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Comment by takahisah | Hacker News Reader

> Project Titan is a huge gamble.

Titan is not a gamble. It's a hobby. And from the eyes of a Trillion Dollar Company, it's not even an expensive one.

What's the worst that can happen? They spend a few more years on it, poaching talent from Tesla and other car companies and from internal teams, and end up with nothing. Sure, they might spend a few billion in the process, but they already did that building a spaceship, and spending at that level doesn't hurt their books at all.

iPhone on the other hand, was a huge gamble at the time. It had the potential to ruin the company by cannibalizing iPod sales, diluting the brand, and destroying morale of top engineers who were at the time the "best" employees they had.

What's the best thing that can happen? They launch the equivalent of an iPhone in the auto industry, figure out how to scale, and change the way people go from point a to b. They are recognized as the company that pulled off something Tesla couldn't, and Tim Cook / Jony Ives get to put their names on a revolutionary product that changed the world again.

So it's a low risk high return situation for them to work on it. Can they pull it off? I would say much more likely than "traditional" auto companies but less likely than Tesla. But again, it doesn't really matter to them (part of why chances of success are lower), and competition is a good thing. As a shareholder of TSLA, I don't want to see Elon Musk smoking weed on YouTube anymore. Somebody please take away his Twitter account too.

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> As a shareholder of TSLA, I don't want to see Elon Musk smoking weed on YouTube anymore.

Much ado about nothing. One puff when it was offered to him. So what? He was much more affected by the whiskey, but curiously no one has a problem with that. He even made it clear that he doesn't use weed because he feels it affects his productivity. All you're upset about is a nonsensical stigma.

Furthermore, the actual content of the interview was interesting.

Stop trying to turn Elon into a yet another fake CEO.

smoking weed is not the problem

the problem is, he said he doesn't smoke weed because it decreases productivity, and then smokes weed anyways.

Nothing he said makes sense anymore

He took one puff of weed on a casual podcast at ~11 p.m. local time. Not certain this is the canary in the coal mine some people are making it out to be... but I guess volatile stocks will find reasons to be volatile?

The problem is that most of the people who run the economy and the Government are still from a generation that views cannabis consumption as dangerous, anti-establishment drug use not appropriate for people they consider as "proper". This view has been codified into law by Marijuana ban laws, and as I realized just today, into banning it from being used by anyone with a security clearance.

As far as we've come with legalizing marijuana and shifting societies perception about cannabis, the vestiges of the old order still exist.

You're absolutely right; but I have a hard time believing this depresses stock valuations with so much smart money out there (by ~20% no less!).

Otherwise I think there's a serious market opportunity to be exploited.

This is not smart money fleeing, it is old money.

Why would all of today’s young engineers, who collectively consume marijuana and concentrates by the ton, suddenly take issue with one of their foremost peers partaking in the same activity? It makes more sense that the older investors who are making a bet on this generation’s promising stallion, in their eyes, are seeing what is to them, aberrant behavior. Given how often and well honored the theme of “older generation not progressing with the times” is, seems much more likely especially when thought in the same context as Occam’s Assertion.

AGAIN, smoking weed is not the problem. I don't mind him smoking weed

The problem is that, he said he wouldn't do X because he thinks it decreases productivity, and then goes and does X.

That's the problem

My point was that I don't think there's a ton of productivity to be lost by smoking 1 puff in the middle of the night vs. smoking a whole joint in the middle of the day.

The "X" in this case has too wide of a range of interpretation to jump the gun on hypocrisy.

For me, eating reduces productivity, as well as drinking alcohol, so I abstain from both while working. The distinction being that while working I modify my behavior to be productive, however, during leisure time I do not have the goal of being productive, I have the goal of relaxation and my preferences now include food and sometimes drink.

> my preferences include food

How long do you go without eating? I find that fasting increases mental clarity.

On average, I work 8-10 hours before eating because I choose to eat in a way that is time consuming. Every meal is cooked using basic cuts of meat and vegetables as they were grown. This takes time to prepare but not much skill. I use my attentive hours to work and choose to cook during my less attentive hours.

The problem is that it was wreckless and unpredictable. How can you trust someone with your money when they are behaving in a way that is unpredictable and careless.

I’m wondering if the weed smoking (that no one ought to care about practically/medically) will cause his security clearance to be reviewed/revoked, what impact that may have on Space-X, and what impact that overall distraction will have on Tesla.

Also not sure if Tesla has government contracts of significance where a security clearance would be relevant.

> As a shareholder of TSLA, I don't want to see Elon Musk smoking weed on YouTube anymore

But the whiskey was ok with you? Should CEO's have to hide their recreational drug (of which alcohol is a subset) use?

FWIW I also hold TSLA and want to see them succeed but a puff of weed (that he didn't inhale) is the least of our concerns.

That said, we can probably both agree 3 hours of sleep rather than an interview with Joe Rogan probably would have been the smart move.

>But the whiskey was ok with you? Should CEO's have to hide their recreational drug (of which alcohol is a subset) use?

Yes, given the fact that weed isn't federally legal and the fact that it could compromise SpaceX contracts with the air force it shows a shocking lack of judgment. It looks like he's coming unglued.

Until weed is actually legal federally, it's absolutely insane for the face of such a large company to take that risk.

Not a moral judgment, just a legal reality.

> it could compromise SpaceX contracts with the air force

If that's true, then you have a good point that I hadn't considered. I can't fathom that could ever become a reality, but my "that will never happen" sense has been way off lately.

The USAF definitely noticed. He technically shouldn't be able to maintain his security clearance after this. It's probably going to amount to nothing, but it's still bad- https://www.theverge.com/2018/9/7/17833208/elon-musk-air-for...

This is fake news. Time to update your sources. If this was an issue for a clearance, then you might as well insta-ban the majority of holders.

There can be a big difference between doing something you’re not supposed to and FLONTING that you’re doing it.

Add to that his level of importance (vs some military office worker with a clearance) and I’d say he’s at a much higher risk.

Clearance is about being compromised. Do you think Musk would reveal state secrets in exchange for weed? Do you think he would exchange state secrets to avoid the public finding out he smokes weed?

The agent who interviewed me said, "Are you the kind of person who speeds and owns up to it, or are you the kind of person who speeds and lies about it?" One of those is risky but generally acceptable.

I dunno. We're in a weird time. I can point to a few people that, i think, should not have clearances. But compartmentalization is a thing, perhaps those folks don't have a need to know the kinds of things i worry about.

My super casual, outside observer view is, the military might provide some facts and figures about payloads, but they're not saying this telescope can resolve .1mm from geosynchronous orbit. they're saying, it weighs this much and can withstand this much acceleration. There will likely be new revised policies on what's shared with spaceX about their payloads. But does anyone think Musk actions would lead him to be compromised?

It's also about the ability to follow rules (arbitrary or not). If you can't be trusted to follow the rules about not doing drugs, why should they assume you can be trusted to follow the rules about protecting classified information?

(That represents my understanding of the clearance processes' view of the issue, not my personal beliefs).

My, very shallow, understanding is, people can’t follow rules. There are a few rare individuals that can, but not the tens of thousands that are required.

> There can be a big difference between doing something you’re not supposed to and FLONTING that you’re doing it.

Flaunting it actually makes it less of a security risk in some ways; for one things no one is going to blackmail him with the threat of exposing it.

Interesting. I actually dictated that to Siri and that’s how she chose to spell it. I see now it’s not a word.

I thought it looked off but I figured she knew better than I did. It’s not exactly word I use all the time.

It is an issue for clearance. You can get by with admitting to past youthful indiscretions during the background investigation but you absolutely can't actively violate federal law and keep a security clearance.

At best, it's uncharted territory. Someone will have to lose their security clearance for using marijuana, then they will sue the government, then the court will decide whether or not state laws can override federal laws here.

The fact that the federal government has not pressed the issue is telling as to which way they think courts will rule.

Having once held a U.S. security clearance, I can guarantee you that Defense Intelligence Agency investigators are going to have a word or two with Musk. Occasional "experimental" marijuana use prior to the clearance issuance is often waived, but any use after can be a bit of a problem.

True for the most part regarding waivers on service members and civilian federal employees. But false in this case, see above.

Not saying the clearance will be revoked, rather a "Please don't do that again" accompanied with a mild finger wag.

A USAF public affairs officer (Capt Hope Cronin) put out a statement denying those false allegations.

https://www.reuters.com/article/us-tesla-musk-air-force/repo...

The articles floating around are all speculation designed to pull in click/views, which you can immediately tell since none of them cited a source and even worse, mentioned having a source.

The Verge has recently turned mostly into a clickbaity outlet. I stopped visiting the site after I watched the Tesla Q2 2018 conference and them immediately releasing a video with a sensational headline claiming many things like "Elon almost lost his job", “Tesla is in trouble” which contradict the facts and were not representative of the event at all.

> Should CEO's have to hide their recreational drug (of which alcohol is a subset) use?

It’s not even about the drug use. Just a general lack of professionalism. Like if he showed up for this interview and ate 3 gallons of ice cream. Why is he participating in such stupid bits for a radio show?

The galaxy brain take is that Elon has always been doing this, and his dumb flamethrower thing is what should get people mad. Don’t tweet about lack of sleep while wasting your time on dumb jokes

I mean people are allowed to have fun , but a bit less so when the company they’re supposed to be running is supposedly falling apart

> Just a general lack of professionalism

This is the final straw in this regard!? This is nothing. It's just him smoking a spliff on Joe Rogan's podcast. He's done like ten more ridiculous things that are unprofessional in public in the last 6 months that I can recall off the top of my head.

Personally, I'm entirely ok with normalizing marijuana usage. It has been legal all year here in SF, and de facto legal for years before that. Nothing bad happened. I'd love for the rest of the country to get over the moral panic on it.

That said, I think Musk's move was colossally dumb. Tesla's valuation is based in large part on future expectations, and those expectations are deeply tied with Musk personally in a way that's true for very few other companies.

If Tesla were in the black and shipping lots of cars, he could have done this happily. But people have a lot of very reasonable concerns about Tesla. One of those concerns is that the CEO is getting erratic under pressure. Publicly dating and breaking up with a pop star. Spending his time shitposting on Twitter. Calling a hero of the Thai cave rescue a pedophile, and then doubling down on it. Announcing he was taking the company private and then changing his mind.

Given that, video of him smoking weed would have been foolish on its own. Doing that at the same time Tesla announced two executive resignations? Absurd. And given that one of those resignations was the Chief Accounting Officer leaving after 29 days? Plain dumb. It makes him look entirely irresponsible.

Is he being irresponsible with the business? Who knows. But Musk knows better than anybody how much of Tesla's valuation is based on his own very personalized PR efforts. He should go find a crisis communications consultant. And then listen to them.

> He should go find a crisis communications consultant. And then listen to them.

What I don't understand is, why isn't the board putting him under severe pressure to do this? Something like: Musk old buddy old pal, you need to pull your head in for another year or so, then maybe he can go on a "sabbatical", without your Twitter password, and have a massive bender.

As I understand it, the board is set up to require something like a 90% vote for something like that, and it’s loaded with his friends. It’s a good setup for getting things done in a hurry in accordance with one man’s vision, but now... it’s pretty much useless.

> and it’s loaded with his friends.

All the more embarrassing for them!

Isn’t tesla one of those companies were the board and voting rights on the stock were set up in such a way that the board has very little control, sort of like Zuckerberg and Facebook? ?

The board of any company is selected by the shareholders, and the biggest shareholder of TSLA is Musk.

Does constitution of Tesla lack rule of exclusion for board elections? Musk should not have been able to vote for himself.

> If Tesla were in the black and shipping lots of cars, he could have done this happily. But people have a lot of very reasonable concerns about Tesla.

There is also this business with the short sellers. That may explain at least part of this lately -- all people regularly do random small-scale unwise things but most of the time (even for celebrities) nobody cares. But take some rich short sellers who already kind of dislike you and publicly challenge them to a duel, when they already had a profit motive to cause your company's shares to decline, and is it any surprise if they put their dirt finding and publicizing apparatus into overdrive?

That still doesn't excuse Musk's behavior. Especially since this should have been a predictable consequence of challenging them so he should be keeping his nose extra clean. But it isn't an implausible explanation for the sudden rise in bad press.

I have no sympathy here; the short-sellers are Musk's own creation.

Even after the big selloff, Tesla's market cap is still higher than GM's. Its valuation is extraordinarily high in large part because Musk has hyped it to the heavens. That has given him an amazingly low cost of capital and enormous free advertising. But the downside is that people who aren't drinking the koolaid can reasonably think that the valuation is too high, and want to bet accordingly. GM has 1/10th the short position because most people think the stock is priced correctly. Tl;dr: Musk's hype made some people go long and some go short. That's what talking a stock up does.

The rise in bad press isn't primarily due to the short-sellers. Plenty of reasonable analysts are concerned about Tesla's repeated failure to meet projections, long-running manufacturing issues, and bad cash position. That's a good chunk of the press. But I think the bulk of it comes from a) the inevitable turning of the hype cycle, and b) Musk's own public antics. Short-sellers didn't make him call a hero a pedophile. They didn't make him spend a lot of time shitposting on Twitter. They didn't make him sell flamethrowers or date Grimes or have Azlea Banks over. They didn't make him smoke weed on camera. They certainly didn't make him write to a reporter to double down, calling the cave diver a "child rapist". [1]

I feel bad for the guy; I know from personal experience that entrepreneurship is high stress. But he knew what he was getting into, and he could be handling this a lot better.

[1] https://www.buzzfeednews.com/article/ryanmac/elon-musk-thai-...

> Even after the big selloff, Tesla's market cap is still higher than GM's.

Part of that is because GM has a low valuation relative to e.g. their sales volume, because they not so long ago had to be bailed out by the government, are loaded up with debt, and are facing the prospect of a market shift toward electric and autonomous cars that may favor new entrants over incumbents.

> Plenty of reasonable analysts are concerned about Tesla's repeated failure to meet projections, long-running manufacturing issues, and bad cash position. That's a good chunk of the press.

Sure, but none of that is really new and is the sort of thing analysts always cover about any company.

> Short-sellers didn't make him call a hero a pedophile. They didn't make him spend a lot of time shitposting on Twitter. They didn't make him sell flamethrowers or date Grimes or have Azlea Banks over. They didn't make him smoke weed on camera. They certainly didn't make him write to a reporter to double down, calling the cave diver a "child rapist".

It's not that they made him do it, it's that they may be spurring coverage of things like that even though they have little to do with the fundamentals of the business. Half the people are saying he should take a vacation and the other half (or maybe the same people) are saying he shouldn't be wasting time shitposting on Twitter as though he should be working 24/7. So is he working too much or not enough?

> Half the people are saying he should take a vacation and the other half (or maybe the same people) are saying he shouldn't be wasting time shitposting on Twitter as though he should be working 24/7. So is he working too much or not enough?

It's more probable than not that he should take a short vacation (or some other kind of break) and stop shit-posting on Twitter. Those aren't mutually exclusive options.

Temporarily taking a slightly lower profile and spending his focus on things that actually matter to his companies (cave divers, pop stars, and short-sellers are not in that set, IMO) would probably be good for everyone/everything that Musk cares about.

I agree with you, because people care about these things when they shouldn't, but given that fact that they do anyway, continuing to do them is unhelpful.

What I'm asking is, why do people care? It can't just be because other people do. It takes a significant number of people to care for no good reason before it makes sense to care just because other people do.

It's simultaneously possible to be against Musk continuing to do things like that and be against the media continuing to cover it as though it should matter.

A huge part of Tesla’s value is wrapped up in the Musk mystique. If/as that starts to tarnish and crack, the valuation of the company is reduced as some investors decide it’s no longer for them.

As to why other people care, people love celebrity gossip, especially “bad” gossip. It sells ads and clicks and generates conversation. At some point, it becomes self-sustaining. I agree that it’s terribly uninteresting in general to me.

Note that I believe his erratic and lightly considered Twitter posts are one thing (ignorable) generally, but I think the $420/“funding secured” tweet to be much more likely legitimate news and quite likely of the “watch me burn these shorts!” securities fraud variety. There is an extent to which such legitimate interest in that tweet brings interest in his other tweets to understand whether the CEO of a many-multi-billion market cap company is prone to communications that put his company/others’ investments at risk. I suspect that extent is less than what is being covered, because it’s a justification for why (largely) respected financial news sources are now able to cover salacious details of his private life with plausible explanation as to why.

Telsa is the Elon Musk Show. Most people can't even name the CEO of another car company. For better or worse, the valuation of Telsa is predicated on the perceived genius leadership of Musk. And that is entirely due to choices made by Musk.

He could have pursued Tesla in a quiet, modest way. Instea of making bold predictions, he could have underpromised and overdelivered, letting results do the talking. He could have stayed out of the limelight, remaining just another CEO.

We all know what he did instead. And that surely got him a low cost of capital and a ton of free PR, so it's reasonable to argue it was the right business move. But having put himself in the spotlight and made it all about Elon, I don't think it's reasonable to claim it's unfair that he's now in the spotlight.

If we're being purely rational, people shouldn't care about the technology genius mystique, and they shouldn't worship high-profile business executives. But they do, and Musk grabbed that with both hands. He can't do that, glory in the upsides, and be upset about the downsides. It's a package deal.

There are likely many short-sellers of Tesla who wish Musk would succeed.

I’m in that camp. I want viable, cost-effective on their own merits, electric cars. I want a vibrant, accessible space industry. I want extra-terrestrial coloNization planning.

I’m short TSLA (about 25% of my liquid investment balance) since the summer not because I hate Musk, but because I believe it’s personally profitable to be so due to the utterly insane valuation. Near flawless execution is baked in on a manufacturing company likely less than 15 months from being out of cash.

I wish Musk well. I hope he navigates through the challenges ahead for the good of humankind. Even if he does so fairly successfully, I like the expected value of my short position.

> Near flawless execution is baked in on a manufacturing company likely less than 15 months from being out of cash.

I'm less sure about that. They have risk, certainly, but they could stumble somewhat or have to raise more funding and still ultimately end up doing as much business as Ford or GM.

Their valuation is slightly higher than that because if everything really goes their way they could end up as the electric version of Toyota at more than three times their current market cap. With higher margins because of the simpler powertrain, which reduces both manufacturing costs for Tesla and maintenance costs for customers who are correspondingly more willing to pay a higher purchase price.

Or they could fail outright or become a small irrelevant electric supercar company.

The efficient market hypothesis says their valuation should approximate their risk-adjusted actual value. Which is always wrong by a little, usually not by a lot.

The interesting thing here is that they're a rather large company that nonetheless has potentially high volatility, which is actually pretty unusual, and invites speculation (and therefore drama). And if a $45B valuation is a result of a 40% chance at a continued $45B valuation and a 15% chance at a $180B valuation, the valuation is correct even though some people may lose their shirts. We just don't know which people yet.

Are you applying a 0% discount rate to future outcomes above?

No sane investor will pay $45 for a 40% chance of $45 and 15% chance of $180 in 8 or 10 years.

(I agree with your premise, but the numbers need to be larger such that their present value, not future value solves.)

Yes, of course, it's all back of the envelope. Assume the future numbers are in net present value. Or assign some non-zero value to the 45% probability that they "fail" in the sense of losing value, since it presumably wouldn't be a 100% write off even then.

> Chief Accounting Officer leaving after 29 days?

The narrative seems to be that the person joined, and then left because of Musk's erratic public behaviors. What really concerns me is what the guy found out to leave so quickly. Or what Musk did to him that made him leave.

Not sure if its different for C-level folks but changing jobs is a huge personal decision that people generally don't take lightly. The person had to have know about the erratic public behavior before, so maybe it was something else.

One of Tesla's PR angles is that they are anti-establishment and different from the corporate automobile industry. So Musk smoking weed plays into that well.

Controversy is not always a bad thing, even when your company has problems.

If the CEO is appearing erratic under pressure, we might investigate where it is being applied and who is applying that pressure.

> Investors are nervous because CEO appears erratic under pressure.

> Investors apply pressure in response to erratic behavior.

If an investor truly believes that he’s acting erratic under pressure, then the best response is not changing the type of pressure to societal and financial pressure.

The best response for the investor who loses confidence in the CEO of a company they’ve invested in where the CEO is personally a large part of the valuation of the company is to salvage as much value as they can and GTFO.

The investor isn’t interested in what’s best for the CEO or company further than the extent to which that’s good for the investor.

> The investor isn’t interested in what’s best for the CEO or company further than the extent to which that’s good for the investor.

Someone who owns shares in a company like this has multiple options. One option is to sell your shares and be done with it, assuming you think the problem is insurmountable. But if you remain invested, you can still do things that reduce the problem or things that exacerbate the problem. The last one seems particularly counterproductive.

> Titan is not a gamble. It's a hobby. And from the eyes of a Trillion Dollar Company, it's not even an expensive one.

Gambling billions of dollars is gambling billions of dollars even when you have a trillion. And everything is tiny compared to their capitalization. They could buy General Motors and burn it to the ground for ~4% of their market cap. That doesn't make it a good idea.

The question isn't what percent of their company size it is, it's whether it's a cost effective use of shareholder money. And best case vs. worst case doesn't tell you anything until you consider the probability of each.

To me, a business decision is always based on _relative_ risk to reward ratio. If you're a startup hiring employee number 3 vs Google hiring employee number 739813, your risk profile is completely different, but the absolute dollar investment in one employee is about the same. In that scenario hiring an employee number 3 could be a huge gamble in a way that hiring employee number 739813 could never be.

But lets leave out the technicalities. Call it a gamble, stupid investment, whatever. Yes, I agree a billion is a lot of money. Apple still needs to have this project, in order to stay relevant to competitors and current/potential employees. Even if it does fail, the side effects of having this project mainly to attract talented engineers and stay relevant make it worth the investment.

> To me, a business decision is always based on _relative_ risk to reward ratio. If you're a startup hiring employee number 3 vs Google hiring employee number 739813, your risk profile is completely different, but the absolute dollar investment in one employee is about the same. In that scenario hiring an employee number 3 could be a huge gamble in a way that hiring employee number 739813 could never be.

Sure, but that's mostly because a startup has a very high risk profile, because success or failure is existential. In nearly all other cases, even for smallish companies, the risk is lower, even for employee number 3. If you're a small doctor's office and you hire a crappy receptionist, you'll have a bad time but you'll survive. If your startup hires a bad marketing person and some competitor popularizes their tech before you do, game over.

And once we're not talking about existential risk, we're talking about dollar risk. Which doesn't depend that much on who you are. If it costs ten billion dollars to have a 10% chance to make fifty billion dollars, is it worth it?

> Apple still needs to have this project, in order to stay relevant to competitors and current/potential employees. Even if it does fail, the side effects of having this project mainly to attract talented engineers and stay relevant make it worth the investment.

But it's a secret. How is it helping them attract anyone if nobody knows about it? They may even have something actually interesting but we won't know until they reveal it (or it leaks), and in the meantime it sounds like pretty boring and expensive follow-the-leader behavior.

And if it does fail they won't even tell anyone about it.

One difference is that the amount of starting capital matters. Say someone tells you that you can spend a million dollars for a 1% chance at a trillion dollars. That makes perfect sense for Apple, but I’d question your judgement if you throw your life savings into that gamble. That’s because the value of a marginal dollar is worth a lot less when you already have a lot of money. To see another example, consider the value that Bill Gates gets from having an extra $100,000 (essentially none) versus a homeless person (life changing).

> One difference is that the amount of starting capital matters.

Well, yes and no. If you're incommunicado in some kind of locked room with a timebombed offer, sure, if you can't afford to lose the money you say no. But if someone actually offered you a 1% chance at a trillion dollars for a million dollars, you take the offer and then immediately sell the company that owns the contract for ten billion dollars and pocket the ten billion dollars.

Or sell half of it for five billion dollars and keep the other half.

> But it's a secret. How is it helping them attract anyone if nobody knows about it?

They don't need to announce it publicly. Only to intended recipients.

> It had the potential to ruin the company by cannibalizing iPod sales

It would only cannibalize iPod sales if it was a success, and then it isn't a problem at all.

It’s not even a hobby. If something comes out of it, they’ll completely remake the category. I seriously doubt their end goal is a car in the way we understand them to be.

elon probably didn't smoke weed because of a lack of competition... probably the opposite actually. the man is in a complete burnout.

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