Elon Musk's finances | Hacker News Reader

Elon Musk's finances

economist.com

154 pointssajid86 comments

I have no problem whatsoever if Elon Musk destroys investor money to build new technological future. In fact, I fully encourage and support his endeavor as long as it's not my money.

Here is epic piece from Warren Buffet from November 22, 1999. Just five months before internet bubble collapsed he explained why he didn't invest in internet technology when everyone said that he was being stupid old fool. http://archive.fortune.com/magazines/fortune/fortune_archive...

> The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.

A 2010 decision, for example, eBay Domestic Holdings Inc. v. Newmark, held that corporate directors are bound by "fiduciary duties and standards" which include "acting to promote the value of the corporation for the benefit of its stockholders."

http://www.nytimes.com/roomfordebate/2015/04/16/what-are-cor...

Under US law there would be a problem if he did that.

I don't see how his interests are separate from promoting the value of the corporation. His approach is just very risky.

Hyping investors to take too much risk is OK unless he intentionally hides something and don't put it in financial statements.

If a CEO genuinely believed climate change was an existential threat wouldnt actions to mitigate it be acting in the interest of the shareholders even if the company loses money?

And if he genuinely believed that the world was coming to an end unless he sacrificed a newborn every midnight, would the killings be in the interest of the shareholders?

I don't think that follows. It would be in the interest of the shareholders for _someone_ to address the problem, but it would not be in their interest to volunteer to foot the bill.

It's not clear. If nobody else addresses the problem, or if someone else does it only with condition that this company also participates, or if not enough of others is working on it - in all these cases, and others, footing the bill could be beneficial for shareholders.

First of all, that's New Jersey law, and does not apply to everyone (though NJ is a favorite location for corporate HQs).

Secondly, that case only went as far as it did because Craig Newmark was very open to say "we believe this is good for society and we're willing and expecting to loose money on it"

Under normal circumstances, CXOs have wide discretion in interpreting what is beneficial for their companies. Case in point: contributions to political campaigns, contributions to non-profits, investment in clean energy or lead-free production etc.

The assumption is usually that shareholders are in a better position to judge such actions so the courts defer to their votes.

I'm generally critical of companies which have high valuations yet continuously lose money, but in the case of Musk's ventures, I think what he's doing is so genuinely innovative that I would be more inclined to put the blame on the system than on Musk himself.

Elon uses long-term thinking but unfortunately our economic system tends to favour short-term returns. In my mind there is a huge difference between Tesla losing money versus Twitter losing money - But to an economist, it's the same kind of beast.

The issue is that Tesla isn’t doing something really new, and won’t be able to keep any advantage in the market in the long term.

Their reputation has also taken a heavy hit after investigations into their autopilot discovered major issues with it, and it was deemed unsuitable for even testing (For example, it will always stay behind the car ahead of you if it can’t find lane markings – even if the car ahead of you switches lanes, but you can’t switch lanes because the lane besides you is occupied – the car will crash).

Long-term, it looks as if the traditional car makers will win again.

> The issue is that Tesla isn’t doing something really new

Objectively they absolutely are.

Oh, they are?

Did they invent any new batteries? No. That IP belongs to Panasonic.

Did they invent any new technology for electric motors, or any gear technology, or even chargers? No, there are even older, and better, and more widely deployed supercharger standards, and they are doing nothing unusual regarding the rest.

Does Tesla do anything new regarding self-driving cars? No, the teams from Sony and VW, Here, Google, etc are all further ahead, and every competitor has more reliable lane assist technology already in production.

So what is it where Tesla is doing something new? What did they invent, or create?

Enjoy your reading: http://stks.freshpatents.com/Tesla-Motors-Inc-nm1.php

Let's see:

Tesla: Growing rapidly, huge customer interest & pre-orders, positive margin on product, easy to see that it may grow big enough to overcome fixed costs.

Twitter: Not growing rapidly, hard to see that they'll become profitable without cutting out a lot of expenses.

Not at all the same kind of beast.

Less than 0% is not what I would call "huge margins": https://www.google.com/finance?q=NASDAQ%3ATSLA&fstype=ii&ei=...

Twitter revenue is growing very rapidly, just like Tesla's: https://www.google.com/finance?q=NYSE%3ATWTR&fstype=ii&hl=en...

Economically speaking, they're very similar.

By margins, I'm referring to the car COGS vs selling price, not including the cost of design. (Yes, I know that this isn't the usual yardstick for mature car companies, but we have no idea how many model S/X cars are going to sell before it needs a new platform, and this IS the usual yardstick for Silicon Valley startups.)

Twitter revenue is growing much slower than Tesla's, especially if you take into account the pre-orders for Model 3.

I agree that some economists/financial people see it the way you describe. That's not the only point of view out there.

p.s. I never said "huge margins".

Technological edge Tesla has seems to be relatively thin. The innovation is in good productization, PR, risk taking and bold business strategy. If I understand it correctly, Panasonic is the more tech-heavy partner (patents for example).

Tesla makes good cars with very low reliability and I see it as conscious choice. They add performance features and cool factors at the cost of reliability. Bigger car makers could have done the same but they protect their brand and bottom line. Tesla can't continue like this when production numbers ramp up.

Can you give some examples of Tesla's low reliability?

a business empire with a financial structure that works only if risky companies perform perfectly on ambitious plans

Everyone talks about the wonders of capitalism and how risk is rewarded, but then someone comes along who is actually taking risks to achieve big objectives and the industry watchers collectively shit their pants.

> Everyone talks about the wonders of capitalism and how risk is rewarded

Yes, when that risk is spread across the system and the fundamentals are stable ventures.

Point being when all you do is take large risks, that's a problem.

(fwiw: long on tsla)

Musk is basically undertaking a moon shot: either a huge success or crash and burn. There's not much point keeping reserves.

>Musk is basically undertaking a moon shot

A mars shot if you will

> Musk is basically undertaking a moon shot: either a huge success or crash and burn.

I wish people would stop using the Apollo program as an example of an expensive gamble.

There was no market uncertainty. The problem was complex but the physics showed it could be done.

The overall plan was tested in multiple stages (which is why the first landing was by Apollo 11) undertaken with massive armies of bright folk overengineering the living daylights out of everything in view.

Meanwhile people call any old MVP a "moonshot" or a speculative research program a "moonshot" and it's just ... a poor analogy.

There are plenty of ways the moonshot could have failed. It just didn't fail so that's how it's remembered. Going from 'physics showed it could be done' to actually doing it is very hard and armies of bright people is not necessarily enough.

> There are plenty of ways the moonshot could have failed.

Yes, and they were explored extremely thoroughly by Apollo missions 1 through 10.

Even well tested rockets still explode sometimes. Rockets are risky, complex, explosive machines. Ask an insurance company about it.

Taking us back to my original point: comparing an MVP or a pure research project to the Apollo program is silly.

I applaud your use of trading lingo but it's just "long tsla" ;)

A lot of economists / journalists I'm sure probably made the same remarks about Edison / Wright Bros, but history came out in their favor.

The whole article is failing to point out the biggest risks that the clean-tech companies are fighting against: global warming and lung cancer. Even though all older car companies have the ability right now to take a huge financial and PR risk, they're still not talking about the damage car emissions cause.

Tesla is the first company that convinced me to buy a new car instead of an 8 year old one, as I didn't see enough difference between the new and old cars before (except the price).

Most of the environmental impact of a car is in its manufacturing, so global warming is made worse by Tesla selling more cars instead of people buying older ones.

> Most of the environmental impact of a car is in its manufacturing

Do you have a reference for this?

https://www.theguardian.com/environment/green-living-blog/20...

It depends on the car you own, the one you are buying and how much you drive. If you don't drive a lot and have a fuel efficient car, keep the car.

If you own a Land Rover and drive a lot, buying a Tesla you'd be up over a few years.

http://www.greencarreports.com/news/1093657_buying-a-new-car...

Source?

Tesla aims to make their cars last 10 times longer than the average gasoline car. There are less things that can go wrong with an electric car.

They are creating ways to increase utility on each car. Less people will need their own car.

Edit: I should clarify. Tesla is aiming to make their drive trains last 1m miles. Most car companies don't offer extended warranty past 100k miles. Normal car companies want you to buy a new car at that point.

https://electrek.co/2015/11/04/musk-we-want-drive-units-that...

Ten times longer. Where is the proof in that hyperbole statement? So a Tesla lasts 200 years? And really - lithium ion batteries don't go bad ever?

Of course an electric car needs less maintenance on engine, transmission etc. But it is by no means no maintenance. Especially a Tesla. See all the reports of people reporting how much repairing and maintenance they have to do.

http://gas2.org/2016/05/21/2012-tesla-model-s-needs-8500-bra...

Are you kidding me? 10 times longer lifespan is _huge_, if we assume the average car lasts only 10 years that would mean you'd be able to use a Tesla for 100 years. That is totally not happening, especially with Tesla's reluctance to share maintenance manuals. It seems, on the contrary, that the Tesla cars have lower life-span than classic combustion engine cars.

Elon has specifically said he's targeted a million miles of reliabiiity on the drivetrain. Maybe not 10 times longer, but still far more service life than a traditional ICE.

Tesla doesn't need to share the repair manuals. You're not touching the battery pack internals or the electric motors; if they fail, they are swapped out entirely and sent to the Gigafactory refurbishment line.

The Tesla is far more than a battery pack on wheels. There are plenty of things that can fail and need to be repaired. Failing to facilitate that means the lifespan of the car si significantly reduced.

Could you be specific what non-drivetrain components could fail that can't easily be swapped out on site or at a service center?

You mean other than the chassis, body panels, doors, undercarriage... Not to mention the question of repair costs and parts availability, both of which are pretty bad. Where are you going to get (say) a replacement for the incredibly complex and unreliable door handle mechanism for the Model S in a few years time once the car's no longer in production? The model-specific battery pack? All the electronics systems based around Nvidia chips that'll be long out of production?

As long as Tesla is still in business, replacements will be available. They still fully support the Roadster, even providing an updated battery pack at cost to owners.

Model specific battery packs? You're aware the battery packs are all the same form factor, correct? They have an 8 year battery/motor drivetrain warranty on the S and X models, which means they'll produce compatible packs for at least 8 years from the last vehicle of a model rolling off the line.

Are the advances in battery technology going to allow this? 10 times longer is a long time to own a car; I assume there will be pretty significant improvements in electric cars over that time period.

I wonder if this would just create a massive secondary market for used Teslas?

I think you mean "use-span", not life-span. I can imagine an electric car doing 1M KM easily, and surpass 2M by manual driving. Furthermore, if we enter the robocar age, this may go up dramatically as computers may be able to drive much safer and therefore drivup the "use-span" even more.

From what I can tell, Tesla doesn't offer extended warranty past 100k miles on the non-drivetrain components. The eight-year, infinite-mile warranty only applies to the battery, drive unit and drivetrain; it largely exists to reassure customers who are worried about their rather high drivetrain failure rate and the fact that lithium batteries often have very short lifespans.

True, but it's easier to fix those causes. It's a lot harder to take the millions of ICE cars off the road then it is to cleanup the environmental impact of a lithium mine.

It's not about lithium mines per se... it's about needing a new car and not a used one since you're buying a (new) Tesla. That means extra carbon in the atmosphere.

New cars will be made and sold anyway; what Tesla is trying to do is to ensure that those new cars will all be electric.

Sure, as an individual I can always buy a used car. But that doesn't change much globally: cars are generally driven until they're uneconomic. If not by me, then by someone else.

Put another way: if too many people buy new cars, then the price of used cars falls. There are enough people who compare the value of used cars vs new ones that a lower used car price causes them to prefer used over new. This is a fundamental feature of the car market, and that's why car dealers make it easy for you to trade in your used car.

What is a better situation: having a polluting factory making polluting cars or having a polluting factory making eco-friendly cars?

Maybe if the automotive industry had made this step a long ago, we could have been buying old but eco-friendly electric cars right now instead of buying gas/petrol cars.

On another perspective, Tesla is also heavily investing in self-driving technology. So we could even stop buying cars and start using a fleet of unmanned self-driving cars which are also friendly to the environment.

Buying an 8 year old car means buying a used car, no? In that case you are comparing the polluting factory to no factory at all.

Fleets of self driving cars are called public transport or taxis (depends on your preference), and have been around for a while. The environmental benefit of exchanging the bus driver with a more efficient steering method is probably offset by the idea that the inefficiencies of cars compared to buses for mass transit. Probably a net win for taxis though, but nothing revolutionary.

But a 8 year old car nowadays means a polluting car, not an electric one.

I don't see fleets of self driving cars being the same as public transportation or as taxis, I view them as something between private transportation and public transportation, an enhanced version of the we nowadays call car pooling.

A self driving vehicle can be a private one but at the same time, it could be also used to provide rides to other people other than the owner. For example: I am imagining that it would make it easier for companies and work places to arrange an efficient transportation to their employees without relying on the local governments or in public transportation agencies.

But I admit that expecting this to be revolutionary and game changing for the environment might be a bit of a stretch.

It's made worse in short term this way, yes. But the car production happens and will happen anyway - Musk is only a small fraction of that now. Tesla is aiming to convince everyone to switch to eco-friendly cars, which means that besides adding its own production, it's basically trying to force everyone else's production to switch to making electric cars.

So you can't look just at this year's increase in numbers of cars manufactured vs. environmental savings of those cars when in use. You want to look at how car manufacturing and use will evolve over the years. Tesla is trying to change the trajectory of the entire industry, and so far it seems to be succeeding.

Are there any credible sources that show Teslas as more environmentally friendly? Electric vehicles run on coal and natural gas to varyingly large extents.

They also run on nuclear power and wind power and solar power - it all depends on what a local power grid uses.

But regardless, burning fuel at a power plant is much more efficient than doing it in an ICE, so even if Teslas were powered by gasoline, as long as it's burned at the central plant, it's more energy-efficient and better for the environment.

Uh? Straight fuel -> mechanical energy conversion is less efficient than a series of fuel -> heat -> mechanical energy -> electrical energy -> transportation -> storage -> mechanical energy conversions?

Yes, because ICEs are very inefficient compared to both electric motors and powerplant turbines. In the latter case, scale buys efficiency.

And that's all before you factor in the transport costs of car fuel - gotta burn the fuel to move fuel to top up the gas stations, after all.

Yes, it is, by a decent margin at that. ICEs have a peak efficiency of only about 30%, and average 15-20%. And that's just in the engine. Powertrain losses for ICE vehicles are a handful of percentage points higher than for EVs as well.

Well-to-wheel efficiency for EVs is better than ICEs in every country except India currently.

An internal combustion engine efficiency averages maybe 20% or so[1]. A combined cycle gas turbine power plant (running on natural gas) can reach 60% efficiency (it seems most operate a bit lower, but still in the high 50s)[2].

An electric car might be 60% efficient from the point grid power is delivered to the point it reaches the wheels.[1] That gives a natural gas -> power at wheels efficiency of 36%, or 1.8x the internal combustion engine.

[1]: https://www.fueleconomy.gov/feg/evtech.shtml [2]: http://www.powerengineeringint.com/articles/print/volume-18/...

Power plants are more efficient than a car's combustion engine, & power plants can change over time without changing the vehicle. Modular design ftw

Yes precisely. The coal plants in a local grid can be swapped out for plants that generate power in any number of other ways. Furthermore, EVs can easily have their batteries replaced with other power storage methods should we figure out something that's safer/higher capacity/less toxic/etc.

But an ICE vehicle will always be an ICE vehicle no matter how technology improves. As long as it exists and continues to be driven it's a constant burden on the environment.

And a lot of todays power-plants can't regulate supply to meet demand easily so power is often wasted or sold at negative price. This is a particular problem at night time. With EVs charging at night one could handle excess power production without expanding total electric production in any way. EVs are simply a good match for the limitations of today's power production.

And the gigafactory will be net zero or net negative due to renewables. Much of the environmental badness is due to manufacturing. That will be close to nil in comparison to a traditional factory for the Tesla vehicles.

Here you go: http://www.ucsusa.org/clean-vehicles/electric-vehicles/life-...

This is a short-sighted question, however. If I buy a new gasoline-powered car, it will pollute the same amount until it is crushed. If I buy a new EV, it gets cleaner over time as more renewables are added to the grid. It's not just a question of how clean the car is today.

In every country except India, the well-to-wheel CO2 emissions for EVs beat gas ICEs. The problem is coal only, natural gas is pretty good. Even China now has enough non-coal energy sources to make EVs worth it.

Source: I was a hybrid vehicle powertrain engineer.

This not true, but also you have to look at the huge solar panel on top of the Tesla Gigafactory that decreases the footprint even more.

https://www.quora.com/What-is-the-carbon-foot-print-of-manuf...

Also I'm biased because I'm suffering from COPD because of the car emissions, so actually I take health impact into account more than most people.

The Gigafactory makes batteries, not cars. Having toured Teslas factory in Fremont, it sure looked pretty carbon intensive to me. I'm thinking of the house-sized aluminum press, hundreds of giant robotic arms, etc.

Everything at the factory you described runs on electricity, most likely clean renewable electricity. And if not, it will be shortly as solar and wind continue to drive out fossil fuels in the electrical generating mix.

It is starting to be a while ago since that was true. Today usage by far contributes most to pollution, not the manufacturing.

It's not a risk if we know it exists.

> The proposed SolarCity acquisition illustrates this: by getting Tesla to buy the struggling SolarCity, Mr Musk can keep it alive and maintain control.

Why doesn't the author believe Musk's claim that Tesla<->Solar City are merging in order to produce a superior product/service?

One company comes and installs both solar cells and batteries. The batteries help you get more value out of your solar cells. You don't have to schedule installations with separate companies, or use separate apps to manage them, or worry about different versions of each product interoperating with the other. If it's not working, there's one number to call, and one responsible party. Sales and marketing can be unified. Looking from the outside, it makes sense...

Am I missing something?

Shame on HN for downvoting you. This was a reasonable and thoughtful comment.

What you're missing is the skepticism that is so rampant in the media and especially on HN these days. It is certainly possible that they're merging to produce a superior experience. It's certainly possible that they're merging for financial reasons. It's certainly possible that the reality is some combination of both.

> or invoke the poison-pill provisions Tesla has in its statutes

Anyone know the details?

Similar articles were written about Jeff Bezos and Amazon 20 years ago.

"no profit", "losing money every year", "unsustainable" etc...

I admire Musk. Not a huge fan of the way he is funding his goals but don't really care, do what you gota do, it's caveat emptor in the stock market.

Musk's companies are not even close to the riskiest financial structures among public companies.

Rooting for success of Tesla and SpaceX. But I don't own the stock.

Sometimes the financial press comes across like they don't want anything important to happen ever. Reward requires risk.

He's doing an AMA today on Reddit. Exclusively about SpaceX though.

https://www.reddit.com/r/spacex/comments/58yc14/elon_musk_wi... 22:00 UTC

The $400m cash flow from pre-orders is an example of it being easier to tackle hard problems than easy ones.

A lot of people would rather risk money in Tesla then make money investing in a bank or an oil company.

What's your point? I would expect that both small banks and small oil companies have very high fail hate, and that the returns on investing in a big bank or big oil company are very small percentage wise.... no?

The only problem here is that $1000/car is nothing compared to what they need to deliver in return: a huge manufacturing plant

Rescuing SolarCity seems like a waste to me. It's in a commodity business and is performing awfully. Why not just fold that hand and not saddle the stronger company with it?

I would say Musk is saving SolarCity just not to have failure on his back. It would be harder to get money, if investors can point out on your failures.

Solar City is basically a bundle of loans that will pay off over the next 20 years. The company has lost a ton of money loaning out other people's money before govt solar subsidies expired. Now that it's at it's shittiest point, Musk/Tesla is swooping in and buying it at a discounted price, without spending a cent in the purchase. Musk is a genius.

I guess the whole thing hinges on Tesla producing and selling a lot of cars. Succeed and they are good, fail and it collapses. Best of luck to them.

I'm suffering from Advanced Elon Musk fatigue!

Reply on news.ycombinator.com