Lyndon Rive started SolarCity after Burning Man with a plan to install and service solar panels rather than manufacture them. The company offered zero-upfront solar to homeowners and grew from a handful of employees to 12,000 by letting customers pay less for electricity with no initial investment. Utilities are the largest water and air polluters; solar uses no water and produces no emissions.
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Okay, so tell us a little bit about SolarCity and what problems were you solving at the very beginning and what were you trying to do at the very beginning and then how has that evolved?
Sure. When we were looking at the solar industry, the idea, as mentioned, the idea came up on a trip to Burning Man. I was tired of doing enterprise software. Elon mentioned, hey, what do you want to do next? I said, I want to start a company that you can feel good about and, of course, make money. Elon said, oh, look at the solar sector. But that was it. So we spent a fair amount of time analyzing the market to see where's the best sector of the value chain, where's the best place to focus on in the solar sector. At the time, everyone said get into the panel manufacturing business. Everyone said that. All the analysts is like, there's a massive supply constraint. This is where all the big money's going. This is where you're going to be successful. Get into the, um, panel manufacturing. And so something that you'll realize as, as you're looking at starting your own business, the great businesses is where there's a massive arbitrage between what people think is good or bad. So the great businesses are the ones where a lot of people hear it out and go, ah, I don't think that's gonna work. Sell secondhand stuff over the internet. That sounds stupid. Who's gonna buy that? Leverage people's apartments. You guys just heard this, to have them rent their apartment instead of a hotel room. That sounds dumb. Who'd wanna do that? So the bigger the arbitrage, the better the opportunity. Now, sometimes they're right, and that's the risk. So everybody was focused on manufacturing equipment. No one was focused on delivering solar energy, and no one was focused on the services part. So we decided to get into the hard work of actually installing solar panels on people's roofs. And the general feedback when we were trying to raise capital was, That's a bad business. It's heavy labor. Um, there's no barriers to entry. And, um, you're not gonna be able to compete against all the local players. And in fact, to date, you cannot find any national brand that is home services. Try to think of one. So, so that there is no national brand, a national brand which does in-home services. that is not a franchise. It just doesn't exist. So you've got Roto-Rooter. That's a franchise. Mr. Electric. That's a franchise. There's nothing that's not a franchise. And so that's what we were up against. But we knew that it was the right thing. And the whole business model is to make solar affordable. And the only way you can make it affordable is by maintaining the cost and doing all the work yourself. So we did that. The first program that we launched was a community program where if you go into the community, You get 100 homes to go solar, you can offer them oil discount. Very straightforward, basic thing. That simple idea made us the number one in the country in the first year of operation. Then we started raising— started doing more and more. And then the breakthrough was raising the capital to finance these systems so that the investment for the homeowner is zero. Homeowner goes solar, They just pay less for the electricity than they currently pay from the utility. And they save roughly 10% to 20% off their energy costs with no investment. So it's just cheaper, cleaner energy. And that allowed us to go from 2 employees— actually, by that time, we were probably about 200 employees. But now we're close to 12,000. So becoming a big company.
You know, when we invested, Your company broke every one of our rules. It was people-intensive, retrofitting homes. It was going against the curve of where Moore's Law was improving solar panels at a very fast clip and the idea of just installing them seemed sort of Plebeian. So you broke all our rules and we still funded you, and I'm really glad. Yeah, we have one rule that overwhelms all the other rules. We break them. Okay, so tell me what the problems are now. What are your issues now? When you're, you know, now you've got how many employees did you say?
Close to 12,000.
So you've got like 12,000 employees. That's a problem right there. I mean, you've got to figure out what to do with them. And are they consultants or are they employees?
No, W-2 employees. And they actually— I view that as an asset. It's the number one reason for the company's success. We have 12,000 people there who work extremely hard. It's what separates us from our competitors is we just have better people.
Better in what way? Are they better trained? Tighter hiring funnel?
We spend a lot of effort in training. We also spend a lot of effort in culture. We have an amazing culture. I'm biased in saying that. It's like saying— but I really do think we have an amazing culture.
What do you do for your culture? How do you improve your culture? Aren't these guys just all off? driving cars and installing things on roofs, do they all come back together?
So we're located in 75 different locations. So it is highly distributed. We do do once a year where we bring out the top 2,000 employees of the company. And then we have a big party. That's all we do is throw a party. You have fun.
Mostly.
We do continual video communication. We focus on highlighting the employees for those who do great things. We make them the heroes of the company. And then we also have the passion of the mission, which really helps a lot. So you may not know this, but the largest air polluter in the country is the utility. The largest water polluter in the country is the utility. The largest water consumer In the country is the utility. So the average household in America uses more water in the creation of the electricity for their house than water consumption itself. So all your dishwashing, all your showering, all your laundry— and that includes homes with pools— uses less water than the amount of water needed to create electricity for your house. Who of you live in California? Yeah, at least on the West Coast. We are facing the worst drought in recorded history. It's not just a bad drought, it's like the worst. And the largest water consumer next to agriculture is the utility sector. But it's a hidden secret. Nobody talks about it.
Well, you are now, so that's where it starts.
I try to talk about it as much as possible, but Some cities are rationing water consumption. The best thing you can do is actually install a solar system that has a net effect twice as good as not using water at all. And that's not a sales pitch.
And you don't use— you're a utility now. You want to explain how that works and then explain how you don't use any water, right?
We don't use it. So solar generation just uses light from the sun. So you have this big fusion reactor in the sky that generates energy. The solar panels capture that energy, and it powers your house. So it's extremely clean. No water, no air pollution, and no maintenance. So it's really easy.
A couple of questions. Have the panels become more dense by a significant amount? And so does the homeowner— is the homeowner more incentivized to put one of these on their house than they were maybe 3 years ago?
No. I mean, it's like these minor improvements. But the efficiency has gone from probably about 14% efficiency to about 16%, 17% efficiency over the last 10 years. So it's really just minor, minor, minor step function improvements in the efficiency. The costs have come down. That's been the biggest focus. So cost reduction has occurred. Efficiency improvements have slightly improved. Now, the holy grail is high-efficient modules, so getting into the 22, 23% efficiency at low efficiency cost. But nobody's cracked that nut yet. We're gonna try to crack that nut, but no one's cracked that nut yet.
