Elon Musk is not just another inconsequential Silicon Valley billionaire.
Most of his inconsequential peers have two primary accomplishments: showing up at the right place at the right time and being sufficiently arrogant to continue the course rather than diversify. Had their shoes been empty, someone else would have stepped into them, and things would have been much the same.
But Mr. Musk changed the world.
He wanted to jump-start the decarbonization of human civilization’s energy. He succeeded. He drove Tesla to create the electric vehicle industry as we know it. Yes, he overpromised. But he often overdelivered and overdelivered spectacularly. Truly wonderful things happened with Tesla’s performance as a technology inventor, deliverer and deployer.
But “happened” is in the past tense. Much has changed since 2018, the year Tesla dreamed up an unorthodox pay package that, in theory, tied Mr. Musk’s pay to the company’s performance. Problem is, the performance was not for making high-quality cars or making affordable cars or making cars at scale. The performance was for pushing Tesla’s stock price up.
This pay package was, I think, bad for Mr. Musk. And it was, I am sure, bad for Tesla and, by extension, our nation’s crucial fight against global warming, by far. Tesla is now asking its shareholders to reapprove this pay package, which would hand Mr. Musk an eye-popping roughly $46 billion, making him, the world’s richest man, one of its highest-paid executives.
I have a recommendation for Tesla shareholders: Vote no.
The board promised Mr. Musk — at his urging — that if he made the board and the shareholders truly wealthy by boosting the stock price, by whatever means, he could have 12 percent of the company. Yet I believe this pay package helped drive his descent from visionary business leader to bizarre carnival barker. And that set of incentives and responses should not be validated.
Here I need to back up and tell you what meme stocks are. The standard example is GameStop, a company that runs about 4,000 video game and electronics stores. Trading at $5 a share at the start of December 2020, its price rose to a staggering roughly $150 a share at the end of January 2021. Mr. Musk joined the fun by tweeting one word — “Gamestonk!!” — and the shares soared to $483 two days later, before beginning a long, jagged decline. As of the start of 2024, it was almost $17 a share, far above the $5 of 2020, even though nothing much had changed about its (struggling) business. And a recent revival of GameStop mania has since pushed it up to $30 a share.
Who is behind all of this crazy? It is not people who want to invest in a slice of Gamestop’s business over the long term. It is, rather, that people who are buying GameStop as a way of pledging allegiance to an idea, a meme, a cultural-technological movement of some kind — and a few hoping to get rich by tagging along and selling at the top. Past stock manias and bubbles involved people who believed that the company involved would be profitable or at least that they would be able to make money selling their stock to a greater fool than them who had just arrived in the marketplace and still believed. But GameStop stock became all but disconnected from the profit-and-loss statements of the 4,000 GameStop stores.
And so it has become with Tesla. It was no longer about getting better at making high-quality electric vehicles for which there was strong demand. For Mr. Musk, incentivized by his pay package, it became about a stock price that must go up.
After 2018, Mr. Musk went all in. He made noise, particularly on Twitter. He still overpromised, but he no longer overdelivered; instead he jumped from moonshot theme to moonshot theme to boost the meme-stock association of Tesla. Humanoid robots! Cybertrucks! Fleets of Tesla robotaxis! An artificial intelligence supercomputer whose brain would be all the idle Teslas in the world, networked! And the share price did zoom, making him the richest man on earth, from about $20, give or take, around 2018 to over $400 in late 2021 before beginning a jagged and often interrupted decline to its still lofty $174.
Tesla had always had build-quality problems. But it used to have a road map for fixing them. And it used to have a road map for gaining manufacturing expertise, adding capacity, introducing models to crawl down from the rarefied technoexperiment and luxury car markets into the enormous market of providing what Americans see as their basic transportation. But those seem to have fallen away. The idea that there would soon be a truly affordable mass-market Tesla receded from real soon to maybe someday. Instead we got the Cybertruck, for which demand is rather limited, as it is not set up to do the things that people who use pickup trucks need them for. And meanwhile, in China, BYD’s blade-battery technologies and process-manufacturing expertise grew by leaps and bounds.
Unlike GameStop, Tesla sells products a bit more critical to our future than games like Call of Duty. For the world, Tesla has been nothing short of a beacon of hope, a carbon-transition technological spearhead to a more sustainable future with less damage from global warming, via a rapid build-out of electric vehicles and power. For our shared future, the world very badly needs to return to the Tesla before 2018, when it was creating the societal knowledge of how to design and efficiently build electric vehicles at a truly ferocious rate.
A management focused on the actual business Tesla is engaged in is far better for society than a management focused on what the pay package incentivizes Mr. Musk to focus on every hour he spends working on the company: continuing the run of Tesla as a meme stock.
John Maynard Keynes wrote in 1936, with characteristic British understatement, “When the capital development of a country becomes a byproduct of a casino, the job is likely to be ill done.” Voting for the pay package would validate this focus, and that is a damned shame, for Elon Musk is truly consequential. And that is a big deal.
Or perhaps shareholders should vote for the pay package out of fear: If Mr. Musk regards himself as betrayed, he may no longer spend time talking up Tesla and its share price — and without his meme stock mojo, the shares could falter. Toyota makes generally higher-quality cars and has revenue that in 2023 was more than four times Tesla’s but commands only about three-fifths of its total market capitalization. That is how far down Tesla stock could go.
But I argue that we must accept the possibility of short-term pain for a forever payoff. Tesla almost certainly accounts for a plurality of Mr. Musk’s fortune. SpaceX makes up the bulk of the remainder. And SpaceX appears to be in very good hands, as he trusts the awesomely competent Gwynne Shotwell, who, as chief operating officer of SpaceX, has managed the marriage of fire and ice, building an organizational culture that combines an astonishing attention to detail with a willingness to experiment beyond the limits of what had been thought possible. She proves that Mr. Musk is capable of far better business judgment. Business judgment that Tesla desperately needs. Right now.
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