Successful people are typically obsessive about their work. Elon Musk for example. I don’t think you need to meet him or have a psychology degree to know he’s obsessed with making electric cars. He’s also obsessed with the dangers of artificial intelligence, boring tunnels, solar power, and his greatest obsession is to colonize outer space. I’m writing this because I’m a bit obsessed with Tesla and I think Tesla is the canary in the coalmine of stock market valuations, social and environmental responsibility and how the future will unfold.
My obsession with Tesla is bittersweet. I have to admit I’m envious of Musk’s success. He’s about my age and we went to school within an hour’s drive of each other in South Africa, but that’s about where our similarities end. He’s obviously a genius. I’m obviously not. He’s happy to get 6 hours of sleep per day and work the other 18 and I’m not. He’s a marketing genius and not only am I really bad at marketing I’m very dubious of its manipulative nature. So, I have good reason to accept my fate of not being one of the richest people and most influential people in the world. But I also respect and am fascinated by the things he has accomplished and follow them closely to learn. He’s a member of the PayPal Mafia, most of who have gone on to huge success, but Musk has taken it to the next level.
Tesla is quickly becoming the iPhone of cars. If you don’t drive one, you should wish you did. People are not buying these electric vehicles because they are environmentally friendly, they are buying them because they are fun to drive. Arguably the best car on the road, whether you are a sports car fanatic or drive a car for convenience. They are quick, fast, quiet, comfortable, and high tech. And Tesla’s have driven billions of miles on autopilot, collecting driving data which has made that self-driving Tesla brain smarter and safer. You could go on a road trip now in certain circumstances and not have to touch a control or the steering wheel. And if your road trip is in the right place, you’d be able to stop for a quick Super-charge while you get some lunch. Musk’s contribution to the transportation industry could be more transformational than Henry Ford’s. And like Ford, Musk is a master marketer. Tesla could be Fisker right now if it wasn’t for Musk’s marketing prowess.
He’s such a good marketer, that most people think Tesla makes the batteries in their cars. Although he recently announced plans to do that, Tesla has relied on Panasonic for their car batteries. Tesla has not only changed the way a car works but has changed the car buying and service experience, in some cases for the worse. Order it online and have it delivered. People come to your house to service your vehicle. Nice right…if it all goes smoothly. But if the internet were to go down you wouldn’t be able to get into your car!! Tesla buyers, mostly of the newer 3 and Y models have learned the hard way that is not easy to mass produce cars. There are more than a concerning number of complaints of system bugs, unaligned fenders and panels, leading to service delays as Musk has pushed employees to meet delivery goals. Ultimately to meet certain market capitalization goals, which also happen to be tied to his compensation. Another thing I’m obsessed with is good service, which I think is a hallmark of a good company. Common Elon, I get that making cars is hard, but good service is not.
Tesla finally became profitable last year which led to its addition to the S&P 500. But margins on making cars are thin, ask VW, Ford, GM, Toyota and all the rest. Musk must know this…. He’s a genius. What he also knew is that he could make money by selling carbon credits, and the more environmentally friendly cars he made the more carbon credits he would earn which he could then sell to the dirty car makers. These carbon credits are what has made Tesla profitable. And the rest of the car makers less profitable.
How socially and environmentally responsible is Tesla? At first glance, very. They are making electric cars, which have an emissions equivalent of driving a gas car that gets about 120 miles per gallon. But they are not a panacea 120 mpg still requires fossil fuel energy, the manufacturing process is energy and resources intensive, and the batteries need to be dumped somewhere when they die. All that being said Musk’s creation is still leading the charge in creating a product so that we all can continue our behavior with pleasure without further breaking down the earth’s protective atmosphere.
So why is he buying Bitcoin? Bitcoin is one of the most energy intensive products around. One bitcoin requires as much energy as 700,000 Visa transactions. “Bitcoin uses more electricity per transaction than any other method known to mankind,” Bill Gates told Andrew, adding, “It’s not a great climate thing.” Studies note that the annual carbon emissions from the electricity generated to mine and process the cryptocurrency equal the amount emitted by New Zealand or Argentina. (There are disagreements over how big the industry’s carbon footprint is, but no one disputes that it’s big.) And given the way Bitcoin works, the more popular it becomes, the larger its carbon footprint grows.” Musk must know this offsets some of those precious carbon credits he earned … doesn’t he? Or is he planning on buying back carbon credits from VW with his Bitcoin profits?
How about social responsibility? I don’t know anyone who works for Tesla but their ratings on Glassdoor appear to be decent, despite stories of Musk holding his employees to the same expectations he holds himself…give 110%, don’t make mistakes and be the first to arrive and work and the last to leave. Which, in his defense, is the recipe for the American dream and a characteristic of many of the greats like Steve Jobs, Michael Jordon, Lance Armstrong, Jeff Bezos…
A recent story that caught my eye is that Tesla has not matched employees 401K plan contributions for 3 straight years. I didn’t dig much deeper and it sounds like Tesla didn’t respond to a request for comment on the story but there could be more to the story. Maybe Musk rewards employees in different ways, maybe they have first dibs on the last SpaceX flight out of here when the planet finally gets overrun by robots.
I like Tesla, and I have my eyes on the CyberTruck fully aware I’ll look even more like Doc Brown. And Tesla is bigger than cars. They are a solar company, a home battery company and they are inextricably linked to Artificial Intelligence, space travel, subterranean travel, Bitcoin and Dogecoin.
Should we be investing in Tesla stock. That’s hard to know. I will point out that as of this writing and after its stock price is 20% off its high, the current price represents 1000 times its earnings. (Would you buy your local coffee shop for 1000 times the amount it earns?) As a reference point Apple stock is 33 times its earnings. So theoretically Tesla is way overvalued, even Musk agrees. Buyers are betting that in 5 years Tesla will earn as much money as the current stock price implies. Which will be a tall order selling cars. Will carbon credits continue to be a profit center for them? Will the solar business take off? Will their Bitcoin holdings carry them? And many other questions you should be asking before you place that buy order. Also know you probably own them in your retirement accounts right now. And I wonder, ironically, how much of Tesla’s stock price (Musk’s wealth) can be attributed to growing presence of AI trading.
But maybe cars are just the starting point. Musk has said his ultimate goal is for humans to be able to inhabit outer space and all the money he makes is help further along that mission. Cars are a great way to get into our psyche and our bank accounts, but where is Tesla headed. Energy is what makes the world go around and our energy systems are dirty, out of date, and held together with band-aids and chewing gum (think about what that storm in Texas did to the power grid). Another story that caught my eye is that Tesla is building a giant utility size battery in Texas to plug into the power grid. Essentially a first. The way power works is that any power that doesn’t get used goes to waste because we haven’t figured out efficient ways to store it at utility scale. Sounds like Tesla is doing that.
Tesla as a power utility…now that’s interesting.
Maybe Tesla can do to the power industry what the iPhone and Google did for the internet. Tesla could well become the fulcrum of infrastructure. The General Electric of this century. And hopefully not the next Enron!