Bits vs. Atoms And The Meaning of Elon Musk
Electric cars, solar energy, rockets, hyperloop and the future of mankind…
Electric cars, solar energy, rockets and now the hyperloop. How do we make sense of Elon Musk’s enterprise portfolio? Is it simply a random reflection of Musk’s eclectic interests and passions? I submit there is a common thread and that thread might change the way we look at technology investment in the 21st century.
The Beginning of Time
To understand Elon Musk and his portfolio we must first look back. Way back. Back to the beginning of time when the universe was young. Back to 1995. The internet was on the verge of “changing everything”. In his book Being Digital Nicholas Negroponte explained exactly how and why everything would change:
“The best way to appreciate the merits and consequences of being digital is to reflect on the difference between bits and atoms. While we are undoubtedly in an information age, most information is delivered to us in the form of atoms: newspapers, magazines, and books… The information superhighway is about the global movement of weightless bits at the speed of light. As one industry after another looks at itself in the mirror and asks about its future in a digital world, that future is driven almost 100 percent by the ability of that company’s product or services to be rendered in digital form… In the information and entertainment industries, bits and atoms often are confused. Is the publisher of a book in the information delivery business (bits) or in the manufacturing business (atoms)? The historical answer is both, but that will change rapidly as information appliances become more ubiquitous and user-friendly.” — Nicholas Negroponte – Being Digital — Chapter 1
The new internet age was all about the overwhelming superiority of transporting bits vs. atoms across the information superhighway. If a product can exist as “bits” (music, movies, photos, books, news, education, money, etc.) the Negroponte imperative demanded it always exist as bits – from creation to delivery. His lesson for entrepreneurs then and now — build a business that converts a product delivered as atoms (plastic CD) into a product delivered as bits over the the internet (iTunes) and you win. In the process you can destroy an industry, replace it with your internet based version, and become fabulously wealthy.
For those unfortunate products and services that could not be reduced to electrons and transmitted as bits, Negroponte also helped popularize the concept of “disintermediation”
“The new story of disintermediation is an old bits-and-atoms classic. The complex process of “things” has created a food chain of middlemen and wholesalers who import, export, warehouse, and redistribute physical items… The people who really ought to be disintermediated are publishers. Here I draw a distinction between magazines (of course) and books: the former sells context, and the latter sells content. The content side of the equation can and will go direct the fastest.” — Nicholas Negroponte Wired Magazine 9-1-1997
And so it came to pass that the billionaire demigods of the Internet would walk among us. Jeff Bezos and Amazon distintermediated the retail bookstore (buh-bye Borders) and is now delivering books as bits to the Kindle. Steve Jobs and Apple disintermediated the retail record store (buh-bye Tower Records) and virtually destroyed the music industry by delivering music as bits to the iPod (with a little help from Sean Parker and Napster). Reed Hastings and Netflix disintermediated the video rental business (buh-bye Blockbuster), and is now delivering movies as bits to computers and TVs and phones. Elon Musk and Paypal made the first significant upgrade in the concept of money since — well — forever by delivering and receiving money as bits rather than paper and plastic atoms.
Most of these entrepreneurs continue to mine the Negroponte “bits vs. atoms” thesis today with spectacular success. Jeff Bezos’ Amazon continues to grow by disintermediating every retailer selling every product know to man. They are also pushing anything that can be delivered as bits to a high quality information appliances they are selling at cost and quite possibly will soon be given away. Bezos latest move buying the Washington Post echoes Negroponte’s prescient comments quoted above. Apparently Bezos wanted both context and content.
Elon Musk is an exception to the Bits Über Atoms paradigm. Since selling Paypal he founded and invested in three high profile companies and recently put his name and celebrity in the service of promoting a fourth. The four Elon Musk initiatives are building cars (Tesla Motors), providing electric power (SolarCity), building rockets (SpaceX), and high speed mass transportation (Hyperloop). Note these are “atom” centric industries one and all. While the Elon Musk incarnations are innovative and decidedly high-tech, the industries these enterprises represent are addressing needs firmly rooted in 20th century pre-internet technology. None of these enterprises have anything to do with delivering digital content on the internet. There’s not a disintermediated industry nor a digitized atom to be seen.
And that is remarkable. Musk made a fortune with a great idea at the right time riding one of the greatest technology waves in human history. But unlike most of his internet entrepreneur peers, he turns his back on the internet tsunami remaking our world daily. Instead he invests his time, energy, and fortune in four disparate industries that have nothing to do with the internet or delivering entertainment / business “bits” to consumers. He is building a better car. He is building a better rocket and a company to launch them. He is generating electricity from the sun for residential and business consumers. And he is designing and promoting a faster mass transportation system. All cool concepts and products. But no bits. All atoms.
Is there a method to this madness? Where is the common thread to these ventures?
Decoding Elon Musk
To understand Elon Musk, his ventures and what drives him, we must do something radical. Something unheard of when dealing with high tech entrepreneurs or, for that matter, any corporate CEO. We must listen to what Elon Musk is saying in a pubic venue about what motivates him, and simply accept his word at face value.
Our venue of choice is the TED conference in February, 2013. Elon Musk is being interviewed on stage by Chris Anderson. As he concludes the interview, Mr. Anderson asks Musk the very question we are posing here. Why these projects and why you?
“Elon, how have you done this? These projects… Paypal, SolarCity, Tesla, SpaceX, they’re so spectacularly different, they’re such ambitious projects at scale. How on Earth has one person been able to innovate in this way? What is it about you?”
Musk fumbled a bit parsing Anderson’s mostly rhetorical question, but he answered it. In his answer we find the key to Elon Musk and his initiatives. But to accept this answer, we must assume he is not spinning words, that this is not marketing puffery, that he is explaining without guile about what really motivates him. From his answers we can glean why these companies and projects are not just interesting to Elon Musk, but absolutely necessary.
First the goal:
“There’s a fundamental difference, if you sort of look into the future, between a humanity that is a space-faring civilization, that’s out there exploring the stars, on multiple planets, compared with one where we are forever confined to Earth until some eventual extinction event.”
“SpaceX, or some combination of companies and governments, needs to make progress in the direction of making life multi-planetary, of establishing a base on another planet, on Mars — being the only realistic option — and then building that base up until we’re a true multi-planet species.”
Then his approach to solving this problem:
“There’s a good framework for thinking. It is physics. You know, the sort of first principles reasoning… what I mean by that is, boil things down to their fundamental truths and reason up from there, as opposed to reasoning by analogy… when you want to do something new, you have to apply the physics approach. Physics is really figuring out how to discover new things.”
Let’s take this at face value, start with his “fundamental truth”, follow where his “reason up” approach takes him, and see if we can glean what “new things” Musk is looking to discover along the way.
His first principle / fundamental truth is as big as it gets:
Humans, human consciousness, human civilization must go on. If we stay exclusively bound to this single planet, then there will inevitably be an extinction event and humanity will disappear. All that we are, all that we have been, all that we have created that makes life and the universe beautiful and meaningful, our art, our music, our literature, our science, all will die with us. Ergo we must become a space-faring multiple planet civilization to avoid that fate. And we must start now. QED.
Continuing with the Elon Musk process, if we “reason up” from there, exactly what do we need to do to make that happen?
We need rockets. We need access to massive amounts of energy. We need to tap solar energy in a very profound way. We need to move large quantities of material off the earth into space at a very low cost.
Elon Musk has set out on a path to achieve a multi-decade (multi-century?) goal of becoming a space-faring, multi-planetary civilization. Starting now. And just to make this more challenging, he is intent on accomplishing this through the mechanism of entrepreneurship, capitalism and public companies meeting short term quarterly shareholder expectations. Frankly, I would have believed this to be an impossible Quixotic quest if he did not appear to be pulling it off right before our eyes.
So lets go back and look at his enterprises through the prism of this thesis. It is all about about reaching for the sparkling diamond of a space-faring civilization. Think of these enterprises as facets of the same glittering goal. They are necessary first steps moving us closer to what Musk considers an imperative for humanity.
The need for SpaceX is obvious. If we are going to get off the planet we are going need rockets. Better rockets. Cheaper rockets. Reusable rockets. Rockets that can be built and flown profitably, with customers who will buy them now so we can continue to build and fly and develop as many new rockets as we need to meet our objective.
SolarCity’s role is less obvious, but no less important. SolarCity has developed a business model that makes it easy for residences and businesses to install solar photovoltaic cells for home, business or transportation use. It is profitable, it is growing, and it is contributing to a geometric increase in solar electricity generating capacity.
Because the distributed business model scales modestly and easily – literally one rooftop at a time — it is easy to overlook the potential longer range electrical generation potential of the enterprise as a whole. Think of SolarCity as if the enterprise is a distributed power plant. SolarCity installed 150 MW of solar power generating cells in 2012 and is projected to install 250 MW in 2013. They are currently only in 16 states. It is not difficult to project that they will be one of the largest electric power plants in the United States within a decade. So what is the connection to the goal of a space-faring civilization? Let’s again go back to Elon Musk’s TED conversation:
“So I’m quite confident that the primary means of power generation will be solar. I mean, it’s really indirect fusion, is what it is. We’ve got this giant fusion generator in the sky called the sun, and we just need to tap a little bit of that energy for purposes of human civilization.” — Elon Musk
In space, in our solar system, you are either using the sun for power, or you are dragging fuel along with you. Solar power is better. SolarCity will keep Elon Musk on the cutting edge of photovoltaic power technology. But there is an even greater benefit to the mission here on earth. Building a space-faring civilization on earth and launching it into the future will require a lot of excess power capacity here on earth. Much more than we have now. Elon thinks the easiest way to get there is solar. He might be right. SolarCity is a business model for quickly scaling electricity production indefinitely into the future.
If SolarCity is the supply side of the solar electric power equation, Tesla cars are the demand side. Again there are indirect benefits. Advancing technology in battery capacity, weight, charging cycles, and power management in a minimal weight vehicle will be directly transportable to space applications. But the biggest benefit of driving and growing the electric car market is the enormous increase in electric power demand created by Tesla and all other electric vehicles. More demand begets more generation, more transmission options and more power capacity.
Elon Musk made a big media splash last week with his promotion of the hyperloop concept. While he stated that he does not have the bandwidth to see it through himself, he also made it clear that he considers it critically important that this technology be built. This is perfectly understandable within the context of his “first principle” goal. The benefit of the hyperloop has little to do with getting from San Francisco to Los Angeles in 30 minutes. The real benefit is that hyperloop technology is exactly what is needed for ultra low cost, high volume transport of material into space.
Rockets are fine for limited transport of people and material into space. For the immediate future it’s the only game in town and SpaceX is making enormous strides in driving down the costs of rocket access to space. But if we are going to be serious about becoming a true space-faring civilization and colonizing other worlds, rockets are not going to cut it. We are going to need to move a lot more cargo into space at a much faster rate and much lower cost than is possible with rocket propulsion.
The answer is hyperloop, or more specifically, the magnetic levitation (mag-lev) technology foundation underlying the Hyperloop concept. If you build an open ended hyperloop mag-lev tunnel up the side of a mountain, you can launch canisters of cargo and people into space at a machine gun pace and a fraction of the cost of rockets. This is why Elon Musk needs the hyperloop technology to be developed. Shortening his commute from LA to SF is just the icing on the cake.
The Big Question
Am I reading too much into Elon Musk’s comments? Reaching too far to find a common thread in his diverse enterprise portfolio? Perhaps. But if we are too take him at his word about his motivation, and my bias is to do just that, then we might ask a bigger, more interesting questions and frame it in the context of the Negroponte bits vs. atoms formulation.
How do we measure advances in human civilization? Is it about our capacity to store, retrieve, and transmit knowledge? In Negroponte terms — to store, move, and process bits? Or do we measure progress by where we go, how far we go, how high we soar, how fast we get there and how much energy we harness and bend to our will? Perhaps the Musk portfolio is signaling another inflection point where investment and advances in moving atoms will again eclipse those in moving bits.
Clearly, breakthroughs in distributing human knowledge are milestones in human history. Language and art permitted the transmission of knowledge from one human to another. Written language and rendered symbols permitted the transmission of knowledge and art across time and generations. The Gutenberg press democratized the process, making knowledge and art accessible to all. The ability to instantaneously communicate and record information via wires and wireless electromagnetic transmission rendered geographic distance irrelevant while distributing human knowledge and art. And now the globe spanning ubiquitous internet makes the knowledge and art of all humanity available to be delivered to any one of us, on demand, to a device we hold in our hand, right now.
Just as clearly, moving people and atoms further, faster, and higher while harnessing and utilizing ever more energy in pursuit of our ambitions have marked some the greatest accomplishments of mankind. Consider the great migrations, explorations, treks, climbs, voyages and flights of history. The migration out of Africa and across the Bering land bridge. Kon-Tiki, and Marco Polo, and Ibn Battuta, and Columbus, Tenzing Norway & Edmund Hillary on Everest, Lewis & Clark, and Shackleton and the Wright brothers, and Chuck Yeager, and Voyager and Yuri Gagarin and men walking on the moon. Amassing ever increasing amount of energy to take us further, faster and higher by harnessing human power, animal power, fire, water, steam, chemical, fossil, nuclear and solar energy are also benchmarks by which we measure civilization.
Negroponte’s book signaled the shift of entrepreneurial energy and venture capital into enterprises dominated by the exploitation of digital products and services delivered as bits over the internet. But when the latest entries in this domain are focused on delivering dinner reservations, imaginary farm animals, and prospective hookups, it is fair to ask whether that investment thesis has run its course.
The “Negroponte Switch” was another meme derived from Being Digital. It was the name associated with Negroponte’s accurate prediction that TV’s getting signals from predominantly unwired broadcasts, and telephony receiving signals predominantly from wired handsets would trade places in the new bit based future.
Perhaps what we are seeing today is a new switch — the “Elon Musk Transition”. A shift where human advancement and entrepreneurial investment switches from being predominately focused on transmitting bits, back to moving atoms faster, higher, and further.
Whether or not the Elon Musk enterprise portfolio signals a shift from bits back to atoms remains to be seen. However, it is indisputable that the shift is inevitable and necessary if we are to become an interplanetary civilization, and even more so if we are ever to take our place among the stars. If Elon Musk is sincere in his assertions about working toward multi-planetary human consciousness, the transition is well underway and it will require controlling more energy to move more humans faster, higher, and further than we have gone before.