Chris Middleton reports on the latest twists and turns in the saga of Elon Musk and Tesla, as Saudi Arabia could help him take the company into private hands.
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The expression ‘a bull in a china shop’ has often been used to describe a reckless individual sending his own achievements crashing to the ground. Elon Musk is perhaps an ox in a pen, trying to free himself from investors’ lassos, while becoming ever more angry and volatile.
But is the Musk ox about to be tamed by an even bigger beast: the world’s oil economy lynchpin?
2018 has certainly been a rough ride for the Tesla and SpaceX chief. In the early Spring, he was a media darling, a new Steve Jobs for the electric transport and private space-faring age, firing roadsters into space, landing his reusable rockets, and launching experimental satellite constellations to bring broadband to rural areas.
However, after the fatal crash of a Tesla car in March, a different Musk began to emerge from behind the inspiring, futurist image that had ignited the imaginations of millions worldwide.
This alternative Musk was egocentric, short-tempered, and seemingly unable to cope with criticism, while Tesla attempted to micro-manage media outlets (see Internet of Business, passim) and Musk discredited negative press coverage, in almost Trumpian style.
But not all of the criticism came from the media. Days after the crash, the US National Transportation Safety Board (NTSB) slammed Tesla for releasing information about the accident without alerting the agency beforehand, as it was obliged to do. The NTSB said, “We take each unauthorised release seriously. However, this will not hinder our investigation.”
In June, Tesla was one of several frictionless transport companies criticised by insurers in a BBC report for misleading customers with product names such as ‘Autopilot’.
The Association of British Insurers said that the way some advanced vehicles are described “can convince motorists that they have self-driving cars when that is not the case”: a point that has repeatedly been put to Tesla by Internet of Business.
The company has never responded to our question about the product name putting owners at risk, despite correspondence from Tesla on numerous other points.
Safety first
Tesla was swift to defend the safety record of its technologies after the incident, which saw the value of its shares plunge in a sell-off.
“Over a year ago, our first iteration of Autopilot was found by the US government to reduce crash rates by as much as 40 percent. Internal data confirms that recent updates to Autopilot have improved system reliability,” it said.
“In the US, there is one automotive fatality every 86 million miles across all vehicles from all manufacturers. For Tesla, there is one fatality, including known pedestrian fatalities, every 320 million miles in vehicles equipped with Autopilot hardware. If you are driving a Tesla equipped with Autopilot hardware, you are 3.7 times less likely to be involved in a fatal accident.”
However, the company’s problem is that Musk’s personal profile and drive – which are so critical to its success – frequently overshadow its achievements. The downside for any company made in the image of a ‘maverick’ CEO.
Even the sober voice of the UK’s FT recently used the phrase “reality distortion field” to describe Musk’s current approach to business – a phrase previously associated with Steve Jobs when he was leading the resurgent Apple.
Diving for brickbats
In July, Musk’s public image took a further battering, but this time the whole world was watching. His attempts to design rescue solutions to help the group of trapped boys in a Thailand cave were dismissed by some experts as disingenuous and publicity-seeking. The criticisms caused Musk to lash out at one rescue diver in the notorious ‘pedo’ tweet that undid much of the world’s goodwill towards the billionaire CEO.
Tesla’s onboard battery of a CEO appeared to be catching fire and burning out. Musk is a man who – like some other leaders, perhaps – would be well advised to step away from social platforms for the good of his own organisation and career, but is unable to do so because he thrives on the attention.
But for some people today, social media are the only media that count. On the one hand, they offer a personal publishing channel free of editorial control, media agendas, and gainsaying, but on the other, a hall of mirrors for anyone with narcissistic leanings: the ultimate me-me-meme, a world of followers (22.3 million in Musk’s case), not readers.
Cuts and money problems
Production, battery, and financing problems piled further burdens on Musk’s shoulders this year, so he could be forgiven for showing the strain. In June, Tesla announced that it was cutting nine percent of its workforce, in what Musk described as both a “difficult, but necessary reorganisation” and a “comprehensive organisational restructuring”.
“Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions that, while they made sense in the past, are difficult to justify today,” he wrote.
“As part of this effort, and the need to reduce costs and become profitable, we have made the difficult decision to let go of approximately nine percent of our colleagues across the company.”
Musk added that making money had not been a motive throughout Tesla’s 15-year history, during which it had never turned a profit.
However, Musk’s announcement made clear that while the company was still motivated by its “mission to accelerate the world’s transition to sustainable, clean energy”, it would “never achieve that mission” unless it could demonstrate that it “can be sustainably profitable”.
But more recent developments have suggested that Musk now believes the company can never succeed while it is shackled by the short-term interests of some Wall Street investors.
Private investigations
Last week Musk took to Twitter again to announce that he planned to take Tesla private, suggesting that funding was “fully secured” for the deal – prompting the US Securities and Exchange Commission (SEC) to launch an investigation into whether the statement was accurate, and commentators to suggest that lawsuits from existing and new investors could follow.
As the FT put it, “One of the aims of Mr Musk’s plan to take Tesla private, he has said, is to allow it to mass produce electric cars profitably, without needing to hit short-term sales and earnings targets that place its shares under pressure from short-sellers betting on a fall in market value.”
On Saturday, Sky News reported that Musk was being sued for a scheme concocted to “decimate” short sellers – as if that were somehow a bad idea for the world economy.
The same need to restructure and renew the company without being subject to the relentless scrutiny of short-term investors’ interests persuaded Michael Dell to take his company private earlier this century, only for Dell re-emerge into the public markets in a smarter, IoT-centric form this summer: an epic piece of financial engineering that Musk may be seeking to emulate.
However, according to an update from Musk yesterday, the secured funding to take Tesla private comes from a controversial source, which some may see as standing against or compromising Tesla’s commitment to clean, sustainable, renewable energy: Saudi Arabia – or more accurately, Saudi Arabia’s sovereign wealth fund.
Last week the FT revealed that Saudi Arabia’s Public Investment Fund (PIF) had been “quietly building a three to five percent stake in Tesla”, conceivably as a bet on a post-fossil-fuels world.
Either way, the irony of a shared journey towards a world of electric, self-driving vehicles ending up as a private venture backed by Saudi Arabia, one of the world’s top two oil producers and a repressive human rights regime, is impossible to ignore.
The Committee on Foreign Investment in the US has the power to block deals on national security grounds – something that has recent precedent, given the White House’s recent scuppering of the Broadcom/Qualcomm deal. But that may not be an impediment in this case.
Musk explained that his claim last week that the funding was “fully secured” followed a series of meetings over a two-year period, including conversations with the managing director of the PIF, Yasir Al Rumayyan, an ally of Saudi crown prince, Mohammed bin Salman.
Musk claimed yesterday that the PIF has expressed renewed support for proceeding with a deal to take the company’s shares off the public markets. Such a deal would be funded principally through equity, he added, with roughly two-thirds of the shares held by existing investors ported over into the newly private company.
But was yesterday’s detailed explanation from Musk a clear-sighted leadership strategy, or the rear-guard action of a man seeking to cover up yet another reckless tweet – which one unreliable witness has alleged was made under the influence of drugs, according to this story on Techcrunch?
In one sense, the facts of the report – whatever they are – have become irrelevant: through his own occasional lapses in judgement, Musk has made himself the story, but not in the way that he intended. From now on, his every word will be leapt on, investigated, and criticised, rather than taken at face value.
This vicious circle does neither Tesla not SpaceX any favours, nor their sincere attempts to make the world a bolder, more imaginative, more ambitious, and sustainable place, with clean energy and communications for all.
Musk explained that he had decided to speak publicly about taking the company private because, “It wouldn’t be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time.
“To be clear […] I am speaking for myself as a potential bidder for Tesla.”
Of course he is. So the question today is one that seemed unlikely to be asked earlier this year (if ever), as a Tesla roadster headed silently into outer space: will Saudi Arabian money really support Tesla’s vision to rid the world of oil?
Answers in a 3am tweet, please.