CEOInterviews.AITesla’s Forgotten Founder Speaks Out – Exclusive w/ Martin Eberhard

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Interviewer0:00

Do you still own shares of Tesla?

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Martin Eberhard0:00

Yes, I've owned shares in Tesla longer than anybody.

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Narrator0:00

Before there was the Tesla that almost everyone knows about worldwide, there was this Tesla, a scrappy startup founded in name by this man. It's kind of crazy to go back in time and think this is what started it all right here. We're taking a small plane to go meet someone very special on an island. Let's go. Today we take you inside the mind of Tesla's employee number one, its co-founder and original CEO, Martin Eberhard, asking him some tough questions. How differently do you think that Tesla would have gone if you had gone with a different investor? In an exclusive interview with a man who started one of the world's most valuable companies. The idea of Tesla came to me while I was on a date with a woman who became my wife. Tesla's origin stories are complicated. For Martin, it is as if he unwillingly gave up his baby for adoption and the child grew up to be world famous and won a Nobel Prize, but the adopted parent is kind of controversial. So, I'm sure there are some mixed emotions. He's done amazing, right? The company is huge. He became the richest man in the world from it. I can't criticize too much. Was that hard for you just giving up that control? But before we get too far into that, please make sure you're subscribed to our channel if you haven't already. We know that we have over a million of you guys watching our videos every month, but not all of you are subscribed and just subscribing to our channel is one of the biggest thank yous that we can get. There's a ton of controversy over who was the original founder at Tesla. So, what we know right now is that Martin Eberhard and his good buddy Marc Tarpenning had the original idea and that's where they looked for investors and they came across Elon Musk who was not as big and famous as he is now, but he did have money. So, they got him to invest in their company. My goal is to get to know Martin Eberhard, what type of person he is, and hear his side of the story. All right, Martin Eberhard. I can't believe we're here meeting you. We have your Roadster here.

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Martin Eberhard2:01

Yes. This is VIN number two. This is Founder Series VIN number two. So, there were two early series before the main production of Roadsters. The Founder Series, we made I think a dozen of them roughly. All of the car companies in the world now make electric cars because of this car. So, I'm quite happy about that.

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Narrator2:20

There's always two sides to every story and we've heard a lot from Elon Musk in the media and Martin Eberhard does not do a lot of interviews. There's not a lot out there. So I really wanted a chance to get to talk to him, see what kind of person he is for myself. Now most people don't realize this, but a few years before Tesla, Eberhard and Tarpenning co-founded NuvoMedia, the company behind the world's first handheld web-connected e-reader, the RocketBook. This was more than a decade before the iPad and Kindle, eventually selling the company for 187 million.

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Martin Eberhard2:51

The RocketBook's main investor was Barnes & Noble, and they later on went and made the Nook. You remember that actually included hiring a bunch of the people from my old company to go do that. So, they're all connected. I wasn't actually looking for an idea for a company. It's the other way around. I started off thinking maybe I'll go buy myself a sports car. It seemed to me that this climate change thing was real. Global warming, we called it then. And then it also seemed to me that the wars in the Middle East had something to do with oil. So in the end I didn't want to buy another petroleum powered car. I went through the math and I worked with my friend Mark. I say he's my straight man. You know, if I couldn't convince Mark, it's probably not a good idea. And so I made him prove the math to him to prove to him that electric cars made much more sense than anything else from an energy consumption perspective and from a carbon footprint perspective. To be convinced from a technical perspective that this is the right answer. To realize that all the companies that ought to be my competitors aren't, it seemed like an opportunity.

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Narrator3:48

Martin told me he realized that electric cars had failed over and over again for one common reason.

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Martin Eberhard3:55

What I saw was universally these cars were designed to be a low-end car that would come in at the low end of the market and, you know, everybody could buy one, which is a noble thought, but it doesn't work. I mean, new technologies when they come along are always luxury items. You know, smartphones and air conditioners and smart watches and everything. The new technologies start out typically as a high-end product and compete on something other than price until you've got enough volume and so on that you can drive down market. So, I said, 'Okay, we're not going to do what everybody else did. If I'm not going to compete on price, where is the natural place for an electric car to compete?' As an engineer, I know that if you design it right, electric cars can have crazy torque, meaning crazy performance. And that said, let's go the route of starting out with making a car that's a performance car that's the exact opposite of what everybody expects an electric car to be. That thought process opened opportunities that wouldn't have been on the table otherwise. The most important one being lithium-ion batteries. Lithium batteries were more expensive, but they're also way better. And so this was the first commercial car ever to ship with lithium-ion batteries on it.

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Narrator5:00

And while we're on the topic of lithium ion batteries, I want to show you this battery setup by Lergy. So, this right here is one of the most advanced household battery management systems that you can get for your triple or your AA batteries. These batteries have more power, more capacity, and more charge cycles than pretty much anything else you can get out there. This is Lergy's 3-in-1 charging station, battery health detection, and storage unit. Lergy has been able to integrate advanced lithium tech into AA batteries. These AA batteries have a 3600 mWh capacity compared to the competition which only has a 2400 mWh capacity which means that they last for much longer and they stay more powerful throughout your charge cycle. Plus they're rated for 1200 charge cycles which means you can fully charge and discharge them 1,200 times before the end of their life. So, you can compare that to this Duracell battery, which is a one-time use battery, or this rechargeable Energizer, which is anywhere from 5 to 800 cycles, but then the Lergy battery is 1,200 cycles. What's brilliant about Lergy is that after a full charge, the batteries automatically drop into the storage compartment below, so you don't have to worry about overcharging or overvoltage, giving you a safer, more reliable solution. And the charger also supports different chemistries like nickel metal hydride or nickel metal cadmium from various battery makers, too. To get yours, check out the link in the description below. And remember, when you use our links, you're also helping to support this channel. All right, let's get back to Martin. So, was it you or Mark that kind of realized that lithium ion batteries were where you needed to go?

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Martin Eberhard6:30

That was me. Although Mark was right there in that we had the first version of the RocketBook used nickel metal hydride batteries which is what was used in some of the previous electric cars. And the second version of the RocketBook used lithium-ion batteries which were fairly new at the time. I knew enough that the people who were selling them wouldn't sell you the batteries unless your engineers went to their safety school and learned how to control them because they're more finicky than prior kinds of batteries. So we understood that stuff. We knew how to make them work. And one of the gating items before we ever incorporated the company was to figure out what it would take to control these batteries in a vehicle. I mean, in the RocketBook, we had two or three cells. In this car, there's almost 7,000 cells. So, how do you manage them all? And so, we drew out sitting in a cafe almost literally on a napkin drew out an architecture said, 'This is what would work.' And once we believed that would work, then we said, 'We have the big pieces put together. We can probably start a company.' And then figuring out supply chain though for a company like that, that's the hardest thing that I didn't see coming. There are companies that make parts for the big car companies that make hundreds of thousands to millions per year of whatever the part is. And then there's companies that make one or two off things for racing cars and stuff. And there's almost no middle ground. There isn't a supply chain for companies that want to make a few thousand of a car. Mark and I are not automotive engineers and we knew that we did not know how to make a car everything and we would not be able to hire a team to start from scratch. So we went looking for a partner for the first car and the partner we found was Lotus. So this car is based on the chassis design of Lotus. This is not, people think it's just a Lotus with electric drive. It's not. The body is completely unique. The frame is about five inches longer and the door sills are lower and so it's different but it's based on the same technology and borrowed some important pieces like the crash structure in the front which is designed to protect against a head-on collision, that's based on Lotus.

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Interviewer8:33

So were there other, did you know that Lotus was the car that you wanted to look at or were there other cars that you were looking at?

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Martin Eberhard8:40

I did a lot of homework and came up with a short list of companies who were possible. Lotus was my first choice.

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Interviewer8:47

Who else was on that list?

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Martin Eberhard8:53

Well, we briefly considered Porsche, but they're way more expensive. Their costs were three or four times what Lotus would charge us. Couldn't afford it. It's not possible. We also talked to even smaller companies in the UK like Ariel. I like them a lot and probably would have made something work with them if we had to. But we were able to persuade Lotus that this was an interesting opportunity.

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Interviewer9:11

And that was your first choice. But how do you persuade them that you want to take their frame and some of their stuff and then make it electric?

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Martin Eberhard9:18

I also hired a bunch of their engineers away from them.

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Interviewer9:24

Okay, so that seems like a big pitch because it's kind of a crazy idea back then. No one's done this. The EV1, that didn't really work out.

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Martin Eberhard9:30

And we took advantage of the fact that they were English and we could be Americans and rude to them and they had to listen to us because that's their nature. So, Mark and I showed up at the LA Auto Show where Lotus had a booth and they didn't know anything at that point. And we basically wandered around the booth until we found somebody whose name tag I recognized. I realized they were up in the company and forced the guy to listen to us. I had also been looking at AC Propulsion. You probably heard about them. Before I ever considered starting a car company, I looked to see if I could buy a car. And this is at the time when, as I said earlier, none of the electric cars were available anymore. AC Propulsion still had their website up, but they were out of business. They had seven employees left and none of them were being paid. So, I actually financially rescued that company, which was a stretch for me at the time. And originally considered, can I turn that company into a real company to make production cars.

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Interviewer10:18

So, financially rescued, like you bought stock?

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Martin Eberhard10:24

I bought stock. Yeah. And I also paid them to build me a car, which they never built. But some of that money was used to take their, they made a car called the TZ. They made exactly three of them total. And they had parts lying around that could have been made into a fourth one which is what they were supposed to do for me but they in the end couldn't do that. So instead they took their own car, one of the three which they still owned, and we together converted that car to be a lithium powered car. It was a go-kart basically but it showed that it worked. And that car I used as my daily driver for about three months and took a lot of prospective employees and prospective investors for joy rides in it.

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Interviewer11:03

So you were able to kind of use that to persuade people for this big idea that you had.

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Martin Eberhard11:08

Yes. That was one of the pieces. Yeah. Again because I was not under the same cost constraints. I didn't use just like an old elevator motor or something to power the car. We used a high frequency AC induction motor. The AC induction motor. It's interesting right now to think about because this is the only motor that does not have these rare earth elements that we see here now are being restricted by China. And that motor was invented by some guy named Nikola Tesla.

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Interviewer11:38

Hence the name of the company.

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Martin Eberhard11:38

Yeah, that's true.

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Interviewer11:45

I've heard a lot of talk about the naming of the company and I thought what I've read is that Mark came up with it at Disneyland. I did. Oh, you came up with it on a date with Caroline. Okay. So, tell me the story of how you guys...

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Martin Eberhard11:50

I had been thinking about a name for the company for a while and I didn't like anything. I tried this and tried that and naming a company is difficult anyways. Whatever it is, I never pick on somebody for the name of the company because if you manage to get the domain name and get the trademark, congratulations. No matter how lame the name. But so I had thought of a lot of lame names that I didn't like. And the idea of Tesla came to me because I was thinking about the motor I wanted to use. It came to me while I was on a date with a woman who became my wife. We went to dinner in Disneyland. There's a cool restaurant in Disneyland called the Blue Bayou. It overlooks the Pirates of the Caribbean ride. Yes, I do know this one. And I suggested this name to her. She liked it immediately. She's like, 'Oh, I think you're behind schedule now. You need to get to work.' That's funny. And then the next day on my usual Wednesday coffee with Mark, which we still do by the way, I suggested to him Tesla Motors as the name of our company and he hadn't even agreed that we're going to do a company yet, but we're in a cafe and he taps on his computer for a moment and says, 'Oh, now we own the domain name.' He bought the domain name.

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Interviewer13:00

And let me just get this one time. Do you say Tesla or Tesla?

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Martin Eberhard13:06

I say Tesla. There you have it. But when I say Tesla, I've always said Tesla and I get a lot of people being like, 'No, it's Tesla.' But you are the one that came up with the name and you say Tesla. I don't know how he pronounced his own name. I don't know. Whatever. But if you're naming the company and you named it Tesla, I just have to get that out there for everyone.

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Interviewer13:29

I actually hadn't heard this Tesla thing. That's new for me. Okay. There's a little bit of a debate because somebody else that's very famous says Tesla with an accent. And then you have to go and you have to get some funding, right, to be able to spend a lot of time talking to investors. So, what were some of those initial pitches to investors like? What was their reaction when you would go pitch this?

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Martin Eberhard13:48

Well, it's complicated because almost all VCs think that they're experts on cars because they have a Porsche or BMW or something. So they all have very inbuilt opinions about them. A typical one, for example, is that I couldn't imagine a sports car that didn't sound like my Ferrari or my Porsche or my Corvette or whatever they have.

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Interviewer14:09

How much money are you trying to raise at this point?

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Martin Eberhard14:16

I had a full business plan. I had a plan to build this car and the next several cars and I had an idea of how much money I needed for the first several steps. So, our first fundraising round, we're looking between five and 10 million. We in the end raised almost seven. Of which the biggest investor was some guy named Musk. And the other investments came from VCs who had made money in my previous gig and also from like my dad and my brother and friends and family kind of thing.

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Interviewer14:39

Any advice to people that are going and pitching their ideas to different VCs because you have a lot of experience doing that?

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Martin Eberhard14:50

I mean I've been on both sides of it. I've pitched and I've received but I'm going to start off by saying that I suck at raising money. I've done it but I always give away too much of the company. You know, I've seen other entrepreneurs raise enough money to run the company and still hold on to control and I was nowhere near that. So, my advice is not all that relevant really because I don't think I'm good at it.

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Interviewer15:08

So, you think if you were to go back in time right now, you would have put some of that control in the initial contracts?

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Martin Eberhard15:20

What I was raising money for in both of my previous companies, this one and NuvoMedia, was so against the grain of what the VCs wanted to invest in that I didn't have a lot of leverage, you know, so I don't know if I would do better. I mean, would I take money from Musk the second time? Yeah, I guess so. At the time that he came into our world, I had already been talking to another VC that was in the middle of deep due diligence and they were looking really positive. And when Musk came along, he was on a tight schedule. He said that, you know, my wife is expecting triplets or whatever on some particular date and the investment round has to be closed before that because I'm going to be busy. So we closed the deal before that time and I went to this other VC firm and said we now have a schedule and an investor if you want to participate in that round you've got to finish by this time and they said this is just not possible for us, we have a process and we go through the process. Later on I ran into that same venture capitalist and asked him how likely were you to close the deal, what do you think it was? He says we're 85%, we probably would have done it but not on your schedule.

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Interviewer16:28

How differently do you think that Tesla would have gone if you had gone with a different investor?

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Martin Eberhard16:33

It would have been different. You know, the Tesla business plan, what Tesla did for the first couple years was pretty much what we had mapped out. We said this is our first car. Our next car we said is either going to be a luxury sedan or a luxury SUV, depending on the market. Turns out Tesla did both. And the next car we'll be trying to drive the price down. That's the Model 3. That's kind of as far as we went.

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Narrator17:04

And there's so much to be said for having a dream or a vision and wanting to do something and then actually doing that, making it happen, finding the supply chain, hiring the right people, and bringing it to the level that it is today. Now, Martin's vision for Tesla was definitely similar to what Tesla did, but it did not include the technology. It did not include autonomous driving. It didn't include robots. It didn't include all the AI. So, it's a very different company today than Martin originally anticipated that it would be.

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Martin Eberhard17:33

We did not ever talk about, for example, making robots. We did not ever talk about autonomous driving or anything like that. That's all post me. I probably would have taken something of a different path in that direction.

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Interviewer17:45

So, your initial business plan though is for the Roadster and then doing the Model S, the Model X, basically. Maybe not those names, but essentially those vehicles and then doing something more mass like the Model 3.

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Martin Eberhard17:57

Exactly. And then the next car after that for me probably would have been below the Model 3. I would have been doing a low-cost car because we should be able to do it now. I'm actually disappointed to see that Tesla canceled their low-end car program because that's what the world needs, not a truck that looks like a dumpster.

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Interviewer18:17

But what about the robo taxi model 2?

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Martin Eberhard18:17

I'm more skeptical of that than most people are. So I probably would not have done that or at least it would have been an uphill sell for my engineering team to convince me we should. But so yeah, I think that people are overlooking the failures of these autonomous systems too easily. I find it kind of amazing that you can put a prototype of something on the road and kill people sometimes because it doesn't work correctly and that's kind of okay. It's not for me. Okay. So yeah. So that would have been different. I mean, do you think that as time goes by, my influence of the company diminishes to zero eventually and it gets taken over by somebody else who has a different vision? And he's done amazing, right? The company is huge. He became the richest man in the world from it. So I can't criticize too much.

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Interviewer19:07

Was that hard for you just giving up that control?

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Martin Eberhard19:13

Yes and no. I mean, I didn't start this company as a get-rich quick scheme. It was insane at the time to start a car company. Keep in mind in 2002 when we started this company, nobody had succeeded in starting a car company in the US for over 100 years. So, the odds are pretty long, right? So, to see that succeed, especially not just that we started a car company, but we started a revolution. All of the car companies in the world now make electric cars because of this car. So, I'm quite happy about that. We need to keep moving in that direction and I think we will even with current politics being what they are. I think that electric cars, everybody knows, is the future. We can just bicker about when.

N

Narrator19:55

The first mission with Tesla was really to inspire other car makers to go electric and also to change the mind of the buying public of what an electric car can be. This is not what people expect.

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Martin Eberhard20:06

I used to take our prototypes in the evenings and go joy riding and drag racing random people on the public streets with the thing and it was amusing because I could beat everything and when people heard it was electric they were like what? Now today the electric car is fast, everybody knows that of course they're fast they're electric, but that's not how we thought about it then. We thought about electric cars as being slow and ugly and no fun to drive and short range.

I

Interviewer20:25

So you really did that in a way, you achieved your mission.

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Martin Eberhard20:31

I worked at Volkswagen for a couple years after Tesla on the EV program there and it was interesting to watch the attitudes inside the company. When I started working for them, this car wasn't in production quite yet or it had just come out but there were a small number on the road and people hadn't really experienced them too much. I found an internal PowerPoint presentation within Volkswagen that had been written by one of their research groups that went through the claims of what the Roadster could do, its range and its acceleration and so forth, and concluded that it was impossible. Couldn't possibly do it. It's not true. And I said, 'Well, I've got my car. Would you like to go drive it?' 'No, no, it doesn't matter what your car can do. We've proven it on paper.' And my wife, who is a retired engineer, she remembered a class she took in college, some aeronautics class or whatever, and they passed around a paper that had been written that proved that a bumblebee can't fly. And the professor would say, 'You see that thing buzzing around the room, ignore that because we've proven it can't fly.' And so my wife says they just proved the bumblebee can't fly at Volkswagen.

I

Interviewer21:37

That's funny. All right, so we have Roadster right here. We should get to this. So this is your Roadster Founder Series VIN number two. This is your car. Can you walk around and just show us some of your favorite features, the things that maybe were your touches on it and what you're most proud of?

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Martin Eberhard21:51

Well, kind of all of it. I mean, this is the concept of the car I had in mind before I talked to any investors was exactly this. It's a small sports car, two-seater, with the batteries more or less where a mid-engine would be. One of the reasons we chose Lotus as our partner in the beginning was because they were already making a lightweight car that was mid-engine configuration. The idea of putting the batteries in a pan under the car came as we were thinking about what the Model S would be. But for this one, we wanted it low. That means there's no room for batteries. So, this one is a unique color, by the way. It's the only car that was painted this color. It's very plain and spartan. We didn't have the money to develop a fancy infotainment system. So, this is an aftermarket radio put in there that's not very good, but it doesn't matter, you know. I mean, when you drive this car, especially this early prototype, it rattles. There are parts that rattle and you hear it all the time. The sound is not that great. The stereo is terrible. The nav system, forget about it. The seats are crude and not that comfortable depending on the size of your butt, I guess. And all that doesn't matter when you drive it. You know, you can come back and say this, that, and the other thing, and then you can't get the smile off your face.

I

Interviewer23:04

It's kind of crazy to go back in time and think that this is what started it all right here.

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Martin Eberhard23:10

The license plate I had in California said Mr. Tesla, but now that I've registered in Washington, that license plate had been taken already. So, this is my new license plate. Founder. I love it.

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Interviewer23:23

Do you drive this around still?

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Martin Eberhard23:23

Not too much anymore. My wife gave me grief about driving it as it's getting more and more valuable as a collectible car. And so I have another one that's actually in California that's my daily driver when I'm there.

I

Interviewer23:34

That's kind of funny where it came from.

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Martin Eberhard23:40

We saw this for sale on some random used car lot in LA. It was forlorn in the back corner of a guy that was selling. It's the only electric car in the whole lot. The guy didn't really even know how to charge it. And it didn't even have 200 miles on it. Had like 175 miles or something like that. And so I thought it was interesting, you know, and so I'm negotiating with this guy and then I figure out who the previous owner was. It was Justine Musk. She won the car in a divorce and just dumped it without ever driving it at a used car lot. And the irony was enough that I figured I had to buy it. And then the used car dealer, he eventually figured out who I was. He googled me or something. And he thinks about a minute and says, 'No, actually I have to sell you the car.' He just gave me my price. Yes, the story is worth it. So, that's my daily driver. It's a much newer one. It was one near the end of production that he finally made the one that he owed his wife, his ex-wife.

I

Interviewer24:28

So, anyways, that's my... It wasn't hard to get this one because this one was sort of promised to you, right, VIN number two.

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Martin Eberhard24:34

I had to sue them. They tried to, I had paid full price in advance for this car and they tried to rescind that deal. That was the real root of my part of the root of my lawsuit with Musk was that.

I

Interviewer24:46

But you got it.

M

Martin Eberhard24:46

I got it. Yeah. Well, yes. And also they did something that I would never have done that they were test driving the new cars on the public roads and their test driver drove my car into the back of a truck and they had to rebuild the front of it, which did not make me happy, obviously.

I

Interviewer25:09

That's kind of crazy. But you have it. It's gorgeous. And I feel like it's definitely a piece of history. Have you signed it?

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Martin Eberhard25:15

No. It's interesting that you ask that. There's supposed to be a plaque on the firewall between the seats. And they didn't have them when they delivered it. So, these were called the Founders Series. It was supposed to be that Mark and I would sign those, but by the time they delivered these cars, I'd already been pushed out of the company. And so, instead they sent me later on a plaque that had all kinds of other people's signatures on it, but Mark's and mine were not there, which is weird for a Founder Series. So, I'm going to replace that with a plaque of my own making that just has Mark's and my signature as it should be.

I

Interviewer25:49

So, what was that early vibe like with Tesla in the very beginning when you were building this? Like what was the atmosphere like?

M

Martin Eberhard25:55

Well, especially something that's improbable, but a lot of startup companies are kind of manic depressive. On the one hand, you know you're going to take over the world and on the other hand, you know, you're going to get crushed like a bug. So it depends on which day it is, you know, and part of the art of the job of a CEO of a startup company is to smooth those out so that when the crew is dejected because something is going badly, you say, 'We'll pull through. We got to make it happen. You got to inspire your team.' So we had both because the more we dug into it, the more we were convinced that what we would make is like nothing had ever existed before. There was never a car like this before. And we became more and more convinced that it would actually work. On the other hand, figuring out how to put a new car into production, to create a new car company, to meet all the federal regulations, including the crash testing and all that, to build the infrastructure for servicing these cars and so on, it's a huge task, and we were doing it on a shoestring budget. The amount of money we raised to create this car and to start the Model S program was on the order of $100 million total. Which is just to put in perspective, I think a third of what another company, Groupon, raised to make coupons, right? And we made a car. And when I was later on working at Volkswagen, I mentioned to the Volkswagen guys that we did this with $100 million. They're like, 'No way. You can't possibly put a street legal car on the road for that little money. Not possible.' And yet that was in the early days cited as one of the reasons why I had to be pushed out of the company. Now to again put in perspective, the budget for the Model S was close to a billion dollars. So probably eight times what this cost.

I

Interviewer27:41

Do you feel a little bit like you were kind of wrongly accused for that or maybe it was just unknown, a lot of unknowns because it was a new startup?

M

Martin Eberhard27:46

Well, it's not just that it was unknowns. At the board level, we made decisions along the way that one after another increased risk and increased cost. As an example, changing the body from the composite material that Lotus used to using carbon fiber, which in the end didn't take very much weight off the car. It was a few pounds. It was the most expensive weight we took off the car.

I

Interviewer28:09

Are there things like if you could go back to that time period that you wish you had done differently?

M

Martin Eberhard28:21

There's a ton of things I would do differently, for sure. But hindsight is what it is. Right. Hindsight 2020. But I think that the big picture we got right. The concept of the car was perfect. It's exactly the right way to start and the proof is it worked when nobody's ever done it before. I think that our choice for using lithium-ion batteries and our way of managing them was correct. All battery management systems on all electric cars today are ultimately based on what we did here. They've improved. They've added more functionality. They've made it more precise, whatever. But fundamentally, it's what we did. Our choice of using an AC induction motor, I think, was the correct idea. Even though right now there's a mix, some cars don't. But today in the world where China is restricting access to the neodymium you need for those motors, it's kind of nice to have a motor that doesn't have any. I mean this motor is made of copper and steel. There are no magnets. And so yeah, I think that in the big strokes we got it right. Doing it again, I would probably have done a different kind of charging system and it would have liquid cooled the motor, for example.

I

Interviewer29:20

You and Mark still get together every Wednesday?

M

Martin Eberhard29:27

We've been getting together for Wednesday coffee since the late 80s, like 88 I think we started.

I

Interviewer29:34

That's crazy. Does he live on the island too?

M

Martin Eberhard29:34

No, no, no. He lives in Woodside. Okay. Yeah. And during COVID we did it virtually and like this week since I'm here in Washington we will do coffee virtually.

I

Interviewer29:44

That's cool. Zoom, right?

M

Martin Eberhard29:44

Yeah. That's a long friendship as well as we've done two companies together and they were successful and fun.

I

Interviewer29:57

I know your relationship with Musk is very complicated. Is there anything...

M

Martin Eberhard29:57

It's not complicated now.

I

Interviewer30:02

Have you spoken to him?

M

Martin Eberhard30:02

No.

I

Interviewer30:08

Is there anything that maybe you respect about what he's done and then things that you...

M

Martin Eberhard30:08

Look, he turned Tesla into one of the most valuable companies in the world for better or worse. So that's good. I'm glad to see my baby surviving, you know. So that's about it. Actually, to be fair, I think also SpaceX has been a remarkably good company. Although I think that he doesn't do an adequate job of giving credit to the people who made that possible. For example, Gwynne Shotwell, I think she's president of the company and she's the one who really keeps the rockets flying.

I

Interviewer30:32

Then you're not a huge proponent of autonomy, full self-driving.

M

Martin Eberhard30:38

No. One of the troubles with autonomous cars is it assumes that cars are the answer. And I'm not convinced in urban environments that cars at all, whether they're autonomous or not, is the answer. I think that there are other answers that are interesting.

I

Interviewer30:51

Do you use Grok or ChatGPT?

M

Martin Eberhard30:56

No. I've fooled around with them with disappointing results. What I don't like about my experiences with ChatGPT is the way that I can pose it a problem and it will give me an answer with full confidence and it turns out it's wrong and then I'll point out that it's wrong and it will make some corrections and it's still wrong. And I've gone through multiple iterations of that. And I've tried this on a subject where I understand the field. So I know what the right answers are and I see it's just wrong, and yet the presentation is, 'Of course I know how to do it and here's the answer.' So I find this to be dangerous. I'm concerned about how it's being used in things like education and stuff like that just because, if you let the AI do the thinking for you, what are you doing? But my biggest concern with AI in general is actually on the other side of it, that it will be used for bad purposes. Deep fakes right now, if you're paying attention you can tell it's a deep fake, but that's today. It won't be true tomorrow. You won't be able to tell. You'll think it's your child calling you up and saying that whatever and you'll see the face and hear the words and yeah. Okay. I'll send you some money or whatever dumb thing you do.

I

Interviewer32:10

So some of the things like maybe you had tried before with it maybe it is getting better with every day but then there are big risks associated with it and as of this recording it's actually coming to all Teslas this week. So it'll be... not all Teslas, not this one. Some of these early ones will not have it. Yes, but the newer ones will have it. And Grok, by the way, do you see the article from this week about how it so easily descends into Nazi propaganda?

M

Martin Eberhard32:39

I did hear a little bit. My dad was talking about that.

I

Interviewer32:44

You should read the article. It's still out there. It's really easy to get it to start talking like a fascist.

M

Martin Eberhard32:51

In general, I mean, these AIs have been trained on the entire internet, including all of its horrible things. So, it's not surprising it has a bunch of horrible stuff built in because that's what we made it out of. It comes from us in a lot of ways because it's trained on us.

I

Interviewer33:02

So I even read something where it was sort of taught to lie and procrastinate on what it was doing because that's how humans...

M

Martin Eberhard33:08

There's an interesting article this morning that a couple of the AIs have been challenged by the old Atari 2600 chess plane computer which was made in the 1970s and that chess plane computer crushed the AIs over and over again. And then the last AI, I don't remember which one it was, refused to play.

I

Interviewer33:34

But I'm wondering though, with it when it heard that it had crushed other AI that it refused because it's like a person.

M

Martin Eberhard33:44

Well, it's not really. That's how people react a lot of times if they're like, 'No, I don't want to do that.' So, I think that's kind of interesting. But I do think that it is improving over time.

I

Interviewer33:55

Improving in which direction, though?

M

Martin Eberhard33:55

Getting smarter.

I

Interviewer34:01

Well, I don't know if that's improving, but it's getting smarter over time. But there has to be some way for humans still to override it and maybe help. It's like a child, right? You have a child and they can go either way.

M

Martin Eberhard34:09

It's not though because the child doesn't start off with the entire internet loaded into its head.

I

Interviewer34:15

But could the parent of it guide it into the right direction? Is there a path for that?

M

Martin Eberhard34:22

I think it's a mistake to over-anthropomorphize the AI. It's not a person. It isn't. It's an algorithm. It isn't thinking the way you do or I do at all. It has no innate sense of morality. For example, the concept of morality doesn't exist. It doesn't have an innate sense of right and wrong at all.

I

Interviewer34:45

And can that be taught?

M

Martin Eberhard34:45

It's not something that's taught. It's something that's built into your head when you're born. You know, children, you're a mother. Children have a very deep sense of justice and a deep sense of injustice and they feel it in their gut at the youngest age. If you spank this kid for what that kid did, it doesn't forget it. It feels that that's wrong at the moment. It's clear.

N

Narrator35:09

It is clear that Martin is not a huge fan of AI and there's a lot of it that does scare him as it should because it is a new technology that we're all learning from right now. Now, is it something that I think that we should totally back away from? No. I think that it is part of our future and we need to embrace it and maybe carve a way for it to be better and give it some kind of moral code. I feel like at this point though there's really no turning back. It's already like we have it. It's a machine perfectly well maybe true. It's going to keep rolling out. So, at this point, I feel like maybe we have to figure out some way to build in some kind of moral code into it.

M

Martin Eberhard35:44

Good luck with that. But if you figure that out, start your company. I'll invest. All right. I don't even know what it means to teach a machine like that about morality.

I

Interviewer35:55

So that's basically the machine though that is going to be driving these vehicles around. That is driving them right now. We have Waymo. We have a robo taxi. I was out in Austin a couple weeks ago doing robo taxi.

M

Martin Eberhard36:06

I feel better about Waymo by far than the Tesla stuff because they're much more serious about their sensors and about observing the environment. I mean Tesla's only using cameras and Waymo uses cameras, lidar, radar, every, you see this car, they're covered with sensors and it's been shown over and over again that the Teslas don't see stuff all the time when they crash into parked trucks and emergency vehicles and whatnot. There was an interesting article, it's now old, but some earlier version of the Tesla software was being tested by some professors at MIT. And they put two pieces of blue masking tape on a stop sign and the result was the car no longer recognized it as a stop sign. Just drove right through it.

I

Interviewer36:50

So I was out there about three weeks ago and I was part of the initial 20 people that got access to robo taxi in Austin, Texas. I did have a phantom braking incident with the sunlight. It caught on camera. Everybody saw it. And I did notice that. So I'm interested to go back now in a couple weeks as they've had some updates and work through some of these issues. They've also expanded the service area and try it out again. What tests would you suggest to do on it?

M

Martin Eberhard37:22

The trouble is that we are really bad at thinking about unlikely events that have awful outcomes. So, if you go for a drive and it works great, that doesn't prove anything, right? It's that one in a 100,000 times it kills somebody or whatever. When you're going to put millions of them on the road, that means lots of people are going to die and we're just not good at that. So my concern is that it's very compelling to get into the self-driving car and it drives you around and it's all awesome and great and it occasionally kills your grandma.

I

Interviewer37:56

But do you think that the amount of accidents that are produced just from human driving and human errors will be prevented and that that number will be smaller than the number of accidents from... I mean Tesla claims this now but they also are blocking the highway safety people from seeing their data.

M

Martin Eberhard38:10

If I crash into you in my car, I'm responsible and I pay for it one way or another through my insurance or writing a check or go to jail because I was drunk or whatever. If Tesla's software crashes, who's responsible? So far, it's been nobody. Oh, bummer. Sorry. Live and learn. Who pays?

I

Interviewer38:34

Well, I think at this point because it's also still in sort of like this beta that you do sign when you go to use it that you will be taking over.

M

Martin Eberhard38:40

But again, which is a crazy notion. I mean the idea that your car does all the driving up until the point where it's too confusing and the AI doesn't know what to do. So you're busy texting or chatting with your buddy or whatever the hell you're doing. You're not totally paying attention because the car is driving and then suddenly there's a situation that occurs that's complex enough that the AI doesn't know what to do and you're supposed to in real time wake up, look out the window, figure out what's going on, react in a way that the AI couldn't figure out how. It's insane.

I

Interviewer39:13

So, I guess you're not going to be buying Optimus.

M

Martin Eberhard39:19

No, I don't want a self-driving car until the day they take away my driver's license.

I

Interviewer39:25

You enjoy driving. You wanted a sports car, so you driving any car like driving a Model S. It's a boat. Yeah. But this was sort of like you're like, I want an electric sports car. It's not out there. Let's build it. And that's really the story of Tesla and how it began. That's how it started.

M

Martin Eberhard39:38

But again, I didn't build a sports car because I thought that was the future of cars. It was only that I thought it was a good entry point. That's it. I mean, we made a good sports car because that's the exact opposite of what people thought electric cars were. And I wanted to change people's idea. And it's also where the early technology would excel.

I

Interviewer39:55

So, is there anything out there about you that you see online? I don't know if you're active on social media.

M

Martin Eberhard40:03

No, I'm not. I had a feeling of that actually talking to you. I know that on Facebook there are at least three or four fake accounts with my name on them. That's not me. I don't have an account there.

I

Interviewer40:15

So, you're not on social media?

M

Martin Eberhard40:15

I'm on LinkedIn. That's kind of like Facebook for old people. If anybody said anything against Musk, even things like, well, he didn't actually start Tesla, the fanboys would just jump all over them in the most vicious way. And I avoided all that by not being on social media.

I

Interviewer40:34

So, is there anything that maybe you would like to clear up about you and your image?

M

Martin Eberhard40:41

I don't know how to answer that. I mean, I do care. I think that...

I

Interviewer40:47

Do you feel targeted by some of the things he's said about you?

M

Martin Eberhard40:47

Of course. I mean, it's not that I feel I was. Yeah. And I still continue to be. The weird thing is I've been out of the company since the end of 2007 and yet every now and then he decides to attack me again on some social media platform or even on the stage at TED he's done that which is kind of weird.

I

Interviewer41:06

Do you think it goes back to the who were the original co-founders and all that?

M

Martin Eberhard41:11

Yeah, I don't know. I mean, somebody had pointed out that I'm still occupying real estate in his head which is kind of funny when you think about it.

I

Interviewer41:24

Well, you know, there's a true line between love and hate. Is there any notion or any path for you guys to reconcile?

M

Martin Eberhard41:29

No, I don't think so. No, I can't imagine. I can't imagine how that would happen from either one of us. I mean, he's pretty set in his ways. So, no, I can't imagine that.

I

Interviewer41:42

Do you think that what's going on now with him and Trump is kind of like what happened with you guys?

M

Martin Eberhard41:49

I think he's become more extreme in his behavior since I knew him. Maybe it's the drugs. I don't know.

I

Interviewer41:55

All right. I'm going to ask you a little bit about where you are now with life. So now you've moved on from all this. Like obviously you feel great pride for what you've done. You've achieved your goal and you've kind of had this new life for yourself. What are you up to these days?

M

Martin Eberhard42:07

Well, I call myself retired. Still lecturing around the world on subjects I care about, mainly entrepreneurship, electric vehicles, energy, that kind of stuff. And I've got my own pastimes that I enjoy.

I

Interviewer42:26

So, like you go hiking? You like the outdoors?

M

Martin Eberhard42:26

Yeah, I do hiking and kayaking and things like that. I should do more probably. I have a hobby that I enjoy. I'm restoring some ancient computers because it's fun.

I

Interviewer42:43

What do you think about the designs of the new Teslas? Do you like the exterior look that electric cars we have like the new Model Y, Cybertruck?

M

Martin Eberhard42:48

Oh, the Cybertruck I think looks like a dumpster. So that would be a no. I think the other cars, all of the models of Tesla after the Roadster look a little bit like a bar of soap in a wind tunnel, which is reasonable. You want to get good aerodynamics, but they're not inspiring designs in particular. And the refresh they did for the few cars that they did recently, I think overall I like the improvements of them, but it's not much. I don't think it's convincing people there's a new car. It's just an airbrush job.

I

Interviewer43:26

There's a lot of overlap between you and Volkswagen because you went to Volkswagen after Tesla and Franz came from Volkswagen to Tesla.

M

Martin Eberhard43:33

Well, Volkswagen is huge though. It's like it's big as a country. Was there anything though with that? Did you have any part in hiring Franz? No, had nothing to do with him at all. So there's no connection. I was not looking to work at Volkswagen. I was working at a VC firm and Volkswagen reached out to me and asked me if I would come and help them with this one program and I was intrigued. I'd never worked at a company that big before. So it was super interesting, but it was also weird that I saw some strange things inside the company that I couldn't make sense of. And they began to make sense when the whole Dieselgate thing came out that I realized what was going on and why. I mean, just as an example, I was having a discussion with the CEO of the company at the time, who's no longer there, that I was encouraging Volkswagen to make more electric cars sooner. That's kind of my gig, of course. And he told me that Volkswagen's strategy for meeting their corporate average fuel economy and emissions requirements was clean diesel. And I said, 'Dr. Winterkorn, clean diesel is an oxymoron.' And he got super mad at me, red in the face and screamed at me and basically threw me out of the room. And I thought that was a bit extreme until the Dieselgate thing came out and I realized that this is why. I'm convinced that the Dieselgate scandal went to the top of Volkswagen. This is from this experience. So that kind of stuff was really interesting though. And my experience within Volkswagen was also neat that the engineers who were sitting at CAD stations and doing design work and actually engineering the cars were almost universally excellent. Really good engineers. I would have loved to hire any of them at Tesla. And as you got up into the management, it was more and more empire building and calcified thinking and so on. People were looking out for their department, not the best interest of the company, that kind of thing. And I think that that's kind of typical of big companies. I don't think it was unique to Volkswagen at all.

I

Interviewer45:25

What would be your biggest word of advice if you could go back and talk to your younger self? What would you tell yourself?

M

Martin Eberhard45:38

I would be more careful about the people I hired along the way. There's been a couple times in my career both at Tesla and at NuvoMedia where a key engineer of mine approached me at a time where it's critical schedule, critical program has to get working, and basically blackmailed me and said if you don't give me more stock and more money I'm going to walk. And my advice to anybody who's in that situation, if you have an employee do that to you, frog march them to the door. That's the end. I don't care how important they are to your program, they go. And I didn't. I caved.

I

Interviewer46:13

Do you still own shares of Tesla?

M

Martin Eberhard46:19

Yes, I've owned shares in Tesla longer than anybody. So, I still have some of my original stock. Not a lot, but some. I sold most of it. I sold most of it probably too soon from a financial perspective, but you never know. But I'm fine, you know? I mean, yeah. I have a beautiful house, beautiful life. I'm not a jillionaire or anything, but I'm fine.

I

Interviewer46:36

My final question here, I'm going to give you three things and I want you to put them in priority for you. What is most important? Would it be money, respect, or power?

M

Martin Eberhard46:48

Respect. Yeah, for sure. I'm not big on power. And I'm weird in the sense that there is such thing as enough money. If I was out of money, money would be on my list because I'm not crazy, you know, but I'm fine. My kids will be fine. So, yeah.

I

Interviewer47:05

Very good. Well, thank you so much. And if you guys have questions, he probably will not be online checking them, but I will do my best to answer them. And maybe you can put them up on YouTube. I'll send you a link. I'll send them to you. Thank you guys so much. I hope you learned a little bit about the original startup of Tesla and what it was like in those early days starting out a new electric car company when nobody was doing that. In the very beginning go from an idea to an actual company that now is one of the biggest firms at least value-wise. I think it's pretty fascinating. I appreciate your time. Thank you so much.

M

Martin Eberhard47:43

Yeah, thanks very much. It was nice.

N

Narrator47:50

After meeting Martin Eberhard today, I'm really impressed at how authentic he came off. He met us at the airport, drove us around with his wife's old Model S around the island, took us to his home. We got to see his original Tesla Roadster, VIN number two, and hear some great stories from him. But what I did notice after meeting him was that he seemed very happy. He is married, he has children, he gets up every morning, he works out, he lives a vegan lifestyle, and he's into health and fitness and meets up with his friends, and overall seems like a very happy person. So, when it comes to who wins and who loses, there's more than just owning that company or being the CEO. There's more to life than just that. And it depends on how you define success. I hope you guys enjoyed watching this video. A lot of time, effort, and our personal money goes into making these videos happen. So, please feel free to share this video with a friend and subscribe to our channel. It really goes a long way. And we'll catch you next time. Oh my god. You know who has the best drive unit right now? Lucid.

M

Martin Eberhard48:48

Lucid. Yeah. The CTO at Lucid. He was my college roommate and a good friend of mine.

I

Interviewer48:54

Really? Yeah. That is crazy. He was actually my best friend in high school when I moved to Illinois. Unix was originally to Altown. So, it's done. Where did you even get this?

M

Martin Eberhard49:05

It's pieces. I find pieces and put it. I know what it's supposed to be. So, I'm still missing some parts, but this is the majority of it.

I

Interviewer49:10

Some people rebuild old cars and you...

M

Martin Eberhard49:10

Oh, I do that too. That's some crazy cars, too. But this is just a...

I

Interviewer49:16

No. That's fun.

M

Martin Eberhard49:21

I mean, this is so early 1970s, late 1960s. I mean, who would make a computer that's basically...

I

Interviewer49:27

What do you do with it? What are you going to do with it?

M

Martin Eberhard49:27

I'm going to get it running and then it's boring after that. I'm done.

I

Interviewer49:32

It's like your Lego set.

M

Martin Eberhard49:32

That's right. A little more though. No, it's actually more than that because one of the thrills I get about digging in and restoring these things is getting into the heads of the engineers who designed it and they were really smart, you know, making these things work with such primitive hardware by today's standards is cool. And some of the concepts that were invented on this machine become normal across, I mean like the Unix operating system was ripped for this machine and now it's crazy.

I

Interviewer50:03

It's kind of like how you connect with but like you know here goes the hard drive hardware platter. That's the hard drive. It's a platter. It goes into the slot if it was on. This is five megabytes only.

M

Martin Eberhard50:15

Wow. Yeah.

I

Interviewer50:22

I wouldn't even know. Like I had never seen anything like this and I wouldn't even know how to use it.

M

Martin Eberhard50:22

And when is this from originally? 1969. Wow. Yeah. I mean, you've heard of floppy discs, right? You show me how big you think a floppy disc is.

I

Interviewer50:33

The floppy discs were like...

M

Martin Eberhard50:33

Yeah. They are metal. Oh, wow. So, it's about the size of eight ounces in. Yeah. And it holds almost a megabyte. That's it. I mean, this is the journal. This is where you talk to the computer and is this.

I

Interviewer50:50

That's so crazy. Yeah. Keyboard on the screen. Yeah. Not that different. I kind of remember this type of thing back in my early childhood. Some of the first computers people had. We had like an old Mac.

M

Martin Eberhard51:10

This is way before Macs. Way before.

Tesla’s Forgotten Founder Speaks Out – Exclusive w/ Martin Eberhard

About Martin Eberhard