 1: of Dell laptop batteries failing and then entering into thermal runaway.
Speaker 1: That's where a battery begins to overheat and the cycle
Speaker 1: perpetuates itself, which leads to battery failure, and this can
Speaker 1: include combustion or even explosions. So this convinced the Tesla
Speaker 1: team that they needed to test their own lithium ion
Speaker 1: battery cells for thermal runaway. So a battery pack consists
Speaker 1: of many battery cells, right, and they wanted to see
Speaker 1: what would happen if they forced their battery cells into
Speaker 1: a thermal runaway situation. And the way they did this
Speaker 1: was a very diy approach and also what I would
Speaker 1: probably call an error in judgment. So they went to
Speaker 1: Eberhard's house, They dug a hole, they put a battery
Speaker 1: cell in the hole, They weighed down the battery cell
Speaker 1: with various stuff, and then they pumped enough juice into
Speaker 1: the battery to force it into thermal runaway. And the
Speaker 1: results were apparently very impressive, not in a good way,
Speaker 1: but in a scary way. However, it did set the
Speaker 1: team on a journey to find out how to design
Speaker 1: the battery cells for the Tesla in such a way
Speaker 1: that should one cell experience thermal runaway, that would not
Speaker 1: then spread to adjoining battery cells. And thus this way
Speaker 1: it could limit the danger of a cell failing it
Speaker 1: would still be dangerous, but not as dangerous as having,
Speaker 1: you know, an entire array of battery cells that are
Speaker 1: arranged in a giant battery pack suddenly going nuclear on you.
Speaker 1: That would be really bad news. So they got to
Speaker 1: work fixing that, and you know, they found engineering ways
Speaker 1: to mitigate the risk, and the team had tons of
Speaker 1: different tasks like this. Everything about designing the Tesla Roadster
Speaker 1: kind of followed that path where they would say, oh,
Speaker 1: the approach we wanted to take, it turns out this
Speaker 1: is not totally reliable. Like sometimes when we build a
Speaker 1: battery pack, the connections don't all work, which means that
Speaker 1: you can't rely on this particular approach for manufacturing, which
Speaker 1: means we can't do that right because if one out
Speaker 1: of every four or five of your battery packs doesn't
Speaker 1: work because the welding contacts aren't right, that's a deal breaker.
Speaker 1: So they had to keep innovating and finding new ways
Speaker 1: to do things in order to make a system that
Speaker 1: was actually workable. So beyond all that, they had to
Speaker 1: figure out how to cool the system down, they needed
Speaker 1: to be able to insulate it. Not just cool it down,
Speaker 1: but also insulate it because electric batteries can take a
Speaker 1: really long time to ramp up in colder temperatures, and
Speaker 1: presumably at least some of the folks who wanted an
Speaker 1: electric sports car would be driving them in places that
Speaker 1: could get a bit more chilly than central California, so
Speaker 1: they needed to figure that stuff out too, And the
Speaker 1: work that Tesla engineers did in battery technology would go
Speaker 1: on to become essentially the standard for much of the
Speaker 1: automotive industry that was working in evs later on. The
Speaker 1: pioneers at Tesla created dependable, replicable methodologies when none existed before.
Speaker 1: The company was hard at work for the first few
Speaker 1: years just ironing out all these technical challenges. On top
Speaker 1: of that, they faced issues with suppliers for stuff that
Speaker 1: was pretty mundane. It turned out a lot of suppliers
Speaker 1: were skeptical about Tesla, and a lot of them were
Speaker 1: reluctant to do business with this startup. But a car
Speaker 1: needs certain things like seat belts and airbags and other
Speaker 1: standardized equipment that has to meet governmental regulations. So smoothing
Speaker 1: out those relationships with suppliers and getting buy in from
Speaker 1: them took a lot of early work as well. That
Speaker 1: work was starting to pay off, however. In two thousand
Speaker 1: and six, Tesla had a prototype vehicle that they could
Speaker 1: actually show off. So it was still a couple of
Speaker 1: years out from actual production, but this would help establish
Speaker 1: Tesla as a serious brand. They officially unveiled the Tesla
Speaker 1: Roadster at a fairly exclusive event in Santa Monica, California,
Speaker 1: on July nineteenth, two thousand and six. The company was
Speaker 1: still kind of in stealth mode at this point, so
Speaker 1: this wasn't like a huge, huge media splash, but it
Speaker 1: was important for Tesla to get this in front of
Speaker 1: investors and potential investors. So one thing that Tesla did
Speaker 1: that was a little bit unusual is that it began
Speaker 1: to take pre orders for the Tesla Roadster. Now, this
Speaker 1: was a new idea in the auto industry. Tesla invited
Speaker 1: people of means, people who could afford to do this,
Speaker 1: to join what they called the Tesla Roadster Club. This
Speaker 1: was a club that had a hefty membership fee. Essentially,
Speaker 1: it was a waiting list, so premium buyers, those who
Speaker 1: wanted to roadster as quickly as they could get one,
Speaker 1: would have to PLoP down fifty thousand dollars for a
Speaker 1: membership into this club. The patient buyers could dedicate thirty
Speaker 1: grand to becoming a member that would still guarantee them
Speaker 1: the ability to buy a roadster, but only after all
Speaker 1: the premium buyers got theirs first. Tesla said the membership
Speaker 1: fee was fully refundable and that members would get their
Speaker 1: money back the quote day that you confirm your option selections,
Speaker 1: which is three months prior to the production of your
Speaker 1: Tesla Roadster end quote. So essentially this was just a
Speaker 1: reserve on a car. This actually grew out of a
Speaker 1: trend that the team had already noticed amongst some of
Speaker 1: their investors, because some of those folks were calling up
Speaker 1: Tesla and asking to pre pay for a Tesla Roadster
Speaker 1: so that they would get one as soon as they
Speaker 1: were available. The price tag was right around one hundred
Speaker 1: thousand dollars, like it all depended on the options you got,
Speaker 1: but you're talking like one hundred grand. That is a
Speaker 1: lot of money to just PLoP down with Tesla to
Speaker 1: put down on a car that doesn't even really exist yet,
Speaker 1: not as a production model anyway, and yet some investors
Speaker 1: were doing this. This necessitated making a list of pre orders,
Speaker 1: and people got very interested on where on that list
Speaker 1: they fell. Became kind of a status thing with Elon Musk, right,
Speaker 1: they're at the very tippy top. But it was clear
Speaker 1: that folks were really getting excited about the Tesla Roadster,
Speaker 1: and even though it was going to be monstrously exc expensive,
Speaker 1: there was a market for this vehicle. Might have been
Speaker 1: a small market, but it was there. So those were
Speaker 1: nice indicators for the company. But behind the scenes, things
Speaker 1: weren't all on a positive trajectory. For one thing, the
Speaker 1: development cycle for the Roadster was taking longer than initially anticipated.
Speaker 1: Things were going past deadline, things were going way over budget,
Speaker 1: and since this was a privately funded company, it meant
Speaker 1: that Tesla was burning through investor dollars pretty quickly. Elon
Speaker 1: Musk was getting a little bit upset about all this,
Speaker 1: and there are a lot of different takes on what
Speaker 1: would follow. So I'm trying to be objective as I
Speaker 1: can and to stick with the facts as I understand them.
Speaker 1: But you should know that what I'm going to say
Speaker 1: next like, there are multiple variations of this story and
Speaker 1: how it unfolded, and I honestly don't know what the
Speaker 1: full truth is. But Elon Musk, as chairman of the board,
Speaker 1: apparently met with other board members, some of whom had
Speaker 1: just joined Tesla because of, you know, early investments into
Speaker 1: the company, and they decided that Eberhard wasn't cutting out
Speaker 1: as the CEO, and so Musk essentially fires Eberhard tells
Speaker 1: him to step down as CEO. Technically, Eberhard was given
Speaker 1: a different position within the company, but as he would
Speaker 1: later say, he felt he had been quote unquote voted
Speaker 1: off the island, and so in two thousand and seven, Eberhard,
Speaker 1: one of the co founders of the company, leaves Tesla.
Speaker 1: Initially an investor named Michael Marx was named as interim CEO. Now,
Speaker 1: whether or not he was interim CEO from the get
Speaker 1: go or that was something they called him after the fact,
Speaker 1: that's something that some sources dispute. Most of them, though,
Speaker 1: just referred to him as an interim CEO. He would
Speaker 1: serve as CEO of Tesla for a little less than
Speaker 1: a year, and Musk would then replace him with an
Speaker 1: Israeli American entrepreneur named Zev dry So. Drory had worked
Speaker 1: at IBM in their semiconductor division back in the nineteen sixties.
Speaker 1: He then left to work at Fairchild Semiconductor. Then he
Speaker 1: left that in nineteen seventy to build his own semiconductor
Speaker 1: company called Monolithic Memories, and nearly two decades later that
Speaker 1: company would merge with Advanced micro Devices, which is better
Speaker 1: known as AMD. Drury was brought in as the new
Speaker 1: CEO of Tesla in late two thousand and seven, so
Speaker 1: his main job was to lead the company while the
Speaker 1: roadster finally went into production, which happened in two thousand
Speaker 1: and eight. But that was also a year where the
Speaker 1: world went into a financial crisis. The real estate crisis happened.
Speaker 1: There was like this massive blow to the economy. So
Speaker 1: it was a really tough time, especially if you know
Speaker 1: you had been looking forward to buying a one hundred
Speaker 1: thousand dollars sports car that was an electric vehicle, and
Speaker 1: now like there's a giant financial crisis in place. It's tough.
Speaker 1: So Tesla was also affected by this. Reportedly the company
Speaker 1: was running on fumes toward the end of two thousand
Speaker 1: and eight, even with the Roadster finally rolling off production facilities,
Speaker 1: Musk chose to replace Drfy with well with himself. Musk
Speaker 1: became CEO of Tesla in late two thousand and eight.
Speaker 1: Tesla also held a couple of rounds of layoffs to
Speaker 1: reduce operating costs while trying to get to the finish line.
Speaker 1: It sounds like it was a pretty tough time at Tesla,
Speaker 1: and Musk bet big time in the company. If that
Speaker 1: had not worked out, he would have lost a huge
Speaker 1: amount of his wealth. But as it turns out, the
Speaker 1: bet ultimately would pay off, though it would be several
Speaker 1: years later before that became evident, so it wasn't even
Speaker 1: like a sure thing. When the Roadster it came out,
Speaker 1: people were predicting that Tesla was going to fizzle out. Meanwhile,
Speaker 1: the co founder of the company, Mark Tarpening, also left Tesla.
Speaker 1: He left in two thousand and eight, after Eberhard did
Speaker 1: in two thousand and seven. He made this decision before
Speaker 1: the Roadster was actually ready, so he both of the
Speaker 1: co founders of Tesla left the company before the Tesla Roadster,
Speaker 1: the first vehicle produced by the company, was rolling off
Speaker 1: to customers. Both of them had left by then, and
Speaker 1: Tarbaning said his decision was due to the fact that
Speaker 1: his team had worked very hard for five years to
Speaker 1: get the Tesla Roadster into production, and that the company
Speaker 1: was then preparing to transition from the Roadster to developing
Speaker 1: the next car, which was the Model S and Tarpaning
Speaker 1: anticipated that would take another five years, and he decided
Speaker 1: that he would rather step back and spend more time
Speaker 1: with his family. So in two thousand and eight he
Speaker 1: also left Tesla's which would leave Elon Musk as the
Speaker 1: leader of the company, a position that he's held ever since.
Speaker 1: And Tesla is the real reason why Elon Musk is
Speaker 1: a billionaire. He was already rich before he got involved
Speaker 1: with Tesla. He had access to generational wealth before he
Speaker 1: got into business at all. But Tesla, a company he
Speaker 1: didn't build but he did help fund, would put him
Speaker 1: on the billionaire's club. The roadster would have its own
Speaker 1: interesting life once it made out out of production. Not
Speaker 1: all reviews of the Roadster were particularly kind. There was
Speaker 1: a rather infamous top Gear episode that kind of slagged
Speaker 1: off on the Roadster, but the vehicle did help set
Speaker 1: Tesla on the path for viability, if not success. The
Speaker 1: company would encounter other roadblocks along the way. To this day,
Speaker 1: there are still folks who think that one Elon Musk's
Speaker 1: compensation package with Tesla is way too high it's become
Speaker 1: a matter for court systems to get involved. And two
Speaker 1: Elon Musk needs to spend more time focusing on Tesla
Speaker 1: or to create some sort of succession plan so that
Speaker 1: someone else can take over the company instead of wasting
Speaker 1: time on X. Those are the thoughts of various shareholders,
Speaker 1: by the way, which I agree with, But I have
Speaker 1: a personal disdain for Elon Musk, so I am a
Speaker 1: very biased person and I fully admit it. But anyway,
Speaker 1: all of that is a topic for a different time.
Speaker 1: That is the origin story for Tesla. To me, it's
Speaker 1: really fascinating that it's a company where you had a
Speaker 1: couple of engineers get together. They had a very specific
Speaker 1: goal in mind, they were able to secure funding, and
Speaker 1: they were able to pursue that goal, and then both
Speaker 1: of them left the company before the fruition of their
Speaker 1: efforts became an actual thing that people could purchase. That
Speaker 1: to me is kind of a crazy story. And obviously
Speaker 1: there's a lot more to Tesla's story than that. There
Speaker 1: are a lot of elements that we didn't even get
Speaker 1: close to touching on, things like autopilot and full self
Speaker 1: driving and all of that stuff that would require multiple episodes.
Speaker 1: But I just wanted to focus on the beginning of
Speaker 1: this because I thought the story itself was really interesting
Speaker 1: and one that you don't hear very much because I
Speaker 1: think Tesla is so closely associated with Elon Musk. But
Speaker 1: the truth is, for the first several years, Elon Musk
Speaker 1: really had nothing to do with the day to day
Speaker 1: operations of that company. It was only starting around two
Speaker 1: thousand and seven that he began to take a much
Speaker 1: more active approach. I mean, he definitely did a lot
Speaker 1: to help get it funded and to keep it funded.
Speaker 1: So that's not a small thing like that's an accomplishment
Speaker 1: all on its own, and I don't want to take
Speaker 1: anything away from that that I think is absolutely key
Speaker 1: to Tesla's existence, let alone success. So there we have it.
Speaker 1: We'll probably come back to Tesla at some point. I'll
Speaker 1: talk more about its history and its evolution over the years,
Speaker 1: but that's it for the origin story. I hope all
Speaker 1: of you are well, and I'll talk to you again
Speaker 1: really soon. Tech stuff is an iHeartRadio production. For more
Speaker 1: podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or
Speaker 1: wherever you listen to your favorite shows. Yea y