
An Update from Elon Musk - JGM564
http://www.teslamotors.com/blog/update-elon-musk
======
reneherse
I'm a huge Elon Musk/Tesla/SpaceX fan, and have often felt it would be the
ultimate opportunity to work at either company (Tesla would be my first
choice, as automotive interface tech is one of my passions).

However, doing a quick bit of research earlier today, a search for "Tesla
working environment" turned up more than a handful of reports by former and
current employees that hint at an unpleasant company culture. Six to seven day
workweeks, below average compensation, hyper-political management, management
that is quick to fire, and a generally chaotic environment. These factors
seemed to be reported even by folks who cited other benefits such as a high
degree of autonomy and the opportunity to work with other highly passionate
top level engineers on important emerging technologies. One additional oft-
repeated concern was that the pace at which Tesla works its engineers is
unsustainable, and will lead to burnout for lack of work-life balance.

Can anyone closer to the Valley than I am comment on whether these concerns
ring true? And how does this compare to work at other highly innovative and
passionate industrial startups?

Elon's explanation of the latest round of fundraising is welcome news, and
personally I'm gunning for Tesla to become the Apple of the auto industry. (I
plan on buying stock as soon as I'm able.) Is there anything we can infer from
these employee reports about the health of Tesla's organizational core/DNA,
and what effect that might have on the company's prospects for long term
success? [Edited for clarity]

~~~
jessep
I have a bunch of friends who work at Tesla. They do work hard, one of whom
works waaaaay too hard, but it's meaningful work. They're changing the world.

It's a similar feeling I get from people I know who work at Apple.

~~~
coliveira
I understand the geek/social effect of saying that you work for Apple or any
other well perceived company, but get real: you're no changing the world. You
would change the world if you were one of the first few employees at Apple, or
nowadays if you are a high ranking executive/manager. Other than that, you're
just a small piece in the engine. Maybe an independent developer is doing more
to change the world than an employee at Apple.

~~~
stcredzero
_> You would change the world if you were one of the first few employees at
Apple, or nowadays if you are a high ranking executive/manager. Other than
that, you're just a small piece in the engine._

“Almost everything you do will seem insignificant, but it is important that
you do it”

\--Mahatma Gandhi

~~~
mmagin
I don't think Gandhi was suggesting people devote their life to working at
Apple.

~~~
ImprovedSilence
no, but it's the sum of seemingly un-important things that actually end up
creating a great meaning. Be a part of it.

------
droithomme
Musk's public statements are the nicest and most logical ones I've seen made
by a modern CEO. No sense of spin. Always a pleasure to read.

~~~
hristov
Ok, even though i am generally pro tesla and like musk, in order to prevent
this from becoming a total worshipfest i will provide some facts that elon is
not sharing.

It is true that tesla has made all their payments under the doe loan
agreement. But they were not in total compliance with said agreement. The
agreement required that tesla keep certain financial ratios up to certain
levels, and tesla failed to do that. As a result, tesla asked trhe government
to change the terms. The government complied but wanted something in exchange.
What they wanted was early repayment of their loans. That is why he is talking
about early repayment. And that is probably one of the reasons why they raised
extra money (although elon is unlikely to admit that).

So that is the full story. It is no big deal, i think tesla are very unlikely
to default on the loan, but elon was definately not giving you all relevant
info.

~~~
QuantumGood
Well, he seems to address this directly where he states:

 _"We did suggest that holding nine months worth of principal payments in
advance in a reserved account was a bit extreme and, moreover, was never part
of our original loan agreement. The DOE agreed and reduced the advance payment
reserve account to six months."_

You saying

 _"keep certain financial ratios up to certain levels, and tesla failed to do
that. As a result, tesla asked the government to change the terms"_

...doesn't seem to add to or contradict his statements.

So unless you can clarify, your statement that _"that is the full story ...
elon was definitely not giving you all relevant info."_ seems inaccurate.

~~~
kimmiller
Financial ratios and/or debt covenants compared to a reserved cash account -
two different things. Sure, the cash account can be a small part of a debt
covenant but is usually just that - a very small part.

Which debt covenants were breached? Often times they put these checks in when
they think something bad is going to happen. Then a couple of years down the
line they mean absolutely nothing, are breached (usually because the company
has forgotten about one of them and accidently breaches them) and need to be
restructured with the lender asking for something in return.

Sounds like something like the above happened?

------
loceng
I think people underestimate what an agile and lean startup like Elon seems to
be running can accomplish. He's a super intelligent guy with a growing
positive trackrecord. The vehicle industry has been waiting for disruption for
20+ years, and the giants finally have lost control and whatever unnatural
advantages they tried to maintain. Technology for electric vehicles will only
continue to improve, and costs will go down. Luckily for economies very
attached to oil they can shift to systems like free re-fueling once a vehicle
is purchased; That's pretty incredible and something I never even thought
about or imagined possible, though it makes sense and works once the puzzle
pieces are all in front of you. P.S. Elon's my new Man Crush.

~~~
toomuchtodo
So I'm not the only dude with an Elon Man Crush.

I'm off to go buy a ton more TSLA stock. And apply at an Elon company. Doesn't
even matter which one.

~~~
knodi
I truly believe TSLA stock is a good investment. TSLA is on its way to be the
Apple of car manufactures.

$ whoami > nobody

~~~
samstave
I wish we could buy stock in Elon directly which would translate into a spread
between all his ventures.

~~~
AndrewKemendo
It's always possible to create an index fund portfolio.

~~~
mertd
Quite difficult. For instance, you can't buy SpaceX. You'd have to find highly
correlated stuff.

------
chintan
What a timing - "Romney Calls Tesla a ‘Loser’" in first debate:
<http://www.wired.com/threatlevel/2012/10/romney-tesla-loser/>

~~~
001sky
_Romney then name-dropped a few beneficiaries including the bankrupt solar
panel maker Solyndra and Tesla Motors, the car maker that has gotten a $465
million loan from the Department of Energy, which it is paying off.

Romney then quipped that “One of my friends said, “You don’t pick the winners
and losers. You pick the losers.”_

\--(1) They defaulted on a fed subsidized loan[#]; (2) They make $90k cars for
rich people; (3) US deficit=$1Trillion, US Debt = $16.X Trillion. (4) Item (3)
is spread pro-rata amongst the poor people who can't afford Teslas. Their pro-
rata share of the debt is a nice chunk of their mortage payments (5) SV is
flooded with cash. Tesla does not need US handouts, subsidized loans and other
craptrap. If the biz/product is a winner it will do fine.

________

[#] Technical.

~~~
mkramlich
> Tesla does not need US handouts, subsidized loans and other craptrap. If the
> biz/product is a winner it will do fine.

If that's truly your belief, let's carry it out across the board to be fair
and complete. No more subsidies, exemptions or bailouts for banks, Wall
Street, oil companies, mining companies or religions (via income tax
exemptions). Oh that's right. Those are approved and supported by the
Republican party. So those are perfectly ok.

But if it is about say solar, wind, tidal, or geothermal energy, or about
science, education, helping the unemployed, the sick, disabled, elderly,
retired -- those are what we should be spending less on as taxpayers and just
let nature take its course. Let the "market" decide the winners and losers. If
they can hack it on their own, the market will reward them with enough cash.
Otherwise they die. There is absolutely no other long term consideration we
should be taking into account, no strategic concerns, no follow-on effects, no
externalities (those don't exist in a proper capitalist/rightwing/libertarian
mindset, it seems), and certainly no moral considerations to be had. And there
is no such thing as climate, ecosystems, or species other than humanity or the
ones we pet or put on our plates -- that's liberal hippy talk. Science? A
thinly-veiled conspiracy against my Bible. Also there's no need for any
business or startup to ever do any R&D spending up front that doesn't have an
immediate return via product revenue. That's just insane and asking for
trouble. Any new idea must be profitable and able to stand on its own legs in
year one, on day one -- nay literally within moments of conceiving of it.
Period. No exceptions for ramp-up time, for execution risks, experimentation,
taste shifts, refinement, pivoting, serendipity, or market events beyond one's
control. That's all weak-minded liberal talk.

$500M loan to one particular solar company that folds? Travesty. Trillions
spent on unnecessary wars in Iraq and Afghanistan started by the last
Republican administration? Crickets chirping because apparently perfectly ok.
Chance a few more blacks or elderly or college students might get to vote --
and not for the candidate I want? Tragedy. Billionaires now being able to
spend effectively unlimited amounts of cash to flood media with dishonest ads
backing their favored candidate? Perfectly ok. Because the market is always
right. Government always eeeevil (eg. Social Security, teachers, firefighters,
roads, libraries, schools, defense). Market always guuud (eg. Enron,
Deepwater, Goldman Sachs, AIG).

~~~
001sky
How about no more subsidies for interest on Debt, in particular real estate-
residential? Isn't it great getting tax breaks on that $1-3 million home?
Every year for you? A working couple at median income pay THEIR ENTIRE TAX
BURDEN to offset your nice house subsidy in SF? Isn't that great?

But, like the above example, you are completely missing the point. There is
little new or interesting. Just re-hash of political talking points.

THERE IS ALREADY TOO MUCH MONEY investing in the Valley. Where do you get the
idea there is a shortage? Gov't stepping up might be OK if there was actually
a shortage of opportunity (but there is not).

Elon Musk has _every advantage_ of raising capital. He's rich. Friends in high
places (also rich). Proven ability to get publicity. Proven ability as a
business entrepreneur. The only reason for people <not> to invest with him, is
they don't think it's a great idea.[1]

Point of fact, though, he just refinanced.

________

[1] Relevant> <http://en.wikipedia.org/wiki/Energy_density>

------
confluence
I've been 100% long TSLA since the beginning and really don't understand the
reasoning behind the doubts people have - given how little they actually know
about a) the car industry and b) electric batteries and c) the ability to
think on first principles and not by analogy. But I guess everyone has the
right to an opinion - even if most of them aren't a) warranted b) backed up or
c) logically reasoned.

We are past peak oil. Battery tech will reach oil parity within the decade.
Solar PV will reach grid base line within the next 2 decades. Fusion will be
introduced within the next 3 decades. Electric engines already run 92%
efficiency (vs the combustion engines 15%) and global warming externalities
are finally being priced.

The electric car is a no brainer (it wasn't a decade ago, and it'll be too
late a decade from now) just like the electrification of trains were. This
company will electrify suburbia and reduce costs while they are at it.

Timing + skill = Very nice stock returns (timing is about 10x more important).

Disclaimer: Goes without saying - I am long TSLA and will continue to be long
for the foreseeable future.

~~~
aidenn0
Battery tech will not reach oil parity within the decade. Oil parity would be
batteries with roughly 1/3 the energy density of oil (maybe 1/4 if you factor
in the fact that electric motors are lighter than ICE motors).

Predictions are hard, but I'm going to go on the record (and am willing to
wager) saying that the batteries in EVs produced in 2012 will have an energy
density lower than 9MJ/L.

Ultimately that doesn't matter though. The ED in the Model S is already almost
good enough, it's the cost that matters, and I think that will go down. If you
end up having a car that is a bit bigger and a lot heavier than an equivalent
ICE car would be, you can still sell it.

~~~
stcredzero
_> If you end up having a car that is a bit bigger and a lot heavier than an
equivalent ICE car would be, you can still sell it._

The Tesla Roadster was heavier than the Lotus car it was based on, but had
quite respectable performance. That fact, combined with the electric car
cachet was enough to sell it.

If they can keep putting the batteries in the floor, they could consistently
wind up with a roomier and more versatile vehicle than the equivalent ICE car.
Then again, what Ford is doing with Ecoboost is very impressive. I suspect
there's a lot of untapped potential for different form factors with ICE
technology.

~~~
ta12121
Respectable, but not as good, except for straight line speed, for more money.
And I'm saying that as someone who'd love a Tesla Roadster.

------
eldavido
"Nonetheless, we have a duty at Tesla, having accepted this loan as a portion
of our capital, to repay it at the earliest opportunity."

Not sure why Elon and a lot of SV entrepreneurs feel this way. You take a
loan; if it reduces your weighted average cost of capital, you roll it and/or
pay it slowly. As a Tesla shareholder, I hope such cheap financing remains in
place as long as possible to maximize shareholder return on equity by keeping
cost of capital as low as possible -- and by improving Tesla's cash position
(helping it to operationally succeed) to boot.

Another guy thinking about buying Tesla stock.

~~~
karamazov
The spirit of the loan was to help a promising company make progress on its
technology. By repaying the loan early, the DOE will be able to make more
loans out of that fund to other such companies. This might not minimize
Tesla's cost of capital, but I'd say it's the right thing to do if it doesn't
add undue risk to the company.

~~~
intended
No you would never do this.

Right or wrong as a matter of managing your finances this is just not
something a competent CFO would allow on his watch.

You accepted a loan, the loan originator had some terms and you are both in
compliance and acceptance of those terms.

There is no rational or financial reason to make that choice.

I understand doing good, but there is a consistency in the choices firms which
do good make. This is inconsistent.

~~~
saraid216
Okay, you've called this action incompetent, irrational, and inconsistent, but
you haven't actually explained why it is any of these things. Maybe it's
obvious to someone with more working knowledge of accounting, but it's not
clear to me. Could you explain?

~~~
pyoung
A extremely simple analogy here would be home loans. If your home loan costs
you ~4%, but you can make 10% in the stock market, than it would make no sense
to pay off your home loan early, because you could use that money and invest
in the stock market (a net of 6%).

I am no accountant, but in Tesla's case, it sounds like they now have a pile
of money that they are going to sit on for emergencies, and that it may make
sense for them to pay down this loan early with some of this cash because it
reduces their liabilities (by reducing the interest they owe), whereas sitting
on it nets a 0% (or near 0%) interest rate. Also, I wouldn't be surprised if
there was some political/strategic motivation for paying off the loan.
Unfortunately, Solyndra has become synonymous with the loan program, and I
wouldn't be surprised if there is some pressure from investors or the board to
distance Tesla from the program because of that.

------
codex
As of last quarter, Tesla had $777M in assets and a whopping $715M in
liabilities--leaving a net balance of only $64M.

Given that their balance sheet is decreasing by an extraordinary $30M a month,
that would have left only two months until the company was insolvent. No
wonder the U.S. government wants their $465M paid back more quickly than
planned.

The company has lost over $850 million since being founded in 2003.

~~~
westicle
That isn't actually what "insolvent" means. Insolvent refers to a situation in
which an entity is unable to pay its debts as and when they fall due. Not
whether they have a positive or negative asset position.

Strictly speaking, the balancesheet is irrelevant to Tesla's solvency.

My tennis club owns a property worth $20m from which it operates. It has debt
of only $1m and repayment obligations of $100,000. It generates net revenues
of $90,000. It is insolvent, with net assets worth $19m.

My startup technology company has no assets other than goodwill and
intellectual property. It has no revenues. It has a line of credit from a
financier sufficient to cover all expenses. It is solvent, with $1m of net
liabilities.

~~~
csomar
Nope, your tennis club is not "insolvent". It's illiquid. It means it doesn't
have cash but enough worth to take pay his obligations. At least, that's what
Sal has explained in his KA videos.

------
JGM564
Exciting quote emphasized in post: "we expect Tesla to become cash flow
positive at the end of next month."

~~~
codex
Well, cash flow positive until they decide to develop, test, and manufacture
another model, which will again put them in the red. Building cars is a very
expensive proposition.

~~~
witoldc
That's why Obama win is so important to Tesla Government Motors.

~~~
rdl
I think the DOE loan has probably hurt Tesla's stock price more than it's
helped -- the rumors about late repayment, etc. have probably depressed it
from 33-35 down to 29. If Tesla hadn't taken $1 from DOE, it would be able to
attack Fisker and Chevrolet and others for being Government Motors, and
wouldn't have gotten name-checked in Romney's debate answer tonight.

The only money MuskCo's should be taking from the government is payment for
services (like flying cargo to the ISS, Moon, Mars, selling cars or solar
power to them, etc.), not using the government as VC. The government is a
horrible VC or lender, and the MuskCo's could do a lot better.

~~~
mullingitover
> The government is a horrible VC or lender, and the MuskCo's could do a lot
> better.

96% success rate is 'horrible'?
[http://www.greentechmedia.com/articles/read/what-abound-
sola...](http://www.greentechmedia.com/articles/read/what-abound-solars-
bankruptcy-says-about-the-doe-loan-program/)

~~~
rdl
96% on _this_ program so far is possible, but there are numerous other
examples of the USG investing in businesses which fail, and even worse records
for state/local governments (stadiums and convention centers being the classic
example)

~~~
pyoung
There are numerous intangible benefits to these programs beyond the success
rate of the businesses. Jobs get created, technology is invented or improved,
and supply chains and support networks are created or are made more efficient.
While VC's might only care about the balance sheet, the government isn't in
this to make money, they are in this to make our lives better.

------
MattGrommes
Sarah Lacy did what I thought was a great hour-long "Fireside Chat" with Mr.
Musk: [http://pandodaily.com/2012/07/12/pandomonthly-presents-a-
fir...](http://pandodaily.com/2012/07/12/pandomonthly-presents-a-fireside-
chat-with-elon-musk/)

It's well worth listening to.

------
debacle
> we expect Tesla to become cash flow positive at the end of next month.

Never in my wildest dreams did I expect that to become a reality. We truly
live in amazing times.

------
anovikov
Hope some good news come on SpaceX, too. What's up with F-H with its so
dubious payload figures, especially for high energy trajectories? How's the
cross-feed system is coming along (if it haven't been dropped yet)? Where is
the 'super efficient staged combustion methane engine' you mentioned a year
back, any idea what thrust class it is and what is the fuel combination?

------
tatsuke95
Not sure if anyone else noticed, but Romney made a crack about Tesla (in the
same sentence as Solyndra) as a useless pet project that Obama subsidizes.

I wonder how this will play out politically, especially if Tesla gets into
trouble financially. That story is already being spun.

