A letter from Silicon Valley
Observing Tesla's inner machinery
In Europe, Elon Musk is often viewed with some scepticism. This view is marred by misunderstandings. He started with electric cars, but now the Tesla founder has kicked off a revolution that will also have a major impact on Switzerland's future.
Never bet against Elon Musk! Tech investor Peter Thiel often utters these wise words when he’s asked about his former business partner. But if you were to read the newspapers, especially in Germany, you'd often be tempted to bet against Elon Musk. The founder of Tesla had "deceived his investors and betrayed capitalism," announced the Frankfurter Allgemeine Zeitung newspaper when Musk was targeted by the SEC, the U.S. Securities and Exchange Commission, at the end of August. The article was titled "Swan Song". The Süddeutsche Zeitung newspaper had already called Musk a "con-man".
In Switzerland, people have a somewhat friendlier attitude towards the founder of Tesla. Nonetheless, Elon Musk, as an individual, often hits the headlines there. This was the case, for example, when he tweeted about potentially taking the company off the stock exchange or lit up a joint during a live interview.
With all due understanding for the media interest that is piqued by this sort of antics, it is easy to forget the innovative strength that Tesla has in so many areas. Despite Elon Musk's repeatedly questionable behaviour, the company is a prime example of innovation. After making contact with the company and its employees on numerous occasions, I have begun to understand what makes this company unique, ground-breaking and revolutionary. Here are its most important unique selling points:
1 - Radically different and better.
Much of the misunderstanding about Tesla originates in the fact that many people are comparing the company to the traditional automobile industry. Talking to people from the company, it quickly becomes clear that Tesla is meant to be more than a car manufacturer. It's about doing things differently, doing things better from the very bottom up. For example, Tesla bought a metal press for its production site, but the press was located at the opposite corner of the USA. Musk wanted the machine to be in use within six months at the most. That's impossible, said the seller's engineers. It would take a whole year to dismantle the humongous machine at its original location, transport it to Tesla's plant in Fremont, and reassemble it there.
Elon Musk then quickly set up a task force with his own engineers from Tesla. After two weeks, they'd found a way to get it transported in the desired time frame. How about another example that illustrates the culture of technological innovation at the company? Painting became a bottleneck while the Model 3 was being produced. Instead of building a second painting line, Musk came up with the idea of painting the cars horizontally rather than vertically so that the speed was doubled.
2 - Software as DNA.
Most engineers don't work on "hardware", such as the car's chassis. Instead, they work on software. The software department is managed like at Facebook or Google, with speed being the order of the day. While traditional car manufacturers focus on maintaining intellectual property rights using patents, Tesla wants to be speedy, and a pioneer of technology on all fronts. In this kind of business model, "backward" hedging is not as relevant as conjuring up a storm to drive things forward. Tesla is often mistakenly reduced to its battery, but this is merely one of its many unique technological features (although there is no doubt as to its importance). Tesla's software engineers have repeatedly made ground-breaking inventions in pursuit of the goal of making cars smarter, and networking them with each other and their environment. Tesla is just as innovative in terms of smart cars, connected cars and smart cities as it is in battery technology.
3 - The strongest company stands alone.
It was only a small piece of news released in specialist publications, but it is an example of how Tesla works. In early August, Elon Musk's company announced that it was abandoning its collaboration with graphics processor manufacturer Nvidia. Nvidia had supplied graphics chips and software primarily used in the field of "auto-pilots", i.e. self-driving cars, since 2012. The reason was certainly not that Nvidia was a bad company. On the contrary: Nvidia is a leader in this field. But Tesla has apparently come to the conclusion that they’ve learned so much during their collaboration that they can now develop their own solutions – with these solutions being even better than what Nvidia has to offer. The magic word is "vertical integration". You might start with external partners, but at some point, you’ll hit a wall. The skills acquired during the partnership are then used to break down this wall. A company that is perfectly vertically integrated no longer has to buy anything. Amazon, for example, pursues the same goal. Sascha Zahnd, from Switzerland, is leading this strategy at Tesla. Almost three years ago, Tesla's CEO Musk personally brought him into his closest management team as head of the global supply chain. Zahnd used to work for Ikea, a prime example of a vertically integrated company that even grows its own wood. This means that part of Tesla's success is also "Made in Switzerland".
4 - Silicon Valley in its purest form.
No company better reveals the best properties of Silicon Valley. The employees are unbelievably proud to be part of a great success story. And they're proud to an extent that's otherwise almost only experienced at Apple and Facebook. When Elon Musk laid off 9 percent of the workforce in June, the workers affected were not angry. On social media, and even in front of Tesla's headquarters, many of them expressed how grateful they were to have been there in the first place. The company places a good deal of trust in its younger employees, too. Meetings aren't just all talk: decisions are also made quickly. Tesla has completely done away with meeting minutes and got rid of battles with PowerPoint. The logic behind this? Everybody is sitting at the table and understands what’s agreed and who’s responsible for it. This makes the company incredibly fast and efficient. The Silicon Valley mystique also encompasses the fact that the investigations by the stock exchange supervisory authority have not really damaged Elon Musk's reputation here - quite the contrary.
We continue to allege that Tesla is being misunderstood, time and again. It is not primarily a car manufacturer: instead, the company is run and behaves like a software company based in Silicon Valley. I'm sure the revolution initiated by Tesla is only just beginning. It will change our lives significantly, even in Switzerland. In line with this, the company recently recorded a hefty profit for the first time in two years: 311.5 million dollars in the third quarter of the year. In the same period, Tesla sold more cars in the USA than Mercedes did for the first time. And there’s a good chance that Tesla's Model 3 will replace the Toyota Camry as the best-selling car in the USA next year. There is little to suggest that Tesla will be satisfied with building good electric cars in the long run. I think it's very likely that electromobility is merely a springboard for further innovations in Elon Musk's ingenious game of chess. I can even imagine that car production will be discontinued in the medium term, as the know-how gained from working on cars would prove extremely useful for comprehensive energy strategies for people, buildings and entire cities.
Simon Zwahlen: Vice President of Business Development & Innovation at Swisscom in Palo Alto, California.
Everybody's talking about self-driving cars. How far is Silicon Valley away from this?
Car manufacturers like Tesla are developing this in vivo, as it were. They are focusing on making further improvements to semi-autonomous driving, which is already being used as standard. In simpler road conditions, for example, on motorways, it already works very well.
Nevertheless, the driver has to intervene time and again.
According to my observations, the truly ground-breaking advances are coming from companies that have started from scratch - such as the transport services Uber und Lyft and Alphabet's subsidiary Waymo. They’re already getting relatively close to a car that’s one hundred percent self-driving.
What form does your collaboration with Tesla take?
I can't give away any details. I can only say that we are in contact with each other.
Why is Swisscom interested in mobility?
The future lies in networking cars with each other and with buildings or entire city infrastructures, known as smart cities. We are dedicating a lot of thought to this because networking is our core skill.
Where do you see your role in this?
On the one hand, in the provision of basic infrastructure for connectivity. Recently, we were the first Swiss provider to launch a nationwide Low Power Network (LPN). But we are also active at the level of individual devices. We founded Autosense as a joint venture with Amag. Autosense develops components which can be used to retrofit cars from earlier generations and turn them into "smart cars". This gives the user direct access to valuable information about driving and about the vehicle. A logbook, remote diagnosis and warnings for engine problems are available. Further digital services for refuelling and parking are planned, as well as bespoke pay-per-use vehicle insurance.
Connectivity: The ability of devices and sensors to communicate with each other. This is a prerequisite for the Internet of Things (IOT).
Model 3: Tesla's mid-range model, in contrast to the Model S, which is located in the luxury segment.
LPN: Swisscom's Low Power Network for connecting sensors with each other. LPN (like NB-IoT) forms part of LPWAN technologies that require considerably less energy than mobile technologies such as 4G or 5G.
Smart car: Software-controlled cars with various "intelligent" functions. This includes a connection to the Internet ("connected car"), as well as (semi-)autonomous driving.
Smart city: A vision of urban development with the goal of using communication technology to make a city's infrastructure more user-friendly and efficient, for example, in the domain of transport.
Swisscom tracks what’s going on in the digital world around the globe, with their network stretching from Shanghai to Silicon Valley. Simon Zwahlen is one of their leading specialists. He provides Weltwoche with first-hand monthly reports on the hottest trends and most fascinating developments.