To understand where Musk is coming from, you should understand the history
of his first company. It is instructive -- and it is very different from
what you might expect of a short bio of a mega-millionaire netpreneur.
Having grown up in South Africa, the son of a South African engineer and a
Canadian model, Musk left home at 17 to go to Kingston, Ontario, and enroll at Queen's
University. He went without his parents' support, motivated in no small
part by the distasteful prospect of compulsory service in the South African
military. ("Who wants to serve in a fascist army?" Musk asks, reasonably
enough.) He got a scholarship and transferred to the University of
Pennsylvania, where he received an undergraduate business degree from
Wharton, and stayed on another year to finish a second degree in physics.
He went on to a graduate program in physics at Stanford, in
which he stayed exactly two days before dropping out to start Zip2.
Seeing the future in the Net, Musk, a self-taught programmer, started
building the software that Zip2 would use to put newspaper-style ads and
directories on the Web. Musk claimed no special knowledge of or
insight into the future of the media, aside from the simple and fairly obvious
principle that a lot of what newspapers did -- entertainment guides,
classified ads -- worked better online. In 1996, a Silicon Valley venture
capital firm gave him $3.5 million for a little less than half his company
(his brother Kimbal and a friend, Greg Kouri, had joined up along the way).
Several months later, Richard Sorkin, a more experienced manager, joined up
to run it. For venture-backed companies with young founders, bringing in a more experienced CEO is a fairly common practice; in fact, Musk helped hire Sorkin. But in this case, the outcome was a series of ego clashes that almost shut down Zip2.
From early on, Sorkin and Musk disagreed on strategy. Zip2 was not a
"consumer" company with a big brand name. The sites it created for the New York Times and other smaller newspapers bore the names of their sponsoring papers, with a little logo and the words, "Powered by Zip2." To users of its sites, Zip2's work was almost invisible.
Sorkin wanted to concentrate on dealing with Zip2's customers and
financiers. Musk, according to Sorkin, wanted to be in the public eye.
"There were disagreements over the priority of general visibility for the
company," says Sorkin in perfect corporate-speak.
I asked Sorkin if it was true that Musk, in the words of another associate,
wanted to see his picture on the cover of Rolling Stone. "Yes," he said. "For Elon that's what general visibility meant."
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In 1998, Zip2 announced plans for a merger with a competing city guide
company, Citysearch. At the time, both companies were in the dangerous
position of competing with Microsoft's Sidewalk city guide service, then
generally believed to be the behemoth that would crush any small players. A
merger was seen as a major coup in a war in which no one expected more than
one or two big survivors.
The merger was approved by the two companies' boards of directors, press
releases were sent out and there were congratulations all around. Problem
is, it never happened.
At the last minute, Musk says, he had a conversation with Charles Conn, the
chief executive of Citysearch, and decided he didn't trust him. In theory,
the terms of the merger had Musk staying on as an executive vice president.
In practice, says Musk, after talking with Conn he felt that the Citysearch CEO would
force him out in a matter of months. Musk and his brother withdrew their
approval. The boards of the two companies met in Santa Fe, N.M., and called the
whole thing off.
Says one senior participant in the negotiations, "The merger came apart over
the inability of the people involved to work together."
The result wasn't pretty. A failed merger is the corporate
equivalent of a wedding that is called off after all the relatives have
been invited. Everybody would rather forget it. As a result of the soured
deal, Citysearch was forced into a merger with Ticketmaster Online, the
national ticketing company.
Meanwhile, Zip2 faced a worse fate. Both Musk
and Sorkin, who supported the merger, wound up losing out. Musk gave up the
position of chairman of the company. Sorkin became chairman in name only,
effectively losing his job. Derek Proudian, a venture capitalist
with the firm Mohr Davidow, Zip2's first investor, took over as acting chief
executive officer. In general, when a venture capitalist -- who is
essentially a money manager -- comes in to actually run a company, it is a
sign of major trouble. Compaq's decision to buy Zip2 in February 1999, in fact, might count as one of the more notable corporate rescue missions in Internet history.
By the traditional standards of corporate America, it was a dismal showing.
On the corporate report card, Musk's grade for "plays well with others"
would have been a solid F. For a senior executive at a multimillion-dollar
company, boardroom maneuvering is what management consultants might call "a
core competency," and Musk seems to have indicated a definite lack of talent.
And yet, put simply, it just doesn't matter, because what matters in
traditional corporations is not what matters in a start-up. In start-ups, ego
wins. What Musk is, and what his backers are looking for, is a believer -- someone whose very ignorance of corporate manners allows him to induce a whole company to come together and embark on an ill-defined but promising course.
In one conversation with Musk, I asked him how he imagines the advertising for X.com will look. In this, as in everything else, Musk does not pretend to be an expert. His perspective is just that of a gifted amateur.
"You know the ads for Tide?" Musk asks, "where there's a name brand and brand X, and brand X always loses? Well, our ads can be like that except that brand X wins."
It is too easy an analogy to say that Musk himself is Silicon Valley's Brand X, the young entrepreneur with a very peculiar combination of calculation, bravado and expertise in nothing in particular. There is, however, some truth in it. There is so much money to be made off the Internet, and most of the experts don't know where to start. None of the traditional talents seem to correlate with success. The only one that seems to really matter is the peculiar ability to get started.
Everybody in Silicon Valley is looking for the lucky guy who can lead them to the big score. There is a talent that Musk has, but nobody can put his finger on it. It seems in some way to be connected to the mixture of brazenness and guilelessness involved in bringing a reporter down to the garage to see your million-dollar car. It is undoubtedly connected to the egotism that makes him unsuited to corporate maneuvering. Maybe Musk really has a special spark that lets him think more strategically than everybody around him. Maybe Musk really is the next big thing. Or maybe he has just managed to make his backers believe that he is the Brand X, the next superstar. In today's Silicon Valley, the difference between being the next big thing and looking like it may not even matter.
