
To Understand the Future of Tesla, Look to the History of GM - Judgmentality
https://hbr.org/2018/04/to-understand-the-future-of-tesla-look-to-the-history-of-gm
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cs702
This is an insightful, thought-provoking article.

It mentions Billy Durant, the exciting, visionary entrepreneur who raised
goads of money and built GM from a disruptive startup in 1906 into a company
with $10 billion (in today's dollars) in annual car sales by the early
1920's... but who was nonetheless _fired_ by GM's board because, despite the
company's rapid growth, it was burning cash and remained dependent on
continued capital-raising. The board concluded GM needed someone who could
_execute_ a business model, not someone with grand visions who would
perpetually need fresh capital to turn them into reality.

The parallels to Tesla's current situation are obvious.

The person who replaced Durant, Alfred P. Sloan Jr., ran GM for three decades
with incredible success, turning it into the world's largest automaker.[a]
This is the same Sloan as in the Alfred P. Sloan Foundation, MIT's Sloan
School of Management, Stanford's Sloan program, and Sloan/Kettering Memorial
Cancer Center. (Durant died poor, managing a bowling alley in Flint,
Michigan.)

PS. The most interesting aspect of this article, for me, is the fact that it
was written and published in the first place. It makes me wonder if the
_mindset_ of investors with regards to Tesla is changing from "show me an
exciting vision" to "show me profitable execution of a business model."

[a]
[https://en.wikipedia.org/wiki/Alfred_P._Sloan](https://en.wikipedia.org/wiki/Alfred_P._Sloan)

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dogma1138
The only problem I have with the GM analogy is that GM benefited greatly from
WW2, not to mention the reconstruction years after it. In fact GM has
essentially even benefited form the German rearmament after the Nazi’s rose to
power until essentially the US declaration of war or at least until the
revenue payments from Opel stopped crossing the pond.

~~~
cs702
When Sloan took over, GM was 3x _smaller_ than Ford.

When Sloan retired, GM was 2.3x _bigger_ than Ford.

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dogma1138
I’m not saying that Sloan didn’t do wonders he clearly did what I’m saying is
that it’s hard to estimate if without WW2 would he had the opportunity to
achieve the same outcome.

“During World War II, GM led the largest commercial-to-military war production
effort in American history. In 1942, the company converted all of factories to
produce $12 billion worth of airplanes, trucks, tanks, guns, and shells for
the US military.”

Before the US got into the war GM supplied a 3rd of the trucks used by the
Wehrmacht.

[https://en.m.wikipedia.org/wiki/Opel_Blitz](https://en.m.wikipedia.org/wiki/Opel_Blitz)

~~~
iabacu
Well, the same macro economics / historical factors that helped GM, could’ve
helped Ford and others. In particular, other 2/3 of trucks must have come from
somewhere.

~~~
dogma1138
Ford didn’t own 2 major subsidiaries in Europe. While GM was buying every
company they could get their hands on Forde was too busy with building
Fordlândia in the middle of the Brazilian rainforest the best they managed to
get is to enter into a partnership with a Russian car company after the
Bolsheviks have already gotten into power.

I think GM was much better positioned and it much more decisively went all out
on war production Ford made cars and engines during the war GM made everything
from bullets to machines guns to tanks and bombers.

~~~
sfifs
Mars, Solar city, Boring company, Hyperloop...

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thewopr
I am a huge Tesla fan (and Elon fan). I own stock (shortly after IPO). I have
a model 3 reservation. I have been singing their praises for a long time. Elon
is an incredible visionary and probably an incredible engineer. This is a
great combination for making the impossible possible.

And I totally agree with this article. If not a new CEO, Tesla needs a good
COO. They need excellent, consistent execution, not novel, groundbreaking
execution. They have 100's of thousands of reservations for the 3 (and I don't
know how many powerwall and solar roof reservations). If they can just execute
on this, the world is theirs. But if they continue to have delays and major,
public mistakes like the model 3 ramp, my stock purchase may have been a poor
choice.

~~~
martythemaniak
There will come a time when Musk needs to step away from Tesla, but that day
is not today. He's publicly mused about stepping away (SpaceX is his real
fav), but had his tenure renewed recently.

If all Tesla did was sell pretty good cars, they'd probably get crushed by the
incumbents. Tesla, is selling way more than that - they're selling the idea of
a brighter, better future. You're not just buying an EV, but you're helping
climate change, you're reducing pollution, you'll be reducing human death and
suffering and ending traffic jams and hey - it all comes in a exclusive,
technologically-advanced, aesthetically pleasing package.

Now, some might object that this is largely a bunch of marketing/PR bullshit,
and you will likely be technically correct, but would still miss the point. If
people wanted a nice, efficient EV, they'd buy the Bolt, which by all
accounts, is pretty damn good. But Tesla sells this "bullshit" because it's
what people actually want to buy, and EVs happen to be the delivery vehicle.
So as much as you might dislike this "bullshit", it's a core reason why Tesla
even exists in 2018.

Where does Musk fit into this? He happens to be the personification of this
idea today. In the popular mind he is "cool" so when you buy a Tesla, you're
also implicitly buying part of this cool, much like buying an iPhone back in
the day got you a part of Jobs' cool. Eventually Tesla will become it's own
thing (as Apple is today) and outgrow Musk, but that's still years away.

OTOH, if you want to know what's _actually_ going on at Tesla and what they
need, this will probably give you the best idea out of any material on the
internet:

[https://www.youtube.com/watch?v=CpCrkO1x-Qo](https://www.youtube.com/watch?v=CpCrkO1x-Qo)

It's an in-depth interview with a guy who owns a consultancy which
disassembles, analyses and sells reports on vehicles, both for manufacturers
looking for research on their competitors and at improving their own products.
His findings are extremely interesting - he's downright astounded at how
incredible parts of the car are (battery, electronics) and thinks established
companies should be quacking in their boots. OTOH, he thinks they've made a
number of blunders in other parts, such as their production line design or
parts of the car (for example, he thinks the body is 20-25% heavier than it
needs to be, with parts that serve no discernable purpose)

~~~
tokipin
This is a common misunderstanding in my opinion. People don't really care
about the environment/climate change that much. People may think they do, but
in practice the amount of people that would convert that sentiment to a
purchase on a high-ticket item is probably a tiny niche, and not something you
would build a business strategy around for something so capital intensive.

The point of Tesla is to force electrification simply by making cars that are
better than gas cars, because then the broader market does most of the
remaining work. Tesla has always known that the whole environmentalism thing
is insufficient and unnecessary.

I think what throws people off is Tesla's stock price and brand. People who
don't understand what can go into these assume it must be "hype and dreams,"
and they conclude that Tesla is popular because of marketing tricks.

~~~
bewo001
The brilliant stroke of Musk was to market the electric car to sports car
buyers. They don't care about high cost, short range, and performance at sub
zero temperatures.

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bkjelden
My biggest takeaway from this article is that Tesla's very aggressive,
forward-looking growth plan could be absolutely destroyed by a recession in
the US economy.

Durant's companies ran fine with him as CEO until recession hit and he ran out
of money.

What happens to Tesla if a recession hits? All of their products, while
undoubtedly groundbreaking, are luxury goods purchased with discretionary
income. Even the Model 3 - reliable, commodity transportation can be had for
far less than $35,000.

How will Tesla handle the pool of buyers for a $75,000 sedan and $900/mo
lessees shrinking dramatically?

Of course all auto manufacturers face this problem. But a company run by an
aggressive, visionary CEO like Musk faces far more risk.

~~~
icelancer
Tesla did experience a recession in the early years of the company when trying
to raise money and sell prototype visions. It nearly crushed the company but
they came out on the other side. Today they're much better capitalized and
Elon structured debt specifically to guard against dips in the economy.

Not saying he can't be wiped out with one or two bad decisions + a recession,
but this isn't new territory for Tesla.

~~~
Nokinside
>better capitalized and Elon structured debt specifically

This goes against everything I know about Tesla's finances. You really have to
provides sources if you want us to believe this.

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osteele
GM had inventory >> demand, Tesla has demand >> inventory. Durant micro-
managed; Musk both has obvious tendencies there, but also just broadcast a
memo directing employees communicate directly, without going up and down a
chain of command. And, as noted in other comments, Musk took over the company
from its founders — like Sloan, and unlike Durant.

There’s ingredients here for a Tesla:GM and Musk:Durant story, or for its
opposite.

To make the argument compelling, I’d want a justification for including only
the similarities while omitting these differences. Without this, the
comparison seems ad hoc.

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bagrow
Great storytelling, but it concludes rather abruptly. An argument of analogy
and anecdote. Further, Musk is not the founder of Tesla, Martin Eberhard and
Marc Tarpenning are.

~~~
Mononokay
Wikipedia has five people listed, and says that while it was registered by
those two, they consider the rest as co-founders. Now, Wikipedia isn't the
greatest source, but it seems to be consistent with most media coverage.

~~~
elvirs
in the Elon Musk book its mostly Martin Eberhard who was obsessed and created
prototype of electric vehicle and started a company. Musk joined as an
investor and then changed the company's direction

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everdev
There's a fine line between learning lessons from history and assuming that a
lesson from history will inevitably happen again in the future. People,
companies and life have elements of chaos and luck that have so far made
consistent, accurate future predictions unreliable.

People are good at identifying patterns, but we sometimes make the mistake of
predicting the future based on past patterns. A classic example is the stock
market where no one has reliably predicted the future without insider
information.

So, yeah it's good to know the history of GM, but let's be careful about
projecting that onto Tesla.

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joobus
Look to the history of Delorean.

[https://en.m.wikipedia.org/wiki/DeLorean_Motor_Company](https://en.m.wikipedia.org/wiki/DeLorean_Motor_Company)

~~~
rasz
Are you suggesting Musk selling suitcases full of coke to fund Tesla?

~~~
trumped
Flamethrowers should do it: [https://www.producthunt.com/posts/boring-company-
flame-throw...](https://www.producthunt.com/posts/boring-company-flame-
thrower)

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olivermarks
A better comparison to Durant's amazing entrepreneurship as auto manufacturing
scaled would be Steve Jobs.

Very similar situation to Durant, fired by Apple (who ironically were trying
to impose sloan style metrics on everything) comes back and builds the biggest
consumer brand on the planet. Look at Apple now, it's sliding back into mid
management mediocrity...

I'm not a Musk fan particularly but slowing down innovation and sizzle at this
point in their scary journey would be a disaster IMO

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rmason
Billy Durant was a bad ass. My father told me a story he heard from someone
who was in the room. Durant crashes a GM board meeting and is told he has no
standing and must leave.

He starts toward the door, says something and in file a series of Western
Union boys who bring in bags of telegrams which at Durant's direction they
empty on the board table.

Durant announces to the stunned board that these telegrams give me voting
control of General Motors and it is you who have to leave - and they did!

I'm just surprised that no one has ever done a movie about him.

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lucas_membrane
This is conventional B-school wisdom (where B = biology or business): the most
successful adaptations are enabled by new DNA. In business, firms that grow
from one of many to leading firms must adapt because leading firms face
different threats, of which, celebrity CEO may nowadays be the biggest.

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csours
Another parallel: Over-automation
[https://youtu.be/CpCrkO1x-Qo?t=3045](https://youtu.be/CpCrkO1x-Qo?t=3045)
(the whole thing is worth watching if you are into this sort of thing)

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doomlaser
Musk should hire away executives from Toyota or Honda to manage the execution
of vehicle assembly at scale.

~~~
carlivar
He has scoffed at the Toyota Production System, so while I agree with you, I
find this unlikely to happen. He seems to be backing into it with comments
like "humans are underrated" since I would imagine his ego can't allow a
backtrack any faster.

