How to innovate like Elon Musk | Vertical Innovation and First Principle Thinking – A free chapter from Innovate the Next book

This is an article on how to innovate Elon Musk through the application of Vertical Innovation and First Principle Thinking.

How to innovate like Elon Musk

This is a free chapter from my 7th book entitled ‘Innovate the Next: Success Frameworks to Innovating Products in Any Revolution.’ It is available on Amazon, in South African bookstores, and on my website.

I described novel innovation as arange between material discovery novelty and proprietary novelty.

I thought it would be learner friendly, in a playful manner, to elaborate on this concept by using, as example, the man of the moment, Elon Musk, and his bold innovations over the years.

My assertion is that his innovation manoeuvres are technically adoptable.

To reflect this, I will trail three of his founded companies – Paypal, Space X and The Boring Company.

I will also discuss Tesla, with which he first got involved as an investor, and then subsequently (as we know) he became its CEO.

Of course Elon has some privileges that some of us might not have, i.e. he is located in the USA (which is a developed country with a population of over 300 million and where there is more availability of funding), he made his money at quite a young age and with that he was able to fund some of his ventures, like Space X, where he invested $100 million of his own money[i].

Due to the multiple successes he has been able to achieve entrepreneurially, it gives him another advantage when raising funds for his bold ventures.

Nonetheless, I believe his approach is adoptable.

To capture his framework, let’s begin as follows…

Novel innovation is a range between ‘material discovery novelty’ to ‘proprietary novelty’

Novel innovation is creating something new, and that did not exist before.

I define novel innovation as a range between ‘material discovery novelty’ and ‘proprietary novelty.’

To form clarity on novelty, let’s borrow a framework and description from evolutionary biology. Ernst Walter Mayr, a 20th century leading evolutionary biologist, defined novelty, “… as a new structure or property of an organism that allows it to perform a new function, thus opening a new ‘adaptive zone’”.

Adaptive zone means adaptive radiation, which is the diversification of species into separate forms that each adapt to occupy a specific environmental niche.

That refers to biology. For our purposes, in terms of humans that innovate, the new function performing property is products.

Material discovery novelty

Dr Fleming discovered the first true antibiotic in 1928, i.e. penicillin and how to process it. Prior to his discovery, penicillin was already suspected to be antibacterial, but it was still unknown as to how to process it.

His discovery was spontaneous. He’d just come back from a holiday and realised that a culture he had been growing had formed a mould. On one side, the mould had eaten the culture and on the other it did not.

Upon further investigation, he found out that it was antibacterial, and even more; an antibiotic. The former only kills bacteria. The latter, i.e. an antibiotic, kills and stops pathogens from growing. Bacteria fall under the spectrum of pathogens, which are organisms that can produce disease.

From this discovery he formulated how to process it.

The discovery was materially novel. It did not exist before, or rather had not yet been discovered.

Everything comes from something. Anything new is made out of things already in existence.

Dr Fleming discovered how to process a new material. To reiterate, I place novel innovation between material discovery novelty and proprietary novelty, i.e. it is a range. Sometimes it leans to the left, other times to the right, or even at times right in the middle.

Yes, there were antibacterial explorations prior to the discovery of processing penicillin. E.g. Synthetic antibiotic chemotherapy began in Germany with Paul Ehrlich in the late 1880s.

The discovery of processing penicillin was materially new, as discovered by Dr Fleming.

As the given definition of novelty in biology goes, it adopted a new radiation zone. It brought about a new function, i.e. killing and keeping other pathogens from growing.

Hence, it leans more on material discovery novelty.

The reason I insert the word range, in forming this description of novelty is that nothing is ever ‘completely new’. Everything is made from something. Everything new is made and comes from something in existence.

The arguments of what is novel could go in a variety of directions. However, we are gathered here to form a framework on how to innovate novelty and thus this range more than anything helps to cut away marginal improvements. You will see as you read further.

PayPal, co-founded in 2000 as a merger of Confinity (which was established by Max Levchin, Peter Thiel, and Luke Nosek), and Elon Musk’s

It enabled people to have an online money wallet to make and receive payments instantly. It used email addresses as a sort of bank, or wallet account identifier or number.

It meant people could send and receive payments instantly. You could make a purchase online even if you didn’t have a credit card. It cut out the delays in sending and receiving EFT transfers and cheque clearances.

Paypal opened a new ‘adoptive zone.’ It served a certain sector of the market in a novel and better way, i.e. those who did not have credit. It ‘occupied a specific environmental niche’ and inserted a novel role.

The material it inserted, i.e. email as an account number, was not new material; it leaned more towards proprietary novelty.

Proprietary novelty

The transistor’s genesis threads through a thermionic triode – which is a vacuum tube – being invented in 1904, by Sir John Ambrose Fleming, who was an English electrical engineer and physicist.

It enabled amplified radio technology and long-distance telephony, but it was fragile and consumed a lot of power.

In 1947, Bell Laboratories demonstrated the first working transistor. The invention was credited to William Shockley, John Bardeen and Walter Brattain.

The above snippet misses some other contributors. There are arguments of who contributed what and to what credible extent. There is beef even among innovators.

Innovation is a cross pollination of ideas and innovations, and varying people.

In chasing improvements to the transistor, the process went through a variety of different innovators (contributors), designs and re-designs and materials.

The field-effect transistor was an improvement to the thermionic triode, operation wise and material wise, as it was hardier and consumed less power.

Germanium was used to make the field-effect transistor. It was difficult to purify and had a restricted temperature range. It was replaced by Silicon (developed by Morris Tanenbaum), which holds up better at high temperatures.

A few months later and working separate from Bell, Gordon Teal, developed a similar device at Texas Instruments. Two people can have the same ideas if they are working on the same problem areas.

A planar process was developed and patented in 1959, by engineer Jean Hoerni, to make silicon dioxide transistors (a manufacturing method of building the individual components of a transistor and then connecting them together).

In chasing improvement and agility, MOSFET (metal–oxide–silicon transistor) transistors were also introduced in 1959. Their advantage is they consume less current and switch faster. MOSFET has dominated the market since then.

In the process of innovation following agility, MOSFET transistors could be made smaller which allowed the products in which they were used, to also become smaller and more accessible to the public; It made possible hand-held calculators, personal computers – at the time where computers were mainly used by corporations, radio players, TV sets and cameras.

The move from germanium to silicon leaned more towards proprietary novelty as Silicon already existed. The innovation was simply in finding a more agile and better functioning replacement to germanium, in silicon. This gave it a proprietary function and was therefore not necessarily a new material discovery.

The planar process leaned towards discovery novelty as a manufacturing process. It was a new adaptive zone and did not exist before.

MOSFET transistors were made with existing material to produce a new utility adding function, i.e. not consuming current except when switching states. This was a new function innovation and created with existing material, and therefore leaned towards proprietary novelty.

MOSFET transistors went through a vast reduction in size during the period from 1971 to 1974.

For example, in 1971, a MOSFET transistor was 10 micrometers, and in 1974 was 6 micrometer – a 4 times reduction of size in a space of close to 4 years.

The reduction in size of transistors also affected the size of CPU’s which are the brains (operating systems) of electronic devices, as transistors act as the brain cells of the CPU.

The Intel® 8080 processor, which was introduced in 1974, had 4500 transistors, each with a clock speed of 2 megahertz (millions of cycles), and 6 micrometres in size.

You can see the use of transistors more than doubling (2300 to 4500) from 1971 to 1974. The cycle speed exponentially went from thousands to millions.

Quad-Core Intel® Core™2 Extreme processor (Penryn) introduced in 2007, has an initial clock speed of 3 gigahertz (billions), and has 820 million transistors.

Today the highest transistor speed is 798 gigahertz (billions) and has a size of 45 nanometres.

Sizes kept getting smaller and speed increased as greater numbers of transistors could be inserted.

This allowed previously individual devices like calculators, computers, radios, cameras, phones, GPS devices, etc. to be operated from a single device; a Smartphone. Smartphones were a novelty which performed a totally new function; i.e. a computer, camera, GPS and calculator, all in one palm-size device.

Apple’s iPhone 6 has 2 billion transistors and contains all the above functionalities. It is many times smaller than radio devices of those years.

All this is proprietary novelty. Because of these innovations, other novelties were created and also exponentially reduced in size.

I am painting this picture to show that these were novel innovations and that they fell somewhere between material discovery novelty and proprietary novelty.

How Elon Musk innovates: vertically integrated innovation to reach material discovery and proprietary novelty

The story of Space X is said to have started in 2001 when Musk was exploring the idea of sending a rocket to Mars. He went to Russia to try to buy a rocket.

He returned home empty-handed because he thought the rockets (which still used old innovation) were sold at ridiculous prices.

He figured he could build his own, because the price of the raw material for the rockets was only three percent of the cost to hire a rocket at the time.

Space X started with that in mind, i.e. reducing space transportation cost. Many years later, Space X is (citing from Wikipedia):

  • The first privately funded liquid-propellant rocket to reach orbit (Falcon 1 in 2008).
  • The first private company to launch, orbit and recover a spacecraft.
  • The first private company to send a spacecraft to the International Space Station (Dragon in 2012).
  • The first reuse of an orbital rocket (Falcon 9 in 2017).

Both their lead ships, the Falcon 9 and Falcon Heavy, have been launched into space successfully 112 times.

Up until 2000, the cost to launch anything into space cost about US $18,500 per kilogram. NASA paid about $1.5 billion to launch 27,500kg into a Low Earth Orbit[ii].

On its website, Space X has advertised trips to low orbit at $62 million on Falcon 9 (which carries 22,800kg, at $2,720/kg) and at $90 million on Falcon Heavy (which carries 63800 kg, at $1410,66/kg).

Looking at these figures alone, space travel costs have been substantially reduced in comparison with the costs in 2000.

Rival company, United Launch Alliance (ULA), advertises its Atlas V at a starting cost of $109 million to low orbit.

Of course, to launch into space has many considerations far beyond our comprehension, i.e. it should not just be the price that determines which company one travels with, for e.g. in NASA or United States Space Force there could be more security.

Note that, even with Space X’s relatively cheaper prices, United States Space Force awarded a space mission contract to ULA worth about $224.3 million and only about $159.7 to Space X.

How did Space X innovate to reduce their prices?

They applied both material discovery and proprietary innovation.

To be able to do this, they applied vertical integration innovation, i.e. they manufactured and innovated most of their own hardware.

Space X investor, Steve Jurvetson, says Elon Musk calculated that the raw materials of building the first rocket would cost about 3 percent of the then cost of rockets (citing the trip to Russia) and that by applying vertical integration and producing about 85% in-house, it could cut the cost of launching (for customers) and they could still enjoy a 70% gross margin[iii].

Such things can only happen when you innovate by manufacturing with new materials that reduce the cost; just as the planar process and MOSFET transistors made mass-production of transistors possible, and then cheaper and smaller over the years, by applying new materials.

The most notable novel innovation (resting somewhere between material discovery and proprietary novelty) of Space X is creating and engineering reusable rockets. They achieved it first. Prior to this innovation, once a rocket was used, it was done with. All that money lost.

There are other novel innovations achieved by Space X, such as the Raptor engine. It is the first full-flow staged combustion rocket engine ever flown and produces the highest combustion chamber pressure ever reached by an operational rocket engine (330 bars) thus exceeding the last record held by Russian Energomash’s RD-701 rocket engine (at 300 bars).

To show that Musk and his team are always on the lookout to achieve novel innovation, the proposed Starship they are working on (which if successful would be the heaviest launched vehicle ever) is set to refuel in orbit.

This is because roughly half of the fuel used by spaceships is consumed just to get into orbit. If that half can be replaced while in orbit, then travel to anywhere in the solar system is very expansive. There is gravity pull on earth but not in the solar system.

So, a way to realise innovation, in anything I think, is to re-imagine manufacturing all your components. Somewhere out there, there is novelty that can be applied, if not by you, then by someone in your team who is technically capable of innovating something proprietarily better.

The Boring Company

The Boring Company plans to transit people quicker in underground tunnels between cities, proposing the substitution of a 5 minute travel time for a conventional 45 minute drive in a city.

They already have a 3.2km active test tunnels in Los Angeles.

Underground tunnel roads have been there for years, Musk’s proposed city long tunnels is, however, quite novel.

The idea was there all along but it has never been implemented until The Boring Company decided to run with it.

In the name of vertical innovation, they created their own boring machine called the Prufrock.

It is slated to be 2 times faster than its rivals, the Godot and the Line-storm. Apparently Musk wanted it even 10 times better.

It is named after ‘The Love Song of J. Alfred Prufrock’ by T. S. Eliot.

It is all in the name of innovation, i.e. trying to improve things. This is where novel innovation – material discovery novelty to proprietary novelty – comes from.


“We’re designing and building so much more of the car than other OEMs who will largely go to the traditional supply base and, like I call it, catalogue engineering. So, it’s not very adventurous and it basically ends up like older products end up — looking the same because they’re going to the same suppliers,”

This quote came from Elon Musk in an interview[iv] where he was saying that Tesla manufactures most of its components, just as they do at Space X.

Tesla also applies the vertical innovation by ‘aiming’ for novel innovations (material discovery to proprietary innovation).

Three of the longest mile range electric cars are Tesla’s: Tesla Model S Long Range (379 miles), Tesla Model 3 Long Range (348-miles),Tesla Model X Long Range (314 miles).The best range achieved by any competitor is the Jaguar i-Pace (292 miles).

Tesla even makes batteries for home use, .i.e. the Tesla Powerwall.

This follows proprietary improvement in every way; in 2019 they acquired a battery manufacturing and engineering company based in Canada called Hibar Systems.

How to become an innovator like Elon Musk: Become a ‘first principle’ thinker and a novel human resource

Have artisan-like hands

All the innovators I’ve mentioned so far, Dr Fleming, the transistor contributors and Elon Musk, all have artisan hands, i.e. they can and do break down innovations, reassemble them and then even infer (innovate/create) their own iteration of innovation (product).

Think of a car mechanic, they have to know all the components of a car and their workings, so as to be able to heal (fix) it. He is an artisan. He cannot learn, through theory alone, how to fix cars. He has to physically do it. Some knowledge will be difficult to acquire (temporary failure), but he has to figure it out. He knows the function of a fuse in car. Brake fluid. Clutch plates. Etc.

He can dissemble a car and configure it back to a working state.

Dr Alexander Fleming was a microbiologist. He could breakdown biology, reassemble it and even invent his own innovation (discovery of penicillin).

The contributors to the transistor were mostly physicists. They could break down matter (think the periodic table) in relation to how it functions. They innovated the transistor further, many times over, both materially and proprietarily.

Elon Musk, who has proven to be an industrial designer, engineer and technologist, has artisan-like hands. He can break things down and build his own improved versions. He was a coder. He can and does produce music.

At the age of 12 (in 1983), Musk coded his first game, called Blastar, which he sold to a computer magazine for $500[v]. His first company, co-founded in 1995 with his brother, Kimbal Musk and Greg Kouri, was called Zip2. It developed and marketed internet city guides.

Zip2 was sold to Compaq for $307 million.

Education-wise he has a Bachelor of Science degree in economics and a Bachelor of Arts degree in physics.

Having artisan-like hands is being able to perform a skill by breaking down the products of the skill into pieces and then reassembling it.

It is being a writer. A writer can produce a written product, e.g. article or book. Even this book had to be disassembled and reassemble in varying ways. It is still not perfect.

When you have artisan-like hands, you start to think adjacently, of the next currently non-existent improvements (marginal, materially novel, and proprietary) you can make to products.

Now note this, although many people with artisan-like hands actually do envision the novel products and improvements they can make, most of them never attempt it.

This is where innovators are different. They actually do something about it.

Be on the move

For example, Tom starts writing articles about love; he actually writes and not only thinks of writing them. Later on, he starts thinking that he can write a book on the topic. He writes it because he has already been writing.

Then he gets tired of just writing about love. He starts having ideas about religion. He writes them down. He later produces a book.

He now starts hearing from writers about the struggles they encounter in marketing their books. Because he has already travelled this road, he starts hosting workshops to give advice to these authors.

He gets tired of workshops and starts producing video advice. It is now an online school.

He hires website developers and video editors as he doesn’t need to know everything about building an online school. He also hires others.

Perhaps even Elon Musk and his co-founders did not know how to code everything for Zip2 and so, hired help.

The point is that, doing, i.e. that one artisan skill you have, can generate ideas for Adjacent Possible ideas of products – 10X more – than someone who does nothing.

To be an innovator, you have to first be on the move, i.e. doing something. Dr Fleming was doing something.

Novel human resource skill

Elon Musk is and has been involved in many industries. From coding as a kid, to studying economics and physics, to tech (Zip2 and Paypal), space, motoring and now even interfacing biology with technology (neuro-technology), i.e. via his company Neuralink. The latter works on building devices which can then be transplanted in the brain to solve brain injuries.

It is clear that Musk has a multitude of skills, i.e. a stack of skills.

If you can think adjacently as a writer, i.e. seeing various topics you can tackle, and other adjacent products (even services) you can build, then think about how, like Elon, you can acquire many skills. It will 10X by 2 your Adjacent Possible product ideas.

I call having many skills being a novel human resource. You are stacked up with skills. Your adjacent horizon of Adjacent Possible ideas is broad and can produce novelty.

Innovation is a stack of things. A chair is a combination of wood (or any solid matter) and a geometric seating shape, suited only to humans (no other animal, not even our cousin, the monkey). You even add cushions to innovate further.

Video streaming is a stack of internet and video. Video and internet are both respectively innovations that have their own stack makeup.

Someone makes a motor engine for a boat, which is also a stack of other engineered devices. To make a car you incorporate the motor and chairs.

Innovation continues through stacking. The transistors were innovated further through stacking of different materials.

Innovation is stacking for agility. Video streaming took video into agility from DVD discs. It is virtual, and stays in the cloud. You don’t need to carry physical DVD’s. Transistors also followed agility in their evolution.

To become an innovator, you have to have ideas of which novel innovations, varying from material discovery to proprietary novelty, acquire various skills.


The more skills you acquire the more products you can create, and the more confident, practical and bold you become in order to chase and then create scarier products.

That is how Elon Musk innovates.

What about ‘first principle’ thinking?

Well, oops, I forgot to add this. The whole narration above infuses ways to achieve results with ‘first principle’ thinking.

First principle thinking is one of Musk’s favourite systems of innovating.

As he explained in an interview, first principle is like looking at a battery, while others say it is expensive and will always be like that, you ask what materials go into it and find a cost to each, and then also compare costs of those materials in other markets. Perhaps you can find it cheaper in those markets, including logistics and other costs, the result being that you are able to manufacture that battery cheaper than anyone else, truly and wholly at a satisfying cost.

Or searching and tinkering with substitute material that will perhaps give the battery more energy and last longer than ever before.

First principle thinking is how the transistor innovators improved on it. They tinkered with different materials and found material improvements along the way. They tinkered with manufacturing (planar system) and found ways to mass produce in a way that it reduced cost and added proprietary difference.

It is The Boring Company creating their own driller in order to see if they can make something that is 10 times better than what is currently available, and to thus reduce the time it takes to drill, and therefore also reduces the cost.

First principle is tinkering with what is known in hope of improving it, or eliminating wastage (to achieve speed and reduce cost and perhaps size).

Happy first principle thinking.

[i] Space X, where he invested $100 million of his own money: (2Ferbauy 2013)

[ii] Up until 2000, the cost to launch anything into space cost about US $18,500 per kilogram. NASA paid about $1.5 billion to launch 27,500kg into a Low Earth Orbit: (08 July 2018)

[iii] History of SpaceX (as on 29 April 2021)

[iv] Elon Musk Explains Tesla’s Vertical Integration Vs. “Catalog Engineering” (23 October 2020)

[v] At the age of 12 (in 1983), Musk coded his first game, called Blastar, which he sold to a computer magazine for $500: Play the PC game Elon Musk wrote as a pre-teen  (9June 2015)