Why Being First Matters for Tesla Optimus
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Hi, it's Dave. Yesterday I was at the Tesla shareholder meeting and the energy was great. Elon had announced the day prior that the two most important resolutions had been approved by shareholders. So I won't go into that today, but in this video I want to focus on two specific things. First, I want to talk about the unique position of Tesla to make the best humanoid robot. And number two, why being first matters with humanoid robots.

All right, in order for a company to make a successful humanoid robot, I think it comes down to two main factors. The first is the humanoid robot needs to be capable of doing many useful things that humans are able to do. If a robot is not able to do that, then it lacks value and has no compelling features to really offer people.

The second thing is the humanoid robot needs to be affordable. It makes no sense for a humanoid robot to cost millions of dollars because not many people can afford it. It's much easier to hire humans at that price. So in order to get to that point where a humanoid robot can be affordable and capable, it takes a complete reinventing of every part and angle of a humanoid robot.

You see, typical robots that are made in the past haven't been good enough. They haven't been able to do many of the things that humans are able to do on a regular daily basis.

So in order to make a truly capable humanoid robot, Tesla needs to reinvent the humanoid robot hardware, the body. They need to make the hardware with exceptionally better motors, gearboxes, sensors, power electronics, the whole robotic hardware system. The hardware itself needs to be capable of doing many of the things that humans are able to physically do, like folding clothes, picking up things, even using hand tools.

What Tesla has found is that there's no out-of-the-box solution or parts available for that type or standard of humanoid robot. So Tesla has had to go to the drawing board and get their best electrical engineers, mechanical engineers, and other engineers involved in creating from scratch new motors, new gearboxes, sensors, power electronics, everything in the robot.

They've had to design from scratch every part of this new humanoid Optimus robot. Further, Tesla has a huge lead with the AI computer. They've had their FSD computer in their cars since 2017 or so with hardware 2, then hardware 3, now hardware 4. Soon in a couple years it'll be hardware or AI 5.

That inference computer in Tesla's cars is super powerful, yet it's super efficient. It's exactly what's needed for mobile applications like a car, but also for a humanoid robot. In other words, Tesla has a multi-year lead with this super important part of the humanoid robot, which is the hardware brains.

So you've got the hardware body that is super difficult and Tesla has all of the pieces already in place to make, develop and reinvent those parts to bring these parts together for the humanoid robot body. And then you've got the AI hardware brain, which is the AI inference computer, and Tesla has a multi-year lead on that.

And then you've got the AI brain itself or the software. And that's the AI model, which involves a robot knowing how to navigate, see things, learn things and do things.

And Tesla has a multi-year lead on this as well through their full self-driving training. Now Tesla is applying a lot of that real world AI experience into a humanoid robot. Tesla also has a lot of experience with manufacturing. They're one of the best manufacturers in the world. They know how to design for manufacturing and how to manufacture at high volume. You've got all these pieces that Tesla has uniquely. And I think it's this unique combination that no other company in the world has right now.

On top of that, you've got a visionary leader who gets it, who understands the potential of a humanoid robot. He understands what it takes to make the best humanoid robot out there, and he has a uniquely powerful skill to focus and push his team forward toward aggressive goals. When you put all of this together, you see that Tesla is in a unique position to make the best humanoid robot out there. All right, so the second point I want to dive into is why being first matters with humanoid robots.

So the first reason I think is if you're first, you'll get more data. In other words, you'll have more robots out there and you're able to improve your AI models more quickly because that data can go back into your AI models and make them better. Once you have millions of humanoid robots out there in people's homes and workplaces, and you have all this data being collected, that can significantly improve how fast your AI models are becoming more capable. This is an advantage if you're first to the market.

Second, you're able to bring down the price of your product through economies of scale. If you're able to sell more of the product, the price per item will go down because you're able to utilize economies of scale. As a result, if the price is cheaper, you're going to be able to sell more of them because demand will be higher. And then you're going to be able to cross over into profitability more quickly.

This also causes big problems for every other company in the humanoid robot market because they're going to need a lot of volume in order to do the same thing. Now you've already entered and taken your stake in the market. In other words, the market isn't empty anymore. And if you're dominating that market, other companies, they're going to either have to make a better humanoid robot than you, which is difficult because you have economies of scale already from being first and your humanoid robot is cheaper.

If they can't do that, then they're going to have to subsidize their introduction of the robot and lose a lot of money for a long time until they can get those economies of scale. Even that is difficult because how do you make a robot better than yours if you have the data from millions of robots on the field making your AI models better? The other option is companies can try to focus on a more narrow use case of a robot rather than being a generalized humanoid robot.

they can have maybe some specialized functionality, but then that's a smaller market. I mean, it could lead to profitability because maybe that narrow use robot can do certain things better and maybe it's cheaper than a generalized humanoid robot. However, it's a smaller market and it might be slower to reach economies of scale in a slower market.

a generalized human or robot like optimist can learn quite fast so it could actually make these other narrow use cases perhaps irrelevant over time as it becomes more capable all right a third thing about being first right to human or robots is that you have mind share and marketing

If you're first to the market and you're first to really getting millions of humanoid robots out there, everyone will associate humanoid robots basically with your company, with your product. I think when you put all of these things together, they matter. For example, getting more data to make your AI models better, to make your product better,

Getting your price down getting to economies of scale basically taking over the market before others get in and then other companies They basically have to beat your product in capability and price, but that's extremely extremely difficult for a startup to do you know

in a field where there's a big first mover advantage, the first mover product is getting better quickly and the price is coming down as well. Ultimately, I think the most important thing is to continue that pace of innovation because that pace of innovation matters the most ultimately.

It doesn't matter if you're first to market, but you're slow with innovation after that. Then others will catch up and will outpace you. But if you're first to market and you continue that fast-paced innovation, quickly iterating, then you're going to be a formidable company that's extremely difficult to beat. All in all, I think this is part of what I think Elon Musk means by opening up a new book at Tesla. The first book was Electric Vehicles and getting into Tesla energy and sustainable energy.

This next book, however, I think is about Robotaxi and Optimus. It's about these applications of autonomy and real-world AI that have massive potential to revolutionize people's lives and the world. And I think at the center of a lot of this is Tesla shareholders reaffirming their commitment and their approval of Elon Musk as the leader of Tesla.

I think the key thing that Elon brings to Tesla is that he is an accelerant of innovation. Even he used that phrase at the shareholder meeting. What that means is that when there's something that needs to improve, that needs to be developed or invented or

new product has to come to life. Elon knows exactly how to get there. He knows how to recruit the right talent. He knows how to focus on the right things. He knows how to push his teams forward to the right goals. And he understands and gets how innovation works. And this really matters because leadership is key in order to make all of this come together.

It's interesting and exciting because the humanoid robot is probably the biggest market out there and the humanoid robot is probably the most substantial product at least I could think of right now. And if things go well, I mean obviously there are risks involved, but if things go well then Tesla I think has definitely a bright future with Robotaxi and Optimus humanoid robot.

all right hope that's been helpful and we'll see you guys my next video i'll go ahead and end with the final three minutes or so of the shareholder meeting um a great clip by elon musk diving into kind of some of these points that i share in this video regarding tesla's unique position to develop this humanoid robot and what it means in terms of potential tesla is going to be by far the leader in that you're seeing a lot of robot startups

But I think it's actually very challenging to do Optimus as a robot startup because what we found to make Optimus work, we've had to design from first principles, from scratch, every part of the robot. So the motors, the gearbox, the sensors, the power electronics, the communication system, everything had to be done from scratch. We found that there's basically nothing, there's no supply chain.

So even though there are many electric motors made in the world, there's no supply chain for the types of motors and sensors and gearboxes that are needed for a humanoid robot. Because it requires so much

ground up design, designing every motor, gearbox, sensor, power electronics from scratch. It's very hard for a startup to, if not impossible for a startup to replicate that. But at Tesla, we have the world's best electrical engineering. I think we've got the world's best mechanical engineering for gearboxes and for electric motors, power electronics. We have the resources to do that. It applies quite well. And then you also have to have

the brain. You need a power efficient inference computer, which we've got for the car and we'll be using an optimist. You need to be the best in real world AI and Tesla's the best in real world AI. So you need all of these, you need a very strong hand of cards in order to make a compelling robot. And then you also need to be very good at scale manufacturing. So in order to have the robot not cost like hundreds of thousands of dollars,

in order to make it cost $10,000 or $20,000, you actually need to design for manufacturing and be very good at manufacturing. In my experience, prototypes are easy compared to volume manufacturing. Prototypes are easy, production is hard, relatively speaking. So Tesla has the production capability, it has the engineering capability, and it has the AI hardware and software capability. And even the most optimistic estimates that I've seen for Optimus

the optimist, I think undercount the magnitude of what this robot will be able to do. As I said at the beginning of the presentation, I agree with the ARK Invest analysis that autonomous transport is called a $5 to $7 trillion market cap situation. Optimus, I think is a 25, literally $25 trillion market cap situation.

Now, I don't want to trivialize what's necessary to get there. It's an immense amount of work that is required to get there. Super difficult. But we are moving very fast down that road. We're going to make it happen. So thank you.