June 10, 2024 • 43 mins
While Elon Musk owes much of his wealth to Tesla, the truth is that he's not the company's founder. That honor goes to a pair of engineers named Martin Eberhard and Marc Tarpenning. We explore the origins of Tesla.
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Speaker 1 (00:04):
Welcome to Tech Stuff, a production from iHeartRadio. He there,
and welcome to tech Stuff. I'm your host, Jonathan Strickland.
I'm an executive producer with iHeart Podcasts and How the
tech are You? So anyone who listens to this show
a lot anyway knows that I tend to dunk on
(00:26):
Elon Musk quite a bit. But it's okay because he
can take it. He's consistently in the running to be
the richest person in the world. Last I checked, he
was number three, behind lvmh CEO Bernard Arnault and Amazon
founder Jeff Bezos. But anyone who can count their wealth
using the designation billions is pretty well insulated from a
lowly podcaster's opinions, and I believe in punching up, ain't
(00:51):
much higher to go than the third richest person in
the world. Now, I would argue there are many valid
reasons to criticize Elon Musk. While I spend a lot
of time lamenting his choices over at X, you know,
the platform formerly known as Twitter. Shareholders in his electric
vehicle company Tesla have other axes to grind. So I
(01:14):
thought I would do an episode about the origins of
Tesla because for the first you know year, really they
didn't involve Musk at all. He was not, despite his
own designations, a co founder of Tesla, depending upon how
you want to look at it, And this might come
(01:35):
as a surprise to you because often either his his
fan base, or Musk himself will portray himself as kind
of like the founder of Tesla. But I'm sure a
lot of you already know that Elon Musk did not
create the company Tesla. For those who don't know that,
let's dive into the origins of this company and the
(01:55):
people who did create it. But first we actually need
to go back before the company existed at all and
talk about how the US state of California got the
ball rolling with some regulations. So California is a very
large state and it has a huge population, the biggest
in the United States in fact, with around thirty nine
(02:15):
million people. Now, lots of those people have cars, and
many of those folks have fairly long commutes to work
or to school or whatever. Plus there's all that driving
to the beach, which, as the documentary series My Crazy
ex Girlfriend tells me, takes two hours three if there's traffic.
Well in the twentieth century. All that driving was taking
(02:37):
a toll on the state's air quality. Right. Yeah, these
internal combustion vehicles putting out emissions and smog was a
real issue. In fact, from what I read, it wasn't
unusual in the nineteen fifties to step outside in Los
Angeles and not be able to see the tops of
some of the buildings due to air pollution. Emissions like
(02:57):
nitrogen oxides and hydrocarbon gas is were the chief culprit
of the visible stuff. Plus there were other gases that
were emitted by gas guzzling engines that would pose a
health risk to citizens. Now, the US as a whole
passed air quality laws, beginning in nineteen fifty five with
the Air Pollution Control Act and then in nineteen sixty
(03:19):
three with the Clean Air Act. But California would need
to do more to keep air pollution in check, and
so California's laws go above and beyond what the federal
regulations require. In the nineteen seventies, California state agencies began
to really take action. This was right around the time
there was also a massive oil crisis as well, something
(03:40):
that would drive home the need for America to develop
technologies that would either burn fuel far more efficiently or
preferably rely on some other means to power things like automobiles.
Now I'm skipping over a lot of details ranging from
global politics to matters of national security on this because
we only have so much time, and I've talked about
(04:02):
it in other episodes too. But anyway, when we get
up to nineteen ninety, California started to make more demanding
requirements of auto manufacturers. State regulators with the California Air
Resources Board or carb CARB passed a requirement called the
Low Emission Vehicle Regulation. The rules meant that manufacturers had
(04:25):
to produce light and medium duty vehicles with much lower
emissions starting in nineteen ninety four. Further, a percentage of
the vehicles that the companies produced and sold in California
would have to be zero emission vehicles. So initially, when
they first passed this in nineteen ninety, that percentage was
just two percent of all the vehicles that they sold
(04:47):
in the state. If manufacturers didn't comply, they wouldn't be
allowed to sell vehicles in California, though more about that
in a bit, And since California is the most populous
state in the country, and because so so many people
in California drive there, that's a market that a car
company cannot afford to lose. So companies had to figure
(05:07):
out a way to comply with these regulations. This brings
us to General Motors or GM. It was one of
several companies working on complying with California's demands, and in
nineteen ninety, GM showed off a prototype electric powered concept
car called the Impact. Funny name for a car like
(05:28):
I guess they had their reasons. I guess they were
thinking it was going to make an impact because it's
an electric vehicle sports car. But when I think of
a car and I hear the word impact, I think
things have not turned out the way you had anticipated. Anyway.
This prototype, in turn, drew inspiration from the work that
General Motors had done with other companies as part of
(05:48):
the World Solar Challenge. Now, as that name implies, this
challenge was a race between solar powered cars. GM collaborated
to design and build a car called the sun Racer.
Racer in this case is are a y cer because
sun rays and driver John Harvey would use this Sunracer
to win the whole ding dang derned thing. Anyway, electric
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cars were nothing new in nineteen ninety In fact, they
were more than a century old at this point. In fact,
electric cars pre date gasoline powered vehicles. Making an electric
motor powerful enough to propel a vehicle wasn't really the
biggest problem. Battery technology was a really huge challenge. But anyway,
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The Impact was a little two seater coup that GM
introduced at the nineteen ninety La Auto Show, kind of
as a proof of concept for a modern EV. It
used thirty two lead acid batteries for power rechargeable batteries.
The Impact would serve as inspiration for a car that
GM would actually put into mass production a few years later.
(06:56):
This one was called the EV one. EV of course,
stands for electric vehicle. The story of the EV one's
development and production is really interesting, but obviously I'll leave
that for a different episode because this is really more
about Tesla. So the important bit for our story is
that GM made these cars available only for lease, not
(07:16):
for purchase. You could not buy one, you could only
lease it, and that started in nineteen ninety six. So
while GM made a few production runs of this vehicle,
the company owned all of them the entire time. And
only leased them to folks in a few states, including
my home state of Georgia, we had some of these cars.
The EV one had a limited driving range. Reportedly, according
(07:39):
to some reviews I read, this was made more confusing
by the car's alert system, which would sometimes underestimate how
much further the remaining battery charge would be able to
take a driver before needing a lengthy recharge session. That's
not great if your car is telling you, hey, I'm
going to run out of juice in twenty miles, and
then fifteen miles later, it's still saying twenty miles that
(07:59):
just this is the source of a lot of anxiety.
I would argue, actually, that's one of the big hurdles
for EV's in general, is this anxiety about driving range.
But I read a few reviews of the EV one
experience and it sounded pretty much like what you would
expect an early modern electric vehicle with predictable limitations. It
wasn't bad necessarily, but it was the type of car
(08:23):
that would be suitable only for a subset of auto owners,
primarily people who would need a vehicle for commuting to
and from work and for short trips, but nothing else.
GM ended the EV one program in two thousand and one.
Presumably the company did this because it was hard to
make a profit from this particular project, and the company
(08:43):
viewed electric vehicles as a niche that just wouldn't provide
enough sales to justify the cost of manufacturing. But the
program inspired a couple of other entrepreneurs to launch an
upstart car company with the goal of making electric vehicles
that folks would actually be able to buy. Now, neither
of those entrepren we elon Musk. Rather, they were a
pair of engineers, one named Martin Eberhard and the other
(09:07):
Mark Tarpening. Now I'll start off by talking about Eberhart. First.
I absolutely love the title he has given himself on LinkedIn,
which is occasional visionary entrepreneur engineer, which is great. And
he also lists his current occupation as enjoying light. So
I would say that Eberhard is setting a heck of
an example anyway. He attended college at the University of
(09:29):
Illinois Urbana Champaigne, where he earned both undergraduate and graduate
degrees in electrical engineering. The first job that he lists
on LinkedIn dates to nineteen eighty three, where he served
as an engineer for a company called Weiss Technology. This
was a young company in the computer hardware space, and
while Eberhard was there, was chiefly known for the production
(09:51):
of computer terminals and personal computers. Eberhard worked there for
four years, then he promptly began his entrepreneurial phase. He
co founded a company called Network Computing Devices, Incorporated in
nineteen eighty seven, and a decade later he would co
found Nouveaux Media Incorporated, a company that made ebook readers.
His co founder would end up being Mark Tarpining, whom
(10:14):
we'll chat about more in just a moment. In an interview,
Eberhard revealed that he first got interested in making a
new electric vehicle right around the time GM stopped making them.
Several factors converged simultaneously to cause this, so, for one thing,
in nineteen ninety eight, California began to make changes to
its zero emissions vehicle requirements. The state loosened the rules
(10:37):
a touch and allowed car manufacturers to earn partial credits
toward these requirements by selling low emission vehicles. Eberhardt saw
this as quote unquote gutting the zero emissions rules, and
it definitely meant that companies like GM had an alternative
to producing electric or fuel cell vehicles, so instead of
building zero emission vehicles, they could focus on low emission
(11:00):
vehicles and meet the requirements that way. That really upset
Eberhart and would serve as the genesis for the founding
of Tesla. But before we get to that, let's turn
to the second founder, Mark Tarpaning. Tarpaning got an undergraduate
degree in computer science from the University of California, Berkeley.
He met Eberhart, though I don't know the details of
(11:22):
how they met, I just know that they met at
some point, and the first credit he lists on his
LinkedIn profile is essentially the co founding of Nuvo Media
with Eberhart. But before that, he worked for a company
called Textron tex Tron, As that name somewhat implies, Textron
started off as a textiles company. In fact, its original
(11:43):
name was the Special Yarns Corporation. These days it does
a whole lot more than just textiles, including some heavy
duty work in the aerospace and defense industries. So never
tick off anyone who knits or crochets. I think that's
the takeaway lesson I have here. Turpening's work required him
to travel to Saudi Arabia frequently, and he would often
(12:04):
take books with him, but he lamented how inconvenient it
was to lug those books around on his frequent travels,
and that it sure would be nice if he could just,
you know, use an e book reader instead and carry
an entire library around without having to deal with the
weight and the bulk of hard copy books. He had
already met Eberhart at this point, and the two decided
to co found Nuvo Media in order to design and
(12:26):
produce ebook readers. TV Guide in the form of a
subsidiary called Gemstar, would acquire Nuvau Media three years after
it was founded. Interestingly, Nuvo Media would also help inspire
the two till later co found Tesla, as did Eberhard's
personal life. So what do I mean by Eberhart's personal
life informing the founding of Tesla. Well, I'll explain that
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in just a moment, but before we get to that,
let's take a quick break to thank our sponsors. Okay,
before the break, I mentioned that Eberhard was having something
happened in his personal life that would end up in
(13:10):
a way leading to the founding of Tesla, and that's
something was a divorce. So in an interview he said
that the divorce is kind of what prompted him to
look into getting a sports car. He says, that's what
guys do when they get a divorce, they go and
they buy a sports car. He was being a little flippant,
but tarpeting At was also in this interview and seems
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to be through his facial expressions, confirming what Eberhard was saying. However,
Eberhard wanted this to be a responsible purchase, you know,
despite the fact that you could argue that it was
somewhat on a whim. He didn't want to get some
sort of gas guzzling sports car, and he said that
most of the sports cars on the market had absolutely
(13:52):
terrible mileage and the state of California was obviously struggling
with this infrastructure that had been deeply affected by gas
guzzling cars for decades. So he was hoping to get
something that would be a little more environmentally friendly. So
he had an interest in the EV one from GM,
but as I mentioned, GM pretty much nuked that program
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from orbit. He couldn't buy an EV one. Eberhard reached
out to a much smaller almost like a boutique company
called AC Propulsion. This company, which launched in nineteen ninety two,
designed stuff like electric drive train systems for electric vehicles,
and the company had built three tiny little sports cars,
(14:37):
almost like an electric go kart. That's how small these
things were. They're bigger than a go kart, but not
by much. They called them the Zero t ZrO and
it made headlines and it was founded by an engineer
who had actually worked on GM's EV one back in
the day. Eberhard was hoping that AC Propulsion would move
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the Zero vehicle into production, because again they had only
ever built three of these things, but AC Propulsion turned
him down. Instead, the company opted to focus on more
practical vehicles, not sports cars. One issue that Eberhard noted
was that the Zero was relying on older battery technology
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like the Impact of nineteen ninety That Zero was using
lead acid batteries. At Nuvau Media, Eberhard and Tarpening initially
used nickel metal hydride batteries for the first generation of
their e readers, but then they switched to lithium ion
batteries for the second generation, and Eberhard suspected that lithium
ion battery technology could be a more viable future for
(15:44):
electric vehicles. So he and Tarpening discussed the idea and
ultimately this is what would lead them to cofound Tesla
Motors around two thousand and two two thousand and three.
Now this was a pretty big decision. Tarpaning felt confident
that they would be able to make a coumpmpany that
could solve the issues of designing the computer and electronic
systems that would actually provide propulsion. Essentially, he said that
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he was pretty sure a Silicon Valleys startup company could
make the stuff that would make an electric vehicle go
that that part wouldn't be the hard part. He was
far less certain about the ability to make a car
that would actually go around all these components, like the
actual car thing, the chassis, the body of the car,
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all of that. That was the part where he was like,
I don't know if we can do the mechanical systems.
We can definitely do the electronic ones and computer systems,
but I don't know about the mechanical ones. So how
do you go about convincing investors to put money in
your idea when you have no record, nothing to point
at to say we know how to make vehicles. You
(16:49):
might say, hey, we know how to make computer systems
and we know how to work with batteries and stuff,
but if you can't point to cars, that's kind of
a non starter. There's gonna be a lot of car
puns in this episode. And I swear as I was
writing it, I was like, this is a car pun
and I didn't even intend it. I just left them in. Anyway,
our two protagonists would need to secure funding for their
(17:10):
fledgling company, and that meant they had to seek out investors,
and that involved a lot of conversations with movers and
shakers and walk in wallets, and around this time they
hired employee number three. Employee number three was a guy
named Ian Wright, not the British soccer player Ian Wright,
but rather an engineer who had worked as a director
for Cisco Systems as well as a CTO for all
(17:32):
Tomar Networks, among other things. And one early decision for
Eberhart and company was the type of vehicle that they
wanted to focus on first. So the idea to make
that ev sports car that Eberhart had wanted in the
first place kind of became the driving force for Tesla. Again.
More unintentional Hart puns not to satisfy Eberhart's desire to
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have another sports car. That's not the reason why they
wanted to go this way, or at least not the
main one. Instead, it was because the founders felt that
a sports car would attract early adopters, people with deep
pockets who wanted something cool like an electric vehicle sports car.
They knew that the first Tesla vehicles were going to
be expensive. That was going to be a given. It's
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just it was going to be expensive to make them,
and so they'd have to be expensive to purchase. A
company couldn't exist otherwise. Hardware often brand new hardware typically
is really expensive, like consumer hardware if you were around
whenever any new technology launched, like Apple Vision Pro is
a pretty good one. I mean, there are other mixed
(18:37):
reality headsets out there, but Apple's Vision Pro headsets are
thirty five hundred dollars to start off. They get more
expensive from there. That's largely because of all the money
that went into R and D and manufacturing companies want
to recapture that stuff. And it's only after a new
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technology reaches a certain level of a adoption that a
company can switch into sort of a mass production mode
and bring the costs of manufacturing down, which in turn
can bring the cost of a product down. But at
the beginning, it's going to be expensive, So putting out
a sensible hatchback electric vehicle probably wasn't going to cut it.
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No one would be willing to pay what it was
going to cost. So the team committed to designing and
producing a sports car, and they decided ultimately they would
call it the Tesla Roadster. Now that whole process would
take five years. The team had a full car to
design in that five years, and Eberhard and Tarpeening would
start off by attending an La auto show and they
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met with representatives from Lotus. So Lotus is a car
company in England. It traces its history back to nineteen
fifty two. And the Tesla engineers had discovered that it's
not unusual in auto manufacturing to outsource a lot of
the stuff that you use to build your cars. You know,
(20:02):
that might be things like latches or safety equipment, or
all sorts of different things, and it meant that they
didn't have to make everything themselves. But they didn't really
know how to go about creating those relationships with suppliers,
and so they figured, we'll go to the LA Auto Show.
We'll see if we can meet with some of the
(20:22):
representatives from the various car companies and see if we
can start to form a relationship that will help us
in our path to making this sports car. So again
they met with these folks from Lotus and they kind
of gave an early pitch of what they were trying
to do to the company. You know, they're like, well,
why should we reinvent the wheel when we can work
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with a company like Lotus that has already done all this. Plus,
you know a roadster has to have like four wheels.
That's way too much inventing. So, according to Tarpaning and Eberhard,
the folks at Lotus said that the pitch was interesting,
but they should all have a full meeting about this
back in England to discuss things further back at Lotus's headquarters.
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Tarpaning cleverly pointed out that this is a great way
for Lotus to make sure that the pair were actually
serious about their business venture, because flying to another country
in order to have a sales pitch meeting, that's a
big request and a lot of startup folks would potentially
bulk at that, but by showing up to actually follow
through on a pitch, that showed that Eberhard and Tarpaning
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were committed to this idea. So they went to England
and the reps from Lotus said that if the team
could secure sufficient funding, Lotus might partner with them to
help with the process of building out an actual vehicle.
This gave Tesla an early advantage because it meant that
they could go to potential investors, they could lay out
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their plan and they could even indicate that Lotus was
a potential partner for them, and that could help build
confidence in the company and the project and to more
investors to actually pour some serious money into the operation.
They could say, yeah, we don't know anything about building
a car. We know how to build all the electronic systems,
but our partner is Lotus, and that's a car company
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with more than half a century's worth of experience in
this space. So that was a big help. When they
walked into different boardrooms with venture captalysts and were making
their pitches, well, one of those early conversations was with
Elon Musk, and Elon Musk was already into his own
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entrepreneurial phase where he was using his already considerable wealth
to get involved in a lot of different things, and
he got excited about this idea from Eberhart and Tarpaning.
And in fact, this was not their first meeting with Musk.
They had actually met him several years earlier. They were
founding members of the Mars Society, which is a nonprofit
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organization that advocates for human astronauts to go to Mars.
Dusk obviously has a very deep interest in this as well,
and years before he would go on to found SpaceX,
Musk attended a conference by the Mars Society, and Eberhard
and Tarpening attended that conference and they went to the talk,
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and after the talk they approached Musk and they talked
to him for a while. But this was not the
point where they got him on board as an investor
for Tesla. They did meet with him again once they
encountered some other issues with potential investors. They kept running
into issues where folks just wouldn't commit, and it was
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growing very frustrating. Meanwhile, AC Propulsion, that company I talked
about earlier that made the relatively small electric sports card
the zero. They had been trying to court Musk, but
they gave up on their efforts. The two parties just
didn't see eye to eye on anything. But this gave
Eberhard and Tarpening the oppertunity to reach out to Musk instead,
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And at this point, Musk was just around founding SpaceX,
and so he invited the pair of Tesla engineers to
his startup HQ. Tarpining then said in an interview that
pitching to Musk was very different from other venture capitalists
because most of the folks that they had encountered had
said that their concept for an electric sports car was
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just bonkers, that it would never work. They couldn't even
see how you could build it, So they would get
shut out of a lot of those venture capitalists conversations
pretty early. But Elon Musk was in the middle of
launching a startup that was dedicating its efforts toward the
space industry. And for a startup to be going into
like creating private space craft, that's such an audacious goal,
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it's such a hard thing to do that, by comparison,
a company trying to make an electric sports car seemed
absolutely mundane. So Elon Musk is like, well, of course
he can do that. I'm trying to go to so
building an electric car that doesn't seem like that's that
big a deal. So the two told Musk that their
plan was to use the sports car as a way
to convince people that electric vehicles don't need to be tiny,
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they don't need to be ugly. They could be stylish
and sexy and fast and impressive, as well as practical
and environmentally friendly, and that this would give Tesla the
momentum to follow a roadmap that would involve introducing other
types of cars, including ones more practical for families and such.
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So in April two thousand and four, Musk initially contributed
around six and a half million dollars of his own
money as an investment into Tesla in its series A
round of funding. Now, I've done episodes about funding rounds before,
but generally speaking, you typically have seed investments early on.
This is just to get things even moving at all,
(25:53):
and then you have rounds of fundraising where you get
investors to put money into a project, and a company
might have several of these before it ever has any
other means of generating revenue. Like that's not revenue obviously,
but generating money so that they can operate because obviously
otherwise you would just run out of cash and the
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whole thing would go bankrupt. So Musk's contribution was the
vast majority of the first round of investment, and it
was around another million dollars provided by other investors, but
the primary investor was Musk. So Elon Musk became the
chairman of the board of directors for Tesla. Martin Eberhard
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was named CEO of the company, and the engineers got
to work designing the roadsters systems. Now, as they would
say in later interviews, everything was difficult. They had to
invent all the computer and electronic systems from scratch. There
was no model to follow. They had done some rough
(26:55):
estimations and concluded that they should be able to actually
do what they wanted to do from a purely technical standpoint, like,
the amount of electricity they could generate using the battery
packs should be sufficient for running the car. The battery
packs shouldn't be too large or heavy or bulky to
(27:17):
impact the design or operation of the vehicle. Right. They
did all the math to make sure that the approach
they were going to take was a practical one, but
that was just math and hypotheticals like actually making the
physical things. That's got its own set of challenges. So
to bring their concept to life would take many hours,
(27:38):
in fact, years of hard work. Okay, we're going to
take another quick break. When we come back, i'll talk
more about the early years at Tesla. We're back. So
while the engineers are actually working on figuring out the
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systems for Tesla, Musk was helping in the efforts to
secure more rounds of funding. Ultimately he would raise more
than one hundred million dollars in multiple rounds. In those
early years, Musk himself contributed millions more dollars in investments,
like when one of his other investments would pay off,
he would invest some of that back into Tesla. So
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the already wealthy Musk was securing a growing amount of
equity in Tesla and that would seriously pay off down
the road, so to speak. So one early technical challenge
that the engineers faced had to do with battery safety.
This was not something that they had anticipated, but in
the mid two thousands, in that first decade, lithium ion
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batteries were starting to make the news due to some
spectacular and dangerous failures involving Dell laptops. There were stories
of Dell laptop batteries failing and then entering into thermal runaway.
That's where a battery begins to overheat and the cycle
perpetuates itself, which leads to battery failure, and this can
(29:06):
include combustion or even explosions. So this convinced the Tesla
team that they needed to test their own lithium ion
battery cells for thermal runaway. So a battery pack consists
of many battery cells, right, and they wanted to see
what would happen if they forced their battery cells into
(29:29):
a thermal runaway situation. And the way they did this
was a very diy approach and also what I would
probably call an error in judgment. So they went to
Eberhard's house, They dug a hole, they put a battery
cell in the hole, They weighed down the battery cell
with various stuff, and then they pumped enough juice into
(29:51):
the battery to force it into thermal runaway. And the
results were apparently very impressive, not in a good way,
but in a scary way. However, it did set the
team on a journey to find out how to design
the battery cells for the Tesla in such a way
that should one cell experience thermal runaway, that would not
then spread to adjoining battery cells. And thus this way
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it could limit the danger of a cell failing it
would still be dangerous, but not as dangerous as having,
you know, an entire array of battery cells that are
arranged in a giant battery pack suddenly going nuclear on you.
That would be really bad news. So they got to
work fixing that, and you know, they found engineering ways
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to mitigate the risk, and the team had tons of
different tasks like this. Everything about designing the Tesla Roadster
kind of followed that path where they would say, oh,
the approach we wanted to take, it turns out this
is not totally reliable. Like sometimes when we build a
battery pack, the connections don't all work, which means that
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you can't rely on this particular approach for manufacturing, which
means we can't do that right because if one out
of every four or five of your battery packs doesn't
work because the welding contacts aren't right, that's a deal breaker.
So they had to keep innovating and finding new ways
to do things in order to make a system that
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was actually workable. So beyond all that, they had to
figure out how to cool the system down, they needed
to be able to insulate it. Not just cool it down,
but also insulate it because electric batteries can take a
really long time to ramp up in colder temperatures, and
presumably at least some of the folks who wanted an
electric sports car would be driving them in places that
could get a bit more chilly than central California, so
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they needed to figure that stuff out too, And the
work that Tesla engineers did in battery technology would go
on to become essentially the standard for much of the
automotive industry that was working in evs later on. The
pioneers at Tesla created dependable, replicable methodologies when none existed before.
The company was hard at work for the first few
years just ironing out all these technical challenges. On top
(32:03):
of that, they faced issues with suppliers for stuff that
was pretty mundane. It turned out a lot of suppliers
were skeptical about Tesla, and a lot of them were
reluctant to do business with this startup. But a car
needs certain things like seat belts and airbags and other
standardized equipment that has to meet governmental regulations. So smoothing
(32:24):
out those relationships with suppliers and getting buy in from
them took a lot of early work as well. That
work was starting to pay off, however. In two thousand
and six, Tesla had a prototype vehicle that they could
actually show off. So it was still a couple of
years out from actual production, but this would help establish
Tesla as a serious brand. They officially unveiled the Tesla
(32:47):
Roadster at a fairly exclusive event in Santa Monica, California,
on July nineteenth, two thousand and six. The company was
still kind of in stealth mode at this point, so
this wasn't like a huge, huge media splash, but it
was important for Tesla to get this in front of
investors and potential investors. So one thing that Tesla did
(33:08):
that was a little bit unusual is that it began
to take pre orders for the Tesla Roadster. Now, this
was a new idea in the auto industry. Tesla invited
people of means, people who could afford to do this,
to join what they called the Tesla Roadster Club. This
was a club that had a hefty membership fee. Essentially,
it was a waiting list, so premium buyers, those who
(33:31):
wanted to roadster as quickly as they could get one,
would have to PLoP down fifty thousand dollars for a
membership into this club. The patient buyers could dedicate thirty
grand to becoming a member that would still guarantee them
the ability to buy a roadster, but only after all
the premium buyers got theirs first. Tesla said the membership
(33:53):
fee was fully refundable and that members would get their
money back the quote day that you confirm your option selections,
which is three months prior to the production of your
Tesla Roadster end quote. So essentially this was just a
reserve on a car. This actually grew out of a
trend that the team had already noticed amongst some of
their investors, because some of those folks were calling up
(34:16):
Tesla and asking to pre pay for a Tesla Roadster
so that they would get one as soon as they
were available. The price tag was right around one hundred
thousand dollars, like it all depended on the options you got,
but you're talking like one hundred grand. That is a
lot of money to just PLoP down with Tesla to
put down on a car that doesn't even really exist yet,
(34:38):
not as a production model anyway, and yet some investors
were doing this. This necessitated making a list of pre orders,
and people got very interested on where on that list
they fell. Became kind of a status thing with Elon Musk, right,
they're at the very tippy top. But it was clear
that folks were really getting excited about the Tesla Roadster,
and even though it was going to be monstrously exc expensive,
(35:00):
there was a market for this vehicle. Might have been
a small market, but it was there. So those were
nice indicators for the company. But behind the scenes, things
weren't all on a positive trajectory. For one thing, the
development cycle for the Roadster was taking longer than initially anticipated.
Things were going past deadline, things were going way over budget,
and since this was a privately funded company, it meant
(35:23):
that Tesla was burning through investor dollars pretty quickly. Elon
Musk was getting a little bit upset about all this,
and there are a lot of different takes on what
would follow. So I'm trying to be objective as I
can and to stick with the facts as I understand them.
But you should know that what I'm going to say
next like, there are multiple variations of this story and
(35:45):
how it unfolded, and I honestly don't know what the
full truth is. But Elon Musk, as chairman of the board,
apparently met with other board members, some of whom had
just joined Tesla because of, you know, early investments into
the company, and they decided that Eberhard wasn't cutting out
as the CEO, and so Musk essentially fires Eberhard tells
(36:09):
him to step down as CEO. Technically, Eberhard was given
a different position within the company, but as he would
later say, he felt he had been quote unquote voted
off the island, and so in two thousand and seven, Eberhard,
one of the co founders of the company, leaves Tesla.
Initially an investor named Michael Marx was named as interim CEO. Now,
(36:30):
whether or not he was interim CEO from the get
go or that was something they called him after the fact,
that's something that some sources dispute. Most of them, though,
just referred to him as an interim CEO. He would
serve as CEO of Tesla for a little less than
a year, and Musk would then replace him with an
Israeli American entrepreneur named Zev dry So. Drory had worked
(36:53):
at IBM in their semiconductor division back in the nineteen sixties.
He then left to work at Fairchild Semiconductor. Then he
left that in nineteen seventy to build his own semiconductor
company called Monolithic Memories, and nearly two decades later that
company would merge with Advanced micro Devices, which is better
(37:14):
known as AMD. Drury was brought in as the new
CEO of Tesla in late two thousand and seven, so
his main job was to lead the company while the
roadster finally went into production, which happened in two thousand
and eight. But that was also a year where the
world went into a financial crisis. The real estate crisis happened.
There was like this massive blow to the economy. So
(37:37):
it was a really tough time, especially if you know
you had been looking forward to buying a one hundred
thousand dollars sports car that was an electric vehicle, and
now like there's a giant financial crisis in place. It's tough.
So Tesla was also affected by this. Reportedly the company
was running on fumes toward the end of two thousand
(37:59):
and eight, even with the Roadster finally rolling off production facilities,
Musk chose to replace Drfy with well with himself. Musk
became CEO of Tesla in late two thousand and eight.
Tesla also held a couple of rounds of layoffs to
reduce operating costs while trying to get to the finish line.
It sounds like it was a pretty tough time at Tesla,
(38:22):
and Musk bet big time in the company. If that
had not worked out, he would have lost a huge
amount of his wealth. But as it turns out, the
bet ultimately would pay off, though it would be several
years later before that became evident, so it wasn't even
like a sure thing. When the Roadster it came out,
people were predicting that Tesla was going to fizzle out. Meanwhile,
(38:43):
the co founder of the company, Mark Tarpening, also left Tesla.
He left in two thousand and eight, after Eberhard did
in two thousand and seven. He made this decision before
the Roadster was actually ready, so he both of the
co founders of Tesla left the company before the Tesla Roadster,
the first vehicle produced by the company, was rolling off
(39:04):
to customers. Both of them had left by then, and
Tarbaning said his decision was due to the fact that
his team had worked very hard for five years to
get the Tesla Roadster into production, and that the company
was then preparing to transition from the Roadster to developing
the next car, which was the Model S and Tarpaning
anticipated that would take another five years, and he decided
(39:28):
that he would rather step back and spend more time
with his family. So in two thousand and eight he
also left Tesla's which would leave Elon Musk as the
leader of the company, a position that he's held ever since.
And Tesla is the real reason why Elon Musk is
a billionaire. He was already rich before he got involved
(39:50):
with Tesla. He had access to generational wealth before he
got into business at all. But Tesla, a company he
didn't build but he did help fund, would put him
on the billionaire's club. The roadster would have its own
interesting life once it made out out of production. Not
all reviews of the Roadster were particularly kind. There was
a rather infamous top Gear episode that kind of slagged
(40:14):
off on the Roadster, but the vehicle did help set
Tesla on the path for viability, if not success. The
company would encounter other roadblocks along the way. To this day,
there are still folks who think that one Elon Musk's
compensation package with Tesla is way too high it's become
a matter for court systems to get involved. And two
(40:37):
Elon Musk needs to spend more time focusing on Tesla
or to create some sort of succession plan so that
someone else can take over the company instead of wasting
time on X. Those are the thoughts of various shareholders,
by the way, which I agree with, But I have
a personal disdain for Elon Musk, so I am a
(40:58):
very biased person and I fully admit it. But anyway,
all of that is a topic for a different time.
That is the origin story for Tesla. To me, it's
really fascinating that it's a company where you had a
couple of engineers get together. They had a very specific
goal in mind, they were able to secure funding, and
they were able to pursue that goal, and then both
(41:20):
of them left the company before the fruition of their
efforts became an actual thing that people could purchase. That
to me is kind of a crazy story. And obviously
there's a lot more to Tesla's story than that. There
are a lot of elements that we didn't even get
close to touching on, things like autopilot and full self
(41:43):
driving and all of that stuff that would require multiple episodes.
But I just wanted to focus on the beginning of
this because I thought the story itself was really interesting
and one that you don't hear very much because I
think Tesla is so closely associated with Elon Musk. But
the truth is, for the first several years, Elon Musk
really had nothing to do with the day to day
operations of that company. It was only starting around two
(42:08):
thousand and seven that he began to take a much
more active approach. I mean, he definitely did a lot
to help get it funded and to keep it funded.
So that's not a small thing like that's an accomplishment
all on its own, and I don't want to take
anything away from that that I think is absolutely key
to Tesla's existence, let alone success. So there we have it.
(42:30):
We'll probably come back to Tesla at some point. I'll
talk more about its history and its evolution over the years,
but that's it for the origin story. I hope all
of you are well, and I'll talk to you again
really soon. Tech stuff is an iHeartRadio production. For more
(42:51):
podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or
wherever you listen to your favorite shows. Yea y
Welcome to Tech Stuff, a production from iHeartRadio. He there,
and welcome to tech Stuff. I'm your host, Jonathan Strickland.
I'm an executive producer with iHeart Podcasts and How the
tech are You? So anyone who listens to this show
a lot anyway knows that I tend to dunk on
(00:26):
Elon Musk quite a bit. But it's okay because he
can take it. He's consistently in the running to be
the richest person in the world. Last I checked, he
was number three, behind lvmh CEO Bernard Arnault and Amazon
founder Jeff Bezos. But anyone who can count their wealth
using the designation billions is pretty well insulated from a
lowly podcaster's opinions, and I believe in punching up, ain't
(00:51):
much higher to go than the third richest person in
the world. Now, I would argue there are many valid
reasons to criticize Elon Musk. While I spend a lot
of time lamenting his choices over at X, you know,
the platform formerly known as Twitter. Shareholders in his electric
vehicle company Tesla have other axes to grind. So I
(01:14):
thought I would do an episode about the origins of
Tesla because for the first you know year, really they
didn't involve Musk at all. He was not, despite his
own designations, a co founder of Tesla, depending upon how
you want to look at it, And this might come
(01:35):
as a surprise to you because often either his his
fan base, or Musk himself will portray himself as kind
of like the founder of Tesla. But I'm sure a
lot of you already know that Elon Musk did not
create the company Tesla. For those who don't know that,
let's dive into the origins of this company and the
(01:55):
people who did create it. But first we actually need
to go back before the company existed at all and
talk about how the US state of California got the
ball rolling with some regulations. So California is a very
large state and it has a huge population, the biggest
in the United States in fact, with around thirty nine
(02:15):
million people. Now, lots of those people have cars, and
many of those folks have fairly long commutes to work
or to school or whatever. Plus there's all that driving
to the beach, which, as the documentary series My Crazy
ex Girlfriend tells me, takes two hours three if there's traffic.
Well in the twentieth century. All that driving was taking
(02:37):
a toll on the state's air quality. Right. Yeah, these
internal combustion vehicles putting out emissions and smog was a
real issue. In fact, from what I read, it wasn't
unusual in the nineteen fifties to step outside in Los
Angeles and not be able to see the tops of
some of the buildings due to air pollution. Emissions like
(02:57):
nitrogen oxides and hydrocarbon gas is were the chief culprit
of the visible stuff. Plus there were other gases that
were emitted by gas guzzling engines that would pose a
health risk to citizens. Now, the US as a whole
passed air quality laws, beginning in nineteen fifty five with
the Air Pollution Control Act and then in nineteen sixty
(03:19):
three with the Clean Air Act. But California would need
to do more to keep air pollution in check, and
so California's laws go above and beyond what the federal
regulations require. In the nineteen seventies, California state agencies began
to really take action. This was right around the time
there was also a massive oil crisis as well, something
(03:40):
that would drive home the need for America to develop
technologies that would either burn fuel far more efficiently or
preferably rely on some other means to power things like automobiles.
Now I'm skipping over a lot of details ranging from
global politics to matters of national security on this because
we only have so much time, and I've talked about
(04:02):
it in other episodes too. But anyway, when we get
up to nineteen ninety, California started to make more demanding
requirements of auto manufacturers. State regulators with the California Air
Resources Board or carb CARB passed a requirement called the
Low Emission Vehicle Regulation. The rules meant that manufacturers had
(04:25):
to produce light and medium duty vehicles with much lower
emissions starting in nineteen ninety four. Further, a percentage of
the vehicles that the companies produced and sold in California
would have to be zero emission vehicles. So initially, when
they first passed this in nineteen ninety, that percentage was
just two percent of all the vehicles that they sold
(04:47):
in the state. If manufacturers didn't comply, they wouldn't be
allowed to sell vehicles in California, though more about that
in a bit, And since California is the most populous
state in the country, and because so so many people
in California drive there, that's a market that a car
company cannot afford to lose. So companies had to figure
(05:07):
out a way to comply with these regulations. This brings
us to General Motors or GM. It was one of
several companies working on complying with California's demands, and in
nineteen ninety, GM showed off a prototype electric powered concept
car called the Impact. Funny name for a car like
(05:28):
I guess they had their reasons. I guess they were
thinking it was going to make an impact because it's
an electric vehicle sports car. But when I think of
a car and I hear the word impact, I think
things have not turned out the way you had anticipated. Anyway.
This prototype, in turn, drew inspiration from the work that
General Motors had done with other companies as part of
(05:48):
the World Solar Challenge. Now, as that name implies, this
challenge was a race between solar powered cars. GM collaborated
to design and build a car called the sun Racer.
Racer in this case is are a y cer because
sun rays and driver John Harvey would use this Sunracer
to win the whole ding dang derned thing. Anyway, electric
(06:12):
cars were nothing new in nineteen ninety In fact, they
were more than a century old at this point. In fact,
electric cars pre date gasoline powered vehicles. Making an electric
motor powerful enough to propel a vehicle wasn't really the
biggest problem. Battery technology was a really huge challenge. But anyway,
(06:33):
The Impact was a little two seater coup that GM
introduced at the nineteen ninety La Auto Show, kind of
as a proof of concept for a modern EV. It
used thirty two lead acid batteries for power rechargeable batteries.
The Impact would serve as inspiration for a car that
GM would actually put into mass production a few years later.
(06:56):
This one was called the EV one. EV of course,
stands for electric vehicle. The story of the EV one's
development and production is really interesting, but obviously I'll leave
that for a different episode because this is really more
about Tesla. So the important bit for our story is
that GM made these cars available only for lease, not
(07:16):
for purchase. You could not buy one, you could only
lease it, and that started in nineteen ninety six. So
while GM made a few production runs of this vehicle,
the company owned all of them the entire time. And
only leased them to folks in a few states, including
my home state of Georgia, we had some of these cars.
The EV one had a limited driving range. Reportedly, according
(07:39):
to some reviews I read, this was made more confusing
by the car's alert system, which would sometimes underestimate how
much further the remaining battery charge would be able to
take a driver before needing a lengthy recharge session. That's
not great if your car is telling you, hey, I'm
going to run out of juice in twenty miles, and
then fifteen miles later, it's still saying twenty miles that
(07:59):
just this is the source of a lot of anxiety.
I would argue, actually, that's one of the big hurdles
for EV's in general, is this anxiety about driving range.
But I read a few reviews of the EV one
experience and it sounded pretty much like what you would
expect an early modern electric vehicle with predictable limitations. It
wasn't bad necessarily, but it was the type of car
(08:23):
that would be suitable only for a subset of auto owners,
primarily people who would need a vehicle for commuting to
and from work and for short trips, but nothing else.
GM ended the EV one program in two thousand and one.
Presumably the company did this because it was hard to
make a profit from this particular project, and the company
(08:43):
viewed electric vehicles as a niche that just wouldn't provide
enough sales to justify the cost of manufacturing. But the
program inspired a couple of other entrepreneurs to launch an
upstart car company with the goal of making electric vehicles
that folks would actually be able to buy. Now, neither
of those entrepren we elon Musk. Rather, they were a
pair of engineers, one named Martin Eberhard and the other
(09:07):
Mark Tarpening. Now I'll start off by talking about Eberhart. First.
I absolutely love the title he has given himself on LinkedIn,
which is occasional visionary entrepreneur engineer, which is great. And
he also lists his current occupation as enjoying light. So
I would say that Eberhard is setting a heck of
an example anyway. He attended college at the University of
(09:29):
Illinois Urbana Champaigne, where he earned both undergraduate and graduate
degrees in electrical engineering. The first job that he lists
on LinkedIn dates to nineteen eighty three, where he served
as an engineer for a company called Weiss Technology. This
was a young company in the computer hardware space, and
while Eberhard was there, was chiefly known for the production
(09:51):
of computer terminals and personal computers. Eberhard worked there for
four years, then he promptly began his entrepreneurial phase. He
co founded a company called Network Computing Devices, Incorporated in
nineteen eighty seven, and a decade later he would co
found Nouveaux Media Incorporated, a company that made ebook readers.
His co founder would end up being Mark Tarpining, whom
(10:14):
we'll chat about more in just a moment. In an interview,
Eberhard revealed that he first got interested in making a
new electric vehicle right around the time GM stopped making them.
Several factors converged simultaneously to cause this, so, for one thing,
in nineteen ninety eight, California began to make changes to
its zero emissions vehicle requirements. The state loosened the rules
(10:37):
a touch and allowed car manufacturers to earn partial credits
toward these requirements by selling low emission vehicles. Eberhardt saw
this as quote unquote gutting the zero emissions rules, and
it definitely meant that companies like GM had an alternative
to producing electric or fuel cell vehicles, so instead of
building zero emission vehicles, they could focus on low emission
(11:00):
vehicles and meet the requirements that way. That really upset
Eberhart and would serve as the genesis for the founding
of Tesla. But before we get to that, let's turn
to the second founder, Mark Tarpaning. Tarpaning got an undergraduate
degree in computer science from the University of California, Berkeley.
He met Eberhart, though I don't know the details of
(11:22):
how they met, I just know that they met at
some point, and the first credit he lists on his
LinkedIn profile is essentially the co founding of Nuvo Media
with Eberhart. But before that, he worked for a company
called Textron tex Tron, As that name somewhat implies, Textron
started off as a textiles company. In fact, its original
(11:43):
name was the Special Yarns Corporation. These days it does
a whole lot more than just textiles, including some heavy
duty work in the aerospace and defense industries. So never
tick off anyone who knits or crochets. I think that's
the takeaway lesson I have here. Turpening's work required him
to travel to Saudi Arabia frequently, and he would often
(12:04):
take books with him, but he lamented how inconvenient it
was to lug those books around on his frequent travels,
and that it sure would be nice if he could just,
you know, use an e book reader instead and carry
an entire library around without having to deal with the
weight and the bulk of hard copy books. He had
already met Eberhart at this point, and the two decided
to co found Nuvo Media in order to design and
(12:26):
produce ebook readers. TV Guide in the form of a
subsidiary called Gemstar, would acquire Nuvau Media three years after
it was founded. Interestingly, Nuvo Media would also help inspire
the two till later co found Tesla, as did Eberhard's
personal life. So what do I mean by Eberhart's personal
life informing the founding of Tesla. Well, I'll explain that
(12:49):
in just a moment, but before we get to that,
let's take a quick break to thank our sponsors. Okay,
before the break, I mentioned that Eberhard was having something
happened in his personal life that would end up in
(13:10):
a way leading to the founding of Tesla, and that's
something was a divorce. So in an interview he said
that the divorce is kind of what prompted him to
look into getting a sports car. He says, that's what
guys do when they get a divorce, they go and
they buy a sports car. He was being a little flippant,
but tarpeting At was also in this interview and seems
(13:31):
to be through his facial expressions, confirming what Eberhard was saying. However,
Eberhard wanted this to be a responsible purchase, you know,
despite the fact that you could argue that it was
somewhat on a whim. He didn't want to get some
sort of gas guzzling sports car, and he said that
most of the sports cars on the market had absolutely
(13:52):
terrible mileage and the state of California was obviously struggling
with this infrastructure that had been deeply affected by gas
guzzling cars for decades. So he was hoping to get
something that would be a little more environmentally friendly. So
he had an interest in the EV one from GM,
but as I mentioned, GM pretty much nuked that program
(14:13):
from orbit. He couldn't buy an EV one. Eberhard reached
out to a much smaller almost like a boutique company
called AC Propulsion. This company, which launched in nineteen ninety two,
designed stuff like electric drive train systems for electric vehicles,
and the company had built three tiny little sports cars,
(14:37):
almost like an electric go kart. That's how small these
things were. They're bigger than a go kart, but not
by much. They called them the Zero t ZrO and
it made headlines and it was founded by an engineer
who had actually worked on GM's EV one back in
the day. Eberhard was hoping that AC Propulsion would move
(14:57):
the Zero vehicle into production, because again they had only
ever built three of these things, but AC Propulsion turned
him down. Instead, the company opted to focus on more
practical vehicles, not sports cars. One issue that Eberhard noted
was that the Zero was relying on older battery technology
(15:20):
like the Impact of nineteen ninety That Zero was using
lead acid batteries. At Nuvau Media, Eberhard and Tarpening initially
used nickel metal hydride batteries for the first generation of
their e readers, but then they switched to lithium ion
batteries for the second generation, and Eberhard suspected that lithium
ion battery technology could be a more viable future for
(15:44):
electric vehicles. So he and Tarpening discussed the idea and
ultimately this is what would lead them to cofound Tesla
Motors around two thousand and two two thousand and three.
Now this was a pretty big decision. Tarpaning felt confident
that they would be able to make a coumpmpany that
could solve the issues of designing the computer and electronic
systems that would actually provide propulsion. Essentially, he said that
(16:07):
he was pretty sure a Silicon Valleys startup company could
make the stuff that would make an electric vehicle go
that that part wouldn't be the hard part. He was
far less certain about the ability to make a car
that would actually go around all these components, like the
actual car thing, the chassis, the body of the car,
(16:28):
all of that. That was the part where he was like,
I don't know if we can do the mechanical systems.
We can definitely do the electronic ones and computer systems,
but I don't know about the mechanical ones. So how
do you go about convincing investors to put money in
your idea when you have no record, nothing to point
at to say we know how to make vehicles. You
(16:49):
might say, hey, we know how to make computer systems
and we know how to work with batteries and stuff,
but if you can't point to cars, that's kind of
a non starter. There's gonna be a lot of car
puns in this episode. And I swear as I was
writing it, I was like, this is a car pun
and I didn't even intend it. I just left them in. Anyway,
our two protagonists would need to secure funding for their
(17:10):
fledgling company, and that meant they had to seek out investors,
and that involved a lot of conversations with movers and
shakers and walk in wallets, and around this time they
hired employee number three. Employee number three was a guy
named Ian Wright, not the British soccer player Ian Wright,
but rather an engineer who had worked as a director
for Cisco Systems as well as a CTO for all
(17:32):
Tomar Networks, among other things. And one early decision for
Eberhart and company was the type of vehicle that they
wanted to focus on first. So the idea to make
that ev sports car that Eberhart had wanted in the
first place kind of became the driving force for Tesla. Again.
More unintentional Hart puns not to satisfy Eberhart's desire to
(17:54):
have another sports car. That's not the reason why they
wanted to go this way, or at least not the
main one. Instead, it was because the founders felt that
a sports car would attract early adopters, people with deep
pockets who wanted something cool like an electric vehicle sports car.
They knew that the first Tesla vehicles were going to
be expensive. That was going to be a given. It's
(18:16):
just it was going to be expensive to make them,
and so they'd have to be expensive to purchase. A
company couldn't exist otherwise. Hardware often brand new hardware typically
is really expensive, like consumer hardware if you were around
whenever any new technology launched, like Apple Vision Pro is
a pretty good one. I mean, there are other mixed
(18:37):
reality headsets out there, but Apple's Vision Pro headsets are
thirty five hundred dollars to start off. They get more
expensive from there. That's largely because of all the money
that went into R and D and manufacturing companies want
to recapture that stuff. And it's only after a new
(18:57):
technology reaches a certain level of a adoption that a
company can switch into sort of a mass production mode
and bring the costs of manufacturing down, which in turn
can bring the cost of a product down. But at
the beginning, it's going to be expensive, So putting out
a sensible hatchback electric vehicle probably wasn't going to cut it.
(19:19):
No one would be willing to pay what it was
going to cost. So the team committed to designing and
producing a sports car, and they decided ultimately they would
call it the Tesla Roadster. Now that whole process would
take five years. The team had a full car to
design in that five years, and Eberhard and Tarpeening would
start off by attending an La auto show and they
(19:42):
met with representatives from Lotus. So Lotus is a car
company in England. It traces its history back to nineteen
fifty two. And the Tesla engineers had discovered that it's
not unusual in auto manufacturing to outsource a lot of
the stuff that you use to build your cars. You know,
(20:02):
that might be things like latches or safety equipment, or
all sorts of different things, and it meant that they
didn't have to make everything themselves. But they didn't really
know how to go about creating those relationships with suppliers,
and so they figured, we'll go to the LA Auto Show.
We'll see if we can meet with some of the
(20:22):
representatives from the various car companies and see if we
can start to form a relationship that will help us
in our path to making this sports car. So again
they met with these folks from Lotus and they kind
of gave an early pitch of what they were trying
to do to the company. You know, they're like, well,
why should we reinvent the wheel when we can work
(20:44):
with a company like Lotus that has already done all this. Plus,
you know a roadster has to have like four wheels.
That's way too much inventing. So, according to Tarpaning and Eberhard,
the folks at Lotus said that the pitch was interesting,
but they should all have a full meeting about this
back in England to discuss things further back at Lotus's headquarters.
(21:04):
Tarpaning cleverly pointed out that this is a great way
for Lotus to make sure that the pair were actually
serious about their business venture, because flying to another country
in order to have a sales pitch meeting, that's a
big request and a lot of startup folks would potentially
bulk at that, but by showing up to actually follow
through on a pitch, that showed that Eberhard and Tarpaning
(21:27):
were committed to this idea. So they went to England
and the reps from Lotus said that if the team
could secure sufficient funding, Lotus might partner with them to
help with the process of building out an actual vehicle.
This gave Tesla an early advantage because it meant that
they could go to potential investors, they could lay out
(21:50):
their plan and they could even indicate that Lotus was
a potential partner for them, and that could help build
confidence in the company and the project and to more
investors to actually pour some serious money into the operation.
They could say, yeah, we don't know anything about building
a car. We know how to build all the electronic systems,
but our partner is Lotus, and that's a car company
(22:12):
with more than half a century's worth of experience in
this space. So that was a big help. When they
walked into different boardrooms with venture captalysts and were making
their pitches, well, one of those early conversations was with
Elon Musk, and Elon Musk was already into his own
(22:33):
entrepreneurial phase where he was using his already considerable wealth
to get involved in a lot of different things, and
he got excited about this idea from Eberhart and Tarpaning.
And in fact, this was not their first meeting with Musk.
They had actually met him several years earlier. They were
founding members of the Mars Society, which is a nonprofit
(22:55):
organization that advocates for human astronauts to go to Mars.
Dusk obviously has a very deep interest in this as well,
and years before he would go on to found SpaceX,
Musk attended a conference by the Mars Society, and Eberhard
and Tarpening attended that conference and they went to the talk,
(23:17):
and after the talk they approached Musk and they talked
to him for a while. But this was not the
point where they got him on board as an investor
for Tesla. They did meet with him again once they
encountered some other issues with potential investors. They kept running
into issues where folks just wouldn't commit, and it was
(23:39):
growing very frustrating. Meanwhile, AC Propulsion, that company I talked
about earlier that made the relatively small electric sports card
the zero. They had been trying to court Musk, but
they gave up on their efforts. The two parties just
didn't see eye to eye on anything. But this gave
Eberhard and Tarpening the oppertunity to reach out to Musk instead,
(24:02):
And at this point, Musk was just around founding SpaceX,
and so he invited the pair of Tesla engineers to
his startup HQ. Tarpining then said in an interview that
pitching to Musk was very different from other venture capitalists
because most of the folks that they had encountered had
said that their concept for an electric sports car was
(24:24):
just bonkers, that it would never work. They couldn't even
see how you could build it, So they would get
shut out of a lot of those venture capitalists conversations
pretty early. But Elon Musk was in the middle of
launching a startup that was dedicating its efforts toward the
space industry. And for a startup to be going into
like creating private space craft, that's such an audacious goal,
(24:48):
it's such a hard thing to do that, by comparison,
a company trying to make an electric sports car seemed
absolutely mundane. So Elon Musk is like, well, of course
he can do that. I'm trying to go to so
building an electric car that doesn't seem like that's that
big a deal. So the two told Musk that their
plan was to use the sports car as a way
to convince people that electric vehicles don't need to be tiny,
(25:11):
they don't need to be ugly. They could be stylish
and sexy and fast and impressive, as well as practical
and environmentally friendly, and that this would give Tesla the
momentum to follow a roadmap that would involve introducing other
types of cars, including ones more practical for families and such.
(25:31):
So in April two thousand and four, Musk initially contributed
around six and a half million dollars of his own
money as an investment into Tesla in its series A
round of funding. Now, I've done episodes about funding rounds before,
but generally speaking, you typically have seed investments early on.
This is just to get things even moving at all,
(25:53):
and then you have rounds of fundraising where you get
investors to put money into a project, and a company
might have several of these before it ever has any
other means of generating revenue. Like that's not revenue obviously,
but generating money so that they can operate because obviously
otherwise you would just run out of cash and the
(26:13):
whole thing would go bankrupt. So Musk's contribution was the
vast majority of the first round of investment, and it
was around another million dollars provided by other investors, but
the primary investor was Musk. So Elon Musk became the
chairman of the board of directors for Tesla. Martin Eberhard
(26:34):
was named CEO of the company, and the engineers got
to work designing the roadsters systems. Now, as they would
say in later interviews, everything was difficult. They had to
invent all the computer and electronic systems from scratch. There
was no model to follow. They had done some rough
(26:55):
estimations and concluded that they should be able to actually
do what they wanted to do from a purely technical standpoint, like,
the amount of electricity they could generate using the battery
packs should be sufficient for running the car. The battery
packs shouldn't be too large or heavy or bulky to
(27:17):
impact the design or operation of the vehicle. Right. They
did all the math to make sure that the approach
they were going to take was a practical one, but
that was just math and hypotheticals like actually making the
physical things. That's got its own set of challenges. So
to bring their concept to life would take many hours,
(27:38):
in fact, years of hard work. Okay, we're going to
take another quick break. When we come back, i'll talk
more about the early years at Tesla. We're back. So
while the engineers are actually working on figuring out the
(28:03):
systems for Tesla, Musk was helping in the efforts to
secure more rounds of funding. Ultimately he would raise more
than one hundred million dollars in multiple rounds. In those
early years, Musk himself contributed millions more dollars in investments,
like when one of his other investments would pay off,
he would invest some of that back into Tesla. So
(28:25):
the already wealthy Musk was securing a growing amount of
equity in Tesla and that would seriously pay off down
the road, so to speak. So one early technical challenge
that the engineers faced had to do with battery safety.
This was not something that they had anticipated, but in
the mid two thousands, in that first decade, lithium ion
(28:46):
batteries were starting to make the news due to some
spectacular and dangerous failures involving Dell laptops. There were stories
of Dell laptop batteries failing and then entering into thermal runaway.
That's where a battery begins to overheat and the cycle
perpetuates itself, which leads to battery failure, and this can
(29:06):
include combustion or even explosions. So this convinced the Tesla
team that they needed to test their own lithium ion
battery cells for thermal runaway. So a battery pack consists
of many battery cells, right, and they wanted to see
what would happen if they forced their battery cells into
(29:29):
a thermal runaway situation. And the way they did this
was a very diy approach and also what I would
probably call an error in judgment. So they went to
Eberhard's house, They dug a hole, they put a battery
cell in the hole, They weighed down the battery cell
with various stuff, and then they pumped enough juice into
(29:51):
the battery to force it into thermal runaway. And the
results were apparently very impressive, not in a good way,
but in a scary way. However, it did set the
team on a journey to find out how to design
the battery cells for the Tesla in such a way
that should one cell experience thermal runaway, that would not
then spread to adjoining battery cells. And thus this way
(30:13):
it could limit the danger of a cell failing it
would still be dangerous, but not as dangerous as having,
you know, an entire array of battery cells that are
arranged in a giant battery pack suddenly going nuclear on you.
That would be really bad news. So they got to
work fixing that, and you know, they found engineering ways
(30:35):
to mitigate the risk, and the team had tons of
different tasks like this. Everything about designing the Tesla Roadster
kind of followed that path where they would say, oh,
the approach we wanted to take, it turns out this
is not totally reliable. Like sometimes when we build a
battery pack, the connections don't all work, which means that
(30:57):
you can't rely on this particular approach for manufacturing, which
means we can't do that right because if one out
of every four or five of your battery packs doesn't
work because the welding contacts aren't right, that's a deal breaker.
So they had to keep innovating and finding new ways
to do things in order to make a system that
(31:19):
was actually workable. So beyond all that, they had to
figure out how to cool the system down, they needed
to be able to insulate it. Not just cool it down,
but also insulate it because electric batteries can take a
really long time to ramp up in colder temperatures, and
presumably at least some of the folks who wanted an
electric sports car would be driving them in places that
could get a bit more chilly than central California, so
(31:41):
they needed to figure that stuff out too, And the
work that Tesla engineers did in battery technology would go
on to become essentially the standard for much of the
automotive industry that was working in evs later on. The
pioneers at Tesla created dependable, replicable methodologies when none existed before.
The company was hard at work for the first few
years just ironing out all these technical challenges. On top
(32:03):
of that, they faced issues with suppliers for stuff that
was pretty mundane. It turned out a lot of suppliers
were skeptical about Tesla, and a lot of them were
reluctant to do business with this startup. But a car
needs certain things like seat belts and airbags and other
standardized equipment that has to meet governmental regulations. So smoothing
(32:24):
out those relationships with suppliers and getting buy in from
them took a lot of early work as well. That
work was starting to pay off, however. In two thousand
and six, Tesla had a prototype vehicle that they could
actually show off. So it was still a couple of
years out from actual production, but this would help establish
Tesla as a serious brand. They officially unveiled the Tesla
(32:47):
Roadster at a fairly exclusive event in Santa Monica, California,
on July nineteenth, two thousand and six. The company was
still kind of in stealth mode at this point, so
this wasn't like a huge, huge media splash, but it
was important for Tesla to get this in front of
investors and potential investors. So one thing that Tesla did
(33:08):
that was a little bit unusual is that it began
to take pre orders for the Tesla Roadster. Now, this
was a new idea in the auto industry. Tesla invited
people of means, people who could afford to do this,
to join what they called the Tesla Roadster Club. This
was a club that had a hefty membership fee. Essentially,
it was a waiting list, so premium buyers, those who
(33:31):
wanted to roadster as quickly as they could get one,
would have to PLoP down fifty thousand dollars for a
membership into this club. The patient buyers could dedicate thirty
grand to becoming a member that would still guarantee them
the ability to buy a roadster, but only after all
the premium buyers got theirs first. Tesla said the membership
(33:53):
fee was fully refundable and that members would get their
money back the quote day that you confirm your option selections,
which is three months prior to the production of your
Tesla Roadster end quote. So essentially this was just a
reserve on a car. This actually grew out of a
trend that the team had already noticed amongst some of
their investors, because some of those folks were calling up
(34:16):
Tesla and asking to pre pay for a Tesla Roadster
so that they would get one as soon as they
were available. The price tag was right around one hundred
thousand dollars, like it all depended on the options you got,
but you're talking like one hundred grand. That is a
lot of money to just PLoP down with Tesla to
put down on a car that doesn't even really exist yet,
(34:38):
not as a production model anyway, and yet some investors
were doing this. This necessitated making a list of pre orders,
and people got very interested on where on that list
they fell. Became kind of a status thing with Elon Musk, right,
they're at the very tippy top. But it was clear
that folks were really getting excited about the Tesla Roadster,
and even though it was going to be monstrously exc expensive,
(35:00):
there was a market for this vehicle. Might have been
a small market, but it was there. So those were
nice indicators for the company. But behind the scenes, things
weren't all on a positive trajectory. For one thing, the
development cycle for the Roadster was taking longer than initially anticipated.
Things were going past deadline, things were going way over budget,
and since this was a privately funded company, it meant
(35:23):
that Tesla was burning through investor dollars pretty quickly. Elon
Musk was getting a little bit upset about all this,
and there are a lot of different takes on what
would follow. So I'm trying to be objective as I
can and to stick with the facts as I understand them.
But you should know that what I'm going to say
next like, there are multiple variations of this story and
(35:45):
how it unfolded, and I honestly don't know what the
full truth is. But Elon Musk, as chairman of the board,
apparently met with other board members, some of whom had
just joined Tesla because of, you know, early investments into
the company, and they decided that Eberhard wasn't cutting out
as the CEO, and so Musk essentially fires Eberhard tells
(36:09):
him to step down as CEO. Technically, Eberhard was given
a different position within the company, but as he would
later say, he felt he had been quote unquote voted
off the island, and so in two thousand and seven, Eberhard,
one of the co founders of the company, leaves Tesla.
Initially an investor named Michael Marx was named as interim CEO. Now,
(36:30):
whether or not he was interim CEO from the get
go or that was something they called him after the fact,
that's something that some sources dispute. Most of them, though,
just referred to him as an interim CEO. He would
serve as CEO of Tesla for a little less than
a year, and Musk would then replace him with an
Israeli American entrepreneur named Zev dry So. Drory had worked
(36:53):
at IBM in their semiconductor division back in the nineteen sixties.
He then left to work at Fairchild Semiconductor. Then he
left that in nineteen seventy to build his own semiconductor
company called Monolithic Memories, and nearly two decades later that
company would merge with Advanced micro Devices, which is better
(37:14):
known as AMD. Drury was brought in as the new
CEO of Tesla in late two thousand and seven, so
his main job was to lead the company while the
roadster finally went into production, which happened in two thousand
and eight. But that was also a year where the
world went into a financial crisis. The real estate crisis happened.
There was like this massive blow to the economy. So
(37:37):
it was a really tough time, especially if you know
you had been looking forward to buying a one hundred
thousand dollars sports car that was an electric vehicle, and
now like there's a giant financial crisis in place. It's tough.
So Tesla was also affected by this. Reportedly the company
was running on fumes toward the end of two thousand
(37:59):
and eight, even with the Roadster finally rolling off production facilities,
Musk chose to replace Drfy with well with himself. Musk
became CEO of Tesla in late two thousand and eight.
Tesla also held a couple of rounds of layoffs to
reduce operating costs while trying to get to the finish line.
It sounds like it was a pretty tough time at Tesla,
(38:22):
and Musk bet big time in the company. If that
had not worked out, he would have lost a huge
amount of his wealth. But as it turns out, the
bet ultimately would pay off, though it would be several
years later before that became evident, so it wasn't even
like a sure thing. When the Roadster it came out,
people were predicting that Tesla was going to fizzle out. Meanwhile,
(38:43):
the co founder of the company, Mark Tarpening, also left Tesla.
He left in two thousand and eight, after Eberhard did
in two thousand and seven. He made this decision before
the Roadster was actually ready, so he both of the
co founders of Tesla left the company before the Tesla Roadster,
the first vehicle produced by the company, was rolling off
(39:04):
to customers. Both of them had left by then, and
Tarbaning said his decision was due to the fact that
his team had worked very hard for five years to
get the Tesla Roadster into production, and that the company
was then preparing to transition from the Roadster to developing
the next car, which was the Model S and Tarpaning
anticipated that would take another five years, and he decided
(39:28):
that he would rather step back and spend more time
with his family. So in two thousand and eight he
also left Tesla's which would leave Elon Musk as the
leader of the company, a position that he's held ever since.
And Tesla is the real reason why Elon Musk is
a billionaire. He was already rich before he got involved
(39:50):
with Tesla. He had access to generational wealth before he
got into business at all. But Tesla, a company he
didn't build but he did help fund, would put him
on the billionaire's club. The roadster would have its own
interesting life once it made out out of production. Not
all reviews of the Roadster were particularly kind. There was
a rather infamous top Gear episode that kind of slagged
(40:14):
off on the Roadster, but the vehicle did help set
Tesla on the path for viability, if not success. The
company would encounter other roadblocks along the way. To this day,
there are still folks who think that one Elon Musk's
compensation package with Tesla is way too high it's become
a matter for court systems to get involved. And two
(40:37):
Elon Musk needs to spend more time focusing on Tesla
or to create some sort of succession plan so that
someone else can take over the company instead of wasting
time on X. Those are the thoughts of various shareholders,
by the way, which I agree with, But I have
a personal disdain for Elon Musk, so I am a
(40:58):
very biased person and I fully admit it. But anyway,
all of that is a topic for a different time.
That is the origin story for Tesla. To me, it's
really fascinating that it's a company where you had a
couple of engineers get together. They had a very specific
goal in mind, they were able to secure funding, and
they were able to pursue that goal, and then both
(41:20):
of them left the company before the fruition of their
efforts became an actual thing that people could purchase. That
to me is kind of a crazy story. And obviously
there's a lot more to Tesla's story than that. There
are a lot of elements that we didn't even get
close to touching on, things like autopilot and full self
(41:43):
driving and all of that stuff that would require multiple episodes.
But I just wanted to focus on the beginning of
this because I thought the story itself was really interesting
and one that you don't hear very much because I
think Tesla is so closely associated with Elon Musk. But
the truth is, for the first several years, Elon Musk
really had nothing to do with the day to day
operations of that company. It was only starting around two
(42:08):
thousand and seven that he began to take a much
more active approach. I mean, he definitely did a lot
to help get it funded and to keep it funded.
So that's not a small thing like that's an accomplishment
all on its own, and I don't want to take
anything away from that that I think is absolutely key
to Tesla's existence, let alone success. So there we have it.
(42:30):
We'll probably come back to Tesla at some point. I'll
talk more about its history and its evolution over the years,
but that's it for the origin story. I hope all
of you are well, and I'll talk to you again
really soon. Tech stuff is an iHeartRadio production. For more
(42:51):
podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or
wherever you listen to your favorite shows. Yea y
TechStuff News
Hosts And Creators
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