The Musk Disruption Doctrine
In 1991 a college intern at ScotiaBank proposed an idea to the head of strategic planning: buy $5mn of distressed Latin American bonds. The bonds were trading at 20 cents on the dollar because investors weren’t confident that the governments of Latin America would repay their debts - even though the bonds were backed by the US government. The intern believed that investors were underestimating the value of a guarantee by the US, and that the bonds would double in value. But the bank’s CEO said no. “The bank has too much exposure to Latin America already.”
The intern was Elon Musk. And that trade would have tripled in value if the CEO had said yes.
It instilled in the young Elon Musk a deep sense that banks are broken, and inspired him to launch PayPal later.
Walter Isaacson’s new biography on Elon Musk is an un-put-downable portrait of one of the most impactful innovators of our time. Love him or hate him, you should still read it. What jumps out is Musk’s ability to recognize when an industry becomes so bloated, so complacent, and so paralyzed by its own dogma that it cannot capitalize on new opportunities. It’s also not flattering of Musk - his insane intensity seems driven as much by a vision of how the world should transform as it is to escape his own demons. The book made me question whether it takes someone as violent, maniacal, impulsive, and dangerously fearless in the face of risk to challenge deeply entrenched, stagnant industries.
Musk’s version of change is such a stark contrast to the erudite executive education seminars on “disruption strategy” offered at Harvard and Columbia by Rita McGrath and Clay Christensen (RIP) from the comfort of their Ivy League campuses. The Musk seminar seems to be 3 weeks of sleepless nights, in a disgusting Palo Alto office with Cheerios and McDonalds as your only sustenance.
I’ve lived half of my career trying to disrupt bloated incumbents as a startup entrepreneur. And the other half inside of them, as an intrapreneur. I’ve seen how ineffectual the polite, Ivy League version of innovation is. Companies pay for it with the same budget as the office Christmas party, and it is taken just as seriously. I’ve also seen the Elon version. When the barbarians of change arrive at the gates of your previously invincible institution. The Elon version, where the people are irreverent and maniacal and indifferent to polite convention is the version that works, although not always as bombastically as Elon does it. If a company is lucky, those people emerge from within. But usually those people quit or get fired when they try to make change from the inside. Especially if they’re right about something like buying Latin American bonds at a deep discount.
Here are a few key lessons that are starting to emerge from the book (full disclosure: I haven’t finished it yet.)
1. You can learn from Elon Musk. But you don’t want to be him - You may admire him or be in awe of him. You may view him as a villain. But you don’t want his life. At least I don’t. I don’t want his abusive childhood, his violent outbursts at his brother and best friends, his inability to sustain relationships, or his fleeting sense of satisfaction at any of his own achievements. His demons are real.
2. A company which can’t question every requirement is doomed - Companies lose the ability to question why things are done the way they are. They become so obsessed with perpetuating their own dogmatic processes that they lose sight of value and impactfulness. This leads to obstructionism, complacency, and an exodus of their own innovators. People will defend their territory, even if it’s wasteful or stupid. In many industries this creates an opening for a new entrant. Many of Elon Musk’s startups were launched in industries where few other entrepreneurs dared to venture, like auto manufacturing and aerospace. These industries became more inefficient with time AND had almost no new entrants for a long time.
3. Neutralize Hierarchy - It’s not clear that Musk lives by this principle - but he certainly espouses it. Hierarchy should not come into play when trying to eliminate waste and create greater value. For Musk, anyone who abuses their managerial status in a way that perpetuates waste or stifles innovation should be fired.
4. Optimize your life for Impactfulness - I found myself identifying with Musk’s sense of restlessness. (That’s maybe the only character trait I identify with). I was unable to accept a paycheck and settle for stability and stagnation when I transitioned from startup to corporate after my first exit. I couldn’t make peace with the politics and complacency of Wall Street. Turns out I’m not alone: a record 5.5 million people have left corporate jobs to launch new ventures since the Pandemic. It’s fascinating to learn that Elon Musk carved that same path twenty years before me.
