t, tonight alexander karp, cofounder and ceo of palantir technologies, a the silicon valley company consulting with the government in the battle against terrorism. >> and what we do is we use what legal scholars call predicate based search so we would look at you and then we would go out and say oh there is are lots of different things in your life that may be indicative of someone involved in bad behavior, but it would als alsoe very clear how the government looked at you, it wouldn't be a wide net cast into a sea of data that brings back all of our, all of the innocent citizens that are touched by that net, it would be a very precise, very precise operation and each step in that operation is documented. >> and also from silicon valley the race to produce electric cars we tawld with elon tusk, the ceo of tesla motors. >> we are not paying for the cost of the co2 conzen inflation

the ocean and atmosphere and not paying for all of these auxiliary wars and the other things at the gas pumps, you effectively have a sudsy difficult taking place at the gas pump because of that and the only way to bridge that is with innovation. it is to try to make electric cars better, sooner than they would otherwise be. >> charlie: a programming note. my interview with elon tusk was recorded before the government announced it would grant $465 million in loans to tesla, the company plans to use the money to build an electric sedan and battery packs. tonight, technology for the hour. next. >> funding for charlie rose has been provided by the following. >> each day a billion people won't find safe drinking around the world we are helping communities to access clean waters. working to improve lives through conservation and education, one drop at a time. >> additional funding for charlie rose was also provided by these funders.

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: alexander karp is here, the cofounder and ceo of elon tusk, data mining software is used by various government agencies in the united states, including the cia, fbi and nypd and also used by hedge funds and also financial firms, karp is a stanford graduate and cofounder of the company with ex-paypal engineers. i am pleased to have him here at this table for the first time, he does not do many television interviews. and for that i am also pleased to have you here. >> thanks for having me. >> charlie: let's talk about the background which is

interesting. stanford law, wasn't it? >> it was stanford law. and then you went to frankfurt? >> then i went to frankfurt. >> charlie: and a ph.d. in neoclassical. >> which is a fancy way of saying a quick path to being unemployed, currently to be the highest educated, least earning person on the planet. >> charlie: and why did you do that? >> well, the same reason i got involved in palantir technologies, i was really passionate about the issues and i was largely wasn't putting money ahead of what i thought was important. some of the ideas i dealt with were quite important, what does it mean to know something, what does it mean to communicate it? what is the foundation of western society? can we participate as citizens in how -- i was very passionate amount the ideas, just like i am passionate about my business, palantir. >> and also about anti-semitism and other issues that you thought needed to be written about and discussed? >> i published widely on both

technical issues, kind of issues involving the convergence of neophilosophy and fluid and on freud and on civil liberties on anything anyone would lead which is what you do when you are an aspiring academic with an interest in writing, and then i migrated into a business context. >> charlie: and what caused you do that? >> well, you know, the interesting thing about academia is it is more intereststg to the people in it than it is to anyone else, you know, and the impact -- >> charlie: i know. >> you end up writing about small things that may be fairly unimportant to other people and i thought that while the ideas were important, the actual impact they were going to have was going to be very small, i mean the kind of work that i did was intelligible to probably 30, 40 people in the world, so it seemed more intrs interesting and compelling to get involved in something else, get in by and see how it worked out, and some

of the issues in business are also quite compelling. >> it turned out i had a facility, i was pretty good at making money and very bad at getting paid, so i basically turned the ability to make money and get paid into a business where i look for other people who are good at making money and bad at being paid and i taught them how to make money quicker and to get paid fairly. >> charlie: this was kind of a venture capital kind of operation? >> basically, my own business, which i built and we -- i went around looking for motley people who had academic proclivities and were interested in business and i would approach them and say why don't you build a business? i will help you, and i did that for a couple of years and then i reconnected with peter. >> charlie: peter tiel? >> yes, peter tiel and began with a couple of other guys to build the company. >> i don't and while there you had the idea for palantir technologies? >> post 9/11 i think the idea again, was so, silicon valley ought to be involved in fighting terrorism and protecting our

civil liberties. and, you know, terrorism is asymmetric, you are finding needles in haystacks, usually an approach which is not a data 9ing which there was a critique on data mining approaches that had been used at paypal and we thought this would be effective in this context, it would allow humans to find needles in haystacks, so make the data intelligible to you and me which it is not, and by doing that it would allow them to find bad people trying to destroy our society, and could be used also to protect civil liberties by making the data so transparent that it is very clear what the government is doing and how they are doing it which is a particular passion passion of our company. >> charlie: why did you name it palantir, after the stones in the lord of the rings. >> yes those who had a social life in high school you may not realize what palantir is, for those of us who didn't have a social life it jumps out to you

as the gemstones in lord of the rings. and they allowed the west to communicate or the forces of good to communicate and see into vast distances, and we thought it was a fitting name for a part that allows you to see into large databases but doesn't allow you to see things you are not allowed to see, which is basically what to the seam stones -- >> charlie: because of civil liberties and everything else or what? >> yes, the basic idea is that the west or western values will win if we in the west believe in what we are doing, there is no point in having a war on terrorism if civil liberties are being undermined to the extent we aren't willing to fight this war and this is true in the cyber context, the approach that was used at paypal was anti-data mining approach, it was anti-data mining because it uses algorithms across large data sets what and we call predicate based search so we would look at you and then we would go out and say oh there are lots of different things in your life that may be indicative of

someone being -- someone involved in bad behavior. but it would also be very clear how the government looked at you, it wouldn't be a wide net cast into a sea of data that brings back all of our -- all of the innocent citizens touched by the net, very precise operation and each step in that operation is documented. >> charlie: how much of your business is finding terrorists for the u.s. government or whoever wants to hire you? >> well, we -- >> charlie: 50 percent of the business or -- >> most of our business is in government, and it all involves both sides of this h equation. finding people who are up to essentially bad things, both in the anti-terror area in cyber, in financial malfeasance, mortgage fraud and also making sure the data is nagged a way that allows agencies to collaborate with one another, which is a big finding that people tend to focus on the policy issues but also massive technical issues that had to be solved and solved in a way where you can just install it, do we

that. and the second piece is how do you do it so that when the government is looking at you or me, it is clear that they are looking at you and me for a reason. if they bring a case against us, what is the case? where did the evidence come from? did it have sources they are allowed to see did they migrate from one source of evidence, one piece of evidence to another source? these are the kind of questions that americans care a lot about. >> charlie: why can't the government do this themselves? >> we -- first of all, we are a piece of this, the hardworking and tremendously impressive people you meet in the business are the most important part. our part is to provide world soft soft area, this is what america is good at and silicon valley is good at. >> that will continue, america's leadership in creating software. >> i think software is an area america will continue to lead and silicon will be at the tip of at that movement, it is a place we have excelled at, think of the products you like to use, they are mostly american, and they don't use it because it is built in america, they use it because it is the best. >> charlie: and why is that?

you know, the thing is, we -- it is of course we have enormous talented people but what makes the software product work is an ability to build a business around a compelling idea. and that, while this seems obvious in america and especially silicon valley, in almost every other place if you want to build a business say how will you make money tomorrow? and silicon value think we build businesses around an idea, and then we figure out how we are going to make money and this is incribly important because if you want something to really work and something really complicated you cannot hire people who are motivated by a paycheck, they have to live and breathe it, they have to do it over a long period of time, you have to be willing to, our company took three years to build before we even went to market. three years. no revenue. in any other part of the world people would laugh you out of the room. you go into -- >> charlie: not in the venture capital world. >> not in silicon valley. >> it doesn't have to be sill on valley for capitalist to say you won't make revenue but we believe you have this seed to grow into something big. >> venture capital exists

everywhere but the companies that have been best at using that capital exists in america by and large and particularly in silicon vavaey and it is, i believe, it is not because we are smarter, it is because we work better together, because we are more likely to be compelled by a big idea and put monetization secretary and this is the secret to our company, even when we went to market we didn't hire salespeople, we have no salespeople working at palantir, we sell the product by exposing clients to it and saying, compare us to what you have. >> charlie: so what is the compelling business idea here? >> the compelling business idea is, if you want to make data, if you want to interact with data in a way that is inte intelligio you and you are government it is a hard hinge to do at scale scale so let's say you go to the market and you buy something, you talk on your cellphone and you send an s mr., s and you extend every little -- you write a report, all of those are data, and massive scale, it is very hard for you to see that as a pattern. so what is the pattern of charlie rose? each charlie rose

interacting with people that are up to no good, and then it is very hard for me, the citizen of america to look at the government and say, did they look at charlie rose because he was up to no good or did they look at charlie rose because they didn't like his hair color, by the way did they use charlie rose as a way to look at charlie rose's audience and find out who is in the audience? if i am looking at the government trying to figure that out it is very hard to do, what is done currently is they hire a team of computer scientists who write al rhythms that none of fuss understand and then they come back and say, oh, well, maybe, do you believe the computer scientists they hire or rather see it yourself? and that is what we offer. we offer a way just gj plug in the platform and you can be a leading expert in finding patterns on large data sets, whether the patterns are terrorists, cyber attackers, people, again, in financial malfee stance or we the people who want to look at that the government is doing and want to form another either through congress or through our attorneys we can then see what is government is doing. this is very important, we also allow people to collaborate which is

he fornously important problem, when people look at what happened on 9/11, the conclusion was it happened because people weren't collaborating, and they focused on kind of -- >> charlie: actually the cia and the fbi? >> agencies did not effectively collaborate and people focus on the foil and the in ability to work together but there is also a massive technical issue, how do you work in a massive data set and take out the two-pieces of data that the fbi is allowed to see? it is very tough, and that is something we have a turnkey approach to that, you can put our product on top of your servers and collaborate tomorrow. >> charlie: what patterns have you discovered about terrorists? >> wale, you know, o obviously,e don't discuss exactly what we have done in a classified context nor am i allowed to but for example in the case that was discussed in the public, we took a data set that lots of people looked at, some of the world's experts, and we found that there was a group of people that lived in a v vlage that was responsible for most of the attacks in iraq, and we found

that they were responsible for most of the money and most of the attacks, and that is very valuable and highly actionable information. if you know, if you know all of the real attacks are coming from one source, there is a lot you can do about that, and this is typical for the kind of things or when we looked at the dalai lama, a care which got a lot of public attention we partnered with citizen lab in canada and we discovered the dalai lama had been infiltrated by one of the world's most sophisticated and largest cyber networks. and we discovered that -- >> charlie: working at the service of someone else? >> working at the service of somebody else. >> charlie: a government? >> that part we were not clear about, but we are clear, one of the various thinkings about cyber is attribution. >> charlie: right. >> i think the metaphor that one could use in talking about cyber is maybe less cyber war but democratization of spy techniques, so in this eighties and the seventies, only large governments could pull off spy operations now teenagers in the basement with a computer can

pull off a spy operation and is very unclear if it is them or someone else and the diagnostic tick he uses is complicated not like they break in your room and the leave a fingerprint a hair behind or take a picture it is tough to find out who they are but what we can allow people to do is get a much better sense of what the evidence is and a where it points to, it is important to our government because if someone attacks your show or an audience, someone who is viewing this show's computer, if it is a government, the reaction of our government should be very different than if it is someone's ex-girlfriend or boyfriend. and these are the kind of things that our product will allow you, allow the government, allow citizens to figure out. >> charlie: how smart and how effective are terrorists without a broad brush, the best of the terrorists, many terms of understanding what you are about and, therefore, being able to deflect it? >> well, the reason, the simple reason why simple data mining doesn't work, even leaving aside

the moral issues it raises is it uses a static algorithm against a nonstatic and highly entrepreneurial adversary. >> charlie: that would be with the terrorists? >> that's the terrorists and so what you plead to do is have a platform that allows you to enter act with the data and see the patterer before they realize they are giving off the patterns so i iis nonalgorithm tick, it is not static gj and what we allow people to do is allow the actual person doing the work to, the analyst, the target tears to see the pattern it is terrorists don't realize they are giving off. now how good is the terrorists? you have to think of terrorists at enter preniewshz, and they tend to be, i think, very good at what they do or my view is we need to put our best entrepreneurs against their best enter presentencenter entreprene that's the way we win. >> charlie: because they quit using cellphones. >> you can think of any approach you use as a static approach and they will figure this out, this person gets taken at that taken away they do a diagnostic, how did this person get caught and change their patterns immediately, and what we need to

do is gain them and be ahead of whatever their technique is and that requests people that are flexible, agile, the people who build weird companies in the valley, you butt them against those people, and by the way in the pockets of government that is what you find entrepreneurial people going after their entrepreneurs. >> charlie: where did they develop their entrepreneurship and their own computer savvy. >> well that is a complicated question but i think these movements tend to be people who are engaged in these terrorist or cyber attacks they believe this what they are doing and i think they tend to attract people that are agile and creative and smart, they believe in things we don't believe in and i think are highly destructive but nevertheless they be the most interesting, talented people of their society, the same people we get our entrepreneurs, the best schools and minds where people are good at something that is very valuable. >> charlie: moving to cyber warfare, what do you fear the most? >> well, i think that if we as a country understand what the

danger is and we as a country understand the kind of -- that it is possible to fight this without giving up our civil liberties we will win, if we underestimate the danger or perceive this as a war that will be costly to who we are we will lose. >> democracies tend to win when the country gets behind it, we are kind of the greatest democracy in the world and we tend to win wars where other people believe in what they are doing. where the people think that there is a tradeoff between civil likts and fighting cyber terrorists it will be hard to win because, you know, you can think of cyber espionage as something we are going to live with forever, as long as we have computers that are turned on there will be people to penetrate them every time we find a way to brock them they will find a way many, the danger is real and it is going to be with us the rest of our life, now the question is, if the danger is real and with us for the rest of our life what can we azizs do, we as americans do that allows us to experience the lint we want and stock them gj and i think unless that educational piece is really addressed directly, we will have

a rob. >> educating the public about the threat? >> both the threat and the way -- >> charlie: and the necessity of taking certain -- >> but approaches, obviously, i am biased and i think palantir technologies's ability to tag data and show what the government has done is enormously important but you have to explain -- if this is explained where there is a contradiction between our liberty and protecting ourself, we are going to have a real problem. it is just the same way in any other war, where if we don't believe in what we are doing we can't win. where americans believe in what we are doing we tend to do very well. >> charlie: but then are you argumenting if they believe in what you are doing they are willing to give up civil liberties? is that part of the argument you are making? no. >> well, i believe one of the reasons why i actually talk in public is that there are oosms like ours which allow the people to make sure the government is actually doing what it claims to do, so if you understand what the government is doing to protect and you understand what the limits are and you know those limits and they can be enforced that is one thing. if it is data mining where they

are cast ago massive net under the aegis of protecting us, well that is not fine let me give you a concrete example, data destruction something that is not talked about enough, you are running a large multinational company and the government knocks on your door and says your that is about to be destroyed, we know it because we are down the stairs and also have classified files and we know what is going on, we need to make a copy now of your data. to prevent it from being destroyed because we know how to secure that data. well you might be in favor of that except for you want to make sure they are heterosexual going to use that data against you. but what is the guarantee they use it, that that data doesn't get migrated into a case that the government brings against you? whative government already has a case against you? >> charlie: you answered your, answer your own question. >> our approach is, when the government takes the data, it is tagged in a way that shows the source, so it can't be migrated from the data they have taken from you to a case they have pending. and this is enormous -- >> charlie: so they take the data and you make sure they tag it. >> if you use our platform we

take that data and tag it. if they use it in a case againt you your attorney will see that and say okay this data came from data i gave you, this is enormously important, you won't help to buy in to have the government protect you unless you know your liberties are protected and this is something we do kind of turnkey or as we say in the centrally out of the box. whether you use us or whether you build the system, that is not my point, these kind of things have to be built in and baked and they have to be discussed with the american people. >> charlie: am always per plekts plexed by with this quesion, if the cia can hire people likeñi you, like palantir technologies, why can't bad guys hire people, not you, but people like you? >> well, i think -- >> they don't exist? >> no, no, no. i think the bad guys do get people of equal talent to what we can get. i think that we, in america, are very good at organizing ourself, so that we out particle the bad guys they get but i think they

get very talented people in the cyber context is a great example. you have what are probably bands of teenagers taking down major organizations, these are highly talented, highly motivated -- >> charlie: that is happening today or potential to do that is there? >> it is -- if what we found was the dalai lama and other open source operations is indicative of what is out there, it is out there and exists today there are many cases we don't know it is happening and we are all capable of being targeted and take it down. >> charlie: are they being paid handsome toly to do this or just a bunch of teenagers? >> again, i think the right metaphor is, software and technology is demom i can't tied espionage gj so we take a large government organization can be done with two or three teenagers in a coffee shop and it is very hard to even know, the big -- the biggest question. >> charlie: that is really scary. >> the biggest question you as a president would have if you were a president, you would have to

decide, an organization in america is being taken down. okay? we know it is being taken down, what is the response? well, you can't know how to respond, it could be your teenage sister's boyfriend. who is just acting like an idiot or it could be a large government organization. it is very hard to pig that out because your teenage girl's boyfriend has the means of doing something in the past which only a large government organization could do. what is that? that person has gotten inside an organization with significant security and been able to obfuscate who they are, now doesn't that sound like the novels you read? >> of course. >> but now you don't need to be a governmental organization. you can be a single teenager. now you as the president to go back to the example, how do you respond? well if it is a government organization, you call and say look, either stop or we will come after you, but what if it is a teenager? and before you solve that issue, you cannot respond. and this is a major issue that -- >> charlie: okay, as part of

your ability to see around the corner, then, in terms of befefe something, before they take it down you can see patterns of people and/or actions and/or behavior? >> well, what we do is we help people like we did with the dalai lama figure out if you actually have been infiltrated so what kind of data is leaving. >> and they have been? >> they had been and in a massive way but then, two, we say these people are likely to actually be this. they appear to be teenagers. but they are teenagers that are likely being handled by this organization. or they actually are teenagers or more likely, when you are done with our diagnostic, we say, we are not sure who we are but we are sure they are in this building. why don't you send someone to go find out who they are. >> charlie: why isn't this going to collide head on into privacy and civil lints? >> well, it would if there was a contradiction between finding terrorists and protecting civil liberties but the exact same transparency you can use to find terrorists you can use to see what the government is using gj

the essential question of civil liberties is how, not the government has data, let's assume the government has as much data as the insurance company. how is it being used? is it being used in a way that is lawful? do they have the right to use it and is it being migrated to places it is not allowed to be used? we allow, we allow the enforcement of rules that the government ought to enforce and by the way the my experience is they want to enforce or they know the need to enforce and they are train heed in that way, then you can have what is the ultimate silicon valley solution, youou remove te contradiction and all march forward. >> charlie: extraordinary stuff, thank you for coming. >> thank you for having me, the as great pleasure. >> alexander karp, palantir technologies, the company you just heard him talk about, what they do and what he does. >> charlie: elon tusk is here and chief executive of two startup companies with bold missions, he leads tesla motors,

the electric car company that attracted attention from both car enthusiasts and environmentalists as well, the company's powerful roadster that travels from zero to 60 in less than four seconds is entirely powered by batteries. the company plans to break into the mainstream auto market with an elect electric sedan as early as 2011, musk is also the ceo of space exploration technologies, a company trying to slash the cost of space travel. last year the company signed an agreement with nasa to send car bow to the international space station. and if that is not enough he also is chairman of a growing company called solar city that installs solar panels on homes and businesses. he has thrived in silicon valley, one of the cofounders of paypal, on line payments company that ebay bought for $1.5 billion in 2002. i am pleased to have him here at this table. for the first time. welcome. >> thank you, thanks for having me. i have been a big fan of the show for a long time. >> charlie: let's talk about you first so the audience does not know, growing up in south

africa. >> yes. >> charlie: -- and how did you end up in canada? >> well, i guess growing up in south africa actually it was very technology oriented and i taught myself how to program computers, mostly because i wanted to program games and when i was 12, i programmed my first game and whenever i would read about technology and great innovation, it was coming from the united states, and so that's where i wanted to be and i tried to convince my parents to move there, and neither of them would, my mother, neither would do it, my mother later moved back to, initially canada and then the u.s., so when i was 17, as soon as i got my canadian passport, three weeks later i was in canada,. >> charlie: so here you are, and you come to canada and make it to the united states, and then you and several other guys come together and create paypal. >> right. >> charlie: and you sell it to ebay for one point whatever it

was billion dollars. >> yes, after paypal, that gave me, capital, and there were three areas, when i was in college, there were three areas that i thought would most effect the future of humanity and those were the internet, the transition to a sustainable energy and transportation sector and the third was exploration of the extension of life to multiple planets, i am not expected to get involved in the third one but that is something which is very important in the future, and with the capital i got from the sale of paypal, i was able to go into both of those areasness and so hence space x, and energy, in the sustainable energy we have solar city and tesla. >> charlie: let's talk about space exploration for just a moment, how is it going in terms of creating a systems that will engage us in space exploration not just for governmnmts and not just for nasa but for private

citizens as well? >> well, you have to divide the efforts that are going on into what is an overt class effort versus sub orbital and there is a very big difference, the general public doesn't understand getting to space and getting to orbit it is important to make that distinction. to do a sub orbital flight you need a terminal velocity of around mach 3. >> to get to orbit you need mach 25, it is a huge, huge, difference because the energy required to that deals with the square of the velocity, so sub orbital may be ninth in energy and/or bit is 625 units of energy, so it is about one and a half percent of the energy to get sub orbit to orbit, sorry there were several efforts in that category that you could grow to orbital, there is jeff, who has an effort, an and i know that is something -- >> is bran some involved in that. >> the bransom, absolutely.

not so much directly from the technology standpoint, but from he is funding that development and scaling composites in california. >> what are you doing? >> we are in the orbit class. and it is a lot more capital, and that is really where we are pushing the ragged edge of what is physically possible. and last year we got to orbit, for the fifth time with our rocket, and that was certainly a huge relief and a milestone. >> charlie: yes. so what is -- what is the next step, after getting a rocket to orbit? >> yes, next month, we are putting a satellite from malalaia into orbit. >> from malaysia? >> for malaysia, a malaysian satellite, and in the rocket business, the rocket company does the launch, not like the airline business, you don't sell the rocket, you sell the launch. >> charlie: right. >> and later this year we are launching a big rocket from cape canaveral, the falcon 9, and that's one that is going to be servicing the space station.

among other things. >> charlie: and is your philosophy here? how the private sector can do a lot more thth it ha has done in areas tht seem, because of the size, you know, reserved for government? >> yeah. definitely, the private sector is very good at organization. and innovation, i mean, private sector is generally better after doing things than the government, i think that is fair to say. but you know, there are certain things that the government, that, like research and that sort off thing, but, yes, so as far as space -- the reason tható there hasn't been a huge number of a big improvement in the space industry i he is because of it is very difficult for -- create a destructive process to get the effect, because there is

such a significant amount of capital that is needed to start a rocket company and it is a very difficult tactical challenge and the number of people that really understand rocketry in the world is a very small number, so it is really a huge barriers to entry. and that is why we haven't seen the function of improvement that there should have been over the years. >> charlie: and your understanding came from sort of -- this was not what you studied in college? >> well, i studied physics. >> charlie: or studying physics and studying rocket science -- >> well, no -- because i i it gives you a framework, good analytical framework but no, i picked it up along the way. >> charlie: what is your core competence, do you think? you? >> i think. >> charlie: technology? >> tec technology, yes. if something has to be designed and invented, and you have to figure out how to ensure that the value of the thing you create is greater than the cost

of the in puts, then that is probably my core skill. >> and bring they to the car and i drove a car this afternoon. >> so far, so good. >> which was terrific. >> it is the roadster. >> yes. >> charlie: where does that stand? you obviously have been in the google parking lot. >> yes. you have seen a few this there. i am sure that is true in other places in silicon valley. >> yes. i don't know whether it is a car that appeals to people in silicon valley because of interest in technology and high performances and lots of other things, or what, whether there are a lot of rich people who are willing to spend that kind of money for something they think is on the cutting edgesesof things they believe in, sustainable energy. >> right. >> charlie: tell me about how, where you are in this development of this electric car which has, most of all, this extraordinary sort of power. >> yes. searczero to 60 in a few second.

>> charlie: it is extraordinary when you think about it, sports cars, and anything else that is out on the road today. >> yeah. in fact, on the top gear test track, it beats a porsche xtr. >> charlie: exactly. >> and the roadster will do better. >> charlie: you have also said in terms of where you want to go that developing a high performance sports car is not what this is about. >> absolutely. >> charlie: it is about something else. and you want to develop a sedan. >> yes. the whole purpose behind tesla, the reason i put so much of my time and money into helping create the business is we want to be a catalyst for pushing the electric car. >> the price of gas you have a consortium of public good. it is one of -- it is really a common problem in economics, the same thing in fishing, where because there is no cost to fishing stocks, people just over fish and, you know, you have

disaster that ensues and here we are not paying for the cost of the co2 concentration in the oceans and atmosphere and not paying for all of the auxiliary defense of wars and all of these other things at the gas pumps, so you effectively have a subsidy taking place at the gas pump because of that. so the only way to bridge that is with innovation. is to try to make electric cars better sooner than they would otherwise be. >> suppose this, this is a hypothetical which may or may not speak to the point, but suppose 15 years ago, let's say bill clinton as president, we talked about the road to the 21st century and all of that, suppose he said, i believe so much in sustainable energy i want to make aommitment and the federal government using all of the resources will develop and electric car with appropriate battery power that will change the face of automobile -- the automobile industry in the world. was that very doable, bill clinton was elected in 1992, 17

years ago. >> yes. you could have made a reasonably good electric car around that time for a lot of investment. >> charlie: and should that have been done? should the u.s. government made that kind of -- otherwise you will not be able to change the driving habits of americans? >> was it a worthwhile expenditure at that time? >> i think it would have been a worthwhile expenditure but the thing that really helps electric cars is lithium iron. >> and when did that come around? >> >> charlie: explain why batteries has always been the great dilemma for developing electric cars. >> sure, well, the energy contained in the battery is so much less than as contained in gasoline, that i mean it is really almost -- it is hard to to quite describe it, let me put think way, the tesla battery pack in the roadster which is the most advanced battery pack in the world, the common reference is to call what is actually a cell a battery. >> charlie: right. >> so a cell is the little

single thing with chemicals and if you have multiple cells that is what actually is the battery. that is essentially what a battery is. >> charlie: multiple cells. >> multiple cells and as the batteries get bigger and bigger they get harder and harder to deal with. so the cell that we use is a commodity cell. >> charlie: right. you can buy it anywhere? >> pretty much and the same sort of thing that is in a number of laptops the challenge is combining those cells into, and having thousands of them making sure they are safe, making sure they will last for 200,000 miles, 100,000, over bumps and potholes and extremes of temperature and safe in a crash and that compounds the problemas civil. and you have to nas civil gj you have to make sure temperature is balanced across the whole thing so the difficulty is really at pack level more than it is at the cell level. and that is really where the biggest area of tesla's expertise, i should point out the tesla also has, we designed and built a motor and the power

electronics and is software that manage it is whole thing, those are important too but the battery is the single most important thing and the tesla battery pack to reference it to gasoline, it weighs about 1,000 pounds and it has the energy content of two after gallons of gasoline. >> so. >> that means you have to have a lot of charges? >> but there is -- because the consumption of that energy is much more efficient in an electric car. and this is, i will get to why is the tesla roadster twice as efficient as a toyota prius which is not a sports car. >> right. >> and the reason is because an electric motor is fundamentally super efficient at turning energy into motion, so a good electric motor such as the one thathat was given to the tesla rotor is 90 percent of turning electricity into motion where a gasoline internal com come comes

shun i didn't know is 17 to 18 percent, generally what it does is create heat. so even though it is only two and a half gallons of gasoline, that two and a half gallons of energy content goes far compared to if that was -- >> charlie: okay, compared to the prius but compare foyt the new gm volt. >> right. >> charlie: how does it do in comparison with a volt? >> the volt is a different architecture and it is a plug in hybrid architecture so i think it is about a 40 or so miles battery back. >k. >> charlie: that's what they say. >> and an engine with a generator, that allows you to go beyond the 40 miles. >> exactly. >> and where ours the pure elect electric and the gj and we have a pure electric strategy, and i mean, i have been criticized sometimes for responding to questions like yours, to explain why we have gone to electric and people have taken that to be an attack on the fault which is not the case.

i hope the volt -- i hope it is a pretty good car. >> charlie: i don't don't take this as an attack. >> totally, it is -- i just wanted to -- >> i hear you. >> put that -- >> what i hold hope do in this conversation is figure out what you have done because you got a fair amount of attention. >> sure. >> charlie: figure out why you are not further along than you are or figure out why you are and what your expectations are. >> yes. >> to do and where is the aim for you. >> i think it has taken a while for the industry to come around to this, it is largely at this point, it almost has welcome traditional wisdom that is future is electric cars, the question is the interim period of this transitional period. but if you look look at the pace of battery improvement, it is clear that is what i mean it is inevitable, the future will be entirely electric. >> and the irony of all of this conversation is that in the last year, a year before its bankruptcy general motors had announced that the volt was the key to their future. >> right. >> charlie: as an automobile

company. >> right. yeah. exactly. i mean, there is valid regarding gm. >> charlie: prius had them con to that conclusion by the way. >> but i think if they have the ed 1. >> charlie: right, exactly. which didn't work -- worked but didn't make it for reasons i am not clear. >> right. >> charlie: and the marketing success. >> yeah. chris -- who built the electric car. >> charlie: right, right. >> i think it is notable that in that -- it shows the customers who had the ed 1 the cars had to be taken away from them and crushed and they held a candlelight vigil. if you have people that really love a product to the degree they are willing to hold a candlelight vigil for it that says hey maybe you should make an ed 2. >> charlie: that certainly does say that. so the car that i drove today, the roadster 2, i think, i think there was a roadster before this. >> right. >> charlie: this is the second iteration of it. >> yes.

>> came through production what year? >> the first roadster, roadster number one, the first production which was fully, department of transport legal and everything. >> charlie: right, right. met all of the standards. >> was february of last year and that was my car. >> charlie: that was the car, your car? meaning -- >> roadster one. >> and so then you decided'dly to make improvements on that? >> yeah, yeah. absolutely. it was -- it was a little rough going in the beginning and we had some issues with some of the power train components. in fact, not the hard stuff but the stuff that is sort of hypothetically easier and we were able to fix those and get production ramped up and now we are at the point where we are delivering about 20 to 25 cars a week. >> you know that tata motors, obviously you know. >> take for a moment what he is doing in india. >> yes. >> charlie: developing a little sedan for $2,300. >> right, right, right. >> where do you put that in the

whole equation of where the future of cars are? >> well i think it is a good idea to have affordable cars. >> you know, i think the problem with something like nana, tata, not a problem i think it is a great idea, a and he is a gentleman and a scholar. >> charlie: all of those i agree with. it is hard no to. >> yes. exactly. i think what as we look at the gasoline of the price of that rising, and i think oil -- >> and inevitable -- do you have some assumptions in your own calculations as to where oil will level off? >> i think it will exceed the numbers we have seen last year. >> 144? >> oh, yeah. sure. absolutely, i think we will see it approach $200 and beyond. >> charlie: by 2010, 11, 12? something like that?

>> whenever the next boom is, as i say the next boom is four years from now, it will be around that point. >> charlie: of all of your businesses, which one do you care the most about? >> well, right now, my time is split roughly evenly between tesla and space x so i guess it would be pretty even between the two, and solar city is doing great on its own, and the two cofounders there have done a phenomenal job and thankfully it requires very little of my attention. >> right now, the reason to create a sports car, a roadster, as the first stage of this is because it attracts attention or what? >> oh, great, great question. so people often misinterpret why we created a sports car because they will say, you know, the implication will be -- >> charlie: sports cars are for rich guys. >> right. >> charlie: and you want to solve the energy problem. >> right. but i feel there was somehow a shortage of sports cars for rich guys or something like that.

if any new technology is expensive when it starts out, and you can point to pretty much anything, and because the first thing that you try to do is make it work and when you make it work then you optimize and you optimize and optimize and look at the early days of computers or cellphones or almost anything, even gasoline cars they were only for rich people until they were made affordable in mass production. >> charlie: right. and ford came along. >> and then you combine that with the fact that we are just a little startup and there is just no way we can afford a billion dollars to make a giant car plant that would make, you know, hundreds of thousands of cars a year because that's the kind of volume you have to get to to make cheap cars. and it is it is first iteration of technology, so we have both a volume problem and a new technology problem. and so naturally you have to --

>> charlie: you have to reach scale. >> you have have you to reach scale and work the bugs out of the system and so you have got to make -- and you want the make the mistakes at a small scale. >> charlie: how is that going, reaching scale and being able to create a market, a business plan that will enable you the reach a large audience and create and continue the development of the technology that will make it even more attractive? >> it is going really well, actually. so we had a few bumpy years in the beginning but at this point we are producing at a steady state of about, annualized production rate of about 1,000 roadster sports cars a year, we unveiled our sedan a few months ago, which is a much more functional car and a $50,000 car, so basically it is about half the price of the roadster. >> and the production run for the year 2010 for the roadster will be? >> about 1,000. >> charlie: and for the sedan? >> sedan, the sedan is only coming out in 22 years. >> 2011 will be the first year?

>> right. >> charlie: and what is the projection for that? >> we are expecting to do 20,000 units a year for the sedan. it is always difficult to predict these things specifically but our target is, we will produce a total of about 100,000 of them and about 20,000 a year and many strairtions on that, we will have an suv and other things and then we will do a third generation platform beyond the sedan, the model of the sedan will be a sub $30,000 car. so we are trying to get to mass production as soon as we possibly can. and that is both from the cars that we make ourselves as well as the cars we do in partnership with others, like the daimler deal you may have heard about. >> charlie: right. so how do you measure the odds of success? >> personally i would say success for me for tesla is that we have accelerated the advent of vick cars by at least five years. so that -- gj. >> is that the goal to accelerate the advent of electric cars? or to create a

great electric car company? >> i think the two are synonymous, you do one, you do the other, yes. >> charlie: and why is it that it is happening by a guy that created a startup in 2003, rather than a whole range of sort of industrial automobile companies around the world? not just here? >> fiat is a successful car company. >> yes. >> charlie: and they own chrysler. >> well, disruptive technology where you really have a big technology discontinuity it tends to come from new companies. >> charlie: right. >> you asked the same question of why does google come from -- why did it come from larry sergi. >> charlie: right. >> a fellow, i have known larry since before he got venture funding for google. >> charlie: and is he an investor in tesla? >> he is, they are both investors in tesla. >> and drive them or don't drive them. >> they drive them, absolutely. because some of the criticism that comes at you and the company now is that you went out

to seeing a lot of external financing and did not reach your goals. >> well, it has taken us longer to reach our foals but -- >> charlie: to raise 100 million or raise 40 or what was the goal? >> well, i think some of the stumbles were silly mistakes we made ourselves and some were market anomalies and we are in the process of raising about $100 million round that began in sort of the summer of last year, and then ran into, you know, force 5 hurricanes. [ laughter ] >> charlie: and economic circumstances that took everything off the table? >> yes. so that forced us to scale back our plans a little bit and we had to do a layoff and we had to raise the money internally from existing investors and i had to put up a lot of the money the personally, and because there was just no money, and so that was -- it was sort of a hair-raising time for the company, but at this point, we are actually in good shape.

we expect to be profitable in the third quarter. >> charlie: and that comes from the success of the roadster? >> yes. and the roadster, we also have a part train for the -- >> charlie: smart car, and electric car? >> yes the smart car was intended to be an electric car but they could never get the battery right, so a year and a half ago i met with daimler and, working with them. i mean, we really tried hard to work with a lot of different car companies. >> charlie: and what happened? >> well, i guess they think, they took the attitude of what is some little startup in silicon know that we don't know or can do? >> charlie: and what would you say to them? >> well, we would say, drive our car and look at our technology and, i don't know, it just never seemed to sort of sink in, but daimler, daimler didñi actually, so i went -- we went to stuttgart and went down the way to india, actually, and met with

doctor, whoever was the head of r&d we had a conversation and what does it take to work together and we would love to do something, we would life to do something with an affordable mass market car that we ourselves can't do right now because we don't have the capital. >> and so i said, want, you know, what about an electric smart? because the smart was always intended to be an electric car. and wha what it would take for o work together well if you could do a prototype that would really go a long way so we did. we worked really hard at the power train team, and 40 days later when they came out to visit we said here is the car, take a drive. and they really liked what they saw. >> charlie: and so what did they do then? >> then they said, okay, well let's take it another step further and they gave us a little r&d contract and eventually got to the point where we got the contract for -- to supply 1,000 cars for them and then if we do well in that we will potentially go into tens of thousands of cars so this is

a car that everyone could afford and could hopefully become quite soon. >> do you have a profile of the people you think will want to buy these roadsters? >> yes, absolutely, it is the kind of person who likes the performance car, maybe a porsche or, , u know, a lamborghini, you ow,. >> charlie: this a car is actually faster than lamborghini zero to 60? >> yes, i think it is almost faster than anything. >> anything i know of. >> but really sort of million-dollar super cars, obviously those will beat it. but it is pretty much faster than any normal sports car, and it is really easy to drive if you want a high performance car with a clean conscience this is the only option. [ laughter ]. the sedan is going to be for someone that wants a great sedan and also, you know, a great conscience and also going to be cheaper to operate. >> charlie: right. you are as crowell know a controversial guy as well.

>> i try not to be controversial. >> charlie: i know. >> people seem to find me. >> charlie: and it finds you because you think big, you are a software guy who has been successful in the private sector. >> yes, yes. you see no reason why you can't do things that other people have not been able to do, no matter how large the corporate empire, to create the best electric car or b put asronauts privately in space which you say you will do in two years? >> well, yeah, it depends on when nasa asks us to do that, so if nasa turns on, asks us to do in this year which we are hopeful they will, the white house has a panel on the future of human spaceflight that pilots can make recommendations in a few month, i hope some of those recommendations will be favorable to space x, because the alternative is, if space x

doesn't do it we will be entirely dependent on the russians to carry our astronauts to the space station after 2010 and billions of dollars will be spent on essentially a sole source situation to the russians which i think is outrageous. >> charlie: and you haven't taken advantage of the opportunity to go in space yourself, have you. >> no, i have not. >> have you wanted to? >> if it was purely a matter of personal interest, i would have done it already. >> charlie: is there an interest the that or not? >> search day -- >> charlie: expressed some interest in that? >> some interest in that, yes. >> yeah. i would like to go at some point, but i am almost at the point it is difficult for me to take personal risks, i used to take a lot of personal risks. >> charlie: because of children. >> i have my kids and responsibilities with the company as well, and so if i do things with personal risk at this point i risk more than my own being. >> charlie: you have had how many trips, you have one set of trips, one set of twins? >> yes.

one set of trips? >> yes, i had the twins in new york, actually. >> charlie: so they like the car? >> yeah:they can't go on the roadster because it doesn't, you know, it is not very kid friendly but the sedan. >> charlie: no it is not kid friendly you are right. >> the sedan is great for them. >> much success to you. thanks for coming. thank you for joining us, see you next time. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org re

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