Elon Musk Net Worth And How He Built His Fortune

Elon Musk Net Worth And How He Built His Fortune

If you want to become a billionaire – and you don’t happen to be born into the Saudi royal family – there are several ways to get the job done. You can seriously invent a good idea, such as a new computer operating system or a social network, and then build it into a giant company. Or you could go the Warren Buffet route, make a decades-long series of smart, low-risk investments, then watch the wealth slowly flow in.

Musk made his money differently than most of today’s famous billionaires. Instead of one great idea, he had many good ones. And instead of a bunch of smart and safe investments, he made some amazingly risky ones. But there was a way to get him crazy, even if it wasn’t obvious to many at the time. The sum of those bets made Musk the richest citizen on the planet this year, and her world-changing influences — from privately launched space missions to a giant car that left the auto industry desperate to catch up — landed Musk as TIME magazine’s Person of the Year 2021.

The Musk family was well off. He had an early talent for dealing with computers, designing his own video game at the age of 12. When he was 17, he left for Canada to escape military service in apartheid South Africa, where he studied at Queen’s University in Ontario. In 1992, he transferred to the University of Pennsylvania, where he studied physics and business. The tree-lined Penn campus may have given Musk his first taste of risky business ventures — he and two friends rented an off-campus house and turned it into a nightclub.

Then he moved to Silicon Valley – for a brief time – to graduate school. Musk has a Ph.D. in Physics. program at Stanford, then dropped out two days later. Young entrepreneurs began to realize that the Internet, a new network of connections between computers, might be more than just a playground for geeks, and Musk wanted to try his luck. Musk and his brother Kimball founded a company called Zip2 as an online business directory, a type of yellow page with maps on the web – a great idea in the mid-1990s.

Elon and Kimball recruited investors and brought in outside help to run the company, which struck deals with publishers such as the New York Times. In 1999, they sold Zip2 to Compaq, the then-declining computer manufacturing giant, for $307 million. Musk earned $22 million from the sale of Zip2. He quickly went out and spent $1 million on a McLaren F1 supercar. “It doesn’t agree with the rest of my behavior,” he told CNN, which filmed Musk delivering the car to his home. A year later, Musk crashed the car – he was trying to flaunt its acceleration and ended up accidentally shooting it into the air like a flying saucer. The million dollar sports car was not insured.

But by then, Musk had already started on his next project. Peter Thiel, who was driving in a McLaren on the day of the wreck, was a co-founder of a payments company called Confinity. (Thel and Musk were not injured in the accident.) Musk has spent his millions starting a new online banking company called X.com. The two companies would merge in March 2000, to form a company that would eventually become PayPal. Musk was named CEO, but in September, while on vacation, the board of directors fired him, and Petel replaced him, partly due to a row over switching the company’s servers. “It’s not a good idea to leave the office when there are so many major things going on that are causing people so much stress,” Musk later said. Musk still owned a stake in the company. When eBay bought PayPal for $1.5 billion in 2002, Musk made a whopping $180 million fortune from the deal.

Musk didn’t end up relaxing with all the things his new millionaires could buy. In 2002, he founded SpaceX with an almost ridiculous mission to colonize Mars. The following year, he made an initial investment of more than $6 million in Tesla, which at the time was nothing more than the founders and visionary of electric sports cars. The company planned to take advantage of its new lithium-ion batteries, which were both light and energy-dense, to revolutionize the struggling field. At the time, lithium-ion cells were only used in small electronic devices, and one of Tesla’s central innovations was to scale them, enabling it to create an electric car with a much greater range than previous electric cars were able to achieve.

The two companies got off to a rough start in the first few years — Musk says he ended up paying all of his proceeds from selling PayPal to financing projects. SpaceX has endured several failed launches, nearly bringing it to a standstill, while Tesla has had a problem as its engineers realized that its battery prototypes were likely to catch fire. “It was a discovery that would potentially end the company if we can’t fix it,” says JB Straubel, former chief technical officer of Tesla. Later, Tesla almost went bankrupt during the Great Recession of 2008.

Eventually, Musk’s investments began to pay off. In 2008, SpaceX secured a $1.6 billion deal with NASA, while Tesla in 2012 began cranking out its first mass-market car, the Model S. Today, Tesla is a behemoth, controlling about two-thirds of the U.S. electric vehicle market. SpaceX is the undisputed leader in private space exploration.

Although Tesla produces fewer cars than older automakers such as Ford and GM, its valuation has risen several times higher than its price. In the past 18 months, Tesla’s stock price has more than tripled, pushing its market value to more than $1 trillion. Musk controls a large portion of that stock, even after selling nearly $12 billion of shares in the past two months, although exercising his additional stock options may leave him with a larger stake than when he started. No one is guessing whether the company will maintain its massive valuation — if Tesla’s stock falls, Musk’s fortune will drop as well. He currently owns about 17% of Tesla shares, which are valued at $175 billion, which makes up the bulk of his net worth. With SpaceX’s value floating at more than $100 billion, according to a funding round in October, Musk’s 48% stake in the rocket maker, plus cash and other assets, brings his total net worth to about $266 billion.

He has invested his money in new companies as well. In 2016, Musk started The Boring Company, which digs tunnels, and neurotech startup Neuralink. Both are now worth hundreds of millions of dollars. These two most recent projects are illustrative examples of the mindset that created Musk’s fortune. Both are highly speculative attempts — Neuralink is trying to develop telepathic interfaces with machines. Boring aims to revolutionize infrastructure.

There’s little chance either of them will pay off in the long run, experts say, but the big risk is the bread and butter of musk. That same approach, spending millions of dollars on incredibly challenging projects, is what turned Musk from a lucky kid with the dot.com fortune to the richest person on the planet. Or at least the richest citizen. “I think (Russian) President Putin is much richer than me,” Musk told TIME in early December. “I can’t conquer countries and things.”