Elon Musk: A Call for Restraint

Elon has strengths and weaknesses, like we all do.

Elon’s strengths are that he is able to see how to achieve big and audacious goals and take the necessary risks to get there.  He’s not afraid of taking big risks as long as they are reasonable risks and the goals are achievable and worthwhile.  He does this better than almost anyone on the planet.

A lot of people when they reach a certain status (ie., with wealth, or company, etc), they tend to want to preserve what they have, and that becomes a main motivating factor in decisions they make.

It’s rare to find someone who leads a large company (ie., in the tens of billions of dollars market cap) or has great wealth (ie, billions of dollars), and who is able to not have preservation as a main or at least one of the main factors in decision-making.  Elon is unique in this regard, and I think it will serve him well in the future as it has in the past.

When a company reaches a certain size, (ie., tens of billions of dollars in market cap), investors like to see a certain amount of reasonable stability, and this also entails the behavior or the CEO.  Imagine if Bezos or Zuckerberg got into continuous Twitter spats with trolls.  Or if they smoked weed on TV/Youtube.  This doesn’t instill confidence.  Rather, the opposite.  Most CEOs are able to understand and appreciate this dynamic.  A rare few don’t, and most of them don’t last.

Elon values his freedom and the ability for him to express himself however he wishes on Twitter, but also to be honest and forthright in interviews as well.  This shows good intent.  But for him to smoke weed on Joe Rogan’s show in front of millions, this lacks discernment and the awareness that hundreds of thousands of his shareholders and employees and contractors are relying on him to be their leader – and a leader who instills confidence, stability, and trust.

For those shareholders, employees, contractors, suppliers, and others who are disappointed in Elon’s smoking weed on Joe Rogan’s show, I share that disappointment.  Elon should do better.  Those counting on him deserve it, and Tesla’s mission is so critical everyone at Tesla deserves better.

Regarding Elon’s pedo accusations, I understand that his is a sensitive issue especially with Elon’s family history (ie., his father having a child with his stepdaughter), but Elon needs to use more discernment here.  If he has clear evidence against the person, he ought to hand that over to media and get it out there.  If he doesn’t, then he needs to move on.  Again, hundreds of thousands of people are relying on Elon to be their leader, and they need a leader who will not loosely accuse without evidence, but one if he is inclined to accuse will do so appropriately and with ample evidence.

Lastly, it’s clear that Elon appreciates the power of long, hardworking hours… or what he calls high energy.  However, working too long hours can have adverse affects on one’s health and relationships, and that’s a very high cost.  Further, it can leads to a multitude of mistakes and mishaps.  Thus, excessive work expectations require some restraint, not only toward himself, but especially to those who he’s working with.  If this isn’t controlled, it could backfire and lead to unnecessary turmoil, turnover, and low morale.

Today’s stock price is lower than what it was 4 years ago.  And the blame need not go out to short sellers, the media, or big oil.  Rather, Elon and Tesla need to look introspectively, and control what they can control.  What one tweets can be controlled.  What one says and does can be controlled.  And it ought to be.

Taking Tesla Private (blog post by Elon)

(published by Tesla at https://www.tesla.com/blog/taking-tesla-private)

The following email was sent to Tesla employees today:

Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.

I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve.

This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. This is not to say that it will make sense for Tesla to be private over the long-term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.

Here’s what I envision being private would mean for all shareholders, including all of our employees.

First, I would like to structure this so that all shareholders have a choice. Either they can stay investors in a private Tesla or they can be bought out at $420 per share, which is a 20% premium over the stock price following our Q2 earnings call (which had already increased by 16%). My hope is for all shareholders to remain, but if they prefer to be bought out, then this would enable that to happen at a nice premium.

Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. If we were to go private, employees would still be able to periodically sell their shares and exercise their options. This would enable you to still share in the growing value of the company that you have all worked so hard to build over time.

Third, the intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. However, the structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months.

Finally, this has nothing to do with accumulating control for myself. I own about 20% of the company now, and I don’t envision that being substantially different after any deal is completed.

Basically, I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible.

This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.



Update: this morning Elon tweeted a series of tweets to explain why he cut off the two analysts, his basic point being, “The 2 questioners I ignored on the Q1 call are sell-side analysts who represent a short seller thesis, not investors. The reason the Bernstein question about CapEx was boneheaded was that it had already been answered in the headline of the Q1 newsletter he received beforehand, along with details in the body of the letter. Reason RBC question about Model 3 demand is absurd is that Tesla has roughly half a million reservations, despite no advertising & no cars in showrooms. Even after reaching 5k/week production, it would take 2 years just to satisfy existing demand even if new sales dropped to 0.”