Unapologetically Hardcore: Applying Elon Musk’s Algorithm to Construction Leadership, with Eric Jorgenson | Ep. 389

Elon Musk builds rockets. You build buildings. Different industry. Same problems. Bad requirements, bloated processes, too many parts, slow cycle time, and a culture that punishes people for deleting anything. Eric Jorgenson spent thousands of hours pulling Elon’s ideas out of interviews, tweets, and transcripts and put them in The Book of Elon. In this episode, Eric and I work through Elon’s five-step algorithm and apply it directly to the way contractors get work, plan work, and build work.

What you’ll learn:

• – Why questioning requirements and deleting parts is 80 percent of the algorithm

• – How the idiot index reveals where your supply chain is taking you for a ride

• – First principles thinking vs. reasoning by analogy, with concrete construction examples

• – Why fast is actually cheap and how it breaks the construction trilemma

• – How to attack the bottleneck instead of running the calendar

• – How to give people hardcore feedback without making it personal

Listen or Watch the Episode

Why Construction CEOs Should Listen to How Elon Thinks

Most of what makes Elon successful isn’t rockets. It’s a way of thinking he repeats to his teams thousands of times. Eric Jorgenson reduced it down to five steps. The first two carry roughly 80 percent of the weight. Get those wrong and the rest of the algorithm is automating something that shouldn’t exist in the first place.

Hard Work Is Common. Intelligence Is Uncommon. Courage Is Rare.

Naval’s framing of Elon. Almost everybody you respect in construction is working hard. A lot of them are smart. Very few are willing to take the kind of risk that gets you the outsized result.

“The courage to keep taking those leaps is the thing that over time separates people with completely average careers and outcomes from people with top one percent, top one-tenth of a percent, one-hundredth of a percent outcomes.”

Construction is rightly cautious about real risk. Lives and bodies are on the line. But most of what holds owners back isn’t the real risk. It’s the imagined risk. The fear of looking stupid in public. The fear of losing money you’ve made. Make two lists. Imagined risks. Real risks. Then force-rank the real ones.

Step One: Make Your Requirements Less Dumb

This is the step almost everyone skips. We inherit a list of requirements from regulators, inspectors, banks, insurers, owners, designers, and assume every one of them is fixed. Most of them aren’t.

Elon spends real effort interrogating requirements. If a rule doesn’t actually protect the consumer, he asks for a waiver, asks for the rule to change, or breaks it and pays the price. Construction owners don’t have to be that aggressive, but the question is the same. Does this requirement actually do what people think it does? If not, what is it costing you?

Step Two: Delete the Part or Process

This is the second 80 percent step. And here’s the test Elon uses to know if you’ve deleted enough.

“If you’re not adding back in stuff that you’ve deleted, that means you haven’t deleted enough.”

If you remove parts and process steps and nothing ever has to come back, you weren’t deleting hard enough. The fear of breaking something causes chronic over-engineering. The gain from successful deletion is alchemic. Time saved. Cost saved. Quality up. And everyone else is happier on the other side of the decision.

“The most common mistake of a smart engineer is to optimize something that shouldn’t exist.”

That’s the quote to put on the wall.

First Principles vs. Reasoning by Analogy

Reasoning by analogy is starting with what other contractors do and trying to improve it by 5 percent. First principles is starting with what is physically possible and working back from there. Eric Jorgenson explains how Elon did this with EV batteries. The industry assumed $600 per kilowatt hour. The raw inputs of cobalt, nickel, and carbon worked out to $80. That gap is the design space. That’s where the real improvement lives.

Elon calls the ratio of price paid to raw material value the idiot index. He once paid $13,000 for a piece of formed steel worth a few hundred dollars in raw material. Twenty times the cost. Somebody in the supply chain was an idiot, and they were too for paying it.

Eric Jorgenson’s investment in Terran Robotics is a construction example. A cable gantry on a truck builds adobe walls using material already on the site. Replaces framing and drywall. Replaces four trades with one cheap robot. First principles. Of course you can.

Fast Is Cheap. The Trilemma Is a Lie.

Most contractors live with the classic trilemma. Fast, cheap, or good. Pick two. Elon’s shown over and over that fast is actually cheap. If you’re fast, efficient, and high quality, the cost drops. Most of that speed comes from the first two algorithm steps. Question the requirement. Delete the part.

Bottlenecks, Flash Mobs, and Walking the Red

The most counterintuitive thing about how Elon runs companies is that he isn’t above the work. He’s in the middle of it. He attacks the bottleneck wherever it is. Right now. Not next standup. Not next week.

In a Tesla factory, he walks the line. Green lights and red lights. He walks toward the red. When he finds the bottleneck, he calls a flash mob. Pulls in everyone who can solve it. Sometimes at 1 a.m. The whole company’s burn rate runs through that one problem.

If you’re a CEO of a construction company, the question is whether you’ve been pulling away from the work as you’ve grown. Get the boots dirty. Find the bottleneck. Get the people who can solve it in the same room.

Removing Silos Between the Office and the Site

One of Elon’s structural moves at Tesla was putting engineering designers’ desks in the factory next to the part of the line they designed for. The line workers grab the designer and tell them the part is stupid. The designer fixes it. Repeat that a million times.

The construction analogy is direct. Move your buyer onto the site. Move your designer or planner closer to the foreman. Increase the communication bandwidth between the people in the office and the people in the field by 10x or 20x. One structural decision. Outsized gain.

“Elon has high empathy at the level of the mission, not the level of the individual.”

That’s how he can be demanding without being demeaning. The standard is the standard. Physics doesn’t care about anyone’s feelings. The work either gets done or it doesn’t.

The Rest of the Algorithm: Simplify, Accelerate, Automate

After questioning and deleting comes simplifying and optimizing. Then accelerate cycle time. Time is the bottleneck. Then, last, automate. Elon learned the automate-too-early lesson the hard way at Fremont. Tens of millions of dollars in robots that did the wrong things. Now the rule is: do it by hand on paper and spreadsheets first. Simplify it. Speed it up. Then automate. Otherwise you’re building infrastructure around a process that shouldn’t exist.

The First Move If You Run a Construction Company

Pick the bottleneck that’s actually slowing your business right now. Get yourself in front of it. Ask whether the requirements driving the work are real or inherited. Try to delete a step. If nothing has to come back, delete more. Then accelerate.

Or, in Eric Jorgenson’s words about Elon and the people who build at this level.

“Humans are builders. And we’re lucky to live in an age where we’re building some really unbelievable and unprecedented things.”

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Connect with Eric Jorgenson

The Book of Elon: https://www.elonmuskbook.org/

LinkedIn: https://www.linkedin.com/in/erjorgenson/

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Website: https://www.ejorgenson.com

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Podcast (Smart Friends): https://www.ejorgenson.com/podcast