Elon Musk Knows How to Build a Company. Here’s How He Did It (SpaceX Edition) – Inc.

SpaceX was born on the Long Island Expressway.

The year was 2000, and Elon Musk had just been forced out of his position as CEO of PayPal. As he cruised down the highway with friend and fellow entrepreneur Adeo Ressi, the question came up:

What was Musk going to do next?

"I told Adeo I had always been interested in space, but I didn't think that was something a private individual could do anything about," Musk relates to Eric Berger, author of the new book Liftoff: Elon Musk and the Desperate Early Days That Launched SpaceX. Still thinking about the conversation later that day, Musk checked out NASA's website, looking for plans for humans going to Mars.

So, after taking some time to study the subject a bit more in-depth, Musk came up with his own.

What follows in Liftoff is a crazy (and fascinating) journey of how Musk built a company meant to try and solve some very complex problems.

And while most aspiring entrepreneurs aren't trying to tackle the challenge of interstellar travel, they can still learn quite a bit from Berger's behind-the-scenes look at the early days of SpaceX, one that Musk himself has endorsed.

Here are a few key lessons, just from the first chapter.

Don't start with a product. Start with a problem.

SpaceX didn't start off building its own rockets. In fact, in the early days, Musk and his advisers traveled to Russia (twice) to try and buy a refurbished intercontinental ballistic missile.

The problem, writes Berger, was the Russians had no respect for Musk. In their eyes, Musk had no idea what he was getting himself into. So, they offered him their rockets at a ridiculous markup.

"I wondered what it would take to build our own rocket," said Musk.

A few years later, Musk and SpaceX had done just that.

Do your research, first.

Musk needed to prove he was serious. An avid student, Musk already had Ivy league degrees in economics and physics. He applied that student's mentality to his new area of focus.

"[Musk] had been reading everything he could get his hands on about rockets, from old Soviet technical manuals to John Drury Clark's iconic book on propellants, Ignition!," writes Berger. Further, Musk knew full well that other entrepreneurs had dabbled in rocket science, and failed. So he studied what they had done, learning from their mistakes so as to avoid repeating them.

Now, Musk was ready to start meeting with rocket scientists, of which there were several. All the while, he continued that "learn-it-all" mindset, asking good questions and listening intently for the answers.

Embrace challenges.

Musk's original plan was to inspire the public, leading to more funding for NASA. But the more Musk learned, the more he realized that that NASA had its own problems beyond funding.

"I began to understand why things were so expensive," said Musk. "I looked at the horses that NASA had in the stable. And with horses like Boeing and Lockheed, you're screwed. Those horses are lame. I knew Mars Oasis would not be enough."

So, Musk began to think bigger.

If Musk could bring down the cost of space travel, there would be more opportunities. And if SpaceX could cut through the red tape that plagued NASA, it could help pave the way to pursue those opportunities.

Not everyone was as enthusiastic.

Berger relates how the following Spring Musk called a meeting of about fifteen or twenty prominent aerospace engineers. The engineers had been encouraged to attend by Mike Griffin, a leader in the field who would later become the Administrator of NASA.

"[Musk] walks in and basically announced that he wants to start his own rocket company," relates Chris Thompson, an aerospace engineer who was advising Musk. "And I do remember a lot of chuckling, some laughter, people saying thing like, 'Save your money kid, and go sit on the beach.'"

But Musk wouldn't give up easy.

"Musk searched among the doubters to find the few believers," writes Berger. "Musk wanted people who embraced a challenge rather than shrank from it, optimists rather than pessimists."

It didn't take long, and Musk found those optimists.

He offered five people the opportunity to join SpaceX's founding team; two accepted: Chris Thompson and a rising star in rocket engines, Tom Mueller.

Make employees owners.

As SpaceX's employee count grew, Musk wanted to leverage those employees' sense of ownership. "Because they were spending his money, Musk gave employees an incentive to be frugal with it," explains Berger.

"Early hires received large chunks of stock. When an employee saved the company $100,000 by building a part in-house instead of ordering one from a traditional supplier, everyone benefited."

What followed was a team building a culture of doing huge things with as little resources as possible.

Of course, not every new business owner is already a millionaire, like Musk was when he began building SpaceX.

But almost everyone can take advantage of the lessons Musk demonstrated in those early days of SpaceX:

1. Don't start with a product. Start with a problem.

2. Do your research, first.

4. Make employees owners.

Do this right, and you'll increase the chances your business has at success--and eventually even turn some of the doubters, into believers.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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Elon Musk Knows How to Build a Company. Here's How He Did It (SpaceX Edition) - Inc.