Friday, February 22, 2019

Creating new things in the real world, Musk, Tesla Spacex etc....

I'm a space geek, much of my social interaction is with other space geeks.
A lot of these people worship what Spacex and Elon have accomplished.

At the same time I've been more and more convinced that Tesla is going to fail.
This causes some significant personal cognitive dissonance.

The following is my attempt to work this out ...

Making a new thing is hard. You will fail, over and over again, you will fail.
Edison tried thousands of light bulb filaments before he found one that worked.

One of the really cool things about spacex is that they let you see them fail.
The blooper reel of landing attempts is outstanding.
Attempting to do something new and hard will have failures.
Trying something new in engineering or in business will have failures.

Because of Spacex:
  • We now know that first stage reuse can make sense.
  • We now know that the iterate fast model of engineering works for at least some of the  aerospace world.
  • Supersonic retro propulsion works.
  • You can (given the right engineering team ) built rockets for a tiny fraction of what the big aerospace primes charge.
All of this is new information in the world due to Spacex efforts.
Everything above this line is engineering....

We still don't really  know that the Spacex way will work in a business sense.
Recent layoffs and recent failed funding raise make this more questionable than it was 12 months ago. (Its clear that  the business case for the large aerospace primes, does not  work absent billions in direct government subsidies)

From an engineering stand point Spacex has been somewhat innovative....
SpaceX  have either surpassed or are approaching 50% of the total world wide launches.
In my opinion (if ancillary things like tesla don't take it out) Spacex will survive long term and the world will be a better place because of that. (see my earlier dialog on why space matters).

The space business has been run for a long time by cost plus contractors working for governments.
This is not a place where innovation thrives.

The Car business on the other had has been a brutally competitive market with microscopic  margins fought over by  efficient international behemoths. Its a hard brutal world.

Tesla managed to crack open that market and with the S and X, they  delivered  a well received  high end quality product that changed the perception of the world. Now every one of those behemoths is planning an EV. Just having a shot at this is a huge achievement...

Some how the engineer Elon that allows us to see spacex failures, has been unable to admit to the world that their are also business failures. By any unbiased measure Solar City was weeks from failing when Tesla bought it.  This burdens Tesla with a millstone that makes the difficult task of breaking into the brutally competitive car market even harder.

Watching the Engineer Elon do magic things at spacex I greatly admire  what he/they have accomplished.   Watching the Business Man Elon commit what looks very much like Fraud to save a failing business I do not admire.  Business ethics matter and used to matter to Elon (see his several year old  tweet about debts and personal responsibility for Solar City Debits) 

Some how the pressure to not have the business fail has pushed pushed Elon to do things that cross the ethical line in a way that has caused me to loose my respect for Business Man Elon...

The Big ones :
  • Solar City Purchase and fraudulent Solar roof presentation.
  • Model 3 production guarantees on the eve of big Tesla Bond Raise.
  • Screwing over his devoted customer base with the crappy quality M3 and things like not refunding deposits.
  • The $420 Funding secured Tweet and subsequent response.
  • The flipping the Bird at the SEC taunting tweets.
  • The recent guidance on Tesla that just does not pass the smell test.
  • The Fraudulent Guarantees in the Buffalo Solar city Factory morass.
  • Treatment of personnel (At both Spacex and Tesla) You can only run in start up panic mode for so long before it destroys people. I have many space friends that have left Spacex because of the relentless pressure.
It is my opinion that Tesla is very close to failing and will fail in the next 24 months.
It is my hope that this does not destroy Spacex. Elon has generated significant personal liabilities in his Tesla dealings, and if Tesla fails the only real Asset Elons owns is spacex. Spacex will be a very different and less dynamic place when its owned by plaintive s lawyers rather than Elon.

I find the whole affair sad.  I wish Elon had stuck to Spacex and just focused there.

I know that some of my followers that see the Spacex brilliance  and subscribe toe the "Saint Elon can do anything" view will rush in to defend Tesla.
I don't want to rehash that argument here. lets us just agree to disagree and we will know who is correct in 18 months or so.










21 comments:

Unknown said...

Elon is a crisis junky. If one does not exist seems he creates one. The cult members just fan that ego. My brother recently diagnosed rapid cycle bipolar and narcissistic personality disorder. Not as wealthy or intelligent as Elon but I see similar swings.

BrandonAGr said...

What would be Tesla failing within 24 months? Going bankrupt? What part of guidance for profitable q2 2019 and beyond looks suspect?

Paul Breed said...

Failing: Chapter 11 reorg at a minimum.

Guidance:
There is a very long list of Elons Tesla performance promises not met.
At the most basic level Elon is the only one saying they will be profitable in Q2.

I've read the 10K, and all Teslas press releases...

In order to get to profitability in Q3,Q4 they cut all R+D and capital expenditures.
Without spend on Capital and R+D they get no model Y, and no Semi.
In Q3 they also sold ZEV credits accumulated over years, all at once.

If you reduce the average sale price to account for recent (January) discounts, and remove ZEV credits. (no ZEV in Europe or Asia) Tesla would have made nothing in Q3 or Q4.
This is using Teslas very suspect numbers. This assumes they maintain Q3 volumes.

Independent data shows their U.S. sales volume is down 75% or more from Q3.
The data leak from Teslas internal inventory tracking system indicates they have 10's of thousands of unsold cars.

Elon has been saying autopilot will be ready for full self driving in 6 months for years
at some point either he's out of touch or he's lying...

For the first time ever they will have competition in the high end car space, For example when I-pace became available in Norway Tesla sales basically went to 10% of previous volumes.


A lot of Tesla fans will say they have a huge tech lead....
The EV-1 was built in the 90's and the people that had one absolutely loved them.
I personally drive a Nisan Leaf, I love the car.

So given all that why is Tesla perceived to be ahead?
The electric tech in the cars is simple, the EV-1 worked well in the 90's.
The principal cost and technology driver is the battery.

Tesla buys batteries from Panasonic. The basic core cell technology is owned by Panasonic, not Tesla. Its at least one generation behind other car companies battery tech.

No one else can afford to put that much battery in their electric car at the price Tesla is selling them for, because Tesla is willing to sell cars at below their sustainable cost.

Why has Amazon wiped out the retail market?
Because Amazon will accept ZERO margins to build volume.
In order for this to work long term you have to continue to do this until you have destroyed all the competition. Tesla has had no competition up to now....










Goolic said...

Tesla has been very close to failing since 2008. Maybe they will, i don't think it's a given.

Mostly i agree with your objections in that each situation could have been better handdled, I disagree that they were fundamentally mismanaged based on the fact that the tecnologies and companies still exist and are activelly getting developed.

QuantumG said...

Ya think their stainless steel redneck rocket is gunna work?

Paul Breed said...

That is a hard one, Elon has gone so erratic in the last 8 mo, I don't know if the SS rocket is real, or a fund raising prop.

The concept of a very large stainless rocket is a good one. Things of that scale are easier than small and highly optimized.

IE I hope Elons finally building a 1/4 scale sea dragon.


Anonymous said...

Thanks. Well analyzed. A couple of years ago I was already convinced that tesla will fail. Luckily, I did not bet money on it. However, this whole story is one big lesson about psychology. I always believed that intelligence and the amount of money that people possess correlates somehow. I was wrong. I would have never thought that investors are so dumb.

Wolfkeeper said...

Every company goes bankrupt eventually, but there's no sign that Tesla is going bankrupt soon; they've got the cheapest batteries, and their cars are desirable and selling well. If sales soften, due to competition, maybe, but even then they may well have scope to return to the market to get funding to build a new model. I certainly wouldn't be shorting their stock right now.

Anonymous said...

Hey Paul, anything new going on with your rocket project? Saw you were out at FAR last weekend.

Timothy Jewsenbog said...

Paul, I didn't get up to Space Access this year. Any thoughts on the new location/organizers? Did you present something that you can share on your blog?

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Teshi said...

Awesome post on wonderful topic

Unknown said...

Paul, once Tesla fails will you go back to blogging about rockets?

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