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The Smartest Guys in the Room Eerily Describes Tesla

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50 pointscamjohnson2619 comments

Unrelated to Tesla, but WeWork recently set up a holding company to buy stakes in buildings it rents from. The name is ARK, which the CEO said in an interview stands for Adam, Rebekah, and kids. The company quickly said his answer was a joke and gave a real definition.

This is interesting because at Enron The LJM company set up by Andy Fastow was created to let Enron move assets off their balance sheet, even though Fastow kept his CFO job and control of LJM. Over time this allowed Enron to hide losses and was one of the main reasons the company fell. The funny part is that LJM stood for Lea, Jeffrey, and Matthew, who were Fastow’s wife and kids.

You seriously can’t make this up.

https://www.bloomberg.com/news/features/2019-05-15/wework-wa...

Yes this was the core of the Enron fraud. I was a bit disappointed this was never touched on as everything else feels superficial.

Except - Tesla has a real product that has a real demand. Enron's smart guys transformed the company from a traditional energy company which met that criterion to a financial engineering company that didn't know enough about financial engineering to survive.

I like to remind myself how many firms are financial engineering firms first and customer facing firms second. Banks, insurers, (at one time) Porsche, Tesla (imho for this one).

You can add airlines to that list. Here's[1] an article that goes into it a bit. American Airlines actually loses money on their whole "flying people around" business. All of their profit last year was derived via selling points/miles for their frequent flyer program. And it's not limited just to American - I'm not sure about foreign carriers, but it's really common for US legacy carriers to derive substantially all of their profit from marketing revenue related to their loyalty program.

[1] https://viewfromthewing.boardingarea.com/2019/01/24/earnings...

Sony apparently makes most of its profit from its insurance business.

Tesla is a car company valued like a tech company right now. Unless they solve the problem of self-driving their stock is overvalued. Let's check-in shall we? Uber - self-driving is dead, BMW self-driving is years away, Alphabet - self-driving is in its very early stages, Tesla - We'll have it by the end of the year or I'll eat my hat!

Google is maybe the only other company with the capability to collect the data necessary to solve self-driving. But they don't own the car production, they need to partner, and hence are at the whims of traditional automakers' margins and product designs.

Tesla is collecting sensor data from their entire fleet, probably mapped to when the user needs to override autopilot. A really elegant source of training data when you think about it.

https://electrek.co/2017/06/14/tesla-autopilot-data-floodgat...

The stock price has no bearing on the financial viability of the company.

Overvalued stock happens all the time. Musk himself has repeatedly stated his belief that Tesla stock has been overvalued by the markets. Even with a bunch of fraud that is still different from Enron.

Fundamentally Enron became the market maker for energy products. They didn't seem to understand that a market maker's role depends entirely on having the confidence of the market participants. Enron then started to do more and more outlandish things whereby they eventually lost the confidence of the participants and that's when it imploded almost over night. Tesla isn't really in a similar situation but Google is.

I was expecting an actual analysis in the Reddit post. Perhaps something along the lines of a quantitative analysis with market data. Seems like many companies could “eerily” be described by the collection of passages outlined in the post (Uber? Snapchat? Theranos?). Would be nice if there was a corresponding anecdote from Tesla’s company history alongside each quote from the book.

Only tangentially related; but if you want to understand the Enron scandal; Kurt Eichenwald's Conspiracy of Fools is a better treatment of the topic.

Agreed, that book was fantastic. Detailed but also very entertaining.

I have that book, but I only got through the first couple of chapters. Is it factually sound? The narration of conversations between Enron people is so descriptive (down to what they were wearing), that I kinda got the feeling that this is a "dramatic re-telling" as opposed to a more investigative review.

I actually found the storytelling style pretty gripping, but again, I wasn't sure how much of it was fact vs. embellishment for narrative purposes.

I've got to say, I don't find this analysis compelling. I'm not a fan of Tesla, but this analysis doesn't add much new.

If you look a little further down in the thread, there are (purported) former Tesla employees talking about what sounds like a really horrible experience working there -- being treated terribly, all the really experienced people leaving, etc.

To me, if those are real former employees telling the truth, that's a lot more meaningful than the comparison to Enron.

You can say the same thing about Amazon employees, yet Amazon is not really comparable to Tesla

Don't worry guys, reddit OP is just a short seller. Buy the dip!

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