I ended up making this long post below as a comment in one of the recent Tesla threads, but I figured it was deserving of its own post. Here's a summary of the reasons I'm super bullish on Tesla.
Betting on Elon Musk
Betting on someone like Elon Musk is potentially incredibly profitable. To build a company that will succeed as I believe Tesla will, you need the boldest, most visionary, brilliant leader you can find, and no one compares to Elon Musk. I loved Steve Jobs, but I think Musk has a huge edge on even him. Literally every company he's run has destroyed its market. It's his track record of being able to foresee the future and build companies around dominating a future market, rather than the current market. Take his first venture Zip2 for example, that market didn't even exist at the time, and he built it from scratch. Then X.com, which later became paypal. Again, he built a company in a market that barely existed, he created the market, and paypal is enormous now.
Again, with SpaceX, people laughed at him thinking he was doing the impossible, but look at what they're doing now. And for Tesla to come as far as it has in this amount of time, and for their cars to have gotten such high praise, it's just mind boggling. Elon Musk is the real deal, the kind of visionary with a coupled insane work ethic and ability to deliver on outlandish promises. If there's anyone to bet on, it's him.
Because of Musk's cult like following, they can hire the brightest engineers, and work them exceptionally hard. Not too different from Apple here. People literally want to go work their asses off for this guy so they can build the future. I'm a software engineer, and I HATE working hard, but I tried very hard (and failed) to get a job at SpaceX, because I wanted to work my ass off and change the world.
The SpaceX synergy
I think many investors overlook the SpaceX synergy with Tesla. Sure, they're building wildly different products, but they're still both manufacturing cutting edge technological machines. Lessons learned from either company can be transferred between the two. Also brilliant engineers can go between the two companies. This creates a serious multiplying force for both companies.
Company Culture
Tesla's company culture is built from the ground up to be highly innovative, fast moving, and completely dominate the future market. Sure, GM, Ford, etc. can and will start making more EVs, but their companies are not built for the future. They're built for the past, and the old ways of doing things are quickly going to become a liability. Tesla is a manufacturing company, but they have learned a lot of lessons from Silicon Valley tech companies and employ similar strategies of flatter hierarchy, which boosts ground up innovation, and quick iterative engineering practices.
Product Quality
It doesn't matter right now. They're reliable enough for early adopters, and early adopters don't care that much about reliability. This is evidenced in polls about owner satisfaction which rank very high. Building a car company from scratch, it takes many years to work out all the issues, and I have no doubt quality will be greatly improved on with the model 3 as production is greatly scaled up and they apply changes to manufacturing from lessons learned.
But, but, but profits...
Telsa would have to be stupid to take profits now, or for that matter anytime in the next 10 years! They are not building a company for the current market, they are building a company for the future market, and that requires reinvesting 100% into growth and R&D. This is why the other auto makers will not be able to keep up. Sure, they'll be making EVs, but they simply cannot commit even a fraction of the capital into growing into the future. Whereas this is Tesla's entire purpose.
The iPhone moment
I, and many others, think Tesla is going to have an iPhone like moment, and potentially with the model 3. Where they release a car that is so compelling there would be no reason to buy another car in the same price range. This will spur huge interest into EVs from the general public, and Tesla will be poised to grow into that market, as they've been anticipating. Whereas other car makers will be left scrambling as they are barely making any EVs and will not be able to ramp production to meet demand.
Optimizing Manufactoring
Did you watch the talk Elon Musk and JB Straubel gave at the gigafactory opening? It literally gave me chills. Musk was talking about how they designed the factory, how it's like a multilayer CPU, and all this stuff about how they're basically reinventing automated manufacturing. They are not beholden to doing things the way they have always been done, they are dropping all that technological debt and building things from the ground up to be as efficient and automated as possible.
First principles thinking
Musk loves what he calls first principles thinking, where he breaks something down into the most basic physical properties, and tries to figure out what the floor of cost is for a product. SpaceX and Tesla are built around this way of thinking, and because of this, they can literally do the impossible. Musk thinks from the ground up. Rather than just making a slight improvement to something, he wants to figure out what are the limits of physics on producing a good. So if you're making a battery, you need X materials at Y mining cost, so the minimum cost is the raw materials, so how do you create a finished product for as close to this minimum as possible? It's literally striving for the impossible, but in this striving they are able to cut the price by a ridiculous margin. This is a big part of the SpaceX, Tesla secret sauce. Other manufactures might look at a product and say, well X company makes it for this price, lets produce it for 10% less and dominate the market. But Musk is literally going from the ground up, thinking if this was 100% optimized from mineral extraction to final sale, what would it cost, now lets work our asses off to get as close to that number as possible.
Amazon was not just a book seller, Tesla is not just a car maker
Many "smart" investors missed the boat on making huge returns on amazon, because they labeled them a book seller, and tried to traditionally value the company as such. If you had paid attention to what Bezos was saying back then and the course he was plotting, it would have been clear that he was building a company to dominate the then emerging online marketplace. If you believed at the time those markets would be huge, it would have been a very smart investment. I think you can see the parallel with Tesla, they are not just another car company. They are building a company to dominate the emerging EV, solar, and electricity storage markets. If you think those markets will be huge, and think Tesla has a good chance to take a big chunk of the market, then it's a very wise investment.
The future will be electric
In my mind, this is a done deal. You can look at the trends, solar prices have been plummeting for years, batteries are getting cheaper and better, etc. We are quickly nearing a tipping point. Sure, there are dinosaurs like Trump that want to bring back coal, but the market has spoken already and renewables are going to become so cost effective that agenda won't matter. So, if the future is destined to be electric, what is the valuation of a company that has vertical integration of the key products of this future, solar panels, batteries, and EVs?
The future will be automated
Tesla has been criticized for putting out "beta" software for self driving, but this is a strategic part of their plan. The current trend in AI, and what's working very well in many disciplines (ie: deepmind) is getting massive datasets to train multi layer machine learning algorithms. This is Tesla's plan. They are getting immense amounts of data currently, while the other players sit on their hands and try to design the ultimate self driving car before releasing it. It's not possible, you need the millions of miles of training data, and Tesla alone will have this. This is why they are not using LIDAR, because they understand the training dataset is the real asset, and they can acquire that data much more quickly by getting as many cars on the road with cameras as quickly as possible. I expect the quality of the self driving AI will begin getting better at an exponential rate in the next year or two, and those other auto makers that are building AI behind closed doors will be left in the dust, maybe even wanting to license the tech from Tesla.
TLDR
Yeah, I have a huge hard on for Elon Musk, Tesla and SpaceX, but it's justified because he's proven time and time again that he's capable of achieving the impossible. Tesla is designed to completely dominate the future car and energy markets, and the existing companies simply won't be able to keep pace because they were designed to dominate a market that will be antiquated within 10 years. The future will be electric, and Tesla is poised to take a large chunk of an immense industry, so future 1 trillion valuations are not outlandish. For all I know the stock price is overvalued right now and may drop a good deal, but I'm investing in the long term vision and would rather not take a chance on missing a dip that may never happen.
Submitted April 04, 2017 at 01:37PM by barefooter http://ift.tt/2oywQgj
