I’d bet on Elon Musk.
Once in a while you see someone who will truly transform a society in an industrial way.
- Benjamin Franklin, for marketing the power of electricity.
- James Watt, for his steam engine invention, propelling the industrial revolution forward.
- Ford, who made Model T cars accessible to the general population with his assembly line process.
- The Wright Brothers, with their experiments in aviation, allowing us to connect in shorter periods of time than ever before.
I can’t think of an entirely new breakthrough in large machinery that’s taken place in the last few decades that improves the lives of people everyday though. Can you?
Enter Elon Musk, who I’m sure everyone has heard of. One of his goals is to make cars similar to elevators. An elevator can be ambiguously described as a large metal box that gets you to vertical places. A car essentially gets you to places horizontally. Have you ever thought of the productivity of cars? 95 percent of the time they’re sitting idle in a parking lot, taking up valuable real estate. They’re depreciating assets, with high maintenance costs every year. Why do we even have them? Because some genius marketing team told you subliminally that for you to have reached success in today’s society, you needed a car. A fancy car, none the less, so that the automobile industry can sell you new ones every decade or so.
Imagine how much it would save the world on parking costs if cars could simply go to a warehouse once done for the day. We would also need less cars as people could “share” cars by hailing a car when needed.
I live in NYC, where it would cost me MORE MONEY to own an actual car per year than to just ride in an Uber/subway/bike. I’m guessing the same would be true of SF. What about the cities that are more sprawled out though, like LA, DC, Seattle, etc.? If an autonomous car gave out rides for $2-$3 like a Uberpool did, it would be a similar price to just taking the subway. Perhaps you could even imagine bus routes in the suburbs of LA to the city. Decades ago, doing work on an airplane was difficult, but now you can bring your laptop and books, and even be served food. Why couldn’t the little bus routes from the suburbs do the same? You could answer all your morning emails on your 1 hour bus ride, eat your breakfast that you packed, and sit in a comfortable chair.
I wonder if a better business model would be to let people own cars and collect dividends in the form of ride payments, or if the company that invents autonomous driving will own all vehicles directly. I can see car companies becoming like airplane companies. Need a cheap tiny car to drive you somewhere? Take a SouthWest type car. Accustomed to luxury? Take the Emirates of autonomous cars.
I worry for Uber, because if I had to bet on autonomous cars, I’d bet on Tesla. Sure, Tesla and Spacex (another of Musk’s companies) has been late with almost everything they’ve promised, but they’ve gotten there eventually, ok? Part of my portfolio is for riskier investments, and single name stocks are definitely riskier than index funds, but I believe in this company, even if it’s burning cash like no tomorrow.
What will happen to the Uber and taxi drivers?
- The same thing that happened to the elevator operators. For more than 50 years, elevators were manually operated by people as it was difficult to make elevators stop on the correct floor — there needed to be a person to do it.
- Frictional unemployment: People are unemployed not because there are not enough bodies, but because of skill mismatches. Maybe the taxi drivers could be employed by scientists who study human driver behavior? After all, not all cars would be automated at first, the computer would need to drive against irrational behavior.
Reach Financial Independence before you’re automated
Either you learn how to automate things or you’ll be automated. It holds true for today, too.
- That 30 minute process you just automated with VBA and excel formulas? Well, you get to save 30 minutes of work everyday. Do it enough and someone else loses their job.
- Automate your mind by forming a habit. Either you automate yourself into good habits, or you’ll get automated by the bad habits.
- Automate your body building muscle and maintaining it. Have your muscles burn more calories without doing anything once you get there.
Hopefully before automation makes unemployment widespread, we’ll reach basic income or you’ll at least be financially independent and have retired early.
So, what was this post even about? I guess I was trying to put to words my trust in Tesla/Spacex. I subscribe to the Buffet theory of Investing: Buy and hold a company that has a moat around it. Because if I can’t put it down into words, I shouldn’t be investing in something. I also subscribe to the Taleb/Cornwall Capital school of investing. Buy things with asymmetric payouts. The next company that invents an entirely new industrial application counts as a company with an asymmetric payout.
The Power of Marketing and Psychology
Conventional marketing is pretty simple. An ad in the middle of an episode on TV/Youtube/Hulu or placed randomly on a website. But psychology has shown that our minds tend to shut off when ads come on, ignore them on websites, and mistrust them.
As a smart company, you should seek to advertise in another way, which is probably why you see Tesla/Spacex on the front page of reddit nearly every day. A book about the fearless leader, Elon Musk? Can you name a autobiographical book on a CEO who is still alive? The fact that Tesla touts a $0 marketing strategy is itself a marketing strategy. You think on it and realize that yes, you’ve never ever seen an ad from Tesla, and you become even more amazed at the fact that a company does so well that it doesn’t even have to advertise.
But oh, it does. Just in other ways. Spaceman, anyone?
Asymmetric Payouts from New Technologies
The creation of new technology almost always defines asymmetric payouts. Here’s where I think Tesla and Spacex’s technology warrants that.
- The creation of an autonomous vehicle army, which would decimate the auto industry. Oddly enough, Buffet is on the other side of this bet as he bought out a ton of car dealerships in the midwest.
- A more hands-off driving process for commercial trucks, which will lead to autonomous trucks in the logistics industry. Note: If you’re 18 and you don’t want to go to college, you can make 6 figures as a trucker. If all you’re after is retiring in less than a decade, and then just lying back and chilling, I don’t see why this wouldn’t be a fair solution.
- I can see them gaining a significant market share in consumer solar panel sales with SolarCity and their user-friendly UI. People want to see their electricity production on an app, and most people don’t want to actually install it. We’re not all MMM, and most of us are not handy. Let’s just face it.
- BFR: Did you know commercial air flight speeds are SLOWER than they were in the 1950s?! How can we not have improved on this for 7 decades? The BFR is meant to replace airplane transport. Imagine going from New York to Shanghai in less than 40 minutes for the same price as you pay now to sit in economy. While I do think people might be hesitant to ride it, I’m sure people were hesitant of trains, cars, commercial airplanes, elevators, etc. for years. Technology moves forward, with first adopters eventually convincing the rest of the population.
- Spacex can launch rockets for 1/4 of the price of any other competitor. There was only one competitor for quite a while, ULA. The cheaper price is due to the fact that Spacex has managed to figure out how to reuse rockets. Prior to them, all portions of the rockets were thrown into the sea and had to be made entirely from scratch again. They have a monopoly on reusable rocket technology, with other companies being more than a decade behind them.
If the BFR actually happens in the next decade, I’ll give up travel hacking I suppose. Unless we start getting cc’s with Spacex points!
The sad thing though? You can’t really invest in Spacex unless you manage to get some via a private syndicate. Even as an accredited investor, it’s been a bit difficult to source. If any of you out there know of a marketplace I can access to get some Spacex stock, please contact me, I’d love to know!
But it’s ok, because Spacex and Tesla are still intricately connected. By Musk. After all, did you see Spaceman? I’m sure Spacex could have sold that payload piece as an advertisement worth tens of millions to any other company. Imagine if Coke had gotten their hands on it. “First soda in space” maybe? Samsung – “It’s out of this world”.
The Boring Company: Reducing traffic by digging tunnels
But oh, Musk is STILL not done. Part of his MO seems to be disrupting exorbitant industries. He takes complex products and redesigns them for much cheaper. His latest venture, the Boring Company, seeks to make underground transport much less expensive than it is currently, thereby reducing congestion. I mean, anything is better than the $4 Billion per mile it costs to drill a mile of tunnel for the NYC subway. This isn’t normal though, on average it’s $500 Million per mile. The Boring Company is seeking to get that cost under $100 Million per mile. Imagine the productivity increase that places like DC and LA can achieve, among other cities.
LA residents currently sit in traffic for 104 hours on average. At 4M residents, that’s 42 Billion hours wasted. I couldn’t find the average wage in LA, so let’s just assume it’s a little above minimum wage. At $420 Billion in lost productivity calculated by guesstimated wages, that’s 4,160 miles of tunnel you could build in LA if the Boring Company can get their tunnels built at $100M per mile. While I have no clue how many miles of tunnel it would take to reduce sitting in traffic, I’m almost certain it’s less than 4,160. That’s a fantastic idea. If people carpool and the company charges an extra $10 to use the Boring Tunnel, odds are, you’d still probably use it.
Do I own Tesla stock? Yes. Would I own Spacex stock if someone would sell it to me? Yes. Do I think that by writing this article, it’s going to even have any bit of an effect on the price of those companies? No. But I’m happy to share my enthusiasm and hope that others can see the innovation Musk is capable of.