Elon Musk Gambled Tesla to Save SolarCity
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Why was it a bad move for Elon Musk?
Elon Musk owned many SolarCity shares (in fact, Elon Musk was the chairman of SolarCity). If SolarCity would go bankrupt, Elon Musk would have lost a lot of money and power. Elon Musk saved SolarCity to save his own skin and money. Its not really that hard to imagine.
Now Tesla shareholders, who overwhelmingly voted for the merger, made a big mistake. But Tesla shareholders own the company, they are allowed to make whatever decisions they want.
Its definitely a sketchy move, but Elon Musk did it correctly. Elon Musk recused his voted, and left it up to shareholder vote. Tesla shareholders only have themselves to blame for this move.
EDIT: Even if you voted "no" and were overridden by all of your fellow shareholders, you had plenty of time to sell your Tesla shares to avoid this disaster. Tesla bought SolarCity back in 2016. Plenty of time to sell if you were keeping up with the news.
Not only did Solar City fail to make Solar Shingles under the Tesla banner... Elon eradicated their contracts with Home Depot, fully destroying the future of SolarCity.
It should be no surprise to anyone that SolarCity is no longer the top solar company in the USA, but has fallen further and further behind. SolarCity, as a company, has been milked and discarded.
Doing it with traditional connectors was a big surprise that revealed the whole thing to be a charade.
They voted for the merger based on Musk's claim that SolarCity had a good financial position and that they were releasing a revolutionary solar shingle product. Both of those were wrong.
In 2016, SolarCity lost a full, solid, $Billion. The Tesla investors who voted for SolarCity / Tesla merger has no excuse on this part: all information was public, and no fraud has been detected in any of these numbers (yet).
> and that they were releasing a revolutionary solar shingle product
That one... I'll blame Musk for for sure. But investors really should have done their own proper leg-work and analyzed SolarCity's financial position on their own.
If someone claims to be a Nigerian prince who just needs a few hundred dollars to give away their fortune, the potential customers/marks should certainly do their research and can easily learn that the offer is a scam, but the scammer is still in the wrong both legally and ethically.
Amateurs. Uber does that every quarter.
$6.2 Billion in revenue, $(6.2) Billion in net loss.
So Uber roughly, has to increase prices by 100% to break even. http://d18rn0p25nwr6d.cloudfront.net/CIK-0001543151/bb9ba252...
I wish I were kidding. But that's what the data says. Page 5 of the above link, Revenue: $6,265 and Net (6,262) if you want to ctrl-F things.
Uber spent $6 Billion more this half-year on Cost-of-Sales, R&D, and Administrative costs (compared to the 1H 2018).
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Operational income / Operational Margins are negative as well. Sooo... yeah... somewhere around 100% price increases across the board for Uber to break even.
Realistically, Uber will only become profitable if they cut back on marketing (aka: giving incentives to drivers), raise rates, and cut back on their R&D spending (all this self-driving car nonsense... Uber isn't rich enough to fund such a project).
Well, if the arguments at the time were good enough to convince them, sucks to be them. What are they gonna do?
Unless they were given tampered numbers or false factual information, Musk could oversell SolarCity prospects six ways from Sunday and they can't do anything about it.
That would be true if Musk had owned SolarCity but not been CEO of Tesla: puffery short of actual fraud would be fine. As Tesla CEO, though, Musk has a fiduciary duty to Tesla shareholders, which means his (enforceable, legal) obligation is greater than just avoiding outright fraud.
If the arguments and timelines were knowingly dishonest, then that's fraud. Hence the lawsuit.
> Unless they were given tampered numbers or false factual information, Musk could oversell SolarCity prospects six ways from Sunday and they can't do anything about it.
If you release a fake product on stage and announce timelines you know there is no possibility of meeting, then yeah, there are a lot of legal ramifications to that. Especially given a case where there are so many personal financial entanglements.
Don't get me wrong, there are definitely some good things that happen via Tesla but the amount of shady deals done out in the open is mind blowing.
I don't get it. Seems like a conflict of interest to me.
But the point still stands.
That lawsuit already exists and is still in litigation.
Then they should have left SolarCity to die (it's not like there aren't other vendors), and focus on making great electric cars and maybe dabbling in the home-battery business.
Now SolarCity is an albatros around Tesla's neck and we may yet see it take them both down.
This is going to seem super nit-picky but SpaceX was and is still a privately owned company. If the board was aware of the decision to purchase these bonds then the act was completely above board.
There are lots of things we tell our selves about the legalities of how companies should be run. But most of those mythologies are based on the regulation of publicly traded companies. Privately traded companies can and do play these types of financial shell games constantly.
Sadly I don't feel like there is much recourse for Tesla shareholders here. Even if you could prove some sort of far ranging conspiracy, there was an up down vote on the merger. Additionally the merger it self was a stock swap and not a cash acquisition. Calling the merger a mistake is fair but my sense when you look at the positions held by musk and others I think that is unlikely a broader fraud happened here. Musk owns 1/3rd of Tesla and because Tesla is publicly traded (unlike spaceX) this 1/3rd ownership stake represents most of Musk's financial liquidity. Based on the 2016 market Cap of Tesla (somewhere between 20 and 60 billion) it seems highly unlikely that Musk would encourage a merger just to gain the additional 800 or so million in Tesla stock he was given for his solar city stock.
Your concern for the shareholders is duely noted :]
I consult for a large energy conglomerate that wants to get into this market from the energy suppliers side, but the problem is that they are completely clueless when it comes to expanding beyond their traditional business. In their vision, they'll supply customers with solar panels, an EV charger, home battery, heating solutions and as a backup their traditional business: gas and electricity. All integrated in a nice package.
It took them two years to set up a department that sells their first product (besides gas and electricity): an outdated EV charger, from a company they bought that stopped innovating after acquisition and is now lagging behind competition. Not a car, just the charger.
Two years to set up the business structure isn't that much time in the scheme of multinational conglomerates. Especially when the market isn't yet that big and none of the other players are making meaningful profits.
On a separate note, SolarCity stopped innovating after it was acquired and went from being #1 worldwide for solar panel installations to a very distant #8 in the US (and not meaningfully ranked on a global scale).
You're conflating innovation with sales.
SolarCity was a financing business more than they were a product company.
They were selling financing of solar generation via Power Purchase Agreements. Installation and equipment manufacturing was largely outsourced.
That was a business model innovation and for a while it worked splendidly, which is why SolarCity became no 1 installer of solar in US.
But the model stopped working which is why Tesla had to restructure the whole business. That's why their sales dropped: they stopped doing what they were doing.
Acquisition happened at end of 2016.
Just in recent weeks Tesla launched a "rent solar" scheme. It remains to be seen how it'll do in the marketplace, but it's a business model innovation comparable to original SolarCity innovation.
They are also working on Solar Roof - another huge innovation with great potential.
And if we're charitable, we can also throw the energy storage business in the same bucket: powerwall, powerpacks, megapacks. Winning high-profile installations and growing business at 100% YoY.
Hardly a company that stopped innovating.
SolarCity's innovation was the financing model. It was adopted by the rest of the solar panel industry. The problem was that they fucked up the investment side and paid for this business model with expensive debt instead of cheap capital.
They are also working on Solar Roof - another huge innovation with great potential.
https://arstechnica.com/science/2018/10/five-solar-roof-shin...
Tesla/SolarCity was never the first, or even the frontrunner, when it comes to developing solar shingles. Just the ones who spoke the loudest and retroactively declared themselves the inventors of a product they haven't yet successfully made and that has been in development by the rest of the solar panel industry for a few decades.
https://topclassactions.com/lawsuit-settlements/lawsuit-news...
https://electrek.co/2019/08/26/tesla-gigafactory-3-leak-imag...
And in the process of getting battery supply secured.
https://electrek.co/2019/08/23/tesla-battery-supply-deal-lg-...
Even if you start from the premise that it makes sense for Tesla to be in the solar business, it's hard to rationalize that the best way to break into that market was to buy a debt laden solar panel installer.
I don't buy the short's narrative that this is anything like an Enron style fraud but the only point that the Tesla short sellers are a little bit right on, among the mounds of BS they publish, is that the Solar City acquisition was a shitty deal and Tesla would be better of today had it not happened. That said I don't think it is going to sink the company the Model 3 is just too good.
Doesn't matter that your cars are really good if you're not profitable. Just look at Saab.
Citation needed...
Tesla as a whole still operates at a loss, but that’s to be expected with the massive expansion of production capacity they’ve been continuously doing since 2012.
According to the letter Musk himself posted in early January of 2019, he said they can squeeze out a tiny profit when selling the top end Model 3s at $45k+. And that they have a big effort ahead to make a profit selling $35k cars. This is a far cry away from a healthy gross margin.
I don't know about that. Do you know why Boeing and Airbus don't make their own engines? Or how about why (practically) no car manufacturer makes their own tires? Because sometimes it makes no sense (or is downright detrimental) holding the entire vertical.
Tesla is in the electric car game and the Li-ion battery game - not the solar panel game. Solar is and has been a total disaster for Tesla. The Powerwall is right up their alley (and if not, it's easy enough to exit), but they should have left solar roofs and installation to partners. Let them fight it out with low-cost Chinese alternatives.
I interpreted that statement as justifying Tesla's SolarCity purchase (which was always a bad idea. Even back when the purchase was announced, almost everyone knew this was a favour for Musk because SolarCity was in a downward spiral and there was no business reason to justify it.)
Like you alluded to in this response, Tesla never needed SolarCity to have a integrated solution. I agree, EV-buyers are probably the kinds of people that may want solar panels. As vehicle buyers they are also the kinds of people who want tires for their cars. In both cases, it makes far more sense for Tesla to rely on partners to supply solar panels and tires to those buyers, rather than compete in those markets directly.
The only legitimate synergy between Tesla and SolarCity is that they target the same sort of people--a Tesla owner is probably more likely to have rooftop solar than a F-150 owner, or even an Accord owner.
But any solar power production needs energy storage infrastructure which Tesla is trying to do with batteries.
> As SolarCity struggled to raise money from institutional investors, it began offering individuals a chance to buy what it called Solar Bonds. (“Now you can get paid while driving the solar revolution,” the marketing material said.) But there were few takers—so other parts of the Musk empire took up the slack. According to the shareholder lawsuit, SpaceX acquired $255 million of the bonds.
Other than Musk's involvement in both, what's the situation where a company like SpaceX sees a need to plow $255 million into debt obligations issued by a solar panel installer?
Solar bonds are not as safe as US treasuries (almost nothing is for those who aren't up to speed), but the argument could be made (hopefully with data!) that they were low enough risk that people weren't going to suddenly stop paying their electric bills for the solar on their roofs (and the benefit to SpaceX was premium earned vs that of other safer cash equivalents), so you might as well lend your satellite launch customer deposits to Solar City to get more solar panels installed on roofs. And if you, as the controller, did not see it the same way, they might consider finding a controller who would.
Disclaimer: TSLA investor, owned SCTY solar bonds, have a friend who is a controller for a private family owned company who likes to talk work quite a bit. I admire the financial engineering used to succeed up to this point, and wince at the fiduciary issues occasionally.
If SpaceX managed to get extraordinary concessions for its bond purchase, like some kind of exclusivity agreement, that would raise even more questions -- like, why does one of Elon's other companies get special perks for buying Solar City bonds that the non-Elon-connected buyer doesn't?
Being able to land and deploy solar panels at scale is essential to this goal. And Musk has learned the hard way not to trust third party suppliers that he doesn't control.
SpaceX's aspirational goal is to launch something Mars-wards in the 2022 window to identify where the base will be and have some resources. Then send several vehicles and a few people in 2025 to set up a mission. Primary on that mission is to deploy solar panels, and start making methane+oxygen from CO2, water and energy. This is both for a return trip and for people to breathe. Then in 2027 send the first trip that can make a return flight. (Those dates are set by the fact that the Earth and Mars come into a good conjunction for launching from one to the other every 26 months.)
Musk says "aspirational". I think "crazy". But bump those by 2-5 years and it becomes barely plausible. And the end goal sounds less crazy now than it did 5 years ago. When it sounded less crazy than it was 11 years ago when we all were laughing at him.
And if he succeeds, the Mars colony could come to be worth more to SpaceX than its satellite launch business. By a lot.
Mars is much smaller than Earth with much more hostile environment. I heard some ideas of growing trees or putting air on Mars, but just to adjust a flow of a river on Earth could cost millions of dollars; if you add complexity to get it done on Mars I don't think a price tag could be even put on it.
Visiting Mars - sure who wouldn't want it, but other than biologist and geologist, I doubt masses would want to migrate and live there, making SpaceX worth billions in process (that assuming somehow SpaceX would be given an exclusivity to park their rockets on Mars - a body to give such approval doesn't even exist and I doubt any single country can claim Mars' ownership)
By the way i am pretty sure people who come to Mars in numbers will colonize it and it now it seems that United States will be the country that colonizes and claims Mars.
I don't see people push for colonizing Antarctica, or the Canadian Arctic. Both places are far more friendly to humans than Mars ever will be.
Mars is a dead-end. It may have a science station one day, but nothing more. Ever.
So why wouldn't you want to get ahead of the curve? Maybe governments and eccentric billionaires start paying SpaceX for their services and expertise in Mars colonization. Maybe SpaceX makes tons of money selling vacations to Mars. Maybe musk names himself Lord emporer of the planet.
Whatever is going to happen, musk wins for being so far ahead of everyone else.
NASA's priorities get changed for it every 4-8 years and doesn't get given funding increases to compensate. I am very skeptical that we will see a permanent moon colony (run by NASA) in the foreseeable future. I would love to be proven wrong.
However while relatively few people want to move to Mars, it is a large absolute number. For example a few years ago when Mars One called for volunteers for a one way trip to Mars, they got 200,000 people volunteering. Even filtering for people whose education and skills would make them useful, they had a large number.
One estimate that I saw said that a viable colony would require about 100,000 people to move over a century. And a person leaving Earth can reasonably spend their life savings to do so. The value proposition is essentially sell your house, use the money to move to Mars. SpaceX is planning to make the trip barely above cost. But don't forget. They will be landing on a planet where basic infrastructure, starting with energy, oxygen and tunnels, are provided by SpaceX. That's going to be billions per year. Of course it will be a long time before that colony is self-sustaining. But when it is, those infrastructure basics will be worth a lot.
As for a second contender, developing a rocket that can compete with SpaceX takes over a decade, and many billions of dollars. And then when you try to travel to Mars, you're going to be landing on a place where the infrastructure is owned by SpaceX. Musk is likely to welcome the competition...and charge top dollar for fuel for a return trip. So you'll have to invest billions more. And once you've done so, you'll be competing against an established competitor who is charging thin margins. And you still won't be in that lucrative infrastructure business.
As for who owns it legally...I believe that the people who live there will claim the land that they settle. And will create their own laws. They would mostly come from the USA where legal tradition resolves all property disputes in favor of squatter's rights. There will be room for all for a long time, but guess who the first and biggest squatters would be?
There's nothing there you can't get on Earth without the hassle of climbing out of a gravity well, schlepping across in front of a 24-hr supercharged X-ray machine, then climbing back down into another gravity well, then gathering whatever it is you felt is worth a hundred billion dollars of investment, waiting 2 years for the planets to align again, climbing back out of the gravity well you descended into, crossing the same X-ray moat, then finally returning to Earth and discovering some cheap bastard got it all from a mine in Australia.
1. Does he mine, refine and smelt his own iron and titanium ore, too? Where exactly does that buck stop?
2. Does SpaceX have a sudden pressing need for all the parts, and the debt obligations of SolarCity that have nothing to do with manufacturing solar panels (That is, 100% of the company?) SolarCity doesn't make any of their own panels, you know - they just install them on rooftops, and do financial engineering, and get bailed out by other people's money.
I'm sure that the Boring Company also has investments from SpaceX.
As to mine, refine, etc, he has generally tried to go down to things that he can get off of mass markets. The thing he avoids is having a custom part only intended for him which he is dependent upon another company for.
All the while, knowing that the financials of SolarCity are worse then he publiclly claimed?
Pardon me, but given the personal financial gain he had in the deal going through, this stinks so bad, you can smell it in Minsk.
Speaking of which - given his penchant for over-promising, and spectacularly under-delivering, I feel like only a lunatic would choose to settle in a Mars colony ran by SpaceX.
Also:
> The thing he avoids is having a custom part only intended for him which he is dependent upon another company for.
So, hold on. Was SolarCity supposed to be making custom parts for a Mars colony? Why would their expertise in doing financial engineering to sell people solar roofs be of any help in this endeavor?
If they weren't going to be making custom parts, and they'd just be making off-the-shelf panels, why pick a supplier decades before he actually needs one? Solar panels aren't sheet metal, but they are as close as you can get to a commodity, these days - and will be even more so, decades from now.
The bonds that SpaceX bought both helped the company stay afloat, and were at above market rates. And SpaceX made money off of that. SpaceX's involvement made sense, both tentatively (in the hope that SpaceX would get technology that they want down the road) and immediately (financial returns). The deal worked out well for SpaceX. Though it didn't pan out for their eventual hopes down the road.
Tesla is the company that really sank money in. Their synergy made more sense, Tesla has a lot of expertise in batteries and solar panels + batteries is a great combination. This is true at a small scale such as the home installations of solar panels + batteries that Tesla sold. Or at a large scale such as the South Australian battery project. And even in a distributed project such as the solar panels that Tesla added to a ton of supercharging stations.
That said, the Tesla involvement in Solar City has been a disaster for Tesla. (Though not for Elon Musk.) But Musk has always run financial house of cards. And he has enough going his way that he could still come out on top. The story with Musk is that he either will change the world or go out with a bang. This is still true. But he's coming ever closer to really changing the world, and the bang if he goes out will be truly spectacular.
4.4% on a junk bond is not 'above market rates'. It's a sweetheart deal.
> And SpaceX made money off of that.
1. In finance, ignore counterparty and default risk at your own peril. 2. Only because Elon then took the money of Tesla shareholders to buy SolarCity. If the purchase didn't go through, those bonds would have been about as valuable as toilet paper.
> in the hope that SpaceX would get technology that they want down the road
These were bonds, not tech licenses. It was propping up a business that may at some point in the future, license tech that hasn't been invented yet at better terms than any competitors in the solar space, who are not bogged down with a financial rock, and an entirely irrelevant residential-panel-financing business about their neck.
> Tesla is the company that really sank money in.
Yes, they ended up eating the worst of his self-serving trades. Despite a happy outcome of SpaceX, it was still not responsible of him to have invested SpaceX money into his own failed side venture.
> Their synergy made more sense, Tesla has a lot of expertise in batteries and solar panels + batteries is a great combination.
Ford has a lot of expertise with ICE engines, yet for some reason, it's not been trying to become a gasoline company... But sure, as much as I think there's no synergy between a failing firm that is specializing in financial engineering, and an auto manufacturer (And hindsight confirms this - SolarCity is, years later, nothing but a drain on Tesla's balance sheets), I do agree that, bad as it is, it's still a better case that SpaceX / SolarCity.
It apparently started as a subsidiary and then converted to a separate company owned by Elon Musk though SpaceX still has a 6% stake.
See https://en.wikipedia.org/wiki/The_Boring_Company for verification.
While the concept of settling Mars is understandable from an academic perspective, what is the economic justification for claiming that Mars is valuable? Any Martian colony would require hundreds of billions of Earth investment just to become habitable for a few dozen people and there aren't any resources on Mars that could be excavated more cheaply there than on Earth.
However, this only calls for a LEO (low earth orbit) colony, not really a mars colony. Even then, shipping raw material up to LEO is still mindbogglingly expensive (let alone Mars). So no one has even attempted the experiment yet.
That's expensive, but not ridiculous if we are able to get some good composites out of it.
That's the thing about all of this "Mars" discussion. There's almost nothing to be gained doing things on Mars instead of Earth.
In all likelihood, it will be intellectual property. Putting people who have taken a risk to go to a new world (literally) in tight proximity with a shared goal is a proven path for innovation. The lack of many Earth-based restrictions boosts that tendency.
CA is one of the most regulated, least risky places, on Earth and yet has led the way in innovation in multiple industries for decades.
More likely, Mars will be like Antarctica: a desolate and undesired research station and occasional tourist destination for those with too much money.
You are mixing cause and effect.
CA started off as an unregulated wild west. It became a center for innovation, and then added regulations. But retained critical innovation mass as it went. However the regulations came after.
You can verify this by looking at industries. Gold mining, no regulations except what the miners invented back in 1849. (And we are still dealing with the weird way of regulating water rights that they came up with.) Shipping because some idiots built a railroad across the country, and therefore Los Angeles/Long Beach was the cheapest way to trade with Asia. Hollywood moved here because lots of good weather, open spaces, and no regulations. Agriculture moved here because of the same plus some ambitious water projects. (Plus available migrant labor that nobody enforced wage laws for.) Aerospace moved here for the same. Silicon Valley started for a different set of reasons (see Steve Blank's Secret History of Silicon Valley) but I guarantee you that there weren't a lot of regulations when that got going in the 1950s.
In all cases regulation came later, often much later. And the result is that many industries that got going in California, such as the manufacture of semiconductors at scale, wound up moving elsewhere. But so far, at least, we've been lucky enough to dream up new ones. :-)
This is empirically false. California's fastest growth for technology (i.e., Silicon Valley post-chip manufacturing), entertainment (i.e., films, video games, and music), and agriculture all took place after the introduction of regulations.
Silicon Valley flourished because regulations protected workers' rights. Entertainment flourished because local governments passed laws incentivizing film production and protecting workers' rights. Agriculture flourished because water-use regulations protected agricultural uses over residential/commercial usage.
In all cases, yes--the industry came first. But these industries didn't flourish until after the regulations came.
And the crazy thing is that despite all the regulation, CA's industries are still flourishing. It turns out that a company that can survive the costs of CA regulation can survive pretty much anything; a company that can't simply doesn't have a viable business model.
That does give them a fair amount of leeway when outsiders are trying to judge them on methods. Is also a hubris trap if not incredibly careful.
Being able to land and deploy solar panels at scale is essential to this goal. And Musk has learned the hard way not to trust third party suppliers that he doesn't control
That gave me the best laugh I've had all day. Bravo! Is SolarCity going to send installers to Mars in Teslas launched on top of a Falcon Heavy?
Tesla: Transportation on Mars and power (battery-tech).
SolarCity: Power on Mars
Boring Company: Automated tunneling, important for building habitats, cheap radiation shielding.
SpaceX: To get there
OTOH, going to the Moon and back is relatively easy, and that's where everybody will be focusing their energy when this Mars mania finally runs its course.
Solar city, if it ever actually made solar panels, would never make multi-junction ones.
The only notable thing here is that hating on Musk is really popular these days. So the failed gambles (this, falcon doors, the initial overautomation of the Model 3 production, etc) will be highlighted and mocked, while the successful gambles will go unmentioned or incorporated as a matter-of-fact developments.
Running Tesla stories through a selection bias filter is really useful, as it'll discard most stories that pop up.
The perfect defense against truth in any form.
I went for dinner to my in-laws a few months ago and my mother-in-law asked if I had heard about the Tesla that caught fire in Shanghai. I said, yeah but did you hear about all the combustion cars that had combusted that day. She had not of course. Didn't even know "normal" cars catch fire. Nothing against her in particular (she had seen it on a mainstream TV news program), I've had similar conversations with coworkers, aquiantances, on social media, etc.
I think it's true that Musk went in and tried to save SolarCity by assuming control and changing the course. That was news at the time where it happened. He did the same to Tesla, actually. It's also true that he's always talking about visions.
The headline of this article starts with: "He (Musk) is full of shit".
Why?
Because that's a quote from a single person she interviewed, who is a disgruntled ex-employee of Tesla with a history of ranging against Tesla and Musk (to quote the article "Since then, he had taken to sending Elon Musk emails and point-blank tweets, describing the pain the layoffs were causing.").
(as a total aside, if you've heard about a laid off low-level employee angrily tweeting and e-mailing a CEO of Fortune 500 company (116 to be exact) you would probably think "an unstable person" not "a good subject expert to interview").
Instead of treating "Musk is full of shit" as a fact, she should could ask herself "is Musk really full of shit"?
Should could do it by asking more people what they think about Musk, more Tesla employees, including those that are still happily employed.
This article is clearly sourced from the most vocal, the most virulent Tesla haters (the self-proclaimed members of $TSLAQ on Twitter).
You can easily find even more people very happy with Tesla's products and I'm sure there are plenty of employees who think highly of Musk.
But it's clearly a hit piece, not interested in presenting a balanced account.
The part about Walmart lawsuit doesn't mention Tesla's response (which paints Walmart in a very bad light) or subsequent joint statement from Walmart and Tesla where they make nice.
My example may seem low-value, but I've seen lots of very long and detailed discussions around here about Tesla's "Executive Exodus", which fall into the exact same selection bias pitfall.
Your uninformed mother-in-law may have actually had a better handle on things by not being a major fan and not internalizing the Tesla PR response.
In the end he takes a lot of risks, but it’s only by looking at both successes and failures that you can judge his approach is reasonable.
No one cares about a great UI if people's roofs are catching fire. With all the positives and negatives weighed and accounted for, there is simply more negative things going on with the company right now than positive.
As to success, quietly selling 1/3 as many Model 3’s as Toyota Camry’s is what success looks like. Nobody cheers for the 292,371 car to roll off the assembly plant. It’s simply boring and not really worth talking about outside of boardrooms and climate change projections.
I don't think Musk was trying to harm anyone-- I think he doesn't realize he's human and he can't actually juggle 44 million balls at once. And I think even if he drops some balls, we're all better off for the ones he juggles successfully.
If the collateral cost of a revitalized space industry and a growing electric car industry is $750million wasted in NY State, that seems like a small price to pay.
You have an obligation as CEO (and Chairman at the time) to be ethical and legal in your actions.
Tesla is one of the many cases of Silicon Valley syndrome where you run a company at negative profit forever while claiming to make all these substantial advances (some laudable, others stupid) in an attempt to disrupt something that's been working for decades for specific reasons. There's a reason car assembly lines aren't fully automated. There's a reason car companies don't allow customers to pre-order a vehicle. There's a reason dealership networks exist.
Musk isn't some fantastical genius with a solution to everything. Everyone before Musk was as smart and as talented, so his active refusal to really learn from anyone before him is what causes him so much headache. In fact, I'd argue that his contract with NASA probably saved SpaceX because that's one avenue where he didn't ignore a previously, well established business.
Everything is done a certain way until it isn't but that historically is past the point of "about damn time" and "why'd take so long". Doing what is right and what is smart are often very different things — and I am not claiming Musk is doing either, but this certainly didn't convince me of the opposite.
And since companies were actually trying to make money, and cars were becoming more fuel efficient, there wasn't the demand. In fact, there still isn't that high of a demand for electric cars these days.
I'm not discounting that Tesla made some innovations. But people make it out like Tesla radically changed the functionality of the electric car when it's still largely the same technology, just more advanced.
To give an example, the Nissan Leaf was out well before people even heard of Tesla, and that was one of the most popular and widely sold electric vehicles. At the time, Tesla only had the 100k Roadster.
1955; drag coefficient 0.36:
https://en.wikipedia.org/wiki/Citro%C3%ABn_DS
Since then we've come quite a bit further, the TM3 has 0.23, which is a substantial improvement but neither car looks ugly.
Other improvements drive the capacity even higher through packaging innovations and possible manufacturing improvements as well.
I highly doubt it was due to range anxiety. Even the early Tesla roadster could, at most, go 200 miles. That's nothing on a gasoline engine.
The Nissan Leaf does not look that ugly. It looked like your standard hatchback for the time.
Batteries did improve but its not like Tesla had access to better batteries than GM (at least in their early days).
The public may have thought that electric cars were all but dead. But smart people knew that their time had not yet come.
Oh, and look! Excepting high end niches that Tesla figured out, and government subsidies, that timeline from 20 years ago looks to come true pretty much on schedule.
I admire Elon Musk. Without him, reusable rockets wouldn't have happened for many more years. But electric cars would have happened with or without him.
That anyone proposed resuable rockets before Musk? Use Google. You're naive if you think otherwise.
>at a fraction of the price per launch of whatever existed before.
There's no evidence that these resuable rockets are a "fraction" of the cost to re-launch. In fact, the cost is likely the reason that no one else has done it; it doesn't make economic sense, not because it's impossible.
All I heard was comment of "SpaceX Steamroller" from industry insiders. The companies that could have invested in rocket reusability decided to sit by and do nothing. It's not like it's an impossible physical achievement either.
Stop worrying about what is hip and trendy and trying to dismiss things that sounds like other things. You don't even try to parse and respond to any facts or details from this story at all, you're just being lazy.
Or, hear me out, there's something to what these "haters" have been saying for years. Which is more likely?
There's nothing wrong with taking risks and failing. There is something wrong with taking investor money and using it to bail out an unrelated company.
Anyone buying into Musk's vision understands that they're buying into all of it, for better or worse. Either that, or they're too dumb to be entrusted with large amounts of money, and markets have a way of handling that situation quickly and efficiently.
[1] https://en.wikipedia.org/wiki/Dabhol_Power_Station
[2] https://www.washingtonpost.com/archive/business/2002/01/01/b...
They are only remembered for their financial "innovations" which was ultimately their downfall. But to suggest they didn't make anything tangible is false. They even had a "Netflix" style streaming service setup with Block Buster at one point.
Enron accomplished nothing that wouldn't have happened without them, in one form or another. Agree with him or not, Musk tackles things that either wouldn't happen at all without him, or that would happen too slowly to matter.
The reality is, we need both kinds of companies, but we also need them to behave ethically.
They were not some hedge fund merely shuffling paper around. GE is a very apt comparison.
For better or worse, secular understandings and political understandings don't always jive. Now that political attitudes have changed, it seems obvious that early adopters will struggle, as their affordability is often based on those same subsidies. This is the only frame of reference in my mind that is terribly important when it comes to the success or failure of many of the properties that Musk runs. The fact that he's kept them going in the current political and social environments is really a credit, I think.
He's not building fossil fuel based vehicles. He's not building coal plants. He's keeping the space race alive. The general dislike of this guy seems personal. There are far larger financial crimes to go after, but Musk made himself a target. Damn, I wouldn't doubt that he does some of it on purpose.
That isn't a reason to not go after Musk.
Executives at all levels need to be made an example of when they commit a crime. Otherwise it encourages others to do the same.
You don't think Musk believes he can do anything? He always over-promises but that's not exactly the same as a con artist.
Elon Musk is great at promising stuff, and then terrible at executing. For every promise he fulfills there are 20 that he doesn't. But sure, the guy who flies private everywhere and shitposts more than I do is "working 100 hour weeks" and "cares for the environment."
"Reaction" is the key word here. The opposite of a fanboy is not a hater, it is the person who doesn't care. The fanboy and the hater are two sides of the same coin - they both develop an obsession with a person and define their personalities as a function of this person. Whether that function is love or hate is secondary.
The way out of his is to ignore him, or judge him by his work. He sells cars - really good cars. For example, they have the best range and are incredibly safe. Your emotional reaction won't make you car's range go down, or make you any less safe in a crash.
And any thread that involves him; I'm not good at this, but I'm trying. The reason Elon Musk inspires such hate is because he is constantly PRing (generously) unverifiable claims, but rarely gets any consequences from it. If he would let his work speak for itself, there would be less haters; his companies are clearly doing some things well.
It's kind of a Steve Jobs thing, but Jobs rarely made forward looking claims -- sure his claims of invention were irritating to some, but they were about a product that existed at the time of the claim.
From transactions like SolarCity to calling divers pedophiles to allowing Autopilot to even be deployed en masse.
His behavior of overpromising and underdelivering is a deliberate strategy to drive productivity within his employee base. You may not like that approach, but it seems to have worked.
You may judge him to be "terrible at executing" if you compare his output with his promised output. If you compare his absolute output with that of a common industrious person, you'll find he scores off the charts.
I don't hate Musk at all. I love what he does and what he has done. But he plays a ridiculously high-risk game, and that could risk destroying all the great things he built.
I heard her doing the podcast rounds last year shining light on the unsustainable business model for hydraulic fracturing to capture natural gas AKA fracking. It's the subject of another book of hers.
Saudi America: The Truth About Fracking and How It’s Changing the World https://globalreports.columbia.edu/books/saudi-america/
Why not? He was also an unstable "genius" who couldn't figure out the business side of things. Seems appropriate.
But then a stock investor tipped her off that Enron's numbers didn't make sense. She started investigating and wrote an article, "Is Enron Overpriced?"[1]. That was the first domino.
Here's a clip about that from "Enron: The Smartest Guys in the Room". A fascinating documentary and cautionary tale.
https://www.youtube.com/watch?v=gaZOIAJJ6Kk
1) https://archive.fortune.com/magazines/fortune/fortune_archiv...
Tesla does have some "solar shingle" installations, but few; they're more like demos than a production product.[2]
The big problem with "solar shingles", which are just solar panels mounted flush to the roof or as the roof surface, is cooling. Most solar panels have air space behind them. Without that, these things run very hot. Dow backed out of solar shingles several years ago because theirs kept overheating. So, no thin-film solar cells in that application.
Somebody should have gotten this right by now. These things have been around since 2013 or so, and they're still marginal.
[1] https://www.solarpowerworldonline.com/2019/04/the-latest-on-...
[2] https://www.teslarati.com/tesla-solar-roof-long-term-review-...
It's a Wix website (which probably tells you a bit about the company) - many of them have Copyright 2023 on them[1]. It's a phenomenon I've noticed for a while, but never worked out why. If anyone knows the reason I'd love to know.
[1] https://www.google.com/search?channel=fs&q="copyright+2023"&...
Tesla's Solar Roof is a roof and has a single look. It looks like a roof, not a solar panel installation.
CertainTeed is clearly an add-on. Maybe less ugly than regular solar panels but you can see that solar tiles are different than the rest of the roof.
DeSol is less obvious but also have the "solar panel" look.
The innovation in Tesla's product is that you can't tell it from a regular roof.
Maybe the reason such product didn't take off yet is because no-one did it well enough.
It remains to be seen if Tesla's product will be successful but it's clearly a unique offering at the moment.
GAF's panels (the 2nd picture) sit on top of the normal roof.
> unclebucknasty - Wow. Sounds like a huge shell game that Musk has set up among his companies. It's betting big, which should be expected from Musk, but it seems a bit odd to be so personally intertwined with public companies and making decisions accordingly. It also seems unduly burdensome to the companies in the "portfolio" which might otherwise perform well.
> a13n - Some people think SolarCity is doing terribly because they're losing so much money. Actually them losing money is an incredibly great sign for the long run (assuming they don't run out of money - which Elon won't let happen).
> partiallypro - The CEO is his cousin, but he has recused himself of voting on the deal. I doubt the SEC & FTC will care; Wall Street on the other hand, I think they all see what this is about.
Boards are dysfunctional, in the best of times.
Isn't even a modern coal-fired power plant cleaner than the ICE in a car? It certainly isn't perfect to have fossil fuel sources powering the electricity used to charge a car, but I'd much rather isolate and improve CO2 capture at coal-fired plants over having 250+ million polluters spread out over the entire country.
Tesla is interesting because his innovation was to create an electric car that actually looks nice and had great acceleration making it actually desirable to drive. All the ones before that were butt ugly and sold on their environmental credentials. Not sure if that will be enough to make them profitable in the long run. Oddly, the big car makers are still unable to make an electric car that is not ugly. Baffled as to why.
His 'The Boring Company' seems like a non-starter to me as there is no innovation except making smaller tunnels than usual. Cannot see how that is will work out, but time will tell.
His 'Hyperloop' idea is not original and seems like a dumbass idea to me. Maybe that is why he has not actually put any money into it and merely encourages others to develop it instead.
He is an entrepreneur so some or even most ideas will not work out, but with the occasional hit. His PayPal was a hit and so is SpaceX. If he has no other hits that is still two more than most people.
BTW, it was Peter Thiel that lead Paypal thru the rough times. Musk was a part of it but he was kicked out before you could say that Paypal was a success.
Come to think of it, moving people efficiently is a largely-solved problem given sufficient population density. Hyperloop is just dumb.
NYC has a throughput problem. High speed doesn't improve throughput, it worsens it.
With ultra-dense city cores the only way to fix them is proper city planning - meaning: tearing down skyscrapers outright or converting them from offices into affordable housing to reduce the hordes of low-income staff travelling for hours just to get to work.
The "free market" has failed here because stuff still works (=people get to work and make money) but the cost is put onto society as a whole (congestion, smog, life quality degradation, hours upon hours wasted being in transit).
Engineering and learning from mistakes maybe less so.
We have no idea, of course, what would have happened if the original founders had stayed in charge and Musk hadn't joined. Maybe the company would have failed. Maybe it would be doing even better than it is. Who knows. That's immaterial to the argument. Regardless of what Musk would like you to believe, or what a court settlement allows, he did not actually found Tesla.
[0] https://www.cnet.com/news/tesla-motors-founders-now-there-ar...
The guy has plenty of flaws, but he’s apparently terrifically good at synthesizing complex technical data in an extraordinarily wide range of topics, and arriving at solutions that others missed but look obvious in retrospect.
At the end of the article they mention the lack of car by New York State. Of course they don’t care, the decision makers already got what they and their rich friends wanted.
Words like "gambled" fit a narrative and get attention, but they are also misleading.
Musk's career arc is "internet yellow pages sold in the dotcom bubble" -> "payments company he was drummed out of so Peter Thiel could clean up his mess" -> "rockets and electric cars which have needed huge infusions of government and investor money to stay afloat since their inception"
I don't buy it. The economics of solar are great long term, and selling it with electric cars makes a lot of sense because a) EV buyers use a lot of power, and can save a lot of money with solar b) the electric car batteries also work great for storing solar energy to use at night
What they're offering to consumers with their new $50 a month solar rental program is the ability to have a completely off the grid sustainable energy solution for your car and your home. That is huge. Have you heard about the multi-trillion dollar petroleum industry?
Also the cars drive themselves better and better every day. Go try it. It's not perfect, but the car fucking drives itself with an object detection neural net and some traffic law heuristics. It's fucking amazing. Go try it if you don't believe me
This short bet will blow up in their faces
Why? It seems like a flooded and commodified utility market, the opposite of something with great economics.
Solar is big business and will become even bigger (because the economics are great and becoming even better).
Commodity or not, some company will make good money there. That company could be Tesla.
As to blanket "commodity" argument: McDonald sells hamburgers, Coca-Cola sells flavored water in a glass bottle and StarBucks sells coffee in a plastic cup. There's money to be made in commodity businesses if you are big enough, have the economies of scale and the leading brand.
This is a very true argument about the margins/economics of a business. If it is easy for competition to enter, it becomes very hard to make a high-margin, valuable business out of it.
> As to blanket "commodity" argument: McDonald sells hamburgers, Coca-Cola sells flavored water in a glass bottle and StarBucks sells coffee in a plastic cup.
All of these have substantial moats in either brand, training, or real estate. In what way does Tesla have any of these (brand matters far less for larger financial decisions like this) and why is it any advantage to any of these areas to have this attached to an electric car company?
And in this area, they already are no longer the leading brand, and have fallen behind many other solar companies.
Whether the panels themselves are a commodity doesn't matter -- it may actually be advantageous by lowering the capital cost required for installation. The user wants to buy the whole experience -- the panels, with a home battery to store and serve as a backup maybe, and a car all controlled through one app.
Right now you can go on Tesla.com and in five minutes you can order a Tesla for lease at $399 / month and rent a solar system for your roof at $50 a month to fuel the car. You're completely off the grid, prepared for the apocalypse, and no polluting the air. That's very compelling.
Another advantage they have is a very simple online ordering system -- try getting a quote for solar somewhere else vs ordering on Tesla.com
another advantage they have is asthetics
and also integration with the same app you use to control your car
Is this really a long term advantage? One, producing a website to have simple online ordering is not a problem for any company on this sort of scale, and two, how big an advantage is this? This isn't a sort of purchase on a whim like a new book on Amazon, these are long term planning decisions for a given family.
They're going to do the math and figure out what might actually be best for their electricity usage, home, and financial situation. Simple ordering isn't that huge of an advantage.
> another advantage they have is asthetics
Again, why is this something not easily copied?
> and also integration with the same app you use to control your car
Is this really that big an advantage? I don't know who is making multi-thousand dollar a year decisions based on this.
The article focuses on how poorly SolarCity seems to be performing post-acquisition. However, hindsight is 20/20. The fact that the acquisition turned out to be a mess doesn't make it a fraudulent transaction -- many if not most large acquisitions don't live up to expectations.
The facts that need to be considered to deem this fraudulent are the data/arguments that drove the decision to acquire SolarCity at the time of the acquisition. Mainly, were the arguments to acquire SolarCity honest and factual? Here is the acquisition pitch deck that Tesla put out at the time of acquisition: http://www.solarwakeup.com/wp-content/uploads/2016/10/Tesla-...
Unsurprisingly, the author of the article doesn't address any of the primary points contained in this pitch deck.
By that same logic, any Y Combinator "unicorn" startup is a ponzi scheme. Overvalued, unrealistic investor expectations.
Granted, this SolarCity deal was definitely not in Tesla's best interest... having chatted with a former engineer there who left because of their dysfunction.
There are better targets out there.
Enron wasn't tackling space challenges, so I guess there's a slight difference there.
Look: fraud is fraud. If someone is lying to the public, it is wrong on that basis alone. Elon Musk could have done everything the same and simply NOT lied about it, and things would have gone far smoother.
The workers at the Gigafactory2 plant have been disenfranchised due to this SolarCity issue.
What in heavens name are you talking about? Are you really claiming that Enron was in the business of replacing petroleum and natural gas with solar and wind energy?
I admire Musk’s obvious engineering prowess (chiefly his ability to find and motivate top talent), and his showmanship, but let’s not pretend that by virtue of being on some holy crusade he’ll never need turn a profit.
It would be great if some sizable fraction of the government budget were used for fabulous projects. Personally, I would like to see our entire economy made fully sustainable, and upon transitioning to the only practical sustainable energy source, nuclear, we will be able to wind down much of our military operations, excepting, of course, Afghanistan.
But that isn’t the world we live in. Instead, we live in the world of two-thirds-of-every-tax-dollar-goes-to-the-healthcare-industry, and much-of-the-rest-to-defense-contractors, and hey-look-kiddies-don’t-you-want-a-literal-chip-in-your-brain (the disheveled homeless guy weeping softly in the corner; he tried to warn people but no one listened).
Look: SolarCity was systematically DESTROYED by Elon Musk, and his supporters continuously defend his behavior. Shouldn't we be asking:
* Where are the solar roofs?
* Why did production at Gigafactory 2 slow down?
* Why did Elon destroy the Home Depot contract?
* How are Tesla's shareholders benefiting from SolarCity being actively destroyed?
* How is anyone benefiting from this collapse of SolarCity?
No one wins when Walmart has 7+ roofs catch on fire due to bad SolarCity installs. This isn't "good vs perfect", we're at the point where SolarCity is actively hampering the name of solar power in the USA. Now people are worried about their roofs catching on fire due to their systematic mistakes.
For how long? The companies he is trying to produce need to at some point be financially sustainable in order to meet their mission. And when should we wonder whether Musk is mixing up the mission with his own narcissistic endeavors?
But I appreciate the honesty about it.
And what if Musk murdered someone ?
Wondering how slippery this slope goes for you when someone has alleged to have committed a crime.
We (humanity) are in a boat that is taking on water rapidly. The guy working the hardest to patch the leaks is Elon Musk and all those that work at his companies (they definitely aren't working there for the money or the lifestyle)
Solar City is a part of this vision.
Articles like this and the comments section here at hacker news are making me very depressed about our prospects.
edit, also Solarcity didn't/doesn't provide charging capabilities, but solar cells. There is not a lack of solar cell companies in the world and SolarCity was never particularly advanced.
Solar City is not just a solar cell company. It is a power generation and distribution company. Which clearly ties into charging electric cars.
Another (very) common early criticism of Tesla: You’re just filling up with coal power.
And. Risky for sure. Elon Musk obviously doesn’t shy from risky. He sets goals that solve existential problems. In this case, our reliance on fossil fuels.
And that's part of the huge conflict of interests being discussed here. The process didn't start with Tesla execs saying "hmm, we should acquire a solar company, let's look at a dozen potential targets and see which one is the best fit." It started with SolarCity needing a bailout and Musk finding a way to justify it as supposedly in Tesla's interests. Tesla could have waited for SolarCity to go under and bought the assets and tech for much less, without the broken business model attached, but instead it overpaid in order to let Musk's family save face (and have a payday).
So this final buyout was not to save SolarCity, but to save Musk and his companies that had previously rescued SolarCity.
Also an incorrect criticism since plenty of power in the USA is generated by natural gas, hydro, nuclear, and utility scale solar and wind.
What is the relevance of these platitudes? Are they intended to be a catchall explanation/excuse for every time Musk makes an objectively terrible business decision? That we have to consider Musk cares so much about ending fossil fuels and factor that into the criticism? Musk (at least based on his Twitter persona) doesn't seem to be the type to buy into the mindset of "the most important thing is that you cared", so I don't think it's ultimately respectful to him to moderate criticism based on his announced ideals.
I'll accept the premise that Elon Musk is special, that he, as you say, "sets goals that solve existential problems." What facts/assertions in the posted article reflect or are a consequence of his higher thinking? What existential-problem-solving goal does Musk have that gives us confidence him paying $5B for SolarCity and assuming $3B of debt is a shrewd, deliberate move, and not the inexplicable clusterfuck we would happily label it were it done by some other company?
The posted story focuses almost exclusively on SolarCity's solar panel production, and makes no mention of it being a "power generation and distribution company". Did the reporter deliberately omit mentioning it, because they want to focus on SolarCity's failures? I googled around for SolarCity and power generation and/or distribution, and I only skimmed the first pages of results, but I didn't see a headline post-2017 that didn't describe something negative, e.g. `Tesla to close a dozen solar facilities in 9 states`. Is it possible that SolarCity no longer meaningfully competes in power generation/distribution?
Some supercharger stations do have an interesting thing: a big battery bank with a four-quadrant utility meter. I assume Tesla has come up with some clever billing arrangement that combines peak shaving, demand response, TOU arbitrage, and selling reactive power to minimize the cost of operating the station. Otherwise it makes little sense to me to collocate battery banks with superchargers.
The part I don’t understand is that Tesla’s stations seem to operate at 480V input. Utility rates are a bit lower if you buy power at “primary” voltage. Maybe Tesla doesn’t want to deal with the fact that primary voltage is different in different places?
I think the main purpose of the batteries is just to cut down on demand charges. Even a smallish older Supercharger can pull 500kW if a bunch of cars arrive at once, and that gets pricey. I wouldn’t be surprised if they got fancier as you describe, though. If the capability is there, might as well use it.
https://electrek.co/2019/07/18/tesla-v3-supercharger-station...
"Musk’s believers argue that the details of his ventures don’t matter: It’s the grand vision that counts. “The guy has a will to make stuff happen that is extraordinary,” says someone who worked closely with Musk. “He willed Tesla to happen. And in willing a reality into existence, he might not stick to the facts.”"