Why Elon Musk's Management Style Is So Innovative—and So Destructive (2025)

We are there, ostensibly, to learn about business models, strategic execution, and profitability curves—until someone brings up Musk. Immediately, the mood shifts.

I’ve watched coolheaded professionals—people who proclaim that “business is business” and prefer to keep emotional baggage out of the C-suite—let out a string of personal reactions.

A CFO’s knuckles whitened. A Tesla owner’s eyes flashed. A German auto exec just glowered: “Ach, dieser Mann … ” (“Oh, this guy … ”).

This wasn’t a case study discussion—it was a cage match.

Tesla’s dominance: the $1 trillion question

Few things provoke more fury than Tesla’s rise—a scrappy startup that morphed into the world’s most valuable automaker in under two decades.

• First came the Roadster, a niche sports car.
• By late 2023, the company’s market cap hovered near $1 trillion.

At times, Tesla was worth morethan the next 15 or even 16largest car manufacturers combined—outweighing Toyota, Volkswagen, GM, Ford, and a dozen more household names.

Here’s the thing: During Tesla’s darkest hours in early 2024, the company missed growth forecasts. It lost its position as the world’s largest EV manufacturer to China’s BYD. And yet, investors still valued Tesla at a premium that defied gravity.

Why?

On one side, Tesla’s market capitalization in early 2024 still dwarfed legacy automakers—even after missing its growth forecasts. On the other side, the price-to-sales (P/S) ratio showed an even bigger shock: Investors were paying nearly12 times moreper revenue dollar for Tesla than for Mercedes-Benz.

Key point: Despite representing just~2 percent of global auto sales, Tesla commands over 50 percent of the sector’s market value.

I posed an innocent question in class: “What drives this financial market exuberance for Tesla, but not for traditional automakers?”

The numbers that make the car guys mad

• Tesla’s value: $1 trillion
• Traditional auto giants combined: $900 billion
• Tesla’s annual production: 1.3 million cars versus Toyota’s 10 million

I pointed out that these weren’t retail investors caught up in a meme-stock frenzy. These were institutional investors—Morgan Stanley, Goldman Sachs, sovereign wealth funds—whose jobs and reputations depend on picking the right stock.

The classroom erupted.

The battle lines

Traditional auto veterans see madness. To them, the valuation is sheer market delusion.

Meanwhile, those outside the auto industry—or Tesla owners themselves—see fundamentals that defy the “auto” label.

“Tesla isn’t a car company,” they insist. “It’s a tech giant.”

They point to the software-driven nature of Tesla’s vehicles, its over-the-air updates, and the massive trove of driving data from embedded sensors (crucial for autonomous driving).

Yes, Tesla once relied on government subsidies and carbon credits, but these supporters argue that the true product is a software-defined, data-rich, ever-evolving machine—light years beyond the hardware-centric, data-poor platforms of legacy automakers.

At the same time, others—especially suppliers, distributors, and executives tied to traditional brands—seethe.

They blame the market for getting “sucked into the Elon Musk distortion field,” insisting that Tesla’s sky-high valuation is a bubble bound to burst. Some critics go so far as to say it shouldn’t even be mentioned alongside BMW. “It’s not an apples-to-apples comparison,” they argue.

Yet, official classifications tell a different story.

Under U.S. SEC reporting guidelines (SIC Code 3711: “Motor Vehicles and Passenger Car Bodies”), Tesla is listed alongside traditional automakers. Bloomberg’s “Automobiles” industry classification—and Tesla’s own SEC filings—also name Toyota, GM, VW, and newer EV entrants like BYD, NIO, and XPeng as Tesla’s direct competitors.

In other words, just because you want to dismiss a formidable rival, it doesn’t mean they’re not biting into your market share. Sometimes, you don’t get to choose where you play—or whom you play against.

By this point, the tension in our classroom was palpable. I had to call a coffee break to prevent a full-blown shouting match between a Tesla owner and an automotive executive. The atmosphere was, to put it mildly, charged.

I ended the discussion by saying, “This is why buying a car is never just about the car. It’s your identity.”

Imagine you’re a Mercedes board member in 2019

– Your engineers say EVs are a decade away.

– Tesla is stealing your luxury market share.

– Your suppliers can’t match Tesla’s software.

What would you do? I bet that exact scenario played out in boardrooms across Germany.

Options

A) Ignore (“It’s just a bubble.”)

B) Copy (“We’ll make better EVs.”)

C) Transform (“Become a tech company.”)

Most chose A or B. All were wrong.

Architect or arsonist? Two sides of Elon Musk’s leadership

“This isn’t about electric motors replacing engines,” one automotive executive told me. “It’s about reinventing the car at its core.”

Traditional automakers built their empires on mechanical excellence, dividing the vehicle’s electronics into five siloed domains—power train, safety, infotainment, comfort, and connectivity. They sourced each from different suppliers, locking themselves into complex networks of hardware-centric, hardwired features.

Meanwhile, Tesla prioritized software and data from the start. Under Musk’s direction, they radically redesigned what’s under the hood: four controlled domains—Autopilot, a central information display, an instrument cluster, and drivetrain/energy storage—all optimized for constant connectivity and software updates.

These aren’t minor tweaks; they entail a revolution in how cars are conceived.

How software-driven vehicles are reshaping the industry’s entire model

Traditional auto:

• Five separate computers communicating through translators
• Dealer visits required for updates
• Multiple suppliers, leading to complex integration

Tesla’s approach:

• One central brain with four extensions for instant communication
• Over-the-air fixes
• Full vertical integration

Tesla’s data harvest: 10 billion miles driven (versus Toyota’s 0)

Tesla didn’t just upgrade the engine—it built a platform that evolves overnight. A bug can be squashed by a software patch instead of a physical recall. Every mile driven streams back data for Autopilot development. The company’s product is less “car” and more “rolling smartphone.”

Think of traditional cars as like flip phones: rigid, hardware driven, replaced every five years.

Tesla built the iPhone of cars: A sleek device that updates with a tap. An over-the-air update can boost your horsepower, fix a recall, or teach your car to parallel park.

This isn’t business as usual. It’s a whole new game.

A quick (but loose) analogy

Legacy automakers built cars like Frankenstein’s monster—stitching together 30-plus disconnected computers from suppliers.

Tesla built a central nervous system—one brain, four limbs. No Frankenstein.

The company’s vertical integration strategy, while costly and risky, gives it unprecedented control over its technology stack. It’s a new alchemy in engineering.

Indeed, back in 2019, Tesla teetered near bankruptcy. Musk gambled everything on Shanghai.

The Musk method: first principles, “nano-management,” and fearless vision

My colleagueMark Greevengave me a firsthand glimpse of this Musk method in action. He visited Tesla’s Gigafactory in Shanghai—a colossal facility built in a mere 12 months. Every 37 seconds, a new Tesla rolled off the line. Each represents a small punch to the auto industry.

Greeven saw a “hybrid automation” approach: 95 percent automated, yet retaining human workers for tasks for which they were more cost effective than robots. This allowed Tesla to scale rapidly and adapt to local market conditions.

He also encountered a line worker who, during lunch, was coding in C++. This wasn’t a manager; this was a factory floor operator learning to program because, as he put it, “Elon always says, ‘Show me your code, and if it’s good, you have a future at Tesla.’”

But how exactly had Musk pulled this all off? Well, something common emerged in his approach, both at SpaceX and at Tesla.

1. First principles, lasting missions:SpaceX’s mantra—If rules stop you, delete the rules—drove radical simplification. At Tesla, “Save the planet” inspired engineers to sleep under desks, fueled by purpose.
2. A loyal management core:Key leaders like Gwynne Shotwell at SpaceX cushion Musk’s chaotic impulses, translating his leaps into functional roadmaps. High turnover may exist, but a loyal “inner circle” keeps the enterprise from careening off course.

The scene was electric: speed, ambition, and a culture of “oversimplify, then add back.”

Rockets exploded? “Good,” Musk said. “Fail fast, learn faster.”

That’s the Musk method.

It propelled Tesla and SpaceX to the top—but without a loyal core and a unifying mission, his chaos can unravel everything.

When chaos overpowers strategy: The Musk method gone wrong

At SpaceX, Gwynne Shotwell and 80-hour workweeks strapped a rocket to Musk’s chaos. At Twitter, no one brought the parachute.

In 2022, Musk purchased Twitter and tried to apply his “move fast, break things” ethos. This time, it imploded—for several notable reasons.

1. No unifying mission:Unlike Tesla’s or SpaceX’s existential quests, Twitter had no grand story. Musk’s “free speech” talk felt erratic. Mass layoffs and abrupt policy changes tanked morale.
2. Engineering ≠ community:Rockets follow physics; humans follow emotion. Twitter’s value rests on user trust, advertiser confidence, and intangible community norms. Brutal reengineering can break these bonds overnight—and when this happened, advertisers fled in droves. Soon, Coca-Cola left. So did P&G.
3. Gut-led decisions, no internal buffer:At Tesla, COO Zach Kirkhorn buffered Musk’s chaos. At Twitter, Musk fired moderators and policy experts en masse, froze code updates, and grew paranoid. As he slashed 50 to 70 percent of staff, he replaced them with outsiders who had no social media expertise. Key knowledge vanished.
4. Financial pressure and stakeholder mistrust:Musk saddled Twitter with $44 billion in debt. Hasty product rollouts (e.g., paid verification) let impersonators wreak havoc on major brands. The platform needed stability, but Musk’s feuds and erratic tweets only accelerated revenue declines.

It wasn’t that no one warned him. Some Twitter engineers openly mocked Musk on Slack; one publicly tweeted, “I have spent ~6yrs working on Twitter for Android and can say this is wrong,” before getting fired.

One realization: Tesla and SpaceX were built in Musk’s image, with processes and people moderating his chaos. Twitter, however, lacked any safeguards—it was just him, banging his head against the problem he created. And it swallowed the entire platform.

Hardware can be stress-tested. An online platform’s trustisfar more fragile.The same “rip off the Band-Aid” approach that built a Gigafactory in 12 months led advertisers to flee and morale to plummet. Within hours of Musk’s “free speech” tweetstorm, brands worldwide likely sent out similar orders: “Pause all Twitter spend—now.”

A$9 billion valuationcarcass—and a cautionary lesson:Vision without context becomes vandalism.

Musk’s belated hiring of Linda Yaccarino as Twitter CEO acknowledged the need for advertising expertise, but the pivot was too little, too late. The platform’s valuation had already plummeted.

You can bend reality—until reality breaks you

The difference between changing the world and burning it down? One word: context.

Tesla had it; Twitter didn’t.

The core takeaway is adaptability.

The future of Musk (and Tesla)

History is the study of surprises.Tesla itself now faces intensifying competition. Whether Musk’s politics are costing Tesla sales is beside the point. Chinese EV makers like BYD, Li Auto, and XPeng are gaining ground, leveraging cheaper labor, government support, and advanced battery technology. Traditional automakers are also accelerating their EV programs. Tesla’s lead is narrowing, particularly in China, its second-largest market worldwide.

And the next big frontier—autonomy—requires more than bold timelines; it demands deft regulatory navigation and deep trust from users.

A few months ago, after a particularly contentious debate in class, one of my quieter students broke the silence:

“I can’t imagine a world without Tesla or SpaceX—yet I’d hate to see the world run by only people like Musk.”

That remark struck me as the perfect encapsulation. Elon Musk, once a hero, has increasingly become a villain these days. He reminds us that the future often belongs to the daring, but that same daring can wreak havoc in delicate domains.

Hubris—an overconfidence born of prior success—can blind even the smartest people to their own limitations. With Twitter, he literally bought the company and took it private, removing any shareholder oversight. There was no one left to say no to Elon Musk. And that is dangerous.

As one analysispointed out, Musk appeared to develop “a destructive level of self-confidence” from his triumphs at Tesla and SpaceX.

Elon unleashed: triumph versus tragedy

History is rife with visionary founders who became liabilities when they outlived their own usefulness. Even the brightest stars cast shadows. True leadership is about illuminating the path without blinding oneself in the glow—whether through obstinacy, failure to evolve, or just burnout.

The lesson: We don’t need more Elon Musks. We need leaders brave enough to learn from his triumphs—and humble enough to avoid his shortfalls.

Three questions to keep you grounded

1. Mission clarity: Is your north star clear enough to unite people?
2. Change management: Are you breaking things that shouldn’t be broken?
3. Power balance: Do you have people strong enough to tell you no?

We all must learn to distinguish between challenges that yield to technical optimization and those that require a deeper understanding of human nature and social dynamics.

As the saying goes, “Absolute power corrupts absolutely.” In the end, Elon changed. He became darker, spilling venom into the public arena—it’s almost as if he’s become co-president with Donald Trump.