VALUE: After Hours (S08 E11): Eric Jorgenson on $TSLA, SpaceX, Twitter/X and his new book The Book of Elon

TRANSCRIPT

[Tobias] I think we’re live. This is Value After Hours. I’m Tobias Carlisle, joined as always by my co-host Jake Taylor.

Our special guest today is Eric Jorgensen. He’s written a new book, The Book of Elon. Fantastic cover.

Elon Musk in his own words, following on from his excellent almanack of Naval Ravikant. How are you, Eric? Welcome.

[Eric] Good, I’m good. Thank you for having me.

[Jake] It’s good to have you on, Eric.

[Tobias] Tell us a little bit about The Book of Elon. How did it come about? What can we expect?

[Eric] Yeah, I mean, this is a very obvious next step to me after the almanack of Naval was so well received. I think we kind of hit on a format that is familiar to all of the Buffett and Munger fans, which is kind of just like a compilation of wisdom. But applying that to other people went incredibly well.

I mean, I kind of did the almanack of Naval as a side project, and now like 2 million copies have been sold, and we’ve given away 5 million more in 40 languages. It’s just on an absolute tear. Elon was somebody that I had always …

He’s been sort of an icon, at least in the tech industry, well before he kind of became a household name for a variety of reasons over the last few years. But he’s lived a really extremely unique life and I think is approaching greatest entrepreneur of all time status or certainly singular among the living entrepreneurs. And I think he’s got a lot of hard-won wisdom because he’s not a …

I mean, he’s not a particularly polished speaker in the way that Steve Jobs was, but his ideas are really well-honed and battle-tested and practical. And so I think there’s just so much that we can learn if you do this exercise that I do, which is collecting everything that anyone’s ever said publicly, getting a pile of millions and millions and millions of words and sort of like distilling it all down into the tightest, most useful, most timeless 50,000 words that is the advice and wisdom that they have to teach somebody. I really wanted to feel like you’re sort of sitting across the table learning, getting personally mentored by Elon Musk.

That’s the goal.

[Jake] And so how do you take that corpus of all of these things and make … Organise it into a way that makes sense.

[Eric] I would love to tell you that the answer is like AI does it, but the answer is like brute force.

[Jake] Brute force, yeah.

[Eric] Like I just spend hours … I select these books carefully because I have to spend hours and hours and hours and hours listening to and reading this person. And I compare it to kind of doing a jigsaw puzzle.

Like I go searching for all the pieces and then I’ve got just a pile of chaos on my desk and I start sort of organising them into piles and I collect the pieces that I like and figure out how they relate to each other and which ideas build on each other or support each other and what the core themes are and what things are sort of … The hits that you know everybody’s going to sort of expect and want in there and the stuff that other people are like, have never heard this before, but it’s actually a really important sort of accentuating point or supporting story that holds up some of these key pieces and shows the synergy and the synthesis between how the ideas actually work together and explain some of these outlier outcomes.

[Jake] So what would be an example of like one of the corner pieces of the puzzle?

Elon Musk’s Secret to Speed: How Bottleneck Thinking Builds Billion-Dollar Companies

[Eric] So one of the corner pieces of the puzzle is probably speed. Like speed and full use of time, right? This is something that the organisations are well known for moving quickly, faster than their peers.

Elon is well known for working a lot of hours, but the sort of layers under that that I feel like aren’t quite as fully appreciated is he works all of the time on whatever the most important thing to do is and like a combination of attacking the bottleneck, using first principles and doing it immediately. And so those aren’t sort of like 10% improvements, those are multiplicative stacking improvements. And it’s really easy to sort of underestimate how those actually combine.

And so we all know that sort of coming from the value school, it’s very well understood that one right decision can solve everything, right? You only need to make one, two, three really good decisions in your whole life to have a career, to have a generational outcome of wealth. But if you’re operating a company, you usually need to make one of those like every week.

But if you can make one every day or every few hours, and it’s the right thing at the right time to address, and you’re like breaking those bottlenecks sequentially over and over again, the compounding effect of that productivity is unbelievable, which is, I think, a big part of what we’re seeing in these results. An order of magnitude difference in productivity compounded over 25 years, build some of the biggest companies on earth from a start that everybody else considered impossible. It’s hard to remember just how impossible these things seemed when he started out.

And we’re still, there’s sort of this perennial feeling of like, we are amazed by what he did in the past that used to be impossible. Like, oh my God, it’s so great that electric cars are household name. It’s so great that self-driving is not working.

It’s so great that we have reusable rockets. I know we told you that would never work, but this thing that you’re doing on the moon, that’ll definitely never work. This thing, like building a TerraFab, that’ll definitely never work.

And so there’s probably like a reverse Lindy effect here, where like we all use the same techniques to explain the outlier outcomes of the past, but at the same time, deny like the outlier outcomes that someone’s claiming in the future.

[Tobias] How does Elon balance running, being the CEO of so many different companies, and still that idea of moving quickly?

[Jake] Because the way that someone like Buffett does it- And still put out 20 tweets a day if you do that.

[Tobias] Yeah. The way that Buffett has this idea of extreme decentralisation, so he pushes all of the decision-making down into the CEOs of the companies, and then he’s largely free to sort of look at the top level. Whereas Musk seems to be much more personally involved in all of the companies.

Does he have good second in command, or does he just respond very quickly? What’s the secret there?

[Eric] I think there’s probably a few. And the answers vary. Gwen Shotwell functionally runs the business and the HR, the finance, a lot of the more operational pieces of SpaceX, and has for many years.

And Elon is an engineer, and all he really wants to do, and where he primarily focusses, his whole school of thought is around build a product so good that the rest of everything kind of takes care of itself. And so he spends a lot of his time in technical reviews and in deeply detailed ones. I expect there’s a level of sort of abdication where there’s like teams and executive teams and administration that sort of happens without his direct involvement.

Inside Elon Musk’s Management Style: ‘Find the Bottleneck and Attack It’

But his version of his job description would probably be a little more like Eye of Sauron than Warren Buffett has like total abdication. And Elon is like abdication for extremely selective, not just micromanager, but like nano-management of like, wherever the bottleneck is in my whole empire, that’s where I’m going to fly, that’s where I’m going to sit, that’s who I’m going to talk to, that’s what I’m going to attack. And then like zoom back out and find the new bottleneck, and zoom back out and find the new bottleneck.

It’s a very different mode of management, obviously, but I do think there’s a really, you know, the common thread between Warren and Elon would be, which is a fun game to play, would probably be like, what is the single most important thing to be thinking about? And that’s where my attention goes. And Warren’s is just like reinvestment of cash flow and like the actual capital allocation decision.

And I abdicate all of the operational decisions to like the people closer to the ground there. And I think Elon’s version is like, the product is all that matters. And the absolute dominance of the product in the market on both physical and economic characteristics, and I’m going to attack wherever the bottleneck is in that process.

Because that is the lead domino that will define whether the entire business is successful or not.

[Tobias] I mean, someone’s made a good comment here. Identify acknowledging what’s most important to work on is an underrated skill. I mean that in and of itself, the ability to identify what is the thing that you should be working on.

How does he go about doing that?

[Eric] Yeah, that’s a lot of people ask me like, what would you ask him? And like, that’s actually my, that’s my answer to that. Like, I think there’s an entire, there’s a section or maybe even a book to be written about like, how he identifies those decisions.

I think the, maybe the answer is just addressing the bottleneck that is only really helpful at a surface level. That is going to be extremely contextual question regardless. And so sometimes you hear him talk about it as it’s the bottleneck to operational speed.

Sometimes you hear him talk about it as like, the bottleneck is that the team that I have turns out they are not going to be successful. And so now my imperative is to replace the team. It may turn out like, I have really talented people, but they’ve got the wrong sort of presumptions or they’re structured the wrong way, or they’re, they’re working on the wrong material.

And, you know, from his sort of zoomed out view and this really clear North star that he’s trying to reach in the longterm, he’s going to go like really put a finger on a technical decision or material decision or a trade-off and really try to force that issue. It’s, it is a truism, but I think the like five wise is also a really good answer to that. You know, a lot of times there’s not just a bottleneck, but there’s a bottleneck in the bottleneck, in a bottleneck, in a bottleneck and drilling all the way down to really understand like, you know, the part in the supply chain that’s constraining, like the example is turbines, right?

Like if, if energy is the bottleneck to scaling AI currently, and the best way to scale the best energy supply is portable gas turbines. All right. Where are all the gas turbines?

Well, they’ve all been bought. Why? Because there’s only three companies that produce them and they can only produce so many.

Okay. What is their bottleneck? It’s actually like the machining of the fan blades inside the turbines.

And why is that? It’s like, Oh, cause there’s only two shops, you know, in North America with enough precision to do it. So like, all right, where do those machines come from?

Like just digging and digging and digging and digging.

[Tobias] Yeah, that, that, that’s fascinating. I’m so fascinated by that thought, it completely blanked what I was going to ask you just then. Now I remember.

I’ve seen, I’ve seen some analysis on, so Tesla’s kind of an interesting, Musk bought Tesla. So it’s like an acquisition. What do they call it?

Entrepreneurship through acquisition rather than him sort of inventing the cars, but he’s done it so early that it’s, it’s functionally, it’s his, it’s his creation. But the question that I have is like, why would you have focused on an automotive cars? They’re just as an investor, you know, the car companies are just, they tend to be bad businesses.

There’s a lot of infrastructure to punch out a car. You don’t make much money on what is a pretty big purchase for most people. But then I’ve seen some analysis of the car industry that says that there’s enough turnover in market share that you can capture a small portion of the market share and you could become sort of self-sustaining at a fairly low level, which might’ve been the thing that attracted him to it.

But I’ve never really heard a good explanation for why he focused on that rather than some other problem initially.

Why Elon Musk Doesn’t Care About ROI: The Mission-Driven Mindset Behind His Success

[Eric] Uh, I think this, the frame of this question shows, uh, is, is really, uh, is a common misconception. I think it’s a poor theory of mine for Elon as a person, like that presumes that he is going about his whole career saying, what company can I start to make the most money? How can I preserve my return on capital?

And it is a correct observation that if that is your North star in life, then starting a car, an electric car startup in 2002 would have been the fucking stupidest thing you could possibly do. And so like the frame of that question would be like, what did he know that I didn’t is, or why would he start this low likelihood of success? Low capital return endeavour is just completely, that is not how he thinks at all.

Um, and it’s why it’s part of why these companies are such an outlier success because these opportunities were on nobody else who thinks in those terms radar. Um, he for better or worse goes into starting a new company saying what important problem needs to be solved for humanity, to be successful for humanity, to thrive for consciousness, to continue. Uh, and importantly, what problem is not actively being solved by somebody else that is very important.

And do I think I can make a dent in it or do I have a chance of making a dent in it? Right? Um, he’s not even picking problems that he has a high likelihood of solving.

He’s picking the most important problem for humanity and shooting a shot at it with maximum intensity, no matter how long the odds of success are. And this is why starting the company is one decision, but it’s a whole different thing when you get to like doubling and tripling down when he gets close to zero. Right.

Do you know, you know, the story of like late 2008, tell it the choice that he faced. So like Q4, 2008, uh, heading into December, uh, he had made like $200 million from PayPal. Uh, and he had put almost all of it into both Tesla and SpaceX and was sort of trying to lead and build them in parallel and fund them almost solely himself.

His going in proposition was that SpaceX, he would fund for three launches with a hundred million dollars. And he thought if you couldn’t make it to orbit in three launches, then they deserve to die. Like, and he’s like, we’ll just, you know, we’ll share everything we learned good game.

Uh, I hope somebody else can pick up and carry on. But that failed third launch there was, he’s like, I think we got it. I think we know what it was.

They didn’t have enough money for a fourth launch, but they had a bunch of spare parts lying around and Tesla is in a really dire position, right? They had just fired the guy who had been functionally the CEO who’d been doing a terrible job, um, for the first kind of six years of the company. The original roadster was negative margins.

Everyone they sold, they lost money on and none of them were delivered and the company was out of money and they were going to miss payroll on the day after Christmas. Um, and so Elon is sitting there with both companies hanging by a thread out of money.

The $40 Million Decision: How Elon Musk Saved Tesla and SpaceX at the Brink

[Eric]

He’s down to his last $40 million.

If you can imagine being so destitute and, uh, he’s, he describes it as feeling like he’s sitting there with like his, uh, holding a kid in each hand over a cliff. Like the mission of SpaceX is to make life multi-planetary and preserve consciousness. The mission of Tesla is to electrify the future, like resolve climate change and, and save lives through autonomous driving.

And he’s like, I cannot give up on either of these companies. And if I put all my money into either one or the other, they both have a much better odds of success. And he takes the path that is maximum risk for him personally, financially, and reputationally, but gives both missions, even a tiny chance to succeed.

And this is the kind of decision that you could only make if you are deeply principle driven. If you’re not coming into this saying, God, I really got to make sure I get my $40 million back. Or, you know, this is not how this man thinks.

He thinks like a hero in a sci-fi adventure movie. And he says like, I got one life left. Like I’m going full YOLO.

Here we go. So he splits the money, puts them into both the fourth launch at SpaceX works. And immediately after NASA calls and offers a billion dollar contract at SpaceX is saved and Tesla, he puts all his money in investors say they’ll match what he puts in.

So Christmas Eve, 6pm, he puts in his money investors come in. And that is the money that gets the initial roadsters out the door and like gets Tesla into actually producing the Model S that becomes like the you know, best rated product or car to date of all time. And really became like the inflexion point that is when he had sort of taken over as CEO of Tesla and things began to kind of turn around.

But that story to me characterises him as being like, it reveals it is a test that most of us will never have to take. And most of us would fail if we had to take it. But it is this like purity of intent.

And I read a great line in Jed McKenna that I think summarises the stories like he asked the universe for something in the way that the universe understands.

[Jake] So do you think I know that we’ve kind of been sometimes even on the show, we’ve been a little bit critical on different points over the years of Elon and kind of feeling like there’s a little bit of refusing to play by the rules that everyone else has kind of agreed to play by. So I’m, you know, maybe the most obvious one would be, you know, you could make the argument there was some securities fraud and, you know, funding secured timeframe. There’s been other things, but is that kind of part and parcel of that, you know, I’m on a bigger mission, like I can’t let your normal human rules stand in the way?

Like, how does that manifest itself? And what do you think about that part of it?

[Eric] Yeah, I mean, so I would say this, this book is not about me. But if asked, I will answer questions about my personal views. Like, this is not an endorsement of every decision or action Elon Musk has ever made in his life.

My attitude is sort of, I think he’s an incredibly interesting person. And like, let’s study the outliers and figure it out. Anybody who’s an outlier to that extent is going to have, you know, light and dark traits that make them who they are.

His, he is, to his advantage, I think, a showman. And he understands that people respond to like superlatives. And I think he’s deeply optimistic.

So I think there are, there are many, many, like, I don’t know, he gets accused of like over promising and under delivering. And I think like some of that is an interesting mix of like, optimism and earnestness. That is like, actually probably on net a good thing.

I think there are definitely like things that come from a dark place. And he’s had, he has had a very rough childhood. I think he, he is interesting in that he burns like both you dirty fuel and clean fuel.

You know, I think he’s running from like a dark childhood and has demons, but like makes the demons pull the plough. I also think he’s very, like, willing to incur speeding tickets, I guess I would say. Like, I think, I don’t think he has a tonne of respect for like stupid laws.

And I think some laws he’s sort of learning about as he goes. What an adventure. And to some extent, I think he probably believes that in some cases regarding stupid laws, the ends justify the means, as long as the ends are good.

And, you know, I’m probably the wrong person to debate like any of the super, super, super specific issues with. But I think it’s no surprise that the yeah, somebody who’s like primary trait is moving quickly on the like, sort of first principles basis to move as fast as humanly possible might disregard some of what he considers red tape along the way, or, or truly just like it not even occurred to him because he’s just trying to take the most direct path. And then it’s like, wait, wait, wait, I didn’t even know that was, I didn’t know that road was close.

Who closed it? Yeah.

[Jake] Yeah.

[Eric] I was just doing the obvious next step that seemed fastest to me. Who knows? Who knew?

[Jake] Yeah. Why do you guys care about that?

[Eric] Yeah. And I don’t know. And to be clear, like, you know, I had no special access to him.

I did not interview him. I did not follow him around. I have no, like, I didn’t interview people from his past.

Like, this is a book that I collected all his most useful ideas from public sources. So I, I spent a lot of time on his ideas, but I don’t want to claim any, like, especially unique insight into his sort of psyche or know how he thinks about or how he made those decisions or whether it was like a knowing, you know, shortcut or like, oh, fuck my bad. My bad, but it’ll be fine.

[Jake] But we’re going on.

[Tobias] Yeah. Yeah. You’ve, you’ve raised this idea of first principles thinking, which is one of the things that Musk is known for.

Can you tell us what that is and sort of apply that in a, in one of the scenarios that he’s used it in?

[Eric] Yeah. So the, the sort of most common example here that it’s used for is, is really the origin of the observation that SpaceX needed to exist. So Elon’s, this is another sort of goes to, to character and principle and his goal was SpaceX.

It was not originally to start a company. It was originally to get NASA’s budget increased. So when he’s sitting there with $200 million, his original vision was, all right, I’m going to just spend a hundred million on this philanthropic mission to increase NASA’s budget.

He was going to go buy a rocket. He was going to put a tiny little greenhouse on it, send it to Mars. It would be the first life on Mars.

And we get like this, you know, front page, beautiful newspaper cover shot of a greenhouse, the first life on Mars. And that would spur this great adventure kind of like we had, you know, when Columbus discovered the new world and catalysed this whole you know, transatlantic shipping movement and all the economic boom that came with it. So what he discovers in this is that it’s actually quite expensive and difficult to buy a rocket and that the launch costs are very inefficient.

First Principles Thinking Explained: The Elon Musk Method That Changed SpaceX Forever

And he goes to Russia. There’s great stories and like going to Russia and trying to like haggle and buy an intercontinental ballistic missile as like the basis for the rocket. And the Russians are like spitting on him and making fun of him and like doubling the price when he’s, he’s trying to negotiate.

And he says like, I got, I got mad. And when I get mad, I try to reframe the problem. And so he’s literally on a flight home from Russia like hung over and pissed because they made him drink a bunch of vodka and they wouldn’t sell the rocket.

And he’s like, starts doing the math on, well, why does a rocket cost this much? Like it costs $60 million to buy this thing. And the first principles piece is he’s like, all right, how much, what are the material components of the rocket?

It’s X amount of carbon fibre, X amount of steel. What is the mass of those things? And what is the, what is the weight of the material that goes into the rocket?

And for a rocket, it turned out to be like 2% of the price of the rocket was the value of the raw material. And if you don’t know, like the, you know, maybe for an iPhone or a car, it’s like 30% is a much more kind of normal consumer thing. So he’s like, all right, why are these things so expensive?

And he started to dig into sort of the structure of the industry and the process of the manufacturing. And he’s like, oh my God, there’s all these like super specialised aerospace guys. And they, they’re actually all incentivised on cost plus contracts.

And there’s like, they’re subcontracting to subcontractors to subcontractors. There’s just a bunch of crazy inefficient things that are going on because we just really incentivise to be efficient. But if this is the system that we allow to exist, we’re never going to get off earth because we have this perception that launch costs are so high.

So he’s like, all right. He collects a bunch of engineers. I think this is actually a really interesting, like a playbook to run too.

He’s like, I went and found, you know, a collection of engineers that have worked on the major launches and space vehicles over the last 30 years. And he had a, for a series of Saturdays, like these working sessions to test the viability of different design rocket designs. And that’s how they sort of came to terms with the fact that there may be an order of magnitude or two potential for improving space launch costs and working towards this ideal of a reusable rocket, which would do another order of magnitude or two.

And so the first principles model is really just starting from what is the maximum possible efficiency? Like what is, what is the, what do the laws of physics allow and working up from there rather than allowing the existing historical analogy or prior best art or best practises to allow your starting place and trying to make incremental efficiency gains from there. And so he says it is important to use both, but like your perception of the ceiling of potential improvement when you start from the existing analogues is just so much lower than if you start with like, what is the, what is the limit of what is possible and how close to that can we get?

And that is where his instinct to like, or his drive to sort of question assumptions and push and simplify and drive things down to get closer and closer and closer. Cause he’ll, you know, there’s stories of him in meetings being like, there is no first principles physics based reason that this design cannot work. Like there’s no reason you can’t build a gigantic tower to capture the landing legs.

And there’s always friction in this. Like all the engineers are like, that’s, that’s stupid. That’s crazy.

We can’t do that. Every rocket needs landing legs. And he’s like, just give it a week, just give it a day.

Just think really hard for a day about like, whether there’s any actual fundamental physics based limitations for why this can’t work. And if you have them, I’m happy to hear them. And if you don’t, then let’s start working on a design.

[Tobias] What’s, what’s been the reduction in cost? How, how cheap is, do you, do you know how, how much more efficient is SpaceX versus NASA?

[Eric] Orders of magnitude. I mean, you can, you can see well, NASA is the wrong like analogue cause NASA is a customer of these things. And so you’d be looking at sort of the mass to orbit from previous space shuttle systems or space systems.

Let me see if I can like pull it up. Actually. It’s, it’s one of these things that is like now on a Moore’s law style curve that is going to change a lot of things.

And the people that are sort of have this knee jerk reaction to mock this kind of like, Oh, you’re going to, you’re going to put compute in space really is like, have you seen the exponential drop in the launch cost? And have you seen that actually the Starship is like going to take that like another order of magnitude or two very quickly? So yeah, it’s a very interesting time in space because it’s one of those things that people close to it feel like it’s, it’s now tipped over into inevitable and people who haven’t sort of gotten close enough to it are like, Oh my God, that’s still, that’s still sci-fi.

[Tobias] Um, while you do that, I’m going to go around the horn a little bit. Uh, Philly, Snohomish, Tampa, Gothenburg, Petitikva, Israel, Toronto, Madeira Island, Portugal, San Jose, Edinburgh, another one in Scotland, Lausanne, Switzerland, Jupiter, Florida, Finland. What’s up?

Happiest man in the world. Not. Wagga wagga wagga.

What’s up Australia? Uh, Byron Bay. Congrats.

That’s where I proposed to my wife. Good place to keep him going back to.

[Jake] She said, yes, she did.

[Tobias] She did. Gave her a bottle of wine first. Smart.

JT, do you have veggies for us today? I do. Do you want to hit us with some veggies while Eric’s, uh, while Eric’s crunching the numbers?

Doing the work. Yeah. Yeah.

The 10 Bits Per Second Bottleneck That Explains Human Thinking Limits

[Jake] So this one hopefully, uh, fits pretty well with a lot of things that Eric’s been talking about and totally just by accident. So it wasn’t even really planned out. None of these things ever are, but, uh, so we’ll start with a strange number and that is 10 bits per second.

And recent research says that throughput of conscious human thought is around 10 bits per second. Our sensory systems take in vastly more than that. Your eyes alone are feeding your brain something like a billion bits per second.

And whatever the exact numbers, don’t worry about that. The point is that human control runs through a very narrow bottleneck. And if 10 bits per second sounds kind of abstract, think about like, you know, earnings day and you’ve got the transcripts coming out.

You’ve got stock chart moving around. You’ve got your group chat blowing up Twitter. You’ve got the incoming headlines.

You’ve got this buzzing sound from the AC that you’re just noticed and this entire world that’s competing for your attention and the inputs are flooding in. But your conscious mind can only really evaluate one thing at a time into, into a deliberate action. Um, and, and focussing, you know, on that one sentence or updating that one assumption or, uh, you know, deciding what’s for lunch, whatever that narrow channel is what kind of 10 bits per second is getting at.

And, you know, we humans, we think serially, we were selectively attentive and the institutions that we built are, you know, our families, our schools, our companies, courts, democracies, they’re all built around that human cadence. Civilisation runs on this kind of slow clock that evolved from our biological constraints. So I’ve been thinking lately a lot about how AI changes that clock and it compresses this distance between sensing analysis action.

It can monitor continuously, predict continuously, update continuously, optimise continuously. And even when AI is speaking to us at a human speed in a chat window, internally, the loop is running at machine speed. And if used correctly, obviously AI brings more intelligence to everyone, but it also has this higher metabolic rate of processing and decision-making and with agents, a faster metabolism of doing.

And I thought it might be interesting to run through some of these thoughts through like these three different mental models that we’ve previously covered on the show. And hopefully it’s a nice demonstration of Munger’s lattice work of mental models and kind of how you can fit things together. So the first one is Stuart Brand’s pace layers, which gives us this first mental model, the first lens to evaluate this.

And as a reminder, Brand observed that civilisation is made of these layers that move at different speeds. And on the outside of this, the construct, you have fashion and then commerce, infrastructure, governance, culture, and then finally nature down at the bedrock. And these fast layers innovate and they create change.

And that would be like fashion and commerce primarily. And then the slower layers underneath that stabilise things. They’re like infrastructure, governance, culture, nature.

And a healthy society depends on this tension between these layers. So now insert AI into the pace layers. And obviously it’s going to speed up multiple areas.

Commerce moves faster, media faster, software faster, apparently going to zero. Strategy moves faster. And maybe even some infrastructure layers move faster if AI enters the physical world more with robots.

But this governance layer, it’s not suddenly moving faster. Culture maybe is not suddenly moving faster. Human nervous system definitely is not suddenly moving faster.

So the core problem is a risk of desynchronising things that were previously synced up. The next one is Jeffrey West giving in his book Scale. In living systems, cities, there’s a scale to things and how they work.

And in a living system, there’s internal rates that keep a coherence through them. Your metabolism, your circulation, growth, repair, lifespan, they all balance together at different scales. So a mouse and an elephant run at very different speeds, but each is internally matched to its own internal biology.

So if you graft a mouse’s metabolism into an elephant body, you don’t get this faster elephant. You get a body whose internal rates no longer fit together and the whole system breaks. So it feels like AI is increasing the metabolic rate of many parts of society without increasing the mental metabolic rate of the humans that are trying to live inside of it.

So we can’t really probably expect to get a uniformly faster civilisation. We’re getting incompatible internal tempos then. And people, we’re not just dealing with more information.

We’re dealing with these tighter loops, shorter response windows, fewer pauses, more frequent demand to kind of reorient ourselves. And this may be starting to sound familiar to you, Toby, because we’re now entering the world of John Boyd’s OODA loops as our third mental model. So do you want to give just like a quick one minute recap of what the OODA loop is?

I know you know it well.

[Tobias] Yeah. The idea is from aerial combat, observe, orient, decide, act. The faster you can make those decisions and manoeuvre, the more quickly you respond to the environment and to your adversary if they’re out there.

And so the more able you are to hose them rather than have them hose you. And the idea applies in business as well of the faster you’re able to figure out what’s happening and adjust to it, the better able you are to compete and adapt to the situation. So it’s not so much the speed of aircraft, but the manoeuvrability of the aircraft is the important thing.

Not so much the velocity of the business, I guess, but the adaptability of the business.

AI Is Breaking Human Decision-Making: Pace Layers, OODA Loops & Overload

[Jake] Right. So Boyd’s work is usually remembered as like this theory of speed, like you said. And perhaps maybe the most important step in there is that orientation, which is this perception becomes meaning.

And it’s where you could build a workable map of reality. The speed of AI could be destabilising this orientation. The environment updates faster than people can build a stable map of it.

And by the time you understand the situation, too much has changed. And my hunch is that why so many people, myself included here, is like you kind of feel a little tired and a bit disconnected because things are disoriented even. Not because we’re weak or we suddenly became less resilient or because more of life is being spent in this.

It’s because more of this life is being spent in constant reorientation mode, new tools, new norms, new incentives, new threats, new expectations. This map keeps changing under our feet. So and that drains our attention often, and it can fragment our memory and shorten our time horizons and makes planning feel very fragile.

And it creates this feeling of kind of always being behind or like that, you know, even when maybe nothing is obviously wrong at the moment. And we can handle that kind of difficulty, but this continuous change without enough time to absorb and adapt, like we need intervals of stability to kind of get our feet under us again. So this is often actually where disorientation can turn political.

You know, legitimacy can start to be constrained, like and systems no longer feel intelligible. Cynicism rises because decisions come, they seem to come from nowhere. Conspiracy thinking rises because, you know, there’s hidden systems feel more plausible than the visible ones.

And this may be the real danger of AI at scale. You know, it’s not Skynet or the Matrix, but it’s that makes everyday life feel increasingly unhittable to ordinary humans, too fast to parse, too fluid to trust, too adaptive to anchor any long-term plans to. And we’ve kind of seen a version of this before in history, and that would be like early industrialisation.

First, the clock changed, like factory time and railway time replaced local human rhythms. You know, the day stopped being organised around the sun or the seasons, and it started to be organised around the machine. And second, like work itself changed.

Skilled labour got broken into narrower, faster, more repetitive units that that kind of took away that sense of pride of like having a completed project. You know, you no longer control the pace anymore, the system kind of controlled it. And then third, like institutions were lagging, like laws and normal norms, politics, they all adapted after people were already living under this strain.

And there were of the long hours, unsafe conditions, urban crowding, labour conflict, there was a lot of tumult that came from that. And these might be patterns worth remembering as we start to experience some of the same thing intellectually with AI. So I think, you know, put these all things together, and the message is that the scarce resource in human society might just be the amount of change people can metabolise without losing coherence.

And if everything gets pulled into machine speed optimisation, the result is disruption in this form of exhaustion at the individual level, maybe instability at the societal level, and eventually maybe a legitimacy crisis at the civilisational level, if you feel like you’re, you’re kind of no longer plugged into a system that you can believe in. So anyway, just thanks to, this is what I daydream about.

[Tobias] Good stuff, JT. Eric, what’d you get to, did you get us a…

[Eric] I did, but also I feel like I need to add a coda to that rant that ended on such a fucking terrifying note.

[Jake] Bring us back to the positive, Eric.

[Eric] I mean, the observation that the metabolism of change is the constraint is actually, is I think the absolute correct takeaway, but I think we need to be optimistic about our ability to manage it. So I will lead us back into Elon, but my buddy Sean Devine just wrote a book called the Dionysus Programme, that he has been very early to AI, very early to the ideas of like Deutsch and Taleb that many of us would appreciate. He’d be an amazing guest on the show and could like talk you through that, but he’s actually very intentionally designed his organisation and come up with a new sort of operating system for, he’s a bootstrap founder, CEO of a software business.

And he is intentionally increasing his organisation’s ability to metabolise change exactly because of what you identified, is like the amount of time that people can spend processing new ideas and importantly, without feeling like their ego is under attack or that like they have a culture that is safe to critique each other. And he’s got this idea between like runtime and review time. So there’s like accountability matters, deliverables matter, chain of authority matters, like in runtime when you’re operating the business.

And then when you’re like running tape, you want to all like put your hoods up and really, there are no sacred cows. There’s no process. Anybody can say anything.

We have to criticise anything, leave the egos outside so that we can really process the information and move forward and like adapt the organisation together. I dropped a link in there, but like it is, I think one of the most important ideas of this decade, if not the century. And we need a lot of people like thinking about it and processing it and appreciating that it is a constraint, but it’s also a manageable constraint.

Like we’ve gone through crises of meaning before and we can update our wet firmware and get better at those skills.

[Tobias] One other thing that really stands out from what Musk has done, I mean, even the story that you tell where he’s flying back from Russia hung over and he’s in the plane and he starts thinking about the materials that go into the rocket and how you could reconstruct the rocket from first principles using physics as the outer limit of what’s achievable. He’s got this incredible work ethic, you know, apparently from the outside, but how does he sustain that? How does that work?

How do you do that?

[Eric] I mean, I think, like I said, I think he’s got demons and I think he makes them pull the plough. I mean, I think he’s got, he pushes himself so hard and sets, uses that sort of battlefield general energy. Like he reads a lot of military history.

I don’t think he’s got an analogue in sort of contemporary entrepreneurs because he sort of attacks like Napoleon. Like he uses a lot of these super high iterations to go to where the front is. You know, your troops will fight harder when the general’s like at that front.

He does really fast skip level promotions when people show promise, just like kind of the wartime, like, all right, there is no, there is no due process, like the battlefield commission onesie Tuesday. Yeah. It’s a very much like you’re smart.

Here’s your platoon go achieve your objective. And that actually ties into, you know, the Elon part of what Jake was saying about the, the ability to reorient really, really, really quickly. Sean Maguire just wrote a great essay.

The first line of it was killer and stuck with me. He’s like, what looks like chaos is actually the, a whiplash from a new bottleneck being cleared. And that was his way to articulate.

You’re like, whoa, whoa, whoa. Musk has been talking about the Mars for 20 years. Like why is he suddenly talking about AI in space?

And the presumptive, the behind that is actually like the launch cost bottleneck has been cleared. And so now what is, what should we get into space at massive volume? If, if intelligence is the bottleneck and chips are the, the bottleneck to producing new intelligence, let’s build a gigantic ass chip factory and let’s fill these starships up with chips and let’s get them up into space.

Um, but I think that idea of, yeah, churning a bottleneck and allowing the organisation to whip around really quickly and like creating chaos and let it resettle. And I think we were talking before we started recording that one of the beauties of capitalism is that like high prices create change very quickly. And if markets are truly allowed to adapt as quickly as realities informing them, then you know, the world will be a more functional place, even if it is a little bit more disorienting to the like lizard brain in us that just doesn’t want change.

Just let me sit here.

[Tobias] What do you think about, uh, the changes that he’s made it at Twitter at X I’m a, I’m an ex-user and I’ve been in an ex-user for a very long time. And I’ve got to say that the, you know, that they just, they say that he has reduced that workforce by 75% or maybe it’s even more than that. And I, I saw a, I saw something the other day saying that there might be 30 people at Twitter, which just seems minuscule compared to, you know, the other companies that are out there.

And I have to say, I don’t think that the, I don’t think the performance of X has degraded noticeably. It still has, it’s, it’s still buggy. And there’s still, I can tell they’re still playing with the algorithm and so on.

And right now my top stories doesn’t work. I don’t know if anybody else uses tweet tech, but top stories is busted for the last couple of days, but it’s pretty, it does pretty well.

[Jake] Bulletproof.

[Tobias] Well, I mean, it was, it was buggy in the past too, but it’s just, I mean, like it looked to me like tweet deck was just, I don’t think they even knew that they had tweet deck for a long period of time. And then they clearly they’re working on it. I mean, I’m talking about the pre, the pre mask.

I don’t think they know that they had it. I think they bought it and they forgot they had it because they put all the work into the twitter.com and tweet deck was just kind of ignored, which was fine by me because it worked fine. But then they’re clearly they’re working on tweet deck.

Now they’re doing some stuff in tweet deck and they’re doing some stuff in the algorithm as well. But I’m just kind of curious, like, what’s your take on, or what does, what does Musk say about, you know, what they were seeking to achieve there and what they’ve done?

[Eric] Yeah. I mean, I think the most interesting version of this story is probably going to come out later. Like, I think we’re kind of still in it.

The, that tweet about 30 people was referring to the engineering, like the core engineering team, not, not like the whole staff at Twitter. And I think there’s actually more head count on the like sales and marketing side, which makes sense because they’re trying to drive a lot more revenue, but it’s easy to forget how, how little Twitter shipped in like the five years before he took over compared to how much they’re actually shipping now. Like there’s been a tonne of new features and better features.

It was a rocky road. The algorithm definitely sucked there for a while as they were iterating quickly and getting reoriented as is apparently the theme of the day. But at least I am also like a Twitter power user and I will say it is much, much better than it has been in the past.

I think, you know, we’re coming into things that feel really good and tight and I’m getting, I’m having success using it for what I use it for, which is wanting to like stay in touch with the people kind of in my sort of little tribes, right? Like my tech tribe, my value tribe, my, my, my book nerds. And it’s only small amounts of like headline news and there’s a lot more customizability than there used to be all kinds of additional kind of features, adding the long form video and all that stuff.

So, I mean, do you remember when the transition actually happened and he laid off 75% of the staff and everybody ran headlines saying like Twitter will go down tomorrow, like it’ll never exist again, you know, good luck. And then like two months later, he laid off another 75% and it, the website is still up. It’s still nothing happened.

So, you know, there’s people in tech in particular who sort of see that as a canary in the coal mine of like, hey, is every software company overstaffed by like 400 X or like a thousand X, maybe. And it does, the leverage available to software engineers is much, much, much higher than it has been in the past. But I think the, I think the rumours of, you know, Twitter slash X’s death is greatly over-exaggerated.

And if they continue developing at this speed, he talked about adding a whole like financial layer to it. His original vision for x.com, even when he was back building PayPal was to be like the everything app, including finance and to be this sort of global town square. And I don’t know, we probably want to put aside the whole like free speech and censorship debate at the moment, but I think somebody’s going to write a fucking incredible book about that in a few years when all of the material is actually out and people have had time to sort of parse through it.

Because I think that’s one of the most interesting things that it’s, it’s hard to know who’s telling the truth about what at this point. But I’m really excited to sort of read that account because I think there are people who think that Elon, you know, saved the West by getting a social media platform out from under free speech. And there’s some people who think that’s an absurd or from under sort of government censorship.

And there’s people who think that that’s an absurd conspiracy theory and no such censorship existed. And they both have sort of equal conviction and what looks like proof. So I’m excited for somebody else to figure that out.

Tell me.

[Jake] Toby, have you been shadow banned before?

[Tobias] I don’t think so. I think I’m pretty, I think I’m pretty anodyne for the most part. I’ve got a, I’ve got a very niche, niche.

So no, I don’t think so. Have you? Too provocative.

[Jake] Nobody’s going to shadow ban me for posting pictures of my kids hitting baseballs.

[Tobias] That’s one of the by-products of Musk being so intense and working such long hours is that there must be some sort of expectation that, you know, if the guy at the top sets the standard, everybody else is sort of expected to meet that standard. I don’t, I don’t particularly follow the companies that closely, but I don’t really know who all the people are under him at any of the companies that he runs. How does he, you know, but I, you hear about it when, when people leave and there’ve been quite a few occasions where, you know, some C-suite in at various different levels have left Twitter or have left SpaceX or have left Tesla.

And there’s been discussion in the media like, oh my God, we’ve lost the, you know, we’ve lost the brains trust of one of these companies. Like what’s Musk going to do? And then there doesn’t ever seem to be any issue after that.

So what’s, how’s he handling that sort of talent acquisition management? What’s he doing there?

[Eric] Yeah. I think it’s an interesting thing. I mean, the first thing that comes to mind is just the picture of the aeroplane with the, with the red dots on it.

Cause nobody ever announces that they are keeping their job. It is, I think there’s probably, there’s probably like a bimodal distribution here where like, there’s people who show up and work really hard for two years in their, you know, kind of twenties or early thirties, and then say like, this was really fun. I pushed myself to the limit, but I can’t do this for 20 years.

And, and that’s perfectly fine by the way. Like, you know, new brilliant engineers are born every day. And that is the culture of some companies.

And he does not want you there if you’re not all in. And that’s hardcore. Yeah.

Like some people will have a moral judgement about that. And those people shouldn’t go work at these companies and they shouldn’t be mad that other people do choose to go work in these companies. Like, I don’t calm down.

The, there are people who have worked there or choose to work there for, you know, 10, 20 years. Even though they’ve become incredibly wealthy, just they super believe in the mission and work well with Musk or work well on the, on the projects. Some of them have left, but also like at this point, the scale of these organisations, I think is such that like, they are no longer super fragile to any, probably one individual aside from a handful, right?

Like I think, I think Gwen Shotwell is absolutely instrumental. I think obviously Elon like matters a lot, but I think mostly as a pace setter and example and, you know, guardian of the, the vision and the mission. And I’m sure there’s many instrumental people whose names I don’t know currently.

But the other thing he said about this actually that is a little interesting is like, everybody has this sort of bias that churn is a negative thing. And he’s like, if a company, to the degree that a company is scaling quickly, churn is actually normal and positive through different cycles. And people just aren’t used to those cycles hitting as quickly back to back as they do.

You know, the person who takes a company from 1 billion to 10 billion is different than the, often the leader who takes it from 10 to 100 billion or whatever. And, you know, when those happen 18 months apart or 24 months apart, it looks like, Oh my God, they left in two years. What must be wrong with that company?

When it’s actually like, Oh, we actually graduated from that stage. And that person’s job was done. And it was time for a new person to sit in that role.

And that was an articulation I hadn’t heard before that I thought was, was good and useful.

[Jake] It was like Procter gamble and it took 20 years to do that. You wouldn’t notice the.

[Eric] Right. Exactly. Yeah.

Yeah. So what it actually, whether it’s good or bad is, is very dependent. I think so as not to be perceived, I really don’t, I don’t consider, I am a Musk like fan, but I’m not, I don’t think I’m blind to his downsides.

And I think there are many stories where his his impatience did cost him incredible talent that should not have been pushed out in, you know, or, or was willing to work hard or had sacrificed plenty or would have figured it out. And he was just too impulsive or too impatient or too rough. And people did leave who the company would have been better staying.

But I’m sure there’s also many cases where he was much, much, much quicker to replace someone with somebody more capable and faster moving. And again, those are invisible wins, right? Like the, the mistakes of sloth in terms of like driving turnover in the grander world of management are probably many orders of magnitude more than the mistakes of commission, early commission.

[Jake] He’s a sense of commission kind of guy.

[Eric] Yes. Yes. And that’s actually one of the, like, you know, I don’t, I don’t write this book to say you should become Musk.

I write this book because seeing, you know, in the same way that like observing the limit of physics, seeing what the arguably asterisk, the greatest entrepreneur living entrepreneur, how he operates, if he’s at a hundred and you’re at five, maybe you can really, really comfortably and excitedly go to seven or nine or 12 and your output doubles and you do something more productive for the world and your life gets better. And you’re not Elon Musk and you never will be.

And that’s totally fine. But the tools that he uses and the pace that he sets can be, you know, a useful sort of exercise to just try on in your head for a little bit and ask yourself some of the questions that he asks himself. And you might find that there’s, you know, stunning opportunities for improvement that you hadn’t considered before.

[Tobias] You’ve been an entrepreneur and a tech guy. And so probably followed Musk pretty closely from the outside as, as all of us have, what really shocked you from going through and reading all of the combined? Yeah.

What, what stood out to you was something that you hadn’t understood or had misunderstood or hadn’t sort of thought of before that was something that he was doing. Yeah.

[Eric] I, I underestimated how philosophically driven he is. I think that there’s a cohesive sort of a worldview behind the decision to start these companies that like drives him to keep going and just the grit. I mean, like to be the richest person alive and still sleeping at the factory, working 18 hour days, taking the risks and slings and arrows that he takes, you know, rightly or wrongly for all the decisions to still be in the arena as the greatest to ever do it.

Who’s doing that? Like Bezos is on a yacht, like Zuckerberg is still young, you know, Buffett did it, but he was so comfortable and kind of just kind of like reading and operating. Like Elon is in a knife fight every day as a 55 year old, almost trillionaire, like I just have so much on Twitter.

Yes. Like, yeah, sure. Yeah.

Like for better and for worse. Like he’s just, like I said, for better and for worse, like he’s, he’s got light and dark and they, they come from, I think, similar places and they, they drive similar places. And, but you know, and I don’t, I’m not advocating for adopting the dark.

This whole thing happened. The same thing happened when like the Isaacson biography on Steve Jobs came out and everybody in Silicon Valley just started like acting like a fucking arsehole because Steve Jobs acted like an arsehole and they copied all the wrong things. And like, yeah, there’s a version of this that I worry will happen.

[Tobias] It’s like people eating at steak restaurants because they want to be a Warren Buffett investor.

[Eric] Yeah.

[Tobias] Yeah. It’s Goretz.

[Eric] I too can eat a terrible steak.

[Tobias] Yeah, that’s, that’s not the best steak. I think one of the, one of the things that I’ve really observed about Musk in the sort of time that he’s been public is that I think he has been close to the wall a few times. And I think that after the fact that it sort of comes out that he has, and that’s one of the things that his ability to survive what looks unsurvivable is sort of amazing.

Do you have any, do you have any thoughts on that?

[Eric] I mean, he’s definitely got a higher risk tolerance than me and probably to some extent, like a gambler’s mentality.

[Jake] It is also- I was going to reframe the question. Like if, if, is there a Martingale, you know, outcome here where eventually you, you do hit the wall and crash out and, and we like, it becomes a cautionary tale now instead of an inspirational one.

[Eric] That thought had occurred to me as somebody who’s like holding him up and as an example. I, yeah, I mean it’s totally, I mean, I don’t know that, I don’t know that Zero, I think Zero, I don’t know what he’s doing with his net worth. I don’t know like where he’s levered and which things are dependent on which.

I know he does, I do know he borrows against his stock in different areas to finance new things. I think at this point we’re, we’re probably past high level of risk there, but I have no, I have no information. I think we’re, I think even if he died tomorrow, like he would still go down as, you know, one of the best to ever do it just based on the organisations that he would leave behind.

And the sort of progress that’s been created, especially if the trends of each of these organisations continue, which I think, you know, kind of the mass and momentum and the culture has been instantiated in all of these, there’s tens of thousands of people at all these organisations. Like we also run the perennial risk of sort of talking about Elon as a human when he’s kind of a symbol. Like there’s the man, there’s the core group of people doing the work that’s more than just him, and then there’s like the symbol and the whole like economy of things that he’s created.

And I don’t want to conflate those because it’s easy to do and then you start to sound like a deranged hero worship and like you’re ascribing superhuman talents to somebody when it’s actually just this sort of compounding leverage process.

[Jake] That’s a good observation.

[Eric] So I, he’s one, I mean, it’s the most leveraged person on earth. Like I don’t mean the financial definition of debt leverage. I mean like the most people, capital, attention, fandom, like talent of employees.

It’s a, it is a lot, there’s a lot of people riding on his judgement and his leadership and his brand. Like, you know, setbacks definitely possible. But as he points out, like he’s like, I’ve lost many battles, but I’ve never lost a war.

He has never lost a company. And even the most insane objectives that he’s, he’s set forth, you know, not all, certainly misses many timelines. But ultimately they do eventually come, tend to come true.

And as he points out, like if you are predicting something concrete about the future, what matters is not the specific date that it happens, but whether it happens at all. And it’s really difficult when you’re projecting on an exponential to actually identify, like it’s very easy to be off by an order of magnitude. If you get the date, the break point wrong in the date.

Why Elon Musk Sets Impossible Deadlines (And Why It Actually Works)

[Eric] And actually when it comes to selecting timelines, here’s another thing I’m sure every professional investor fucking hates hearing this, but he picks deadlines that he thinks he, their organisation is 50% likely to make. That is his heuristic, right? He believes there’s like a gaseous expansion level law of schedules.

And so he’s like, if you pick a deadline, you’re a hundred percent likely to make one, the work will take that amount of time, even though it will waste tremendous amount of time and resources. And two, you probably still won’t make it because that’s the nature of deadlines and how people treat them anyway. So if you pick a deadline that you’re only 50% likely to make, it’s this forcing function where some of the time you’re going to make it and way faster than anybody else thought you would.

And the rest of time you’ll fail, but you’ll still be way ahead than if you made it twice as long. And so of course there’s the nature of that is that there’s going to be broken, like quote unquote broken promises or over promise and under deliver, whatever, all over the place. But he’s like his true North star is making the future happen faster, getting the best product possible out into the world as quickly as humanly possible.

And through that lens, like short timelines are just a means to do it rather than, you know, the ultimate thing is not like the goal of his life is not to be correct about the predictions that he’s making about his performance is to make the performance as good as possible.

[Tobias] Awesome, dude. We’re coming up on time. The book is The Book of Elon, cover spectacular.

I haven’t read it cover to cover, but I have flicked through it pretty closely and I loved every page that I read. I had a really good time reading it. It’s a superbly crafted book.

So congratulations on that. Folks want to get it, get in contact with you. What’s the best word about to go about doing that stuff?

[Eric] Obviously on Twitter all the time, Eric Jorgensen. The book is at elonmuskbook.org. I’m at ejorgensen.com and my company scribe media helps people write and publish books. If anybody’s interested in some help writing, publishing, promoting, it’s what we do.

[Tobias] JT, any final words?

[Jake] No, just thanking Eric for coming on. It’s good to catch up with him.

[Tobias] Yeah, congrats for having me. Grab a copy of the book. It’s great value.

Thanks, Eric. See everybody next week.

VALUE: After Hours (S08 E11): Eric Jorgenson on $TSLA, SpaceX, Twitter/X and his new book The Book of Elon

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