In a recent article, we discussed Tesla (TSLA, Financial) and the significant threats to its growth posed by a lack of strategic advantage, less investable resources than legacy automakers and an apparent lag in innovation. We also mentioned CEO Elon Musk’s somewhat bizarre Twitter rant against Warren Buffett (Trades, Portfolio).
A bit of trolling of a respected Wall Street icon is not going to do much to shift investors’ perceptions of Buffett or of moats as a valuable investing concept, but it may further influence the perception of the man doing the trolling. Indeed, Musk has a growing reputation for volatility. That spells trouble for a company built largely on the image of a singular visionary leader.
Musk is rapidly moving from asset to liability for Tesla, and that could spell deep trouble for the company's operations - and its inflated share price.
Reality check for Musk
Musk’s salesmanship and charisma has been one of Tesla’s most valuable assets to date. But with his recent behavior in the face of production chaos at the Fremont factory and deteriorating company financials, it seems the billionaire futurist is turning quickly into a liability.
As his promises become more wild and his willingness to engage in trivial Twitter wars becomes more prominent, even the general public (which has been primed by years of fawning media attention to trust in Musk’s vision) will begin to question whether the super-genius at the helm of Tesla is actually able to deliver on all the fantasies.
Master of flimflam
While Elon Musk’s supporters and admirers will say he is a gifted communicator with a visionary outlook, his detractors are quick to call him a flimflam artist who is pulling the wool over the eyes of a fawning media and docile public. Whatever his intentions, no one can question that he is good at spinning a story in his favor.
An April interview for CBS highlighted these fundamental pathologies afflicting Tesla and its leader.
The interview made the usual fawning obeisance to Musk’s genius, introducing him at the start of the interview as a “titan of Silicon Valley.”
While we have found that ignoring what Musk says in favor of what he and Tesla are actually doing, it is sometimes worth paying attention to his words. A few interesting things jumped out at once.
Musk has consistently struck an upbeat tone about the Model 3’s production, even in the face of seemingly endless production hell. But in the CBS interview, he also admitted to continued difficulties:
“I definitely feel stress, yeah. It’s like — we’ve been incredibly difficult and painful the last several months. Yeah, I’m sleeping on the factory floor, not because I think that’s a fun place to sleep, you know. Terrible.”
This is not the first time Musk has claimed to be living on the factory floor. He has claimed to have done so during previous production bottleneck issues. It is a clear attempt to conjure up images of heroic effort and notions of the indispensable genius saving the day. But Musk did find time to attend the Met Gala, despite the fact production numbers continue to lag well behind the goal that has been extended repeatedly.
Running out of spin
The problem with relying on a convenient fiction built on misleading data points is that, ultimately, reality takes the wheel. When it does, the acts of misdirection stand out much more starkly. While many continue to idolize the Musk who will suffer alongside his workers and camp out at his own factory, that admiration will, in many cases, turn to feelings of betrayal once it is clear what he is doing.
Let us be clear: Musk and Tesla are deliberately curating the production figures and targets in order to misdirect from reality.
On that note, another excerpt from Musk’s interview bears mentioning. During a discussion about regulation of artificial intelligence, Musk opined on the problems to society created by “fake news”:
“I think there should be regulations on social media to the degree that it negatively affects the public good. We can’t have like willy-nilly proliferation of fake news, that’s crazy. You can’t have more types of fake news than real news. That’s allowing public deception to go unchecked. That’s crazy.”
Musk should take his own advice and start sharing a more realistic outlook for the Model 3 and Tesla. Shareholders deserve honesty, not spin.
Disclosure: I/We are short Tesla via long-dated put options.
