Elon Musk’s manufacturing and management ‘algorithm’

In July 2017, Tesla just launched the Model 3 sedan, which is a more affordable electric car than earlier models. The company had a year to figure out how to produce 5,000 Model 3 sedans per week, a number that Musk calculated would be enough to keep the company afloat. But he didn’t have enough time to build more production lines, so he had to find a way to speed up the ones he already had. The turmoil prompted Musk to come up with what he calls “the algorithm,” five rules for overhauling Tesla and rescuing it from financial trouble, according to a new biography by Walter Isaacson released earlier this week.

• Question every request
• Remove any part of the process that can be removed
• Simplify and optimize
• Speed ​​up cycle times
• automation

The era of ‘concentrated pain’ and troubled companies

For about a year, from the summer of 2017 to the fall of 2018, Musk’s performance deteriorated both personally (Isacson described “bad moods leading to catatonic stupor and depressive paralysis”) and professionally (Tesla’s market value ($2.2 billion) are in trouble. Red).

“It was the most concentrated period of pain I’ve ever experienced,” Musk tells his biographer in a new book published this week. “Eighteen months of relentless madness. It was unbelievably painful.”

At work, he fought around short-sellers, investors who were betting that the company’s stock price would plummet because they believed his manufacturing goals were impossible to achieve.Outside of work, he was also dealing with a breakup from actress Amber Heard, telling her rolling stones A journalist he “very much likes” and disturbing news from his father. Errol Musk got pregnant by the woman he previously raised as a stepdaughter. Things spilled into the public eye, with Musk loudly questioning on Twitter (before he bought the social media platform) whether he suffered from bipolar disorder.

At the time, he had not yet become one of the richest and most famous men in the world. Musk is a wealthy but mercurial executive who has been squeezed out of online payments service PayPal.In fact, his vast wealth is only due to Unorthodox compensation package He only got the money back after Tesla’s valuation reached $650 billion. Otherwise he will gain nothing.

Just as Musk wasn’t in the same position then as he is now, neither was Tesla. In 2017, this is a company promising technologybut many investors believe overcommit Its manufacturing goals. Since Musk has told investors that Tesla is indeed on track to meet its production targets, the company risks a collapse in its stock price if it fails to meet his deadline. Skeptical of Musk, some big investors began shorting Tesla stock, convinced the company couldn’t produce enough cars to become financially viable. Musk told Isaacson that short sellers “are a leech around the neck of the business.”

In an August 2018 blog post, Musk called Tesla “the most shorted stock in history.”While this may be an exaggeration – there are some Tesla short position worth $13 billionThat’s still a lot of money, according to data from S&P Global Market Intelligence.Short sellers betting against Tesla alternately make fortunes (making worth $1 billion a day August 2018) and significant losses (taken Book loss of US$1.3 billion once).

Musk is coping with the stress and complicated personal circumstances of potentially losing his car company in one of the only ways he knows how. “During a period of emotional darkness, Musk threw himself furiously at work,” Isaacson wrote.

To help Tesla meet the ambitious production goals he has set for it, Musk began working at the factory to identify every aspect of its assembly line that could be sped up so the company could meet its production goals. It eventually led to the creation of “the algorithm” that would become his and all Tesla employees’ mantra.

Tesla scramble creates algorithm

Whenever one of Musk’s companies receives an extremely difficult, potentially impossible order, he expects his employees to work around the clock, just like he does. Musk calls these concentrated bursts of energy “surges.” Isaacson said Musk likes to think of himself as a field general, “personally charging into battle with a team of all-out fanatics.”

It was under these circumstances that Musk honed the “algorithm” that boosted production at Tesla’s Gigafactory in Nevada and another factory in Fremont, California. Musk admitted that the extent to which he repeated this practice was “annoying.” When he did this, Isaacson wrote, “his executives would move their lips and mouth the words just as they would chant the liturgy with their priests.”

The algorithm is a step-by-step process that asks employees to question various aspects of a given process — safety regulations, the number of bolts in a car part, whether a task should be automated.

Throughout the process, Musk patrolled the factory floor, personally inspecting the assembly lines and solving problems as they arose. At one point, he asked a machine that installed bolts to move faster, so he rewrote the code on the fly. “Factory setups are always stupid,” Isaacson said, telling his employees after he reconfigured the machine to run more than three times faster.

Musk also took a series of unorthodox approaches during this period, with mixed results. Ignoring traditional manufacturing practices, he insisted on designing Tesla’s Fremont factory with machines that would automate every task from the start, rather than using humans first and then automating where possible. After this became a disaster, he changed direction and began focusing on removing robots that he considered too slow.When he realized there was insufficient capacity on the factory floor, he ordered build a huge tent Accommodate an additional assembly line in the parking lot.

According to Tesla, Tesla will eventually produce a record number of Model 3s in the second quarter of 2018. company.

Tesla shares soar as working conditions come under scrutiny

After the crisis that finally stabilized Tesla, Musk became the richest man in the world.The estimated value of his Tesla shares $90 billion as of August, according to Nasdaq data. The company’s stock price has climbed from $20.88 when Tesla launched the first Model 3 in July 2017 to $267.48 on Tuesday, an increase of 1,181%. Tesla’s current market capitalization is $838 billion.

But Musk’s fanatical strategy clearly comes at a human cost. The book states that Tesla’s injury rate is 30% higher than other companies in the auto industry. Employees also claim they were forced to cut corners and work in smoky air during the California wildfires by using electrical tape to cover cracks in the plastic brackets that hold electrical components inside vehicles. CNBC the report said. The company has denied these claims.

Tesla’s soaring stock price and some of Musk’s tactics to keep it high have drawn scrutiny from regulators. In September 2018, Musk and Tesla paid $40 million to settle SEC lawsuit when he manipulated company stock Tweet He is taking Tesla private. As part of the settlement, he was also forced to step down as chairman of the company but remained as CEO.
Musk has taken the same all-out approach to his projects lately. Acquired X, the former Twitter. Shortly after the acquisition last year, he reportedly sent an email to employees asking them to “work long and intense hours.” So far, the results are mixed; Advertising revenue declines, X’s paid product has very few subscribers. But given that analysts and commentators have similar misgivings about Tesla, this could be a similar crisis moment for the eccentric executive.