“Our goal is to fundamentally change the way the world uses energy” – More on Musk’s magic

(Bloomberg Business) — There’s a refrain you’ll hear from current and former employees of Elon Musk. He’s forever asking his staff to go back to “first principles.”

This is the idea that the engineers at Tesla Motors and SpaceX need to tackle problems with the freshest of eyes: Don’t assume anything. Don’t accept that what people have done before you is correct. Instead, formulate your engineering problem clearly and then start at the most basic level to solve it. In first-principles speak, this means getting right down to the raw physics to see if there are any laws of nature that might get in your way. If the physics allow for the possibility of something to happen, then carry on, even if the job seems very hard.

Musk certainly did not invent this approach, but the Tesla chief executive officer is perhaps the world’s most devoted follower of this line of thinking. Case in point: his launch on Thursday night of what is, in effect, a subsidiary of his automaker, called Tesla Energy. For about the past year, Tesla had been experimenting with building battery packs for home and industrial use that can store energy taken from solar panels or from the grid. The company now plans to mass-produce these storage systems. Musk sees these types of systems as the missing link in pushing the world wholesale toward solar power. “Our goal is to fundamentally change the way the world uses energy,” he said during the news conference.

There are, of course, existing storage products, and what does a car company know about industrial batteries? Musk, who’s also chairman of the energy company SolarCity, argues that existing technology is kludgy and expensive. Tesla has built a $3,500 Powerwall system for the home that can hang on the side of a house or a garage wall. Its minimalist design makes it look like a modern art piece. It’s filled with lithium ion battery technology borrowed from Tesla’s cars—although the home systems have their own special sauce. A much, much larger industrial system, called the Powerpack, will go to businesses that want to store their solar power either to keep operating their facilities at night or to go off the grid during peak hours to save money. Wal-Mart Stores is already using them at 11 locations in California.

Musk, with his first-principles approach, has calculated just how many Powerpack systems would be needed to create enough storage capacity for the world’s grid to hum along smoothly on solar power alone. It’s 160 million Powerpacks for the U.S., 900 million to replace the world’s fossil fuel-based electricity, and 2 billion if we were to make all electricity, transport, and heating in the world renewable. “That may seem like an insane number,” Musk says.

But it’s not, at least in Musk’s mind. Humans have produced upwards of 2 billion cars. “We have shown that human industry is capable of producing 2 billion really complex objects,” Musk says. “This is something within the scope of humanity’s capabilities. It is super hard, and there is a lot of work and a lot of factories that need to get built. But this is a feasible thing. It’s important to realize that.”

While it can seem so obvious, the first-principle approach may well be one of Musk’s real strengths in competing against massive industrial players in the aerospace, automotive, and energy markets. There’s an awful lot of baggage that surrounds these businesses, and Musk has proven both willing and able to rethink conventions. It’s one of the characteristics that gives him a business edge and that has drawn admirers in Silicon Valley.

As Google CEO and co-founder Larry Page told me for my upcoming book on Musk:

Good ideas are always crazy until they’re not. I’ve learned that your intuition about things you don’t know that much about isn’t very good. The way Elon talks about this is that you always need to start with the first principles of a problem. What are the physics of it? How much time will it take? How much will it cost? How much cheaper can I make it? There’s this level of engineering and physics that you need to make judgments about what’s possible and interesting. Elon is unusual in that he knows that, and he also knows business and organization and leadership and governmental issues.