Tuesday, August 7, 2018

Thoughts on the trials of Elon Musk

These days, the most uplifting story concerns the Tesla automotive project. I find it interesting because I have been something of a car nut since grade school. Our next-door neighbor was the local Ford dealer just when Edsel Ford decided to make his company dominant in racing. This was a no-holds-barred land-based space race—the first use of aluminum honeycomb outside of NASA went into Ford's LeMans enduro racers. My neighbor, who was mostly selling trucks and tractors to his farmer customers, would give me the chest-pounding literature of Ford Racing because he found it irrelevant to his business. Then I added to that knowledge base in college working for an auto parts store where I first became aware of the incredible size and complexity of the USA on wheels.

My initial reaction to Musk entering that world was, "Elon baby. Stick to software. Cars are an amazingly difficult and expensive proposition. This a world that eats upstart competition for breakfast." And yet, Tesla still stands as an ongoing concern and its most recent brush with death—the mass production of an affordable EV—seems to be most significant for how much money the "shorts" lost the other day. So what have we learned?

1) There seems to be sufficient expertise in bleeding-edge production techniques so that an upstart can be world-class on its first try. I was pretty sure this could not be done but it was. Tesla has some amazing millwrights.

2) Building electric cars apparently is a lot harder that it looks. The Model S has now been out for 7 years and there is still no realistic competition. Those who were warning, "just wait until Volkswagen (Toyota, the Koreans, etc.) gets serious about EVs, then Musk will fail" have been given a pretty strong demonstration that it was easier for Tesla to solve its production problems than for traditional car makers to overcome their own internal bias towards continuing to make what they already make.

3) Tesla is proving that the switch to EVs is a complex cultural change that relies on software development, direct to customer retailing, and supercharging networks as much as innovative production expertise. The legacy car makers are notoriously deficient in these areas. On the other hand, Tesla's leads on this cultural arena are still quite susceptible to technological diffusion (what they know will soon be common knowledge.)

In other words, stay tuned.

(update 9 AUG 2018)

The shitstorm that Musk created by announcing his desire to take Tesla private is a sight to behold. Musk is hardly the first high-end Producer Class figure to discover that the world of finance is filled with bloodthirsty Predators who do NOT have his, or his company's best interests in mind. To them, he is a cipher whose only interest to them is how much money does he have to rip off.

Here in Minnesota, we had a guy named William Norris who ran a significant computer company called Control Data. During the 60s and 70s, he would get into constant fights with the shareholders. Trust me, Musk is hardly the first to notice that shareholders often get in the way of successful business operations. In fact, Henry Ford once replied to questions about taking Ford public, I would rather take down Rouge brick by brick with my bare hands than let a gang of speculators get their hands on Ford Motor. (or similar) In fact, old Henry had been dead for 9 years before Ford finally went public.

I see the shorts are threatening to sue.

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