Tesla Needs Its Tim Cook Now!
Tesla Needs Its Tim Cook Now!
What is Tesla, Anyway? And What Is to Be Done About Its Management? Now that Elon Musk is no longer a fundraiser, cheerleader, & sometime coach for engineers pushing forward remarkable & essential...
What is Tesla, Anyway? And What Is to Be Done About Its Management? Now that Elon Musk is no longer a fundraiser, cheerleader, & sometime coach for engineers pushing forward remarkable & essential technologies and has become a meme-stock tech-bubble carnival barker, is he the right CEO for Tesla? No. What Tesla needs now is its very own Tim Cook…
Oh, Elon Musk is a fine CEO for the Tesla of the current bunch of Musk fanboy Tesla speculator-shareholders who are planning to offload their stock in the next couple of years. It is very important for them that Tesla succeed as a meme stock. And Musk is doing all he can to make it happen.
But is that the only Tesla? Is that the Tesla we care about. I think the question answers itself.
.Back up:
From the standpoint of America and the world, Tesla as an organization is being built to be a technology-generating carbon transition-forcing enterprise. Its value for humanity and the country is 100% how it is a spearpoint and an accelerant in our carbon emissions-reducing transition from internal combustion to electric vehicles—a transition that is happening much too slowly. From the standpoint of its long-term shareholders (if there are any planning to hold the stock for the generations), Tesla as an organization is being built to be a sustainable profit-making enterprise—an efficient maker of electric vehicles for which there is and will be demand at scale. From the standpoint of its stakeholders—of its network of suppliers, workers, engineers, and customers—Tesla as an organization is being built as a production enterprise.
And from the standpoint of Wall Street’s speculators, Tesla is a bouncing ball in a roulette wheel: a meme-stock tech-bubble casino play.
In January 2018 Elon Musk’s tame Board of Directors at Tesla voted and in March 2018 a shareholder vote approved a pay package for Musk as Tesla’s CEO that turned him from a fundraiser, cheerleader, & sometime coach for engineers pushing forward remarkable & essential technologies into something else. It turned him into a meme-stock tech-bubble carnival barker.
The pay package offered him—if Tesla also met some revenue and cash-flow targets—twelve tranches of stock options, each equal to about 1% of the company’s total equity, with the first tranche vesting if Tesla’s equity market value crossed $100 billion and each successive tranche vesting when value crossed a further benchmark $50 billion higher than the last. That compensation package is now in the courts. The Delaware Chancery has found that the process by which they were voted and approved did not meet the arms-length standard required of an executive who is also a shareholder with effective control over the company. But the odds are that it will eventually have all of its legal i’s dotted and t’s crossed: the Board is tame, and few shares of stock are held today by those who are not Musk fanboys willing to enthusiastically endorse his words and plans.
As a result of this pay package, Elon Musk’s stock-plus-options amount today to a stake of about 22% of Tesla. Compare that to the stake of 10% or so he would have owned without the pay package. Of his other holdings, SpaceX is of great promise. But the rest—Twitter, Boring, and the others? Nobody would be too surprised if they were going to be zeroed out by the market. Musk’s notional wealth today might be $160 billion, but only the $120 billion Tesla component does not immediately and completely rely on the right idiosyncratic buyer of large positions with the right valuation appearing at the right time.
Before the pay package Elon Musk was—I cannot believe I am writing these Second Gilded Age words—a more-or-less run-of-the-mill Silicon Valley billionaire. He was perhaps the one of greatest consequence. He was a very effective fundraiser, cheerleader, and occasionally coach for engineers doing battery technologies, electric vehicles, and rocket science. Without him, all three of those modes of technology would have been pushed forward significantly less than they were. When the histories of humanity’s grappling with the problems of dealing with global warming are written, one of the very brightest stars in the positive constellation and one of the biggest heroes for humanity will be Elon Musk and his actions in the decade of the 2010s.
Contrast that with your truly-standard Silicon Valley dekabillionaire who is almost completely replaceable as just one more groupthinking component in the hive mind. Musk did overpromise. But the enterprises and technological directions that he raised money, pushed, and cheerled for overdelivered as well.
But then came the pay package. Elon Musk’s wealth had notionally amounted to $9 billion or so in the mid–2010s, rising to $20 billion or so as of mid–2019. And then comes the runup: from $20 billion or so in mid–2019 to the peak of $340 billion in November 2021 (and now $160 billion or so). And this comes as Tesla as a company goes from a market capitalization of $25 billion in the mid–2010s to $40 billion in mid–2019 on its ride up to more than $1.1 trillion in late 2021 (and now down to $550 billion today).
As, after the pay package, as Tesla’s stock price rocketed upward surpassing the last of the milestones at the end of the plague year of 2020, it seems that the content of Elon Musk’s mind shifted. Overpromising, yes. But the promises were no longer focused on electric power trains, charger networks, and batteries. The promises became focused on Artificial Intelligence, Full Self Driving, Humaniform Turing-Class Robots, Robotaxis, and—most recently—using all of the chips in currently-idle Tesla vehicles as a distributed AI Supercomputer. And while the overpromising continued, the overdeliveratoring stopped.
As I have watched, I have thought: This is no longer a cheerleader and coach for real technologies. This is a meme-stock bubble-era carnival barker.
Now being a meme-stock carnival barker is a business, and a business that is at least sometimes a highly profitable one. But it is a profoundly different business than that of building a profitable enterprise attractive to prospective long-term shareholders—or even one attractive to short-term shareholders who are betting they will be able to sell in the future to long-term shareholders. As Bloomberg’s Matt Levine puts it, we are now in a Third Era of stock markets, in which:
There is no law of nature requiring that a stock’s price… equal… the market’s collective estimate of its future cash flows. That’s just a matter of tradition… [that] could always change…. Stocks… [as] pure tokens in a psychological gambling game…. Three years ago… GameStop Corp.’s stock went to the moon…
And so we have Elon Musk’s on Tesla’s most recent earnings call:
Cathie Wood said it best…. We should be thought of as an AI or robotics company…. Tesla as… an auto company… is just the wrong framework…. Then the right answer is impossible…. Tesla is almost entirely… solving autonomy and being able to turn on that autonomy for a gigantic fleet…. It might be the biggest asset value appreciation in history… that day… [of] unsupervised full self-driving…
But more than four-fifths of all of Tesla’s revenues come from cars. Making cars does have substantial economies of scale, but they are mass-production era-level economies of scale. They are not infotech write-once run-everywhere economies of scale. That the cars have EV power trains matters, but not all that much. Tesla made $0.45 cents a share in the most recent quarter. Tesla sells at a price-earnings ratio of 76. The Ford Motor Company has been pretty good at the profitable car-making business for 100 years. The Ford Motor Company has a price-earnings ratio of 7.
It matters a lot for current Tesla speculator-shareholders planning to offload their stock in the next couple of years that Tesla succeed as a meme stock. And the Elon Musk I see right now is one who is diligently working hard to satisfy their every wish. And since there are virtually no long-term Tesla shareholders holding it for a generation, whether Elon Musk as a dominant CEO is now building Tesla as a profit-making organization is close to irrelevant to everyone.
But all of Tesla’s stakeholders other than current Tesla speculator-shareholders—suppliers, workers, engineers, and customers—very much need Tesla to be run by a CEO focused on its being successful as a productive organization.
And for all the rest of America, and for the world, it matters very much that Tesla be run by a CEO focused on its being successful as a technology-generating carbon transition-forcing enterprise.
What Tesla needs in its CEO right now is a Tim Cook of its very own.
Does anyone think that the current instantiation of Elon Musk is the right CEO for those non-meme stock Tesla organizations? I no longer do. Is there a way that the institutions of modern capitalism in our current Attention-Info-Bio-Tech mode of production can reach that conclusion and take action? I do not see one.
References
Bloomberg. “Billionaires Index: Elon Musk”. Accessed April 26, 2024. <https://www.bloomberg.com/billionaires/profiles/elon-r-musk/>.
Bloomberg. “Tesla Inc (TSLA:US),”. Accessed April 26, 2024. <https://www.bloomberg.com/quote/TSLA:US>.
Dickson, Drew. 2024. “Tesla’s biggest problem: cars,” Financial Times. August 26. <https://www.ft.com/content/485109f3-9118-4d75-a202-58bd2b89da45>.
Forbes. “Elon Musk”. Accessed April 26, 2024, <https://www.forbes.com/profile/elon-musk/?sh=71a857d87999>
Levine, Matt. 2024. “Trump Media’s Business Doesn’t Matter.” Bloomberg Opinion. April 1. <https://www.bloomberg.com/opinion/articles/2024-04-01/trump-media-s-business-doesn-t-matter>.
Levine, Matt. 2021. “The GameStop Game Never Stops” Bloomberg Opinion. January 25. <https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops>.
This strikes me as one of the most balanced evaluations of Musk. The usual progressive assessment of him is that he never invented or engineered anything. That is true enough. However, Tesla and SpaceX differ from the usual Silicon Valley obsessions because they produce an actual physical product. Software has the unique characteristic that over the product is created the marginal cost of output is essentially zero. That's why there are so many software billionaires. SpaceX continues to thrive because it already has a "Tim Cook" in the form of Gin Shotwell. Also, Musk continues to push the development of they're next generation vehicles. Unfortunately, he's not devouring similar energy to Tesla. He is just busy extracting rents. His other current obsession is Culture Wars. His behavior is remeniscent of Henry Ford's after the mid 1920s.
I've gotta disagree with the premise of the piece. Tesla had accelerated the development of electric cars by 2-3 years--a great boon to humanity. "Had:" past tense. Is there any reason to believe that Tesla will remain well ahead of its EV competitors in the future? If you replace Musk with a Tim Cook clone, Tesla would be far more likely to survive the next decade. But I doubt that Tesla's survival is all that significant any more. There is a lot of high-quality competition these days. What Tesla doesn't do, somebody else will do.