Musk saved Tesla and created ‘the algorithm’ to guide production and administration

Elon Musk’s darkest, most painful period also produced one of his greatest achievements.

Tesla’s Model 3 sedan, a more affordably priced electric vehicle than previous Tesla models, was released in July 2017. To stay in business, Musk had determined that production of 5,000 Model 3 sedans per week was required. The company had one year to figure out how to achieve this goal. Since he didn’t have time to construct additional assembly lines, he had to find methods to increase the efficiency of the existing ones. According to a new book by Walter Isaacson, published earlier this week, Musk used this chaos as inspiration for what became known as “the algorithm” —five rules for redesigning Tesla and rescuing the company from financial collapse.

“concentrated pain” and a failing business
Musk’s personal life (Isaacson recounts “foul moods that led to catatonic trances and depressive paralysis”) and business life (Tesla was $2.2 billion in the red) were both rocky over around a year, from the summer of 2017 to the fall of 2018.

Musk tells his biographer in a new book out this week, “That was the time of the most concentrated pain I’ve ever had.” Eighteen long months of nonstop madness. The agony was beyond description.

At work, he was confronted by short sellers, or investors who wagered the company’s stock price would fall because they didn’t feel his production targets were realistic. He had just broken up with actress Amber Heard, whom he “really loved,” and received some distressing news about his father outside of work. Errol Musk fathered a child by the woman he’d raised as a stepdaughter. When things reached a head, Musk publicly questioned whether or not he was bipolar on Twitter (before he bought the platform).

He had not yet achieved the status of being one of the wealthiest and most well-known individuals in the world. Musk was an extremely wealthy but unpredictable executive who had been fired from PayPal. He would only receive his enormous riches from Tesla’s unconventional compensation plan until the firm was worth $650 billion. If not, he’d end up with nothing at all.

Tesla, like Musk, did not enjoy the same level of prominence as it does today. It had advanced technology in 2017, but many investors were dissatisfied because they believed the company had overstated its manufacturing potential. If Tesla misses the deadline Musk has set, the company’s price could plummet because he had previously assured investors that production was on track. Some large investors were shorting Tesla shares on the belief that Musk couldn’t lead the company to financial success by producing enough automobiles to satisfy demand. Musk told Isaacson that short sellers are “leeches on the neck of business.”

Back in August of 2018, Musk wrote a blog post in which he proclaimed Tesla “the most shorted stock in history.” A more accurate estimate of the size of the short position in Tesla shares would be the $13 billion reported by S&P Global Market Intelligence. Profits for short sellers who wagered on Tesla were as large as $1 billion in a single day in August 2018, while losses were as high as $1.3 billion in paper losses.

Musk used one of the few coping mechanisms he was familiar with to deal with the strain of the threat of losing his automaker and a problematic personal situation. If you’re feeling down, “in times of emotional darkness, Musk throws himself into his work, maniacally,” as Isaacson puts it, you should focus on your work.

Musk began working in the plant to determine every aspect of Tesla’s assembly lines that could be sped up to assist the company in accomplishing the production goal he had set for it. As a result, he came up with “the algorithm,” which became Tesla’s unofficial motto.

Tesla’s jumbled thoughts give birth to the algorithm

After receiving one of Musk’s extremely challenging, possibly impossible directives, Musk expects his firm’s staff to labor around the clock as he does. These concentrated efforts are what Musk refers to as “surges.” As Isaacson puts it, Musk sees himself as a military general “personally surging into the breach with an all-hands-on-deck cadre of fellow fanatics.”

This is when Musk fine-tuned “the algorithm,” increasing output at both the Nevada gigafactory and the California facility. To Musk’s shame, he says he kept saying it to an “annoying degree.” In those moments, “his executives would move their lips and mouth the words like they would chant the liturgy along with their priest,” as described by Isaacson.

Step-by-step, the algorithm prompts workers to investigate everything from safety rules to the amount of bolts in a car part to the topic of whether or not a certain operation should be automated.

Throughout, Musk walked the factory floors, checking on assembly lines and fixing issues as they arose. He once modified the coding of a machine that installs bolts on the fly when he requested it work more quickly. After adjusting the machine’s settings to make it run more than three times quicker, Isaacson claims that he told the staff that “Factory settings are always idiotic.”

During this time, Musk also tried several unconventional strategies, with varying degrees of success. Rather than relying on human labor initially and then automating where practicable, he insisted on constructing Tesla’s Fremont factory with machines to automate every task from the get-go. After that failed miserably, he changed his mind and set his sights on getting rid of any robots he deemed too sluggish. He saw that there wasn’t enough room for assembly lines on the factory floor, so he had a huge tent set up in the parking lot.

Tesla predicted that by the end of the second quarter of 2018, it would have produced a record number of Model 3s.

Tesla shares rise despite concerns over the company’s workplace.

Musk became the wealthiest person on the planet after the recession helped stabilize Tesla. According to NASDAQ data from August, the value of his Tesla shares was close to $90 billion. Since Tesla introduced the first Model 3 in July 2017, the stock price has increased 1,181%, from $20.88 to Tuesday’s closing price of $267.48. The current valuation of Tesla is $838 billion.

However, Musk’s reckless approach cost real lives. The book claims that Tesla’s injury rate is 30% higher than the industry average. CNBC stated that during the recent California wildfires, employees said they were forced to work in unhealthy levels of smoke and that they were allegedly pressured to take shortcuts such as using electrical tape to cover fractures in plastic brackets that support electrical elements inside the car. The firm has refuted the allegations.

Authorities looked at Tesla’s skyrocketing stock price and some of Musk’s strategies to maintain it high. Musk and Tesla paid $40 million in September 2018 to resolve a Securities and Exchange Commission lawsuit that claimed he manipulated Tesla shares by tweeting that he was taking the business private. He was also removed from his position as chairman of the board as part of the settlement, though he retained his position as CEO.

Musk went all-in again recently when he purchased X, formerly Twitter. He allegedly sent out an email to his staff shortly after his acquisition last year, requesting “long hours at high intensity.” Ad revenue is down and there aren’t many people paying for X’s services, so the early returns aren’t great. However, the quirky CEO may be facing a similar “chips-down” moment as analysts and critics did when they first doubted Tesla.

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