Posts tagged ‘Tony Stark’

If Feel Like I Called The Elon Musk - Popular Mechanics Love Fest

In my extended article the other day about Tesla I wrote of Elon Musk

Elon Musk is not the smartest guy in the world.  He is clearly a genius at marketing and brand building.  He has a creative mind -- I have said before he would have been fabulous at coming up with each issue's cover story for Popular Mechanics.  A mile-long freight blimp!  Trains that run in underground vacuum tubes!  A colony on Mars!  But he suffers, I think, from the same lack of self-awareness many people develop when they are expert or successful in one thing -- they assume they will automatically be equally as brilliant and successful in other things.  Musk creates fanciful ideas that are exciting and might work technically, but will never ever pencil out as profitable business (e.g. Boring company, Hyperloop).

Seriously, go back and look at old popular mechanics covers.  Here is one in my domain:

The magazine specialized in really cool ideas that 14-year-old geeky boys like me ate up in the 1970s.  But most of them share in common with Elon Musk's ideas that they will never be practical.  So it is not surprising that Popular Mechanics put out an absolute puff issue on Elon Musk, apparently aimed at helping the man Popular Mechanics loves rehabilitate his reputation after getting some bad press for making false promises and breaking securities laws.   The piece was such a hopeless PR piece masquerading as journalism that the Atlantic felt the need to call them out for it.

Other readers, particularly journalists, were flabbergasted, including several Popular Mechanics staffers and contributors who declined to speak on the record because they feared jeopardizing their jobs. “It’s not the job of a magazine to do some PR recovery efforts for somebody exhibiting unstable behavior just because you like that he makes cool cars and rockets,” one Popular Mechanics writer said. (Disclosure: I worked at Popular Mechanics as a web intern for about a month in 2012.) For many journalists, the essay collection was a love letter bursting with unbridled, unfiltered admiration for Musk, a public figure the magazine covers, regularly and objectively. The material reads as if it came straight from the public-relations managers whose jobs are to make their boss look good.

In response to criticism the Popular Mechanics editor said:

D’Agostino said he decided to do the project after reading a slew of negative press of Musk and his properties, and, as he put it in the final collection, “myopic and small-brained” criticism. He cited as examples news coverage of the misleading tweet about Tesla, the ensuing SEC debacle, Musk’s weed experience on Joe Rogan’s podcast, and the entrepreneur’s relationship with the singer Grimes....

Musk, he said, is a good representative for the Popular Mechanics ethos. “It’s always been a magazine about what’s possible and the people who sort of tinker with things and solve problems with the aim and goal of improving human life and existence, and using technology to make things better,” he said. “When you look at someone like Elon Musk, we kind of think of him as one of us. He’s doing something very Popular Mechanics—you don’t know if it’s going to work, but he tries these things and gives it his all.”

I am perfectly willing to acknowledge Musk's good points, as I did in my long essay linked above, but in my opinion Musk is leading a lot of very naive investors over a cliff.  Go read the Tesla fan boards and the $tsla tag at twitter and you will see a series of investors who have never bought a stock before talking about how they put all their savings into Tesla.  Ugh.  Magazines like Popular Mechanics have some responsibility not to shamelessly tout a high-risk stock to naive investors.

For those who don't want to read my whole essay, the biggest problem at Tesla is that Musk has promised a lot of things, all of which take capital which it is increasingly clear Tesla does not have.  The promised Semi, pickup truck, coupe, solar shingle, China expansion, EU sales of the model 3, expansion of the sales and service network, bringing body shops in house, implementation of full self-driving -- not to mention repaying a growing accounts payable backlog and over a billion dollars in debt coming due in the next 6 months -- all will require billions of capital and Tesla is hitting bottom.  Musk claims he will be able to fund this with organic cash production but this almost has to be an outright lie.  He needs to raise equity, but has not done so when his stock was at all-time highs.  Now that he is in trouble with the SEC, rumors swirl that he may not be able to raise new capital.  If he cannot, Tesla will be bankrupt in 6 months or less.  Tesla might survive if it can find a white knight (though many of the obvious candidates have turned him down) but this is a lot of risk for noob investors to take on and a lot of risk to simply IGNORE in a Popular Mechanics puff piece.

Postscript:

By the way, is the balance problem on Elon Musk coverage really a dirth of hagiography? This is the man the press explicitly calls the real life Tony Stark.  If anything, he needs that guy referred to in the final seconds of the movie Patton, the person who rides with the Roman general during his Triumph and whispers in his ear that all glory is fleeting.  I have no problem talking about the wonderful things Musk has helped push forward (and I do) but good God aren't you obligated to also include stuff like this, out of his own mouth?

You can click on the tweet and see my whole response, but eschewing 3rd party dealers and having its own sales and service network has been a Musk strategic pillar for 8 years.  The production ramp for the Model 3 is years behind.  And the CEO just looked at the map and realized they did not have enough service locations even for their less-than-expected sales?  This may be a great idea man and visionary and man who can get great efforts started, but this is not the tweet of a great, or even a good, CEO.

The Good Intentions Generation

This seems to be a generation in which good intentions are enough.  Actually, I am not sure this is exactly right, let me try again.  This seems to be a generation in which the signaling of good intentions is enough.


Socialism will work because we have good intentions for it.  Trade wars will work because we have good intentions.  Tesla is valuable because it has good intentions.

Democratic socialism supporters don't even know what socialism is.  Trump supporters don't understand squat about economics but just feel that Trump genuinely wants to help them.  Tesla bulls don't even try to look at a balance sheet but just really, really love the idea of Elon Musk being a real-life but progressive Tony Stark.  Not sure where I am going with this, but just frustrated this morning trying to talk policy in a world of virtue-signalling.  In the last few elections I have been presented with discouraging but predictable choices.  Now I am presented with a choice between two parties that have both lost their minds.

The Dangers of Trying To Reinvent An Industry, And A Few Notes on Tesla

I am often critical of Elon Musk and Tesla, and will be again later in this post, but I wanted to start by sympathizing with Tesla's plight.  As you may know, Tesla set out not only to produce a leading electric car (which it did) but also to reinvent automobile manufacturing (which it is struggling to do).  One of the hard parts about reinventing an industry is being correct as to what parts to throw out and what parts to keep.  Musk, I think, didn't want to be captive to a lot of traditional auto industry thinking, something anyone who has spent any time at GM would sympathize with.  But it turns out that in addition to all the obsolete assumptions and not-invented-here syndrome and resistance to change and static culture in the industry, there is also a lot of valuable accumulated knowledge about how to build a reliable car efficiently.  In Tesla's attempt to disrupt the industry by throwing out all the former, it may have ignored too much of the latter, and now it is having a really hard time ramping up reliable, quality production.  Musk even recently admitted it may have gone overboard on factory automation.

I don't agree with all the conclusions, but I thought this was an interesting article on Tesla vs. Toyota production practices and the industry lessons Tesla may have been too quick to ignore.  One quote I liked, “Machines are good for repetitive things… but they can’t improve their own efficiency or the quality of their work.”  I sympathize with Musk on this one.  You CAN"T upend an industry by copying everything it does -- you have to go off in a different direction, at least on some things.  It may be that Musk eschewed the wrong bits of industry practice, but this is an understandable mistake.

What is not understandable is Musk's lack of transparency, his self-dealing, his wild and unfulfilled promises, and his unprofessional behavior.  Some notes:

  • A few months ago, at the Tesla truck launch, I wrote:

But Tesla needs to stay hot. California is considering new vehicle subsidy laws that are hand-crafted to pour money mainly into Tesla's pocket. Cash is burning fast, and Musk is going to have to go back to the capital markets again, likely before the end of the year. So out came Musk yesterday to yell SQUIRREL!

Tesla's main current problem is that they cannot seem to get up to volume production of their main new offering, the Model 3. The factory appears to be in disarray and out of production and inventory space. They can't produce enough batteries yet for the cars they are already making. So what does Musk do? Announce two entirely new vehicle platforms for tiny niche markets.

I saw the truck launch as a cynical ploy to distract from Tesla's operating problems and perhaps to get a bit of financing in the form of customer deposits (a growing percentage of Tesla's available cash is from customer advance deposits).  There was no way it could do anyting with this truck, given its operating problems and lack of capital.  It seems that I was on target, because not even 6 months later Tesla has tired of pretending the truck is going anywhere.  After Telsa did not even mention the semi in their earnings conference call, Musk said in answer to a question:

I actually don't know how many reservations we have for the Semi. About 2,000? Okay. I mean, we haven't really tried to sell the Semi. It's not like there's like an ongoing sales effort, so sales – orders for Semi are like opportunistic, really companies approaching us. Yeah, it's not something we really think about much.

  • Elon Musk proved himself on the same conference call to be a spoiled brat who has spent too much of his time having people kiss his feet and compare him to Tony Stark.

One week ago, Elon Musk entered the history books for his unprecedented, petulant handling of "boring, boneheaded" questions from two sellside analysts, who merely wanted more details about the company chronic cash/rollout issues.  And no phrase captures Musk's descent better than "These questions are so dry. They're killing me."  That's what Musk told RBC analyst Joseph Spak in response to a question about Model 3 reservations.

My older readers will know that my dad was President of Exxon from the early 70's (a few weeks before the Arab oil embargo) until the late 1980's.  In that job he never had to do analyst calls, but he did about 15 annual shareholders meetings.  I don't know how they run today but in those days any shareholder with a question or a rant could line up and fire away.  Every person with a legitimate beef, every vocal person who hated oil companies and were pissed off about oil prices, every conspiracy theorist convinced Exxon was secretly formulating chemtrail material or whatever, and every outright crazy would buy one share of stock and show up to have their moment on stage.  My dad probably fantasized about how awesome it would be to just get asked dry financial questions about cash flow.  And through all the nuts and crazy questions and outright accusations that he was the most evil person on the planet, dad kept his cool and never once lost it.

If you asked him about it, he likely would not have talked about it.  Dad -- who grew up dirt poor with polio in rural Depression Iowa -- was from that  generation that really did not talk about their personal adversity much and certainly did not compete for victim status.  He probably would just have joked that the loonies at the shareholder meeting were nothing compared to Congress.  My favorite story was that Scoop Jackson once called him to testify in the Senate twice in 6 months or so.  The first time, just before the embargo, he was trying to save the Alaska pipeline project and Jackson accused Exxon of being greedy and trying to produce more oil than was needed.  The second time was just after the embargo, and Jackson accused Exxon of being greedy and hiding oil offshore in tankers to make sure the world had less oil than it needed.

Through all of this, the only time I ever saw him really mad was when Johnny Carson made a joke about killing the president of Exxon (he asked his audience to raise their hands if they thought they would actually get convicted for killing the president of Exxon) and over the next several days our family received hundreds of death threats.  These had to be treated fairly credibly at the time because terrorists were frequently attacking, kidnapping, and bombing oil company executives and their families.  We had friends whose housekeeper's hand was blown off by a letter bomb, and I was not able to travel outside of the country for many years for fear of kidnapping.  (For Firefly fans, if you remember the scene of Mal always cutting his apples because he feared bombs in them from a old war experience, you might recognize how, to this day, I still open packages slowly and carefully.

This is a long way of saying that Elon Musk needs to grow the hell up.