CEOInterviews.AIMarc Tarpenning & Martin Eberhard, Tesla cofounders at UCB Newton Berkeley Changemaker® Series

I

Interviewer0:13

Welcome, everybody. It is great to see you all. Move on in. We'll have a lot of people here. So if you can move toward the middle, it would be fantastic. Wow! Thank you very much. Can you believe that it is almost Halloween? We are at the end of October. And also, two of my absolute favorite speakers, I'll be interested to hear from you all later how you all like it. I am also thrilled to have two people introduce. And a quick reminder, 11/4, which is next week, we're going to have class online. And it's mandatory for everybody because it has to do with everybody's year-end project, so just two cents on that. If you have any questions about that, feel free to ask me. But in the meantime, it is my pleasure to introduce the student speaker introducers tonight. After you all.

Y

Yuhan Wen1:11

Thank you.

A

Asha Gupta1:17

What do you do when an entire industry gives up on an idea? In 2003, that's exactly what happened to the electric car. General Motors had just recalled and destroyed nearly every last EV1, the world's first modern production electric car. The industry saw EVs as an unprofitable niche that they were forced to comply with due to the zero-emission vehicle mandate, which was very soon canceled under immense industry pressure. The message was clear: electric vehicles had no traction.

Y

Yuhan Wen1:48

But two Silicon Valley engineers decided to run in the opposite direction. That summer, in a small office in Menlo Park, Tesla Motors was born. Neither of them were experienced with the automobile industry before, but they had already co-founded Nuvomedia and built one of the world's first e-readers, the Rocket eBook. Leveraging what they learned about batteries, they decided to do what no automakers dared. They networked nearly 7,000 lithium ion cells together into one single battery pack and dropped it into a sports car chassis. The result was the Tesla Roadster, a high-performance electric vehicle that could exceed 200 miles on a single charge and accelerate from 0 to 60 in under four seconds. It didn't just prove electric cars could function in everyday life. It proved that it could be accelerating. As an engineer myself, that story is particularly inspiring. My name is Yuhan. I'm a PhD candidate from Electrical Engineering and Computer Science department. Marc and Martin's journey bridging technology and entrepreneurship, taking bold leaps, and showing that engineers make great founders is particularly inspiring to me.

A

Asha Gupta3:04

My name is Asha Gupta, an undergraduate student studying economics and media law and policy. Marc and Martin's relentless pursuit of their vision to create social impact through technology guides my desire to create change, proving that regardless of what others say, it is possible to make a difference that helps the world. To understand how they pulled it off, let's look at their paths before Nuvomedia and Tesla. Martin Eberhard began his journey by obtaining a computer engineering degree in master of science in electrical engineering at the University of Illinois, Urbana-Champaign. He then jump-started his career as an electrical engineer at Wyse Tech and co-founded Network Computing Devices.

Y

Yuhan Wen3:40

Marc Tarpenning graduated from UC Berkeley in 1985 with a degree in computer science. He started his career at Textron in Saudi Arabia, developed software and firmware for Seagate Technology and Bechtel, and later became Vice President of Engineering at Packet Design.

A

Asha Gupta4:06

Martin continued revolutionizing EV technology as Director of EVs at Volkswagen and founded an EV battery startup. He is now a partner at Wardenclyffe Partners.

Y

Yuhan Wen4:18

Now, Marc has dedicated himself to mentoring the next generation of entrepreneurs at Berkeley and as a venture partner at Spirit Ventures. As he once said, people have asked me why I would want to start a company, because there are things worth changing. So tonight at the Newton Changemaker series, please join us in welcoming the founders of Tesla, Marc Tarpenning and Martin Eberhard.

I

Interviewer4:52

There you go. Wow. So glad you made it.

M

Martin Eberhard4:57

Thank you. Thank you for having us.

M

Marc Tarpenning5:04

That was a great intro. I love that. Not setting expectations, however, that was a little bit scary.

I

Interviewer5:11

Well, you've done a lot of amazing things. I have some opportunities to ask you one or two questions. I have a question that's been upvoted by the students. And by popular demand, we will try to leave as much time as possible for you all to ask questions. So, Hailie and Taiba, get ready. Thank you for joining us today. Thank you for joining us earlier even today. Gosh, it's nice to have you all here. It doesn't take rocket science to realize that you all have been somewhat present in your ideas. I know you think that you were kind of practical in looking at doing the e-book, because, I think, well, maybe you'll tell us the story later, or why you all wanted to do Tesla. But I thought we could start forward thinking before we go backward, if that's all right. And I wanted you all to think about the future and just maybe only 10 years in the future, wondering from each of you what you think the world might be like. And part of that is so that we as students, all of us, students always, can think about how we can orient ourselves or think about how we can positively impact that future or take advantage of it.

M

Martin Eberhard6:25

Well, just to start off, the talk we heard this afternoon from Michael Marks, he made the point that any predictions you make about the future are going to be wrong. So with that in mind, whatever we might think, the real answer is you need to stay flexible. You need to pay attention to what's going on and look forward, not backwards.

M

Marc Tarpenning6:45

Yeah. Michael had said, you want to predict the future really often because it's always wrong. Yeah. The kinds of things that are going to happen: AI is everywhere. Of course, everyone knows that. So thinking back to when the internet was young, it sort of hit on the scene in the '90s, and it took over everything in a weird way. And everyone knew everything was going to change, but no one knew how it was going to change.

M

Martin Eberhard7:13

And we were wrong about our guesses.

M

Marc Tarpenning7:18

We were wrong all the time, yeah. And I think that that's exactly right now, we're in the middle of this AI revolution. We don't really know where value is going to accrue. We don't know who the winners and losers are going to be or what the winners or losers are going to be. But we know it's going to be everywhere and change everything in some inexplicable way. So be really flexible, play with AI in whatever your discipline is to understand how to use it, because it is useful. And if it isn't useful right now for you, it's likely to be useful in the near future.

M

Martin Eberhard7:46

And I think it also may come and do some harm, and you need to be able to recognize when it's AI that's doing something.

M

Marc Tarpenning7:52

It's going to be a disaster many ways, yeah.

I

Interviewer7:59

Well, let's call it like you all see it. What do you think is going to be disastrous? What could be disastrous? And maybe if we know about it, we could avoid it.

M

Martin Eberhard8:05

It's hard to predict all of it. But I would say the opportunity to create really convincing fraud scares me, having been the victim of identity theft already several times. AI already can be pretty convincing. And next year, it will be indistinguishable from real. So I think that kind of misuse of AI is inevitable, and we don't know how to protect against it yet.

M

Marc Tarpenning8:23

If you look at Sora 2 that came out this week, or whatever, and the videos that it can create, they are watermarked conveniently at the moment, but it's indistinguishable from reality. It's beautiful.

M

Martin Eberhard8:34

And I've got a program that removes the watermark from your AI.

M

Marc Tarpenning8:40

Well, no, of course. Yeah. You can't keep the watermarks on. So it's a beautiful technology, but it's going to really make trying to figure out what's real and what is fake nearly impossible.

M

Martin Eberhard8:53

But back to your original question, this also creates all kinds of opportunities. If you've got ideas about how to protect people from this misuse of AI, even if you're also using AI, that's a huge opportunity for sure.

I

Interviewer9:06

Yeah. What do you think is going to happen with cars?

M

Martin Eberhard9:14

We debate that a lot. So first of all, cars are going to be electric. The current administration might be slowing it down or whatever, but the fact is electric cars are better. And the worst thing about electric cars now is that they're too expensive. And the prices are coming down because we're learning how to make stuff cheaper. But I also personally think that in urban environments that cars in general aren't the right answer. I think that ultimately there's other kinds of mass transit that we could do that would be more efficient and make the cities better. I think Marc and I don't totally agree on this.

M

Marc Tarpenning9:39

We don't agree totally, yeah, partially because if you look at mass transit, around here, of course, it's very limited. But if I take Caltrain now into San Francisco, I live on the Peninsula, so going into the city, that didn't used to be possible for me because it dumped me off at Fourth and Townsend unless I wanted to go to Fourth and Townsend. It was really hard to get anywhere else. Now, between Uber and frankly, Waymo, which is super fun, how many of you have been in Waymo? Yeah. Isn't that totally random? It's like so bizarre, you're in this thing, and it's driving around. I love it. And that really to me enabled a kind of public transit. Now, in an ideal world, it would be more like Europe, where I would have been able to go to Fourth and Townsend and then get into the metro or whatever and go to where I wanted to go. But we don't have that for whatever reason. So I think that these car services are going to be really powerful. The big question is, when do we get the self-driving car that you just buy? That might not be for a long time. That's going to be a hard problem. But I could imagine that maybe when you go and rent a car, you get the rental that doesn't have a steering wheel and it just drives itself, and it's a service that you're paying for. I could see how that might work. I don't know. We'll see.

M

Martin Eberhard11:01

It's going to be really fun to hack those cars, too.

I

Interviewer11:07

Isn't that a movie?

M

Martin Eberhard11:07

Could be.

M

Marc Tarpenning11:07

Yeah.

I

Interviewer11:12

We were talking about entertainment, but it does give you all sorts of opportunities for entertainment. What about you, you all really came out with the first e-reader. What do you think is going to be the future of reading?

M

Martin Eberhard11:18

I think we're already somewhat in that future that most people don't actually read books anymore. I see people reading on iPads more than I see them reading in a paper book.

M

Marc Tarpenning11:29

Or their phones. You have this little tiny screen, and people sit there. So at the beginning of time when we were doing the e-book, we assumed that no one would ever read on a little tiny screen. And the screen technology was really bad. So we had just seen the very, very latest screen technology that was just barely readable. And we figured, this is the opportunity to create electronic readers, because if you do it when the technology is just barely possible, it just gets easier and easier and easier. And if you wait until it's easy, then it's too late, someone else got it. So it never occurred to me, at least, that people would be happily reading hundreds of lines of text on a little tiny display.

M

Martin Eberhard12:06

But the display is so much higher resolution.

M

Marc Tarpenning12:11

It's so much better, yeah.

M

Martin Eberhard12:11

But you make a point that's been a hallmark of quite a few of the things we've done together. And that is, that we tend to get interested in a new field or a new technology when the technology is just barely good enough. And I would say that's also true for Tesla.

M

Marc Tarpenning12:24

Oh, totally.

M

Martin Eberhard12:24

Yeah.

I

Interviewer12:30

So just for giggles, here, we have the future in the room. I'm just curious how many of you actually buy textbooks? And we're not taking a picture of it. I just want to know, is there anybody in here who buys textbooks? I'd say that's a good 5% of you. How many of you have a driver's license? That's more than I thought.

M

Martin Eberhard12:49

How many of you have a car? Good. I got it. Here's the hard one. How many of you can drive a stick shift? That's better than I expected. Congratulations.

M

Marc Tarpenning13:03

That's way better than I expected.

I

Interviewer13:03

How?

M

Martin Eberhard13:09

One of my hobbies is teaching kids how to drive stick shift. I've taught probably a couple dozen kids to drive stick. And a lot of kids can't.

I

Interviewer13:14

Now, that explains why you're CEO, it all makes sense to me now, because that's a hard thing to teach anybody to drive stick shift. Yeah. So thank you for looking into the future a little bit. It is so evident talking to you all, and looking at what the picture that was up there before, how much you all, speaking of entertainment, complete each other in a way. And I'm curious to know, maybe no one said that to you all before, but you have such a wonderful camaraderie.

M

Martin Eberhard13:43

That's why we keep working together.

I

Interviewer13:49

Yeah, well, you keep working together. Can you take us a little bit back to when you were both in college and how you all even met?

M

Martin Eberhard13:55

We didn't meet in college. We met after college. Yeah. So we have a mutual friend.

M

Marc Tarpenning14:01

So my high school buddy and actually Berkeley roommate was hired by you in my buddy's first job. You were his boss.

M

Martin Eberhard14:10

Yeah. No, I wasn't his boss. So this is a company called Wyse Technology. We made a thing called computer terminals. You probably never heard of one, but your computer is being turned into one now. But I got the job. I was the first kid hired straight out of school into this company, because I happened to have the same thesis advisor as the founder of the company did. That was handy. But Greg, your friend, was the next kid hired straight out of college. So we were the children at the company.

I

Interviewer14:41

Where was the company?

M

Martin Eberhard14:46

It was in Silicon Valley.

I

Interviewer14:46

So how did you move here?

M

Martin Eberhard14:54

From, oh, well, I'm born in Berkeley. It's my home.

I

Interviewer14:59

Exactly. So I knew. So I just needed to hear that from you. So that's why you went to Illinois for college?

M

Martin Eberhard14:59

My family moved there when I was in 11th grade. And I paid for my own school, so I was in-state resident. I could afford it.

I

Interviewer15:12

I've never asked you this, I don't know how you got to Berkeley.

M

Marc Tarpenning15:17

I drove from Sacramento. It's I-80.

M

Martin Eberhard15:17

Here's the weird thing, we both...

M

Marc Tarpenning15:24

You just come all the way down. It's super easy.

M

Martin Eberhard15:24

Yeah, two native Californians here.

M

Marc Tarpenning15:24

Yeah.

I

Interviewer15:30

And what on Earth, how long did it take before, for some reason, I had this vision of you all playing games or something together. But what was your relationship like when you met? Because when you meet someone and they're your friend's boss...

M

Martin Eberhard15:38

I wasn't a boss. I was just colleague.

I

Interviewer15:43

Oh, colleague. Fine.

M

Martin Eberhard15:43

But he threw these great parties at New Years. And Marc in those days was working overseas and would just come into the US occasionally for good parties, I guess.

M

Marc Tarpenning15:49

Yeah. It's for the party. What else?

M

Martin Eberhard15:56

Yeah. And Marc and I just talking to each other. I think we got into some deep political conversations. And I think you pulled me a little bit toward the right, and I pulled you a little bit toward the left, but not very far. Yeah.

I

Interviewer16:08

So happy medium. When you were working overseas, was that when you were working in oil? I don't know.

M

Marc Tarpenning16:14

I was never working in oil. Yeah. So when I got out of college, and this, I know, is going to sound totally irresponsible, but there was a time when there were so few computers around and people who knew how to operate them and work with them were in great demand. And that was me as a teenager. So while I was here at Berkeley, I was doing all kinds of consulting gigs for various companies. I was a great deal for them. So I had saved a bunch of money. And when I graduated, I didn't want to get a job or anything. I just went overseas, and I was going to hang around with some friends from Berkeley and tour Europe. I'd never been there. And I got tracked down by somebody I had done a project for. And he said, you got to come back. This is after like four weeks. You've got to come back. I've got this project. It's super off the rails. You're the perfect person for it. And it'll take three months. And then I'll send you right back to where you are in Geneva, Switzerland. You can go right back and continue your trip through Europe, and you'll just have a bunch more money. And I thought, OK, well, that sounds good. So that three months was six years. And it took me to Saudi Arabia. And I was working on computer systems at the airport in Riyadh, which was a project enormously off the rails, which was, so I was part of the fix-it team that came in and tried to get the project back on the rails.

I

Interviewer17:44

So that's where you were coming from when you came back home for parties?

M

Marc Tarpenning17:49

Yeah, so then typically around the holidays, I would come home. There are tax reasons to not come into the country very often, but I would come in around holidays. And the New Year's day party is, I think, yeah, where we...

M

Martin Eberhard17:55

Yeah, correct.

M

Marc Tarpenning17:55

...spent a lot of time.

M

Martin Eberhard18:02

So there came an opportunity for us to do a consulting job together. I don't remember who got roped into it first, but we wound up working in, this is the most exciting space you can imagine, computer disk drives. Oh, baby.

M

Marc Tarpenning18:13

So those are the spinny things that used to store data. And they still are used.

M

Martin Eberhard18:19

Yeah, it was incredibly boring, but it was fun working with you. And it was a good experiment to see if we could work together. And it turned out it was great. I was basically the hardware guy. You were the software guy.

M

Marc Tarpenning18:24

Yeah. And disk drives are actually a really fun thing because they're fun for about a couple of weeks because they're electromechanical. So there's a spinny thing. There's a magnetic thing. There's an analog thing which is head, and it's flying. And there's an aerodynamic weirdness to it. And then there's a bunch of software. My specialty was the firmware, the thing that makes the hard drive get the data off the head. And that turned out to be really fun for one project and then another project.

M

Martin Eberhard18:52

And we knew it had to end when we found ourselves at Disk Con.

M

Marc Tarpenning18:58

Disk Con.

M

Martin Eberhard18:58

The world's most boring...

I

Interviewer18:58

So like Comic-Con...

M

Martin Eberhard18:58

...trade show ever. Oh, my god.

I

Interviewer19:04

...but the opposite of Comic-Con. I like that.

M

Martin Eberhard19:04

If it wasn't for that espresso bar at the beginning of the thing, I think it would have just died.

M

Marc Tarpenning19:10

Well, at the end, we were leaving, we had lost the will to live for being there. And then there was this espresso bar that kind of materialized. And we both had double espressos and...

M

Martin Eberhard19:15

We crawled on our hands and knees to it.

M

Marc Tarpenning19:21

Yeah, it was really brutal. And that was the end. We said, we're never doing this again. We're done.

M

Martin Eberhard19:26

And that led to us hanging around cafes thinking about what to do next. And that's kind of where the e-book idea came from.

I

Interviewer19:31

I thought, it's because you got tired of carrying those books back and forth.

M

Marc Tarpenning19:31

Well, that was one of the, you want to solve a problem that you know exists. And at that time, you had to carry all these books around because that was the only medium that we had. And I was traveling a lot, or had been, and we thought, well, let's solve that problem. And it's going to take a technology that's just barely possible if we can get a display.

M

Martin Eberhard19:51

There were about three or four technologies that mattered. There were batteries, which this led eventually to Tesla. But in those days, it was nickel metal hydride. There was low-power, relatively high-performance microprocessors. And there was flash memory, and then most importantly was screens.

M

Marc Tarpenning20:10

Yeah.

I

Interviewer20:10

So you know that now. Did you look at that then when you were meeting in the coffee house? Were you like, OK, these are the three things that are just...

M

Martin Eberhard20:16

Yeah, yeah. This is a problem-solving technique that I've used my whole career is that if I have an idea for something, I'll lay out an architecture of what I want to do. Then I'm going to try to be as honest as I can with myself and say, these are the places where it might fail. And if I can't get those working, I don't do the project.

M

Marc Tarpenning20:35

So another technology that we were looking at was, again, it sounds ridiculous given where we are now, but at the time it was innovative. Because of our background in disk drives, we realized that the data rate coming off the heads was just barely good enough to support streaming video. And video decompression, the silicon had just become available that you could actually decompress MPEG-4's in, or 3's at the time I think, into video coming off the head. So we thought, well, we could make, and you could compress it as well. And we thought, well, that's pretty crazy. So we could use a disk drive to record television shows. Again, nobody had done this before. And we thought that was a great idea, and the technology was just possible, and it was just going to get easier and better. But neither of us had a TV. So we thought that...

M

Martin Eberhard21:23

We were both anti-TV in those days.

M

Marc Tarpenning21:28

...this was really not a good thing for us to be doing something that, again, we have no experience in. But we read books. So we thought, oh, let's do the book thing.

M

Martin Eberhard21:33

And then shortly thereafter, TiVo came out doing exactly what we were going to do.

M

Marc Tarpenning21:40

Yeah. It was right in the same time, because those engineers had also come to exactly the same conclusion that this technology was just barely possible.

I

Interviewer21:45

You're both investing in companies now. So I can't help but ask, is there some technology that's just barely possible now besides AI, which is totally possible, that you are wondering what's going to happen with it?

M

Martin Eberhard21:58

Well, the one I'm on is, maybe not quite possible. It's right on the hairy edge. And that's nuclear fusion. There's a company I'm intrigued by called Commonwealth Fusion in Boston, spin out from MIT. Whoever gets that working might well be the most valuable company in the world.

I

Interviewer22:17

Well, that'll address the need for electricity.

M

Martin Eberhard22:17

Yes.

M

Marc Tarpenning22:26

Yeah, it'll help. I see a lot of technologies. And there's some in biotech that are quite exciting that are, again, sort of new understandings of enzymatic reactions and stuff. It's not something that I understand at all, so I just have to listen to the experts and say, OK, that must be exciting. And, oh, they did win the Nobel Prize for that. That seems important, which is actually what happened. So that is in chemical precursors for pharmaceuticals, which I thought was super, super fun. And then the other thing, we look at energy systems, and we also look at chemical conversion of electricity hopefully directly into synthetic fuels for aviation. It's all about aviation. Aviation is like the one place you...

M

Martin Eberhard23:13

Energy density.

M

Marc Tarpenning23:13

You really can't...

I

Interviewer23:18

Energy what?

M

Martin Eberhard23:18

Energy density. That's why, yeah.

M

Marc Tarpenning23:18

So aviation is the one thing. You're not going to have electric jets. It just doesn't work.

I

Interviewer23:25

So for those of us who don't know that much about enzymes or nuclear fusion or aviation, is there something that has to pass a smell test for you all to either give advice to or think about investing in? Is there some smell test for you all?

M

Marc Tarpenning23:37

Oh, yeah. So the idea has to be compelling in some way. There has to be someone who would want to buy it if it existed. I know it sounds funny, but I see lots of deals where it's nice, save the planet or whatever, which I'm really in favor of. Don't get me wrong. But if no one's going to want it, no one's going to buy it. They're not going to buy it to save the planet. They really, it needs to be a compelling product in some way, in some vector. And it doesn't, it can be cheaper. It can be faster. It can be prettier. I don't care what.

M

Martin Eberhard24:10

And it has to be a solution to an actual problem. We've seen too many pitches of ideas that are solutions looking for a problem. It's a cool thing, but what are you going to do with it?

M

Marc Tarpenning24:23

Yeah. And some of those eventually do find...

M

Martin Eberhard24:23

True.

M

Marc Tarpenning24:23

So MEMS technology was a great example. They discovered that you could make silicon that moved, which was weird. And I don't think it was expected. But anyway, they eventually figured it out. So for years, MEMS flip-flopped around trying to figure out what to do with this thing going up and down in the chip. And then they discovered projectors. And oh, that's a big market. But it turned out that you could reverse the whole thing and make it so it could sense very precision movement. And that's what's in every cell phone. So it went from being this really super weird thing in the lab for years, for decades. The problem is, if you had started a company doing MEMS, there would have been those many decades where you had no sales, which would have been very bad.

M

Martin Eberhard25:04

Yes.

I

Interviewer25:12

So I'm going to ask you something based on that I've never really thought of. And that is, when you all came out with electric cars, I don't think anybody, you all need a lot of money to start Tesla and do stuff. And it was not easy for you all to get investors.

M

Martin Eberhard25:18

That's for sure.

I

Interviewer25:23

How did you keep...

M

Martin Eberhard25:23

I showed a prototype, we had to, I don't know, hundred VCs at least. And the funny thing...

I

Interviewer25:29

Were there even 100 VCs then?

M

Martin Eberhard25:36

Oh, yeah. Yeah.

M

Marc Tarpenning25:36

We're not that old.

M

Martin Eberhard25:36

And every VC, except one, is an expert on cars because they have a BMW or a Porsche or something. Yeah.

M

Marc Tarpenning25:43

It's actually one of the great things when you're pitching to VCs about that because you can always say, well, what high-end sports car do you have? And they always have an answer.

M

Martin Eberhard25:51

Yeah, yeah. But they also say, well, I could never buy a car that doesn't sound just like my BMW. So anyway. But yeah, so we made a lot of pitches and got told no a lot of times. And we were also throwing the pitch to any rich guy who had money who might want to invest. We talked to quite a few of those. And one of them invested. You probably heard his name.

I

Interviewer26:14

Did you, like crazy rich guy?

M

Martin Eberhard26:20

Yeah.

M

Marc Tarpenning26:20

Crazy rich. 'Crazy' rich guy.

I

Interviewer26:20

Yeah.

M

Martin Eberhard26:20

Correct, yeah.

I

Interviewer26:27

Interesting. I'm sure there'll be some questions around that. So I am going to pivot once again and ask you a question that students asked, I think. Oh, yes. I think, you're not giving me control. Hailie, can you pull those questions up? Do you mind doing that? And if you go back, there you go. So we asked a whole bunch of questions.

M

Martin Eberhard26:47

Oh, dear.

I

Interviewer26:47

What do you all want to hear about? And there are two that went to the top: what was your most valuable mistake, i.e., things didn't go as planned? And what did you learn from it?

M

Martin Eberhard27:00

Oh, my goodness.

M

Marc Tarpenning27:00

You have to go first.

M

Martin Eberhard27:08

I can think a lot of places where we made mistakes that if I could do it again, I would do it differently, that's for sure. The most, when I say 'most valuable,' meaning the highest dollar value mistake probably was in the way that we negotiated our contracts with a particular investor. And if I could do it again, the lesson I learned from that is read the fine print really well.

I

Interviewer27:29

I'm assuming, does anybody not know who this particular investor might be? Just wondering.

M

Martin Eberhard27:36

We're just being clear about that, yeah. But I think every entrepreneurial venture I've ever been on starts off with a certain degree of naivete, the stuff we don't know. And in reality, that's important that if we had known actually how hard it was to make a car, we really understood it, we might not have done it.

M

Marc Tarpenning28:00

It's like having kids. If you knew what would be entailed, no one would have kids. But there's at least existence proofs that that's OK.

M

Martin Eberhard28:06

And then the other side of the coin is that once you get going, you need to get over that. You've got to figure out what you've got to do. And I would say the biggest hole in our understanding was, weirdly enough, supply chain, how hard it was to get suppliers to sell stuff to us. And I'm not sure going back, how we would have fixed that though. It's just hard.

M

Marc Tarpenning28:23

Yeah, especially at that time, since there was no history of small car companies, at least in this country, we thought, well, the car companies don't make anything anymore. They assemble things, and they market things. And the only thing they make is the internal combustion engine. So we don't care about that. And we'll just be able to buy all the same stuff that they have. We will have to pay more for it.

M

Martin Eberhard28:40

Which is sort of true.

M

Marc Tarpenning28:47

We'll get windshields and rear view mirrors and everything else from the supply chain. Well, a lot of those places said, oh, yeah, we'll sell it to you. You have to order it in 100,000 quantity. And we're like, OK, we're making like 5,000 a year. This isn't going to work. So that was really hard to get the supply chain figured out, which we eventually did. But that took us way longer than we expected.

M

Martin Eberhard29:05

But I don't know how...

M

Marc Tarpenning29:10

No, I don't know...

M

Martin Eberhard29:10

If we went back in time and said young Marc, young Martin, it's going to be really hard to do supply chain, what we might do is talk ourselves out of starting the company.

M

Marc Tarpenning29:23

Yeah, or we might have really gone after some supply chain gurus or something. But I'm not sure that would have...

M

Martin Eberhard29:23

Oh, we had been. You remember when the board turned her down, turned us down.

M

Marc Tarpenning29:29

I know. Yeah.

I

Interviewer29:35

Before we open it up and you all get ready, I am curious. You just said 'the board turned you down.' How did you have to work with the board? I think that's something that people aren't, no one really talks about.

M

Martin Eberhard29:41

So first of all, your board of directors mainly is a bunch of people who have, in one way or another, invested in the company. And if you did a good job, you brought in one or two outside board members who aren't investors. And it's a contentious crowd. And if you build your board right, it's diverse, the people from different walks of life, people with different experiences. And you want to have a certain amount of, I don't want to say conflict, but it shouldn't be all agreement on the board. You want to be able to debate stuff. The question is, can you debate those things in a healthy way? Which I think we did in the beginning.

M

Marc Tarpenning30:10

Oh, yeah. I don't think, that was really, the board is, and I'm on a bunch of boards now. And ideally, the board is helping. It's asking the right questions. It's getting you the right connections. It doesn't always work out, but at least they're, in theory, helping you. And they're helping you raise money, which for a lot of startups, including Tesla, that helping raise money is a big deal, unfortunately.

M

Martin Eberhard30:41

But to your original question, it's not helpful when the board would not let us hire a world-class supply chain person. She would have been perfect. And it was not helpful when the board never let us hire a CFO.

M

Marc Tarpenning30:52

Yeah. Oh, my god. Yeah, that was, the thing is that the board, there's only a few hires that the board approves. So the board, the C-suite people, they kind of approve. But the big deal is that they approve the package, the stock price, the stock grants and stuff. That has to be approved by the board, and salary. Yeah. So that's the only time that the board we can get kind of contentious is when they won't allow you to hire somebody you really want because they're too expensive. And you can only rely, we had a cool company. So we got people that would never have thought that they were going to join some wacky little startup. But because it was a compelling idea, we got a lot of engineers at discount prices, it was stock, but I mean discount prices, that we couldn't have afforded otherwise. But as you work your way up, that delta becomes greater. And then to get those really high-powered people, you need to write a big check and a lot of stock. And the board did not like that.

I

Interviewer31:54

You're both engineers. You both have an engineering background.

M

Martin Eberhard31:54

Correct.

I

Interviewer31:54

You went on to get your master's also. Do you wish that you had any kind of business education? Now I hear engineers go, I just asked Perplexity.

M

Martin Eberhard32:08

No, not really. I think we did do some reading on our own to learn about how finance works and stuff like that. But I think I don't know. I guess I say that we both wind up getting an MBA the hard way by doing it.

M

Marc Tarpenning32:23

I think that if we had gone to business school or something, we would have made a whole set of different mistakes. I don't know if they would have been worse or better. Or we would have talked ourselves out of even doing the things. I don't really. But I don't think it would have changed the number of mistakes or even really the magnitude of them. It just would have made them different because there's a few things we would have learned, I hope. The degrees have to have some value.

M

Martin Eberhard32:54

And in the meantime, in the time that we didn't spend at business school, we were busy learning stuff.

M

Marc Tarpenning32:54

That's true.

I

Interviewer33:00

There you go. I'll open it up for questions from you all if you all want to go. But, there's way, I love that, way in the background. While you're getting up there, can you remind us what your family situation was like when you were starting Tesla? Just wondering if you could, were you like...

M

Marc Tarpenning33:12

I can hardly remember that. Yeah, I had three little kids that were, well, no, no, I had three little kids. Well, maybe...

I

Interviewer33:24

Maybe you didn't know that.

M

Marc Tarpenning33:24

...two almost. So at some point really early in Tesla, I had our third kid. So I had like three, so I had a newborn, a three-year-old, and a six-year-old.

M

Martin Eberhard33:35

And I got married just shortly after we started Tesla. And my wife had two kids from a previous marriage. So I suddenly was a dad with little kids, which was interesting.

I

Interviewer33:50

And you were entrepreneurs as Mr. Software, Mr. Hardware in a totally new space. It's kind of stunning.

M

Marc Tarpenning33:57

Yeah, you want to also then move, because you want to have as much of your life in total disarray as possible.

I

Interviewer34:02

Did you move?

M

Marc Tarpenning34:02

No, I...

M

Martin Eberhard34:02

I got married and got kids.

M

Marc Tarpenning34:09

Yeah, you want to do as many things as possible at the same time.

M

Martin Eberhard34:09

Yeah, that's right, yeah.

I

Interviewer34:09

Way back there, I think there was a question. Or I don't know if you got the...

M

Marc Tarpenning34:14

And someone's got a microphone, too, somewhere.

A

Audience Member34:14

Hi. I'm over here. I do have a microphone.

M

Martin Eberhard34:14

I see you.

A

Audience Member34:20

It's so great to see you guys. Thank you so much for taking the time to talk to us. My name is Hailie Atkinson. I'm a sophomore at UC Berkeley, and I'm studying computer science and cognitive science. And I just wanted to ask, Tesla is, it wasn't the first EV company. I know Toyota and General Motors, they were also getting into that EV, I guess, space. But when Tesla was founded in 2003, you guys made it super, super successful and brought a lot of attention to the EV industry. So I'm wondering, what do you think most differentiated you from your other competitors at that time?

M

Martin Eberhard34:48

I think...

M

Marc Tarpenning34:53

We produced cars.

M

Martin Eberhard34:53

And I think that's an excellent question. It's really good.

I

Interviewer34:59

What, say that again. I didn't hear what Marc said.

M

Marc Tarpenning34:59

We produced cars.

I

Interviewer34:59

Well, so the Toyota and GM.

M

Marc Tarpenning35:04

But not when we were there.

M

Martin Eberhard35:04

No, that's true.

M

Marc Tarpenning35:04

Not when we started.

M

Martin Eberhard35:04

But there is a difference. I asked myself that exact question when I was trying to actually talk this guy into starting a car company with me. And I spent a lot of time looking at every EV company that had come along since the 1950s. I also looked at the ones from 100 years ago, but they were irrelevant. But what I saw, without exception, for all of the EVs that had come out before Tesla, the people creating them were trying to make a car that everybody could afford as their first car. And it struck me as a really bad idea. I understand that when any new technology comes along, it just about always starts off as a luxury good. And you learn how to make it, and you build your volume up, and you can drive your prices down, and you work your way down market. And yet, everybody had always with EVs tried to save the world with their first car. And they made a car that was too expensive or was too crummy. As a startup company, every single part we buy for the car cost double what Toyota or Volkswagen paid for it. So we can't possibly compete with them on price. Yet, that's what people tried to do. So I said, if we're not going to compete on price, what's the right place for us to compete? And to me, as an electrical engineer, the answer was performance. I understand torque. I understand you can make a car that goes like crazy. And I understood that if we applied the technology, we could make a car that was the exact opposite of what people thought electric cars could be. And that brought technologies on the table that wouldn't have been there. And there's two key technologies to the Tesla. That was the first car ever to ship with lithium-ion batteries. Lithium-ion were a little more expensive, but they were game-changing in terms of longevity and energy density. And the second technology was building a motor that did not have magnets in it. We used an AC induction motor, which, does anybody know who invented the AC induction motor? It's a guy named Nikola Tesla. Guess where I got the name for the company. So yeah. So the approach was actually a marketing approach first. I said, where did everybody do it wrong? And let's not do that. Let's do it the right way. And then now that we're playing a different game, what technologies are suddenly now available?

M

Marc Tarpenning37:07

One thing that's great about the car industry is it's regulated in a sense that every car gets registered. So you can actually look at all the consumer data and find out exactly where everybody is buying what car. It's all public. So you look at it, and you could see that the really expensive cars were these sports cars. And the faster that they get, the quicker they were, the more people were willing to pay, insanely. 2/10 of a second, another $50,000. I'm like, wow. Would you pay $50,000 for that 2/10 of a second? But people did. And we don't really care why. We just know that there was a customer base that really cared about that. And we wanted to make sure those customers were really happy with something that was quicker than anything they'd ever been in before.

M

Martin Eberhard37:57

I actually enjoy going fast on my car, probably more than you do.

M

Marc Tarpenning37:57

Yeah.

M

Martin Eberhard38:04

But yeah, and the Tesla Roadster, our first car was 0 to 60 in 3.9 seconds, which was at the time faster than pretty much anything on the road.

I

Interviewer38:11

I know you're probably not supposed to do this, but I think I heard Marc tell the story before that if you touch basically you try to touch the dashboard, does this sound right?

M

Martin Eberhard38:16

Oh, that was just me torturing people that rode in the car.

I

Interviewer38:16

What did you do?

M

Martin Eberhard38:22

Well, I was driving along, and I would ask my passenger, who's usually the first time in a Tesla, I say, would you mind turning the radio up a little bit? And as they reach for the knob on the radio, I'd step on the pedal and throw them back in their seat. And they could literally not get their hand on the knob.

I

Interviewer38:29

Because it's going so fast?

M

Martin Eberhard38:35

So accelerating so quickly.

I

Interviewer38:35

It still works.

M

Martin Eberhard38:35

Oh, yeah.

M

Marc Tarpenning38:43

Oh, yeah, except it's even, everything is faster. It's even more impressive now. One of our potential investors that had come in, and he was, always raising money. Remember, we're just always raising money. And we had this guy. And I can't remember who he was, actually. But he came in with some fancy Porsche...

I

Interviewer38:55

And he parked in the parking lot of our company and came in. And you did that trick to him, and he left. He seemed happy. I don't know. And then he called. And he goes, what the hell did you do to my car? And I thought, oh, shit, someone backed into him or something. And I was going to say, we'll take care of whatever damage it is. He says, I paid $200,000 for this thing, and it drives like shit now. It doesn't accelerate at all. I'm just like, that was amazing. And he hung up. And I'm like, great. I think that was a good. I think that was good.

M

Martin Eberhard39:29

Yeah, I'm not sure who—I'm trying to remember who that was, yeah. But I remember that.

I

Interviewer39:35

Who's next? If you have—

A

Audience Member39:40

Hi. I have a microphone. Can you guys hear me? Hi. How are you?

M

Marc Tarpenning39:40

Great.

A

Audience Member39:47

Oh. Hi. My name is Nat. Sorry. I know you, so I automatically assumed you know me, too. I forgot.

M

Marc Tarpenning39:52

Not here.

A

Audience Member39:52

It's not my car you see all the time on the street. My name is Nat. I'm in my third year here. I'm a very big admirer of you both, and I appreciate your time very, very much. Thank you for being here. My question is, I spoke to a mentor of mine recently who told me that in order to get through the very difficult task of developing whatever product you want to develop, you have to focus on the end goal and emphasize that vision of what it will look like when it's developed and see what you want the future to look like with your product implemented into society. And what came to my mind was that if you emphasize that end goal, you might lose sight of the journey, which can actually contain a lot of the best moments. I feel like oftentimes when we try to picture what the outcome could be, we neglect how good the process can be. So I want to ask, which one you guys think is more important to focus on while you're developing the—

M

Martin Eberhard40:41

I'd say it's a blend of the two. Those are both astute observations. Yeah. But first of all, one of the roles of an entrepreneur, founder of a company is to remember what the vision is when things are tough. And in both of the companies we've done together, we've gone through some very dark periods. And your job and mine was to keep the team motivated, keep them wanting to do it.

M

Marc Tarpenning41:05

Yeah. You have to keep the vision on the North Star of what you're trying to deliver and to make customers delighted. That's a Steve Jobs thing. You've got to—the journey, I guess you can enjoy the journey. Our journey was like a disaster the whole time—not a disaster, but it had many ups and downs along the way. And it was super instructive. And process is a good thing. But really, to me, getting that product out and having the product perform—you had said, how many of you—you're looking at the future is what you said. I actually don't believe that at all. We all hope to be living in the future. That's a goal. But actually, you create the future by the things you do. So if you don't actually create anything, you're just going to be living in the future. So as an entrepreneur, you're creating a future you want to live in by generating that new product, and you really want to stay focused on that new product, unless the product vision has to change because of technology or economics or—

M

Martin Eberhard42:13

You just realize you've made a mistake.

M

Marc Tarpenning42:18

Or you made a mistake, yeah. But if you want to keep that North Star, I think that that's really important. If you have processes in place to help along the journey, that's really good. And maybe that's what that MBA thing would have done.

M

Martin Eberhard42:23

Well, there's another point that we made to our team regularly, and that is, to remind the team that we're not just building in the case of Tesla, a car. We're also building a company. And you've to remember that from time to time. And that sometimes means that you're going to make demoware that gets thrown away because you need it to build the company. And it means that the kinds of habits and things you do within your company become company culture over time. I remember my first company. I was at Wyse. We had—our company party was the last Thursday of every month. And I was like—and this probably was to the end of the company. It was on the last Thursday of the month. And the reason was, because one of the early guys who worked in manufacturing had to do something on Fridays. That guy left the company. Years gone by, and still.

M

Marc Tarpenning43:09

We had a guy who made cookies once a week. I can't even remember.

M

Martin Eberhard43:17

Yeah.

M

Marc Tarpenning43:17

He made—when there was 10 of us that worked. And at one point, he's, like, 300 people, and he's making cookies every week. But it was a thing that we kept going long after he left.

I

Interviewer43:29

Journey.

M

Marc Tarpenning43:29

Journey.

A

Audience Member43:34

Thank you.

I

Interviewer43:34

Yeah, whoever's next, go ahead. Raise your hand.

M

Martin Eberhard43:38

Raise your hands so I can find you.

A

Audience Member43:38

Hi. Over here.

M

Martin Eberhard43:38

Hi.

A

Audience Member43:45

Hi, my name is Lapere. I'm a recent new instructor at Berkeley. And I realize you guys both have been at a lot of these different types of events and love giving back to the next generation. I'm wondering what your thoughts are on what we need to change about our education system, from high school to college with the emergence of GenAI and everything changing now?

I

Interviewer43:57

Maybe even earlier.

M

Martin Eberhard44:04

Yeah.

M

Marc Tarpenning44:04

So in between these various things, after Tesla, I was an elected official in my local town as a school board member in a K-8 district. And at some point, I don't know, the Labor Department or something came and gave a little presentation saying in K-8 education, these students that you have that are entering kindergarten, by the time they graduate, by the time they get into the workforce, more than half of the jobs that they'll be going into, don't exist. There isn't anything for them. And if you don't believe that, the current crop that's going into the workforce right now, it's about 49% of those jobs didn't exist. So what you have to make sure is the actual stuff you're teaching is OK. But what's really important is to teach how to learn, and how to be curious, and how to keep learning all the time, because what you're going to end up doing is going to be unrelated to a lot of the education along the way. And that was in k-8. And I can only imagine going into college. The ideas are changing what the right thing to teach is exactly. And how that's going to work, I don't think anyone knows yet.

M

Martin Eberhard45:22

Yeah, I think I agree with you. I think that a university education gives you two different distinct kinds of knowledge. The first and most obvious set is the tools and languages and methodologies that you need to get a job today. You've got to teach those. Otherwise, your students are not able to get hired. But the other class of things you learn are the tools you'll need for a lifetime of engineering, no matter what you're doing. Just a random example would be statistics. Statistics is statistics. You'll need it your whole life, no matter what. And I think that the typical freshman coming out of high school, coming to college, like I was, doesn't know the difference between these two at all. And I believe it's up to the University to make sure that the students get the right mix of these two classes.

A

Audience Member46:09

Thank you.

Hi there.

I

Interviewer46:09

Oh, sorry. Yeah, go ahead.

A

Audience Member46:14

Hi. My name is Lily. I'm a third year, studying analytics and data science here at Berkeley. I'm really glad to meet with you guys today. Earlier in the conversation, something really caught my interest about the idea that gas cars will become obsolete in the market, that electric cars will be the new norm. But obviously, with markets that emerge and become popular, there starts to be a little bit of oversaturation. And I was curious to know if there were any alternatives, even to electric or to gas, that you've seen come up at all that you think might, I don't know, put up a competition with electric?

M

Martin Eberhard46:46

Well, the difference between electric cars and everything else is that electric cars actually aren't burning fuel. You can use whatever fuel you want to make the electricity. You can use solar and wind, and you can use nuclear. You can use coal. You can use petroleum if you want. It doesn't matter. This is unique to electric cars. And when I was trying to convince Marc to join me on this crazy adventure of starting a car company, one of the tools I did was a spreadsheet where I calculated the well-to-wheel energy efficiency of every possible way I could think of to move a car, and that included all the stuff you expect—like gasoline and hydrogen and diesel and also electric, making electricity with diesel, making it with coal, making it with natural gas. And it was clear to me that the electric car was by far the most efficient of all of those. And as an engineer, I like to believe that in the end, the efficient path is the one that wins.

M

Marc Tarpenning47:39

Yeah. And it's not even close. That's the thing. And you can test that. If you have an internal combustion engine car and you want to see how efficient it is, if you disconnect the cooling system in the parking lot here and just drive away, you'll discover that your car will melt into a puddle before you get onto Ashby. And the reason is, because almost all the energy is just wasted. And that's why you have to have all that stuff.

M

Martin Eberhard47:59

Typical gasoline car is about 25% efficient.

M

Marc Tarpenning48:05

Oh, at best.

M

Martin Eberhard48:05

Yeah. And a typical electric motor is about 89%/90%. And the better ones are above that. And the battery system is also 95% efficient. So it's sort of hard to beat that.

M

Marc Tarpenning48:16

Yeah. And electric cars won't get twice as efficient because they're already in the 90 percentiles. And that's why you also—electric car heaters and stuff, when you press the heat, it comes on right away because it's like a hairdryer, because there's no waste heat. There's no waste energy. So you have to make the heat right away, which is great if you're in a cold climate.

I

Interviewer48:32

Would you all share the mission for Tesla when you started? And I'm not sure if that's—I just remember something noble.

M

Marc Tarpenning48:46

Yeah, it was probably to reduce oil consumption by reinventing the personal car, or something like that.

M

Martin Eberhard48:55

Something like that. Yeah.

I

Interviewer48:55

It was focused on reducing oil consumption.

M

Martin Eberhard48:58

Exactly. There were—I used to have a presentation in my early slides about electric cars. And I said that there's really two different reasons why you might want electric cars. One is because you cared about things like climate change, and the other is because you cared about national security from getting so much of our fossil fuels from overseas. And one was an issue on the left. One was an issue on the right. And I said, it doesn't really matter which of these issues is the one that encourages you to buy electric car. Pick one.

M

Marc Tarpenning49:30

Well, there was also the gearheads.

M

Martin Eberhard49:34

[INAUDIBLE].

M

Marc Tarpenning49:34

So we had those two. And then there were the people who just wanted to go really fast, really quickly. And having parties with all of our customers was fascinating because you had all three sets.

M

Martin Eberhard49:43

Yep, that's right.

A

Audience Member49:43

Hi. I have a microphone. Hi. My name is Mona, and I'm a recent graduate from UC Berkeley. And it's an honor to meet you. I'm really curious as to—I know you touched upon the process of growing and scaling Tesla over the years. So I'm really curious on some of the engineering and operational challenges that you encountered, and how did you overcome some of these challenges in scaling Tesla from starting originally as you guys were building prototypes and then really taking that to launch into production?

M

Martin Eberhard50:14

So be careful. Both Marc and I left the company just about the time that our first car began shipping. So we were not part of the big scale, although we did set the groundwork for that. We built a platform that was scalable and that would move to other cars. We envisioned cars that followed on which were more or less what Tesla built, plus or minus, but pretty close to what we'd actually built.

M

Marc Tarpenning50:34

Yeah, well, so one thing that we did, and there's lots of companies that can make prototypes and stuff. And everything that we had the engineers do had to be manufacturable, had to be made for manufacturing from the very, very beginning. In fact, there was a period where we didn't allow rework equipment in the machine shop, if you will, didn't have any of the machining that you wanted. And finally, the mechanical engineers convinced us we had to get something that they wanted, because everything had to be completely manufacturable. And if you're able to just fiddle with something, that's not manufacturable. So from the very beginning, we did that. And then we took all the learnings from the Roadster, and we were feeding those into what became the Model S, the sedan project, which was a ground-up. This is everything we've learned from building the Roadster, how are we going to make a much higher volume product? So, vastly simplifications and lots of manufacturing stuff. So that was—from the very beginning, it was all about getting into manufacturing and making as many of them as we could. Now, the Roadster was always going to be small volume because that's the kind of car it was. People just don't buy a lot of those. But the sedan was going to be much higher volume. And that's where you really make an impact.

M

Martin Eberhard51:57

And that was not a mistake. We deliberately chose a small market for our first product because we knew we would not be able to make very many cars. We didn't have enough money. So one of the dumb mistakes you can make is, as an entrepreneur, is to come up with a great piece of technology, show it to the world, the world wants it, and then you can't fulfill that need. So what you did is you created an opportunity for a competitor to come in and just eat your lunch. Yeah.

I

Interviewer52:23

It's hard to see who has the microphone. So speak up.

A

Audience Member52:28

Hello. Over here.

I

Interviewer52:28

Yeah.

A

Audience Member52:35

Hi. It's such a pleasure to meet you. My name is Favor. I'm an exchange student from Ghana, West Africa. And I'm just curious, in your early days, how did you handle low moments? What made you not talk yourself out of continuing Tesla?

M

Martin Eberhard52:48

Insanity.

M

Marc Tarpenning52:48

Yeah, well, so we were co-founders. I think this is actually—actually, at Sparrow Ventures, although we invest in many solo founder companies, we have a slight preference for companies that are co-founded with at least two people because it's so manic depressive that if you have two people, the chances of them both being at the same low at the same time is mitigated, and the company doesn't fall apart. So I think that's a big part of it.

M

Martin Eberhard53:16

And I think it's a good match on the people that—I tend to be the wild and crazy idea guy. And Marc tends to be the 'prove it to me' guy. And the combination is really good.

M

Marc Tarpenning53:22

And there were also—at Nuvomedia, we had a particularly bad week, really terrible week. And the exec team, we went out to lunch all together trying to figure out. And the thing is that the exec team has to always present to all the employees that, great, we know what we're doing. We have some vague idea. We know what we're doing. And we went out. And I remember this really vividly. And we were coming back. And our head of marketing—and we were walking by a pet store, and the head of marketing said, oh, I've got a great idea. It's Rohde, our dog, that one of the employees would always bring in—its Rohde's birthday today. Let's throw a birthday party. So we threw a birthday party for this dog. And people years later said, that birthday party for the dog was my highlight. I thought, it's a little disturbing that that's the highlight, but I like that you—

M

Martin Eberhard54:19

But it was a good distraction. It's kind of what you do with your two-year-old when they're having a temper tantrum.

M

Marc Tarpenning54:24

Yeah, exactly. But you do things to keep the momentum and keep people excited, even if it is a birthday party for a dog.

M

Martin Eberhard54:30

Yeah. But I was only half-kidding when I said you have to be crazy. It is a certain amount of crazy to be an entrepreneur, that you have to really believe in what you're doing. And for us at least, we've only ever done startups where we believed in the product. We really believed in it. And before we really got ourselves deep into it, we had already dug into what we thought was the most likely part to fail, and we convinced ourselves who could make it work. In the case of Tesla, that was the battery. We had an architecture for the battery on paper before we even incorporated.

M

Marc Tarpenning55:01

And that ability that having the founding team believe in the product and want the product, that's something that we look for in the venture world as well, because if they're just doing it because they think they can make some money on it, it's like we're not interested in investing in that. That's just not sustainable.

M

Martin Eberhard55:21

It's boring.

M

Marc Tarpenning55:21

It's way more easier way. You can go work on Wall Street or something. It's easier.

A

Audience Member55:25

Thank you.

Hi. My name is Priya. Nice to meet you guys. I'm a third year at Berkeley, and I'm a data science major. My question was pertaining to. So you talked a lot about the hiring process for the discount engineers and how you were able to get good talent at a cheaper price. So not necessarily pertaining to that, but perhaps when a company was experiencing a lot of really, really high growth, what were your priorities in terms of talent? So as someone who anticipates being the person who's sourcing talent and who is currently in the position of being the talent that is being sourced—Outside, say, technical expertise and the ability to be cross-functional and work in a bunch of different disciplines, is there something that really stuck out to you in the talent that you were like, these are the people I will fight for with the board, these are the people that I want?

M

Martin Eberhard56:11

We were trying to get a mix of people in quite a few different directions. But the most important one for us was to try to get a mix of Silicon Valley engineers who we knew were good, and automotive engineers, which were difficult to persuade to come to a startup company doing something impossible. But we did actually luck into that eventually. And I guess part of what we look for there is, can we make these two teams work together? And I guess in those two different fields, in the automotive field, we were looking straight out for expertise. And it was self-selecting. If they would even consider coming to work for a startup company, they might already have at least close to the right mindset. It's funny. We were just talking this afternoon about some of the places where we got it wrong. And one of the clues we didn't notice was, we brought in a guy to be one of our VPs and discovered long time later on that nobody who ever worked for him before would ever work with him again.

M

Marc Tarpenning57:10

That's considered a bad sign in hiring.

M

Martin Eberhard57:16

It turned out he was the first person we fired at the company. And when we did fire him, everybody who was on his team came to me and said, you should have done that six months ago.

A

Audience Member57:24

Wow.

M

Martin Eberhard57:29

Yeah.

A

Audience Member57:29

Well, thank you so much.

Hi. Carson. Right here. I'm a third year. And again, I really appreciate you guys giving us some of your time. My question is more around an observation, whereas both of you finished college, and Martin with a masters. Many founders and innovators today drop out. Could you talk about your college experiences and how you grew both as people and future innovators?

M

Martin Eberhard57:59

Yeah. The comment I made to one of the previous questioners about the two different kinds of things you learn in college. Those are notions I came to decades after I finished my college. It was not at all clear to me until I was reflecting on what I got out of school. And it was surprising to me that some of the classes I thought at the time were a waste of my time weren't. So we know several people who are entrepreneurs, some of them quite successful, who didn't get degrees. And one of my observations of such people is they tend to have a chip on their shoulder toward people who do have degrees. And I find that to be, I don't know, off-putting.

M

Marc Tarpenning58:43

And as a programmer by trade, the people that we hired that had degrees, they were just better. They worked better with people. They had better style, I guess, is something. Also, there is something about work—startups, there's a lot of work to it, and a lot of random work that you don't necessarily expect. And we have that word 'work' for a reason because sometimes it's not fun. Sometimes it's just work. And people who have gone through college and have gone through those classes where they didn't think there was a lot of value, but actually there was, they just didn't know it, and completed all those things—I do think that says something about their character, that they're willing to put in the time to pass a class, or in this case, solve some weird problem that they really find not exciting. But it's just work sometimes. And it's good to know that these people have a history of being able to accomplish that and finish.

M

Martin Eberhard59:46

Funny thing, one of our mutual friends who didn't finish his college degree, 30 years later, came back and finished his degree after putting down the college degree for so many years.

M

Marc Tarpenning1:00:02

And actually, unfortunately, not one of our friends, but someone that we've all heard of, Steve Wozniak, came back to Berkeley while we were here because he dropped out, co-founded Apple, and then came back to finish his degree, I guess, in his 30s or whatever, which was kind of funny, under an assumed name Rocky-something or other.

I

Interviewer1:00:19

Really?

M

Marc Tarpenning1:00:24

Yeah, yeah. No, totally. Yeah.

I

Interviewer1:00:24

There's a Steve Wozniak—

M

Martin Eberhard1:00:29

While you're at it—

I

Interviewer1:00:29

—lounge. It could have been called the Rocky lounge.

M

Marc Tarpenning1:00:30

Yeah, I don't think—anyways. It certainly—it was Rocky-something or other. Yeah.

M

Martin Eberhard1:00:35

Yeah. So I think that most of the time that chip on his shoulder is actually a bit of jealousy that they didn't finish. You guys know who Brian May is, the lead guitar from Queen? Yeah. When the Queen was done, he went back and got his PhD in astrophysics. Pretty cool dude.

M

Marc Tarpenning1:00:48

And worked for NASA for years until just recently.

I

Interviewer1:00:55

Just—I'm going to take a little bit of a breather. I don't know if you all want to have a sip of water or not. But I had asked you all to think of a question for each other. And we're at that time tonight where I'm wondering if you all would ask each other your question.

M

Martin Eberhard1:01:06

You want to go first? You want me to?

M

Marc Tarpenning1:01:11

Yeah, I'll go first, because if it's the same question, then I—so if we hadn't done the whole car thing, what would have been the next thing? What would have been the other thing that you were—that we might have done?

M

Martin Eberhard1:01:19

Oh, my goodness. Oh, my goodness. What were we thinking about in those days?

M

Marc Tarpenning1:01:25

Other than sprinklers and stuff. We were looking at all kinds of things.

M

Martin Eberhard1:01:31

Yeah, I had looked at a lot of different technologies. Yeah, most of them were dead ends. We were still kind of fascinated with the mobile space, and we might have found something to do in that space. It's a little—I don't—yeah. I get so one-track minded that—I knew for a lot of things, it wouldn't be. It wouldn't be storage or disk drives or anything like that. It wouldn't be a TCP offload engines or something dull like that.

M

Marc Tarpenning1:01:55

We did that for a while, too.

M

Martin Eberhard1:01:55

Yeah, it was on that truck.

I

Interviewer1:01:59

Anything having to do with that conference.

M

Martin Eberhard1:02:00

Yeah, yeah. So back to you, a little background. I like to tell the story about when I came up with the idea for the name of Tesla, and I came to see you the next day or something for coffee. And I told you, what do you think of the name Tesla Motors? And you got on your laptop and immediately bought the domain name. And I say that that's the moment when you said that you would actually do that.

M

Marc Tarpenning1:02:28

Yeah.

M

Martin Eberhard1:02:28

You tell a different story half-joking that when we were done with the e-book thing, I was super interested in how copyright law was changing dramatically because electronic books separated the content from the medium totally. And the laws weren't there. And the attempts by lawyers to make laws that made sense there came up with horrible things like the Digital Millennium Copyright Act. So I thought that would be interesting. And I actually went and took the LSAT test with the idea of going to law school. And you say you decided to do something as insane as starting a car company with me to save the world from becoming a lawyer.

M

Marc Tarpenning1:03:03

It is true. Yeah. I did think it was my duty as a human to do that.

M

Martin Eberhard1:03:11

So with that background, my question to you is, when did you actually decide that, yes, I'm going to do something so crazy as start a car company, making cars out of a technology that everybody knows doesn't work?

M

Marc Tarpenning1:03:23

Yeah, I don't know. It was—well, so we spent nine months figuring out how to start Tesla. We wrote what I thought was the last business plan ever written in Silicon Valley, but I just saw one actually the other day. So there's actually another one out there. But it took us nine months to do that. And somewhere in that process, in the early part, I remember coming home and deciding, OK, this is what we're going to do. But when we recruited one of our independent board member—and she was kind of on board with us. And then we said, guess what? We're going to do electric sports cars. And I remember Laurie just looking completely panicked that she had gotten herself into something incredibly stupid. So that was really early. I don't know. I'm not sure exactly the moment, but it was a process. You're persuasive.

M

Martin Eberhard1:04:22

It took me a while. Yeah.

M

Marc Tarpenning1:04:22

Well, that's good. I kept you honest.

M

Martin Eberhard1:04:27

That's true. Yeah. No, I talked already a minute ago about this spreadsheet I put together to calculate the well-to-wheel efficiency of everything. And this was something where every number that I had in my spreadsheet, Marc made me prove it, where'd you get that number? I'd have a number, for example, the energy efficiency of converting petroleum into gasoline. And I'd say, well, I found this study online. It was done by a combination of Shell Oil and Chevron. That's probably right then. And each of my numbers had to be proven like that. Yeah. So that's true. That was building up to the process. But that was all before I came up with that moment where I said, I think we should call it Tesla.

M

Marc Tarpenning1:05:03

I was kind of in at that point.

M

Martin Eberhard1:05:03

Yeah.

I

Interviewer1:05:08

That's great. Yeah, who's next?

A

Audience Member1:05:10

Hi. My name is Fareed. I'm doing a master's degree in product development with the chemical engineering department here. There's one thing that interested me. You guys spoke about the college time and the entrepreneurship time. But one thing that grabbed my attention is the fact that you, Marc, I think, worked in Saudi Arabia for about six years, which wasn't a common thing back in the days. I'm actually from Saudi Arabia, and I know that it wasn't an attractive thing to go to Saudi Arabia, or a common thing to go back in the days. And I think for many of us, being an entrepreneurship might not be the first step after graduating from college. It's probably going to be working for some other company and then going through that journey. So would you be able to reflect on that career in between college and you becoming an entrepreneur, and how did that shape your thoughts?

M

Martin Eberhard1:06:18

Yeah, great question.

M

Marc Tarpenning1:06:18

Yeah. So it was really helpful. The word 'entrepreneur' clearly existed, but certainly wasn't as pervasive as it is now. And certainly at Berkeley, there was no classes in entrepreneurship or anything like that. That was completely unheard of. But I had always been, as—I was always doing these crazy consulting projects for other people. And the Saudi thing was just an extension of that. And I'm in my 20s. And I discovered that, from here to Saudi Arabia is on the other side of the planet, pretty much, and I could get the company to buy around the world tickets to send me back and forth. And I could visit countries on other people's money and stay at these really nice hotels. And I'd be in business class. It was great. So for years, I orbited the planet. I visited 27 countries entirely on corporate money, which admittedly each stay was only a few days. But it was super fun in my 20s. So it wasn't exactly deep philosophical reflection of what I needed to learn. It was really about staying at the Four Seasons. It was really great. And then afterwards when I came back here, because if you're going to do computer stuff, you end up here, like if you're going to do movie stuff, you end up in LA here, you end up here. And the startup vibe was just so strong, and it was so pervasive—or so compelling that we had to do that.

M

Martin Eberhard1:07:58

And I took a job. I did on-campus interviews when that was a thing, and I got a bunch of job offers. And I looked at companies all over the place that were—my degree was kind of hot at the time, so I had many offers. And I took one that was not the highest paying one by any stretch, but it was in Silicon Valley, and it was kind of a startup company still. I was employee number, let's say, 45 or something like that. I didn't know what a startup company was. I didn't know what stock was. I didn't know what an entrepreneur was, none of that stuff. Similarly, we didn't have entrepreneurial classes or anything like that. What I liked though, how I chose this company, is I like the vibe when I visited the company. I came out from Illinois to Silicon Valley and visited a company. And that vibe that I liked turned out to be that entrepreneurial thing. I loved it. The people who were working there, they felt empowered. They could work on something. This was the pitch we made to people, dragging people out of the automotive industry into working for Tesla. We said, someday you might get promoted to be the manager of trinket trade development and ashtrays at Ford. Or you could come work for us, and you can design the chassis. It was that kind of thing. But the time that I spent working for Wyse was a major education for me about how to take a product from the engineer's workbench to production. And we built things in the literally millions. And it took a certain kind of discipline that you just don't get in school.

I

Interviewer1:09:27

Yeah, I think we can go two or three more questions. Who's—

A

Audience Member1:09:33

Hi. So I'm not a student. I'm a dad, and I work in private equity. I'm here for an AI workshop. But I actually took a test drive in a Tesla Roadster in 2008.

M

Martin Eberhard1:09:41

Oh, how fun.

A

Audience Member1:09:41

It was a gift for my birthday. So it was such a unique experience that my wife was able to arrange that. So I must have been one of the few people that—

M

Marc Tarpenning1:09:48

Was it down in San Carlos?

A

Audience Member1:09:48

It was in Palo Alto, or Menlo Park, Menlo park, at the dealership.

M

Marc Tarpenning1:09:54

Oh, at the dealership?

M

Martin Eberhard1:09:54

The dealership. That's a little later, yeah.

A

Audience Member1:09:54

And my question is actually more from a dad perspective. These are all students in college. And I work with a lot of companies in our private equity firm trying to help executives learn about AI and deal with the disruption that AI is causing them in their job and also in their company and their market. What is your view—you've been through many disruptions. What is your view—how do we make sure people can continue to be creative and curious when AI looks like it's going to commoditize a lot of the things that used to require the 10,000 hours to get there? How can we use it as an augmenter versus a replacement?

M

Martin Eberhard1:10:33

It's a good question. And I think it's a question that's come up as we've invented tools along the way. There are times when tools make an entire profession obsolete. But quite often the tools just make us better at it. It's not clear which way AI is going to go in every profession. I think maybe it will make some career choices not so great. But it'll be a tool for many others.

M

Marc Tarpenning1:11:00

Yeah, I look at—so my oldest son is a programmer in San Francisco. And the way he uses AI is really powerful. He can do things that would have taken me hours and hours and hours to do. And he's able to do them in minutes. It needs constant guidance. And he thinks it's just a great, powerful augmenter of what he's doing. So the one thing that I would not do is pretend it isn't happening. I would be playing with all of the latest tools and trying to find something in your workflow that actually you can use it for that improves your productivity, because someone else kind of doing the same thing you are is doing that, and they're going to outproduce you.

M

Martin Eberhard1:11:49

I feel like refusing to use Word processors when they were invented. You're still writing your stuff down on a notebook or typing it on a typewriter.

M

Marc Tarpenning1:11:56

Yeah.

I

Interviewer1:11:56

Carbon, copy, paper.

M

Martin Eberhard1:12:01

Oh, my god. Yeah.

A

Audience Member1:12:01

Hi. Hi, I'm Mona, I'm a senior studying economics. Thank you both so much for being here. My question is directed to you, Marc. I recently read that you invested in Tello, which is an EV company.

M

Martin Eberhard1:12:13

Hey, so did I.

A

Audience Member1:12:13

Sorry. Then I guess it's directed at you both. Why did you guys decide to go back into the EV space, especially when it's probably so much more saturated than when you guys started Tesla?

M

Marc Tarpenning1:12:26

So the things have changed. So many of the things that we had to do at Tesla, we had to invent, which we didn't entirely understand. So there were many parts of a car that we had to innovate on because the supply chain didn't provide them. So whether it was electric air conditioning, which is a thing which you need for electric cars, that didn't exist. We had to make that, which was not—we thought, oh, we'll just get it off the shelf. Well, it didn't exist. Electric power steering, didn't exist. All of these things that—the way the brakes work didn't exist. So we had to invent those things, which was not part of our core mission. That was not the drivetrain. That is not what we wanted to be doing. And now all of those things are off the shelf. And this ability to have off-the-shelf components now take a lot of that development time and cost off the table, I think, allows a time, again, like we used to have in the early internal combustion engine days where you can have lots of small, niche car companies. All of the car company brands that you see, Oldsmobile and Lincoln and all, those used to be independent little car companies that eventually got consumed and became General Motors, for example, or Ford. And I think we're out of time because of the way that supply chains have provided—the auto industry ecosystem is providing this, also the way the contract manufacturing is working, we can have compelling cars that people really want that are relatively low volume, 20,000, 30,000, 40,000 cars a year, which would be a disaster for the Fords, but for a small car company would be great. So I think it's just at a time when these kinds of things are possible again, where they hadn't been, partially because the internal combustion engine was so incredibly difficult to get to work that you couldn't, and only a few companies in the world could make them. And it turns out electric drive is a lot easier.

M

Martin Eberhard1:14:28

So another way of looking at it, the automotive space is different than, for example, cell phones. It is not a winner take all business. We have dozens of car companies around the world. They're all successful. And the reason is partly because there isn't a single car that's suitable for everybody. There are different kinds of cars for different applications. Some lend themselves better to electrification at this point. Others will come later. So I'm much more interested in general in looking at companies that are taking this technology and putting it into an unmet need in the marketplace. And there is currently nobody making small trucks that are electric. So that's what excited me. There's a super small—it's really cute. The other very competing company that I'm super interested in is Slate. I don't know if you guys have heard about Slate. It's funded by Jeff Bezos, making also a small electric pickup truck with a slightly different take, really, really focused on low cost, which I like. Yeah. So my interest is in looking for other niches in the automotive space. I was looking at the business plan of another electric car company that was making a big sedan. And their pitch to me was that it was going to have 10% more range than the Tesla, and it was going to have a 10% faster 0 to 60 time than Tesla, and I was going to have 10% more legroom in the back than a Tesla does. And they went on like this. And I said, so your business plan then is to be Tesla times 1.1. I didn't invest.

I

Interviewer1:16:03

We have time for one quick question, and then I will post our code for feedback. And then maybe people will have questions for you up on stage. So who has the microphone?

A

Audience Member1:16:08

I'm here.

I

Interviewer1:16:08

Oh, great.

M

Martin Eberhard1:16:13

Oh, there.

A

Audience Member1:16:13

Hi. My name is Esenam. I'm a business administration major here, and I'm here for an exchange semester. So I'm kind of very interested in Tesla. I think over the years [INAUDIBLE] ride on the perception that are the pioneers of EVs. And a lot of companies now have adopted this model. So I'm interested in how you think of still being sustainable within the years coming by? And then years from now, what do you see as the place of EV? Do you think it's going to be taken over by a different technology?

M

Martin Eberhard1:16:57

Go ahead.

M

Marc Tarpenning1:16:57

Yeah. So EVs will win in the end because they're cheaper to operate. There's no maintenance on them. So the whole maintenance—they're cheaper to operate. They're cheaper to own. They're more expensive to buy at the moment because batteries are expensive. That's going to go. It's getting cheaper by the day. So they end up being higher-performance, less-cost, super-efficient. They're just going to win that. And they're more fun to drive. Ultimately, they're going to win. It might take a while. And in terms of Tesla, Tesla has changed the complexion of the auto industry. Everyone is making electric cars. Some—especially China is cranking them out in some beautiful, beautiful cars. And they will win in the end. It'll take a while. And there'll be lot of—

M

Martin Eberhard1:17:44

Tesla may or may not.

M

Marc Tarpenning1:17:44

Tesla, who knows? I hope it's around forever, but we don't know. But no company lasts forever.

M

Martin Eberhard1:17:50

I'm hoping they come out with a new car that doesn't look like a Dumpster.

M

Marc Tarpenning1:17:55

Yeah, the Dumpster thing is a mistake.

I

Interviewer1:17:55

I hope we'll have you all around, and I hope we'll have Tello and Slate next semester. I think it would be fantastic. It is always insightful to hear from you all. A huge round of applause. Thank you very much.

Marc Tarpenning & Martin Eberhard, Tesla cofounders at UCB Newton Berkeley Changemaker® Series

About Martin Eberhard