Multimedia: Catalyzing Change While Bringing in Cash

Multimedia

Elon Musk, CEO of Heron investee Tesla Motors, talks about doing good in a for-profit business and takes a surprising step to make good on that promise.


We at Heron often talk about how “all investing is impact investing”—that is, that any enterprise is having some sort of positive, negative or neutral social impact, and that an enterprise with a net positive social impact will have continually greater social impact as its financial performance rises.  One example among our investees (via a fund) is Tesla Motors, which recently became California’s top auto employer, so we enjoyed this Inc. Magazine interview of CEO and Chief Product Architect Elon Musk, conducted by venture capitalist Steve Jurvetson.  We drew out the transcript of some thought-provoking moments discussing purpose-driven business and the ability to catalyze change below.

Two months after the video was published, Musk announced Tesla’s intention toallow others to make “good faith” use of their patented technologies in order to serve the purpose of accelerating the advent of sustainable transport.

SJ:  [19:22] I was at a lunch at a Google event and out of the blue, with no expectations that this would be a topic Larry Page turned to me, knowing a little bit about our connection and said, “You know—how much money do I have?” And he mentioned a number and I thought that was cute, that he was trying to recall that. He goes, “You know if I were to get hit by bus today I should leave all of it to Elon Musk.”

EM: Really? He said that?

SJ: Yeah.  […] [20:08] Well he’s a remarkable guy, obviously also an underachiever, and has a company that wants to do good in the world. And I think he looks at you with a bit of envy, because what he then proceeded to say was, “You know, I could give my money to a nonprofit and a lot less would get done than a corporation that’s pursuing things that are directly aligned with things I care about, like getting off of oil and colonizing other planets.” He believes in those missions and thinks that a corporation if endowed with the right to do that as its business purpose is the best vehicle out there and wishes he could do more of that in his own life. […]

[21:01] It was a very deep moment. So, it raises the question of a purpose-driven business. So you’ve heard already that Tesla’s not just trying to make money. That is not the priority. If you read the most recent shareholder letter, it says profits are not—

EM: Yeah, in fact I started off the shareholder letter by saying that profits are not the primary goal, and I got a little bit of –uh—some of the Board members who questioned that statement—

[laughter]

—and I was like, well, it’s true, you know?

SJ: And you weren’t like, “For now,” or “Just while we’re growing.” It’s just not the priority. Which I think in a business school is a really good point to dwell on for a moment.

[laughter]

EM: It’s not that I think they’re not important or anything; it’s just not the primary goal. Actually we told people that at the IPO as well. So it’s not new information—or at least for people that watched the IPO it’s not new information. And actually, amazingly the stock went up after that [letter went out].

SJ: I think there’s a profound reason. You see the benefits of being focused on something that’s a higher calling as your primary motivation. Your employees love it, the customers love it, your partners love it, and you feel better about your job. The interesting thing, the irony perhaps, is that at least within our portfolio, the companies that have that kind of a founding principle actually make more profit and grow their revenue more quickly than the ones that don’t. It’s this little sample set, but the handful that have taken this bold of a step, to say, “No, no, we will not make that our number one priority,” actually do a great job.

And it occurred to me, and I don’t know if this was conscious in your head at some point, that if you weren’t wildly profitable, the auto industry wouldn’t follow you. In other words, this whole mission of catalyzing a shift to a new electric vehicle isn’t going to work if the business model’s worse than the current business model.

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