Published on October 10th, 2020 |
by Johnna Crider
October 10th, 2020 by Johnna Crider
Ross Gerber, CEO of Gerber Kawasaki, took to Twitter recently to share that he was available to answer any Tesla-related questions. He noted that he saw the entire new battery cell factory at Tesla Battery Day and also rode in a full self driving (FSD) Tesla last year. So, naturally, I picked his brain.
Happy to answer any tesla questions. I was in a FSD tesla last year and I saw the entire new Cell factory at Battery Day. One of a few dozen in the world who has seen the future… $tsla https://t.co/KvAFMyhtkH
— Ross Gerber (@GerberKawasaki) October 6, 2020
I wanted to focus on Battery Day and the fact that he, someone who looks at Tesla from an investor’s perspective but seems to understand what many analysts simply don’t. I thought that perhaps he understood the tech in a better way and could reveal some things to us. It turns out that Ross has similar thoughts to my own — many who do not understand Tesla and its technology simply don’t want to understand, or their opinions about Elon Musk are clouding their ability to understand.
What was the one thing that impressed you the most as an investor about Tesla’s battery cell factory, and on the flip side, what do you think Tesla needs to improve?
What Impressed Ross
“Well, first of all, I think the thing that was most interesting to me as an investor is that the way I look at Tesla now has changed. I really did not have my models — the fact that they were going to re-do the battery cells and make those in-house. That vertical integration is an investment of time and money but has huge potential implications long term to Tesla, climate change, and everything.
“Clearly, they’ve been working on this for years. This is not something they’ve just done in the last six months. They’ve managed to keep this secret for years and what they’ve done by doing this is they basically created a new battery, and in doing that, it’s going to change the world. So, I think investors have to look at Tesla differently now because the power of actually controlling the best batteries in the world is enormous, and these Terafactories have enormous potential for the long term.
“I don’t know how to value something that corners the market on future batteries. I think that Elon’s ambition is so much greater than what people understand and that’s coming more and more into view as time goes on, and this just proves that his ambition is just ginormous. Tesla can easily become one of the biggest companies in the world. I think Tesla will be bigger than Apple. I think Tesla will be bigger than Amazon. And if I say this, most people think I’m crazy, but I’m talking in the next ten years and I think they’re going to achieve their goal. This is mindblowing.”
Tesla Needs To Improve In This Main Area
“I think that Tesla’s weakness is the fact that they don’t have a succession plan. There is no operational head like Tim Cook of Tesla. Steve Jobs had Tim Cook and Tim Cook is a crucially important role that needs to be filled at Tesla. As much as I love Elon, he flies around everywhere and he takes risks and if something happens to him, I think that puts the mission at risk and the company at risk. I think it’s a huge weakness that Tesla isn’t working harder to build a deeper bench.”
What challenges do you see that Tesla can learn from as it continues to grow?
I asked this question because I thought it would be a great way for Tesla and Elon Musk to get some balanced constructive criticism that was unbiased. Ross made some excellent points, but the one thing that he was most concerned about was what would happen to Tesla if something happened to Elon. That is seen as Tesla’s greatest weakness.
“Tesla is a company filled with engineers, and I think the problem is they need more management talent that can provide a deeper bench for Elon and, God forbid, if anything happens to Elon, people who can help see this mission through. I think they have enormous brainpower and talent from an engineering perspective and they have some great managers, but I just don’t think they have the depth that they need.
“Part of the reason is that people can’t work for Elon very long. The pace there is so ravaging that you just don’t see that many people stay at Tesla for more than five years because they just can’t take it.” Ross explained that he talked to a former Tesla employee who had a great career, but he retired because he couldn’t keep up with the pace. “The culture is so intense and I just don’t see that at tech companies in the Valley (Silicon Valley). Elon’s culture is you live and die Tesla.” Although, it does make sense for the CEO of a company to be as dedicated as Elon is to Tesla (at least, those were my thoughts in our conversation).
“The problem is that he’s lost a lot of talent in this sort of churn and burn world that he’s in and he hasn’t been able to build the depth that I think the company needs, especially on the upper end. I think that’s something they can fix in the next year or two, but I think they need to fix it.”
It seems that some analysts are having trouble understanding Tesla as a tech company and one that also makes batteries. You understand the tech. How is it that the others don’t get it?
“Well, there are two elements to it. The first element is understanding the technical side of it and the second is understanding the people involved and believing in them. When someone invents something new and they say — ‘I’ve invented the airplane. Watch, I can fly.’ — everyone says ‘You’re crazy. You can’t fly. Nobody can fly. Only birds can fly.’ That’s just normal.’ I don’t know how many people believed the Wright brothers, and I don’t know what kind of headache they went through trying to do what they were doing, but I’m sure that it was a very difficult process.
“Any new invention that changes the paradigm of expectations has this challenge because the skeptical public and the analysts just don’t think that big — I guess that’s the best way to think about it. And the second part is trusting that the people doing this know what they are doing. This is how I made a lot of money on Tesla. It’s not, per se, some superior understanding of technology. It’s just that I understand that Elon understands technology better than anybody, and so I’m betting on Elon. My expertise is only so much, but I don’t have to be [an expert] because I know the guy I’m betting on knows his stuff better than anyone in the whole world.
“What the analysts do is that they are skeptical of Elon and they are skeptical of technology, so they come into everything thinking that it can’t be true, and then they just need to prove that. It’s always easy to prove something you don’t want to believe in. So many investors have missed Tesla who just wanted to come up with reasons not to believe. In fact, most of these analysts just have a personal thing against Elon and they color their understanding of things with their biases. This is a really important point where I bet on people and I bet on the future. I think I know what I want the future to look like and Elon is building a future that I see and it just makes sense to me. But I felt like it doesn’t make sense to analysts because they don’t sit in their room thinking about the future. They are looking at financial statements from last year.”
One thing I noted in the conversation is that it seems like such analysts don’t want to see the future or envision it because if it was different from what they thought, it would invalidate the things they so desperately want to believe in. A great example is the “Tesla is a failure, Tesla is going bankrupt” theme that we often see on Twitter, that we have seen for more than a decade. If they were to look at Tesla’s future with its technology, their core beliefs would be invalidated — and imagine all that time wasted pouring over 2017 financial statements and realizing that that time was wasted.
“You can’t prove the future, and when someone says, ‘How do you know, Ross? What makes you so smart?’ And I say, ‘You don’t have to believe me.’ When I drove the Model 3 two and a half years ago, I bought one of the first ones — just like when I got the first iPhone. I was like, ‘Dude, this is a game-changer,’ and people were like, ‘Why, because you say so?’ And I said, ‘Yes, I understand consumer technology. I’ve been doing this my whole life and have made millions and millions of dollars investing in consumer technology. I think I know what consumers want, and when I got the Model 3, it turned out that I was right, but there is no quantifiable model that I can build based on my opinion.”
“These analysts just don’t have the balls to have a vision and to believe in it. They have to justify everything with a financial statement. The way they think is broken, is the best way to look at it. If you’re analyzing technology, you need to think about what you think the future is going to look like and how this fits in that vision, and analysts don’t do that.
I asked Ross if there was anything he would like to add — maybe something that could help those who were willing to try to understand the tech a little better.
“I spent several weeks working with a battery expert who used to work at Tesla, studying battery technology. Then I’m sitting in the belly of the beast and it’s very intimidating for me because I’m a finance guy. I’m not an engineer. Engineering is the opposite of my skillset — I’m a musician, really. I think I’m just like everybody else trying to understand the technology. I just work harder at it because it is important to me. I was laughing because he showed me the factory but it looks like the whiz-bang factory with robots and all that. I think it’s cool, but I honestly can’t tell you what any of these things are really doing. I understand how a battery works, but that’s about it.
“I think what people have to understand with technology is that they have to trust the people building it, like Elon, to tell you what it is. He laid out a presentation with PowerPoint slides that I think clearly explained each part of the process and how they’ve improved it, and that’s all you need to know. They made a battery cell that’s seven times better and that’s all you need to know. It’s better, it’s cheaper, and it’s going to be a game-changer in two years that these people just don’t get. So, if you invest in Tesla today, don’t worry about the next year. Worry about the next five years. In five years, this is when we are going to see this amazing result. It’s not like a short-term thing, and I think that’s what investors have to understand.”
I think that Ross explaining the reason why analysts think the way they do helps one to understand them better. Analysts are so focused on past financials that they literally can’t see what’s before them — a future that they can’t predict. Unpredictable futures can be terrifying, so it’s natural to want the comfort of past knowledge. However, when you combine this with hatred or disdain for the CEO of the company you are analyzing, your data becomes corrupted.
In other words, to truly analyze any company, you need to leave your personal feelings about that company or its CEO at home. It was a refreshing interview that helps one to see the mindest of an analyst and their reason for choosing to have a closed mind. Now, not every single analyst hates Elon or Tesla, but many are overtly critical of Elon Musk, and it seems like that bleeds into their analysis of Tesla. Sometimes, sheer hatred can be so blinding that one refuses to see the good in anything that the person they highly dislike achieves.
I also think that Ross has a point about Tesla’s main weakness — what would happen if something happened to Elon? Elon Musk is the heart and soul of Tesla — as he is at his other companies. These companies are his dreams, and with Tesla, Elon does need people on his team who will see the mission through if the worst was to happen.
Disclaimer: I’m an investor in Tesla [TSLA], because I believe in Elon Musk and the whole Tesla team.
Featured image by Chris Loupos, edited by CleanTechnica.
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