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RUBY:

From Schwartz Media, I’m Ruby Jones. This is 7am.

Elon Musk has now lost more wealth than any human being who has ever lived.

It’s not because of his purchase of Twitter—well, not directly, anyway. It's because in the last 12 months, the share price of one of his other companies, Tesla, has plummeted.

But why is Elon Musk the man, so intertwined with Tesla the company? Has the company become an extension of his ideas? And how healthy is that?

Today, veteran Tesla-watcher and financial journalist, Antony Currie, on the unshakable faith in Elon.

It’s Monday, January 16.

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RUBY:

So, Antony, over the past year or so, the person who used to be the world's richest man, Elon Musk, has seen his wealth plummet and he's reportedly now lost $200 billion USD in his net worth, which is the most that any one person in history has ever lost. So, how is that possible? How does a person lose that much money?

ANTONY:

Well, first of all, for the Internet wags out there who’ll want to point this out, of course, he hasn't lost it until he sold his shares. Then again, I suppose that means he also didn't have the extra $200 billion if he didn't sell his shares. So, we are talking about a paper loss. So, he had all this money from his shares, mostly in Tesla, and I think we're going back to the beginning of 2022 here for the net worth, we're talking about $340–50 billion. And one way it happened is simply because, I mean, certainly from my perspective, having looked at Tesla since it went public in 2010, I think it was, it very quickly became overinflated—to my mind. There are lots of people who argue against me, but I always thought it was worth far too much money for what it was doing as a car company. So, to an extent it got built up over time a lot through both the successes that Tesla, through Elon Musk, was having but also through all of the hype that was coming through on what Tesla might be able to achieve from everything from electric vehicle sales all the way through to robotaxis and people in Silicon Valley especially getting really excited about just how much money this company could possibly make in five, ten, 15 years. And that really shot up the price of Tesla, especially just after the start of the pandemic. It's amazing how, like every other company, Tesla stock dropped at the beginning of the pandemic in 2020. And then, it sort of just went off on a tear as if nothing could stop it. And then by the end of 2021, it was reached—I think it reached $1 trillion in market value.

RUBY:

And when we talk about the hype, it's really quite impossible to separate Tesla, the company, from Elon Musk, the man. So much of the confidence in Tesla really comes down to this idea that Elon Musk is this visionary, this kind of tech-Superman. So, what happens if we try and trace the origins of that story? If we go back to his first involvement in Tesla, what do we know about how that came about and what unfolded?

ANTONY:

Yeah, so if you go back—so, he first got involved—Tesla was not even a year old when he first came on the scene. So, a guy called Mark Eberhard set it up the previous year and it was him and two others who were running it and Elon along came in and he invested $6.5 million.

Archival tape – Wired Science:

“Elon, thank you so much for being with us here at Wired Science.”

Archival tape – Elon Musk:

“Well, thank you for having me.”

ANTONY:

And it wasn't his day job, his day job was always to run SpaceX, the space transportation company that he set up probably just before then, actually.

Archival tape – Elon Musk:

“I spend about two to three days a month on Tesla-related business, and almost all the rest of the time is on SpaceX. So, SpaceX is very much my day-to-day job. And then I provide product guidance, strategic guidance and obviously funding for Tesla.”

ANTONY:

In fact, in 2006, he wrote this—what he called the secret document about Tesla Ho Ho Ho, where he said, look, this is really I'm doing this on the side at Tesla. And he went through all the things he wanted to do with strategy, how to go from building a big, a really big and successful sports car, the Roadster, and then turning that into, eventually, a mass market car.

Archival tape – Elon Musk:

“What I’d like to do is help solve some important problems. So, I think in a small way, I helped build the internet, and then with respect to the global warming problem, the transition from—away from oil and other hydrocarbons to something which is clean and sustainable.”

ANTONY:

So, that's how it got to that point. And I think if you look at that 2006 plan, again, he was saying that SpaceX is my day job but here’s what I'm doing at Tesla. They basically followed that plan, if you look at it from a very, very sort of 36,000-foot perspective. It went from the Roadster to the Model S, which was the sort of high-end sedan all the way through to what is now the Model 3 and the Model Y, which are meant to be mass market cars that are a bit more expensive than that, but he's got there.

RUBY:

And it does seem like Musk enjoys a lot of support, perhaps even faith, from within—from the board, from shareholders at Tesla. Is it unusual for a CEO to have as much confidence, I suppose, in his abilities?

ANTONY:

I think certainly within Silicon Valley, and I do struggle with this sometimes to call Tesla a tech company, should Tesla be considered a Silicon Valley company just because it's there? Maybe, maybe not. It's certainly been treated as one. But in Silicon Valley, certainly, founders can get a lot of support from their board.

I think if you're a tech company, especially if you're one of the founders or very, very early people who started there and then take over the company, a lot of faith is put in you. Also, basically if you're a founder, before you go public, you can stack the board with whoever you want. It's only after you go public that there starts being a few rules about, well, who's independent on the board, who's not? And really, I mean, even now, even after a few changes, after a 2018 spat with financial regulators, a lot of them are still his friends. His brother Kimbal is still on the board, for example, which, you know, if you think that, you know, you want to have an independent board, having a brother on the board shouldn't really happen at this stage in a company's life.

RUBY:

Right, so Tesla has a board that is stacked with Elon’s friends and quite literally his family as well, and they’re also a board that is giving him huge incentives as CEO, including, I believe, this $60 billion incentive package. Can you tell me more about that?

ANTONY:

Yeah, so Elon Musk doesn't take a salary. I think if we go back a bit, Elon Musk doesn't really need to take a salary. Even before Tesla, he'd already founded and then sold a couple of dot-com companies and let's say he netted about $200 million. You can get different figures depending where you look, but he did pretty well out of those two deals before he got to Tesla. So, he has money, doesn't necessarily need a salary, didn't take one at Tesla. So, he was given incentives and that happens a lot. You get a bonus, you get a long term incentive package and that's tied to how the stock price does often. And he got one in 2012, which was meant to be a ten year package, which, as I recall, he hit all of the various tiers of that package within four years, five years. So, in 2018, they decide to give him another one. And this one is over ten years, allegedly, and it's split into 12 different tiers or tranches, and he has to hit certain targets. So, whether that's number of cars sold, whether it's amount of earnings, a certain type of earnings, whether it's how high the share price gets, and these, at that time—I'm writing about this at the time—seemed outlandishly high targets to get. So, there was a lot of reason to be sceptical that he would make—hit any of these, but he’s now hit 11 of those 12 within, what are we now, four and a half years?

RUBY:

So, would you say that even before Musk's attention turned to Twitter and before the Tesla stocks began to drop, that there were signs perhaps that the board was too supportive?

ANTONY:

Oh, god, yeah, the board's been too supportive for far too long. So, over the years, all the hype he's put into this and all the promises he's given, Musk has become so synonymous with the brand and the success of Tesla that to get rid of him would risk upsetting Tesla itself. In fact, the whole 2018 bonus schedule/incentive structure stated that he had to retain the role of either CEO, chairman or something like that to retain those rights. So, they wanted him at the top. Robyn Denholm, the now-chairwoman, she became chair in late 2018, she was on the board beforehand and she's justifying how the board at the time came up with this package in early 2018. I'm going to read this quote here, it’s quite an amazing one, actually. She said they designed it precisely because Musk “needed to assemble an amount of wealth, if you like, so that it could fuel his other aspirations around interplanetary travel and those types of things.” So, they've basically created the problem themselves, that they gave him enough money to be able to go out and buy whatever he wanted and do whatever he wanted and the whole board gave him the ability to earn enough money to do things outside of Tesla.

RUBY:

We’ll be back in a moment.

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Archival tape – News Reporter 1:

“Weeks ago, Elon Musk carried a sink into Twitter headquarters. But some fear it's his Tesla stock that's going down the drain.”

Archival tape – News Reporter 2:

“Elon Musk revealing in an SEC filing he recently sold another 22 million shares of Tesla, valued at about three and a half billion dollars.”

Archival tape – News Reporter 3:

“But I think it's a moment of truth for Musk and the board to ultimately get through this, because this has just been a train wreck situation that continues to get worse.”

RUBY:

Antony, we’ve spoken about this kind of unwavering faith that’s grown around Elon Musk, among shareholders and the board at Tesla. Now that Tesla stock has gone into free fall though, has that faith been shaken, or have they stuck by him?

ANTONY:

The board, unsurprisingly, is saying nothing. Several shareholders—again, this is small, independent shareholders mainly, we're not talking about the really big guys who manage trillions of dollars of our pension assets, those are not saying anything and often don't—you've got a couple of shareholders, the third largest individual shareholder has been out saying it's time for Elon Musk to go—he was a self-described Elon-fanboy last year. It's amazing how this has completely shifted, all because the stock is now worth, what, one third of what it was a year ago. And let's put that into perspective, it's now worth, I checked it this morning, it's now worth about $380 billion USD, which is worth more than the top three carmakers in the world, individual carmakers—so forget about the alliances—Volkswagen, Toyota and Stellantis, which is this weird, construct of Fiat, Peugeot and Chrysler. They make nine times as much money, revenue wise, as Tesla does selling cars. They’re the top three carmakers in the world and they are not worth, combined, what Tesla is now. So, even now I would look at Tesla and say, I would argue it's probably still possibly overvalued in the way that I would look at a really successful car company. So, it's not as if the 65% drop has suddenly made Tesla a complete pauper and in real trouble. It's not, it's got a lot of cash. It sold 1.3 million cars last year, it's probably going to sell even more this year—in part because this Inflation Reduction Act in the U.S. means that most people, unless you earn too much money, will get a seven and a half thousand USD tax incentive to buy an electric vehicle. So, you know, Tesla's the biggest selling EV brand in the world. So, it's going to sell more cars, it just will. So, it's not as if Tesla is in a bad position. It's just that it's in a far worse position, market value wise, than it was 12 months ago.

RUBY:

Okay, but when we look at that 65% market value drop, to what extent is that tied to Musk's acquisition of Twitter and his actions there? Or is this more about underlying issues at Tesla or is it global economic conditions? If you had to kind of delineate what actually is the cause?

ANTONY:

I would, based on what's happened in the past, I would say that Twitter is having a really big effect. Now, I'm not going to exclude other issues. So, Elon Musk is really pushing the idea that it's the Federal Reserve has increased interest rates far too quickly, a recession is coming and he's probably right. But that doesn't mean that's the only thing that's impacting Tesla stock. If you look at a couple of his smaller, newer competitors—so, we can look at Ford and General Motors and others, they haven't fallen as much, but then again, they also weren't worth as much. But a couple of other electric vehicle companies we've been looking at, so there's Lucid and Rivian in the States—Lucid, I think is run by a former Tesla guy, as I recall—they are down more than 80% last year, but they're also much smaller, having more problems. So, if you're Elon Musk though you can look at that, you can look at the stock market, what the Fed's doing and say, it's not my fault, I can do whatever I want. Look what I've done in the past, I'm awesome.

But I still think the Twitter escapade is causing him a lot of harm in three ways. Firstly, as we said, he's distracted. Secondly, he’s got a lot of absolutist tweets out there. I'm not saying that in a political sense, I just mean he is very absolutist in the way he thinks about things. He was saying, what back in early November, if you're an independent American, you really ought to be voting Republican in the midterm elections. It was something he wrote recently about if you think this about cars, then you should definitely be doing that, and it's very sort of binary in many respects.
But, he felt he could get away with it. His shareholders are looking and saying, come on, you can't run Twitter. You can't say rude things about basically a left-leaning base of people who buy your cars and you're being rude about them on Twitter almost every day since you've bought it and before. But also, and this is where shareholders are getting really rankled, back in April, he said, I've sold $8 billion worth of my stock for Twitter, if I end up buying it, I'm not going to sell anymore. He then sold another $15 billion in December, suddenly out of the blue, and that really annoyed people. If a CEO or founder sells stocks suddenly that really always looks like a sell signal, i.e. shouldn't I sell the company as well? Right, so that's another reason why I think the stock went down a lot at the end of the year. Yet, still it remains a very highly valued company on long term trends.

RUBY:

But why risk the enormous profits that you're making at one company, Tesla, by taking a gamble like this on another, on Twitter?

ANTONY:

I'm going to give you my opinion here. I think he feels he's right.

Archival tape – Interviewer:

“So, Elon, a few hours ago, you made an offer to buy Twitter. Why?”

Archival tape – Elon Musk:

“How'd you know?”

ANTONY:

I think he feels that despite all he said about, first, climate change being the biggest threat to humanity and then what, two or three years ago it was population reduction around the planet, which is not a big problem for a very long time, if ever, but he thinks it is. Now, it's free speech, and his own absolutist idea of what free speech is, could be or should be.

Archival tape – Elon Musk:

“My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilisation.”

ANTONY:

And for some reason, he's decided that he is the one who can fix this. And I think that goes back to over the years the board and shareholders giving him the impression that he's the only one who can run, say, Tesla. The only one who can run, say, SpaceX, and that nothing, even if things do go wrong, he gets over in the end. And maybe he will, America is a place of people being given second chances all the time, and Musk has had several second chances. Tesla almost went bust a few years ago, which he admitted to. There's been a few times shareholders have said, hang on, you said you didn't need to raise any more money then you're tapping us for more money—this has happened several times over the years. There's a lot of things you can point to and say, but you haven't hit that target, you promised that and it didn't happen. You've been talking about robotaxis and self-driving cars since 2014 being ready in the next year, 18 months, two years, and still they're not there. There's a lot you can look back on over the years and say, there's a lot of reasons not to trust everything that Musk says. Not to be really rude about him, but, you know, he said a lot of things that just haven't happened and that happens at companies. But the absolutist faith people put in this absolutist individual boggles my mind.

RUBY:

So, it seems like not only is Elon Musk the first person to lose $200 billion USD in net worth, he might also be the first person to bounce back from it, to get another chance.

ANTONY:

Absolutely. I mean, even these shareholders who are really annoyed with him still talk about Tesla as if it can be worth $10 trillion by 2030, get the robotaxis out, get this done, get that done. I read this, I think, this is like being in Groundhog Day sometimes, it's like maybe this will happen at some point, but there are so many reasons why a lot of what they're hoping for isn't going to happen.

RUBY:

Antony, thank you so much for your time.

ANTONY:

My pleasure.

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RUBY:

Also in the news today…

Cardinal George Pell, who died last week, has been revealed as the author of a memo attacking the current pope as too progressive.

A Vatican journalist, who published the memo under a pseudonym last year, revealed Pell provided him with the text and asked for it to be published.

And a key ally of Jair Bolsonaro has been arrested in the Brazilian capital, after a riot by the former president’s supporters breached the congress building last week.

Former Justice Minister Anderson Torres was arrested in Brasília after flying back from Florida in the United States.

I’m Ruby Jones, see you tomorrow.

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