How to Create a Company | Elon Musk's 5 Rules

Summary

In this inspiring transcript, the speaker emphasizes the importance of working 'super-hard', especially when starting a company, by sharing personal anecdotes like working around the clock and living in an office. They stress the need for a truly exceptional product or service to stand out in the market, the significance of assembling a talented and dedicated team, and focusing resources on enhancing the product rather than on superficial advertising. The speaker also encourages taking bold risks early in one's career, before the onset of family obligations, to pursue innovative ideas without regrets.

Takeaways

• 🔨 Work Ethic: Starting a company requires working super-hard, with every waking hour dedicated to the business.
• 💪 Product Excellence: The product or service must be significantly better than competitors' to stand out in an existing market.
• 🛋️ Sacrifice: Entrepreneurs may need to make personal sacrifices, such as living in an office and using shared facilities, to focus on their business.
• 💻 Resourcefulness: With limited resources, such as having just one computer, creativity and efficient use of tools are crucial.
• 📈 Efficiency: Working double the hours compared to others can lead to twice the output in a year, giving a competitive edge.
• 🤝 Attracting Talent: Building a company is about assembling a team of talented and hardworking individuals who share a common vision.
• 🌟 Focus on Quality: Companies should prioritize improving their product or service over non-essential expenses like advertising.
• 🚀 Risk-Taking: Encourages taking risks early in one's career when obligations are fewer, to pursue bold ideas without fear of failure.
• 🛑 Eliminate Noise: Companies should avoid spending resources on activities that do not contribute to product or service improvement.
• 🌱 Early Action: The best time to start a company or take risks is when one is free from major life obligations, like having a family.

Q & A

What does 'working super-hard' mean in the context of starting a company?

In the context of the script, 'working super-hard' refers to dedicating every waking hour to the business, including working seven days a week, often in a highly resource-constrained environment like sleeping on a couch in an office and sharing a single computer.

Why is it important to work more hours than the competition when starting a company?

Working more hours allows a startup to accomplish twice as much in a year compared to a competitor working standard hours, which can be crucial for gaining a competitive edge in the market.

What is the significance of having a great product or service when entering an existing marketplace?

In an existing marketplace, a new product or service must be significantly better than the competition to attract consumers away from trusted brands. Being only slightly better is not enough to convince consumers to switch.

Why is it essential to attract great people when creating or joining a company?

A company's success is determined by the collective talent, hard work, and focus of its people. Great people can drive innovation, productivity, and the overall direction of the company.

What is the advice given for companies regarding spending on things that don't improve the product or service?

The advice is to focus on signal over noise, meaning to invest resources only in areas that directly improve the product or service, such as R&D, manufacturing, and design, rather than on non-essential expenses like advertising.

Why did the speaker and his brother choose to live in an office instead of an apartment when starting their company?

They chose to live in an office to fully dedicate themselves to their work, minimize distractions, and likely to save on living expenses, which allowed them to focus more resources on their business.

What is the speaker's view on the importance of taking risks when starting a business?

The speaker encourages taking risks, especially when one has fewer obligations, as it allows for bold moves that could lead to significant rewards. As obligations increase with age and family commitments, the ability to take such risks diminishes.

How does the speaker describe the role of a company in terms of its people?

The speaker describes a company as a group of people gathered together with a common goal to create a product or service. The success of the company is heavily influenced by the talent, hard work, and cohesive direction of this group.

What is the speaker's opinion on spending money on advertising for a company like Tesla?

The speaker believes that at Tesla, and by extension for any company, money should be invested in R&D, manufacturing, and design to improve the product rather than spent on advertising.

What is the final piece of advice the speaker gives to entrepreneurs regarding risk-taking?

The speaker advises entrepreneurs to take risks now, while they may have fewer obligations, and to do something bold without regret, as this is the time when they can afford to take such risks.

Outlines

00:00

🛠️ Commitment to Hard Work

The speaker emphasizes the importance of working extremely hard, especially when starting a company. They recount their own experience of living in a rented office and showering at the YMCA to save time, working seven days a week. The speaker illustrates the concept by comparing the output of a 50-hour workweek to a 100-hour workweek, suggesting that the latter would achieve twice as much in a year. They stress the need for dedication in every waking hour for those starting a company.

🏆 Excellence in Product or Service

The speaker discusses the necessity of offering a superior product or service, especially when entering an existing market with established competitors. They argue that a product must be significantly better, not just slightly improved, to attract consumers away from trusted brands. The speaker also touches on the importance of entering untapped markets where the product standards may be lower, but the expectation for quality remains high.

🤝 Attracting Top Talent

The speaker highlights the significance of assembling a team of highly talented and hardworking individuals when creating or joining a company. They assert that the collective talent, work ethic, and focus of the team members are the key determinants of a company's success. The speaker advises doing everything possible to gather great people, as they are the essence of the company and its potential for creating outstanding products or services.

📈 Focus on Signal Over Noise

The speaker advises companies to prioritize efforts that directly improve the product or service over those that do not, using the example of Tesla's decision to invest in research and development, manufacturing, and design rather than advertising. They encourage a constant evaluation of company efforts to ensure they contribute to enhancing the product or service, and to cease any activities that do not add value.

🚀 Embracing Risks Early On

The speaker encourages taking risks at the early stages of one's career or entrepreneurial journey, before the onset of family and other obligations that might limit one's willingness to take chances. They suggest that the current time is optimal for bold actions, as the stakes are lower and the potential for significant rewards is higher. The speaker assures that taking risks now will not be regretted.

Keywords

💡Work super-hard

The term 'work super-hard' refers to an extreme level of dedication and effort put into one's work, often exceeding the standard work hours and commitment. In the context of the video, it is used to emphasize the importance of putting in extra hours and effort when starting a company to gain a competitive edge. The speaker illustrates this with a personal anecdote of working seven days a week, coding at night, and sharing a single computer with his brother.

💡Product or service

A 'product or service' is the tangible or intangible offering that a company provides to its customers. The video stresses that for a new company to succeed, especially in an established market, the product or service must be of exceptional quality. The speaker argues that it should not just be 'slightly better' but 'a lot better' than the competition to attract customers away from trusted brands.

💡Entrepreneur

An 'entrepreneur' is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. The video discusses the mindset and actions of entrepreneurs, particularly the need to create a product or service that significantly outperforms existing offerings in the market. The speaker uses the term to highlight the challenges and expectations placed on those who start their own companies.

💡Great people

'Great people' refers to individuals with exceptional talent, work ethic, and a shared vision. The video emphasizes the importance of assembling a team of such individuals when building a company. The speaker suggests that the collective talent and focus of the group are critical to the company's success, as all a company essentially is, is a group of people working together.

💡Signal over noise

'Signal over noise' is a concept that prioritizes meaningful actions and decisions over those that do not contribute to the core value or improvement of a product or service. In the video, the speaker advises companies to focus their resources on R&D, manufacturing, and design, rather than spending on advertising, to ensure that every effort results in a better product.

💡Risk-taking

The concept of 'risk-taking' involves venturing into uncertain situations with the potential for significant rewards. The video encourages taking risks, especially when one has fewer obligations, as it allows for bold moves that could lead to great achievements. The speaker suggests that the time before having family obligations is ideal for taking such risks.

💡Obligations

'Obligations' refers to duties or responsibilities that one is expected to fulfill. In the context of the video, the speaker mentions that as people age and start families, their obligations increase, making it harder to take risks that could affect not just themselves but also their dependents.

💡Cohesive

'Cohesive' describes a group that works together harmoniously towards a common goal. The video speaks to the importance of a company's team being cohesive, as this unity and direction contribute to the overall success of the company's product or service.

💡R&D

R&D stands for 'Research and Development,' which is the process of creating new products or improving existing ones through scientific research. The video uses the term to highlight the importance of investing in R&D to create a superior product, as opposed to spending on advertising.

💡Manufacturing

'Manufacturing' is the process of transforming raw materials into finished goods through industrial processes. In the video, the speaker emphasizes the importance of investing in manufacturing to improve the quality of the product, which is a key strategy for companies like Tesla.

💡Design

'Design' refers to the creation of a plan or template for something, especially in industrial or commercial production. The video stresses the significance of design in making a product as good as possible, and it is one of the areas where companies should invest their resources.

Highlights

Starting a company requires working super-hard, often 7 days a week.

To be successful, work twice as hard as your competitors, aiming for 100 hours a week compared to their 50.

Ensure your product or service is not just good, but significantly better than the competition's.

A great product is essential, especially when entering an existing market with entrenched competitors.

Being slightly better than competitors is not enough; the product must offer a substantial advantage.

Attracting great people is crucial for the success of a company.

A company's success is determined by the talent, hard work, and focus of its people.

Focus on signal over noise by investing in R&D, manufacturing, and design rather than advertising.

Tesla's strategy of not spending on advertising but rather on product improvement is highlighted.

Evaluate company efforts to ensure they contribute to a better product or service.

Taking risks is encouraged, especially when you have fewer obligations.

The current time is optimal for taking risks before additional responsibilities limit your options.

Do something bold and take risks now to avoid potential future regrets.

Working from a small office and showering at the YMCA exemplifies the extreme dedication to a startup.

Having just one computer for both business operations and personal use during the startup phase.

The importance of a cohesive and focused team in driving a company's direction and success.

The necessity of stopping efforts that do not result in product or service improvement.

Transcripts

I think the first is,

depending on how well you wanna do

and particularly if you're starting a company,

you need to work super-hard.

So what does super-hard mean?

Well, when my brother and I was starting our first company,

instead of getting an apartment

we just rented a small office and we slept on the couch.

And we showered at the YMCA, and we had just one computer.

So the website was up during the day,

and I was coding at night,

seven days a week, all the time.

Work hard, like every waking hour.

That's the thing I would say,

particularly if you're starting a company.

And I mean, if you do the simple math,

say like, okay if somebody else is working 50 hours

and you're working a hundred,

you'll get twice as much done in the course of a year

as the other company.

I think two, is you gotta make sure

that whatever you're doing

is a great product or service.

It has to be really great.

I go back to what I was saying earlier

where if you're a new company,

I mean unless it's like some new industry or new market,

if it's an untapped market then you have more ability to...

The standard is lower for your product or service.

But if you're entering anything

where there's an existing marketplace

against large entrenched competitors,

then your product or service

needs to be much better than theirs.

It can't be a little bit better,

because then you put yourself in the shoes of the consumer

and they say why would you buy it as a consumer?

You're always gonna buy the trusted brand

unless there's a big difference.

So a lot of times entrepreneur

will come up with something which is only slightly better.

And it can't just be slightly better.

It's gotta be a lot better.

The other thing I'd say is that if you're creating company

or if you're joining a company,

the most important thing is to attract great people.

So either join a group that's amazing

that you really respect,

or if you're building a company

you've got to gather great people.

I mean, all a company is is a group of people

that have gathered together to create a product or service.

And so depending upon how talented

and hardworking that group is,

and degree to which they are focused

cohesively in a good direction,

that will determine the success of the company.

So, do everything you can to gather great people

if you're creating a company.

Then, I'd say focus on signal over noise.

A lot of companies get confused.

They spend money on things

that don't actually make the product better.

So for example, at Tesla

we've never spent any money on advertising.

We put all of the money into R&D

and manufacturing and design,

to try to make the car as good as possible.

And I think that's the way to go.

So for any given company, just keep thinking

about are these efforts that people are expending,

are they resulting in a better product or service?

And if they're not, stop those efforts.

And then I think the final thing

I would encourage you to do is...

Now is the time to take risk.

You don't have,

yeah, you don't have kids,

but as you get older your obligations increase.

And once you have a family you start taking risks

not just for yourself but for your family as well.

It gets much harder to do things that might not work out.

So now is the time to do that

before you have those obligations.

So I would encourage you to take risks now.

Do something bold.

You won't regret it.