Wednesday, May 9, 2018

When you have to go from a world of sycophancy, story stocks, and magical heuristics to a world of reality, that first step can be a doozy.

As you may have heard, Tesla is hitting a bit of a rough patch. Elon Musk probably represents Silicon Valley culture and its dysfunctions better than anyone else and, in a lot of ways, even more than Space X, Tesla is the definitive Elon Musk company.

In aeronautics, Musk has always been somewhat grounded by both his engineers and his customers. You can't simply wave away problems with rockets, and the payloads that they carry are so obscenely expensive that you can't take unnecessary risks either. And the fact that it was privately held meant that the company had to do more than simply tell a good story.

With Tesla, Elon Musk could convert fanboys and a cult of personality into tremendous share price. He could get more bounce for unlikely promises than most businesses could get out of solid earnings reports. The only problem was that at some point you have got to transition out of that world and into one based on product and profits. Musk is now stepping into that new world and it is not going well.

From the indispensable Michael Hiltzik
But Tesla Chief Executive Elon Musk's performance on his conference call with analysts Wednesday, following the release of the company's first-quarter financial results, was in a class by itself. To mention the bottom line here at the top: It was enough to make people wary of buying his stock, and could even make people wary of buying his cars.

Aficionados of weird CEO behavior will treasure the hour-and-15-minute call for years. He insulted analysts who asked pertinent (or perhaps, from his standpoint, impertinent) questions. He made unsupported claims about the safety of his cars' autonomous driving systems. He attacked the news media for reporting on accidents involving those systems. At times he seemed distracted, even confused.

Musk displayed particular contempt for analysts who dared to ask about his company's capital spending plans and the state of reservations for the mass-market Model 3 sedan. These issues aren't trivial for Tesla investors. Whether the company will need to raise capital this year has been oft-debated; it became a more critical issue after Tesla revealed that it burned through about $1 billion in cash in the first quarter. And the company's very survival depends on the Model 3, which has been plagued by production delays and quality control issues.

Yet when analyst Toni Sacconaghi of Sanford C. Bernstein & Co. asked about capital requirements, Musk cut him off. "Excuse me. Next," he said. "Boring bonehead questions are not cool." The next questioner was Joseph Spak of RBC Capital Markets, who asked about Model 3 orders. Musk gave him the cold shoulder too.

"These questions are so dry," he said. "They're killing me." Musk then cued up Galileo Russell, a Tesla fanboy who issues his sycophantic opinions on Tesla via a YouTube channel. Musk spent about 20 minutes conversing companionably with Russell — who pronounced Musk's answers "awesome" — on issues tangential, at best, to the hard quarterly numbers the company disclosed a few minutes before.


What perhaps was most disturbing in Musk's performance Wednesday was his discussion of the safety of Tesla's cars and the company's Autopilot semiautonomous driving system. In March, the occupant of a top-of-the-line Tesla Model X with the system engaged died after the vehicle hit a highway barrier in Northern California, was hit by two other cars and caught fire. The incidents revived memories of a 2016 crash when the occupant of a Tesla running on Autopilot in Florida was killed in a collision with a truck the system apparently had not spotted.

Let's be clear about this: Musk has no statistical grounds to state categorically that autonomous systems are safer than human-driven vehicles. That conclusion might stand to reason, since human error is blamed for most vehicular deaths and injuries, but autonomous systems might create dangerous situations we can't yet anticipate. His apparent assumption that the debate is over — "Vehicles that we're producing are capable of full autonomy," he said — is a little scary, considering how much still needs to be learned about the functioning of fully autonomous cars, and about the interaction of autonomous systems with humans in the cockpit.

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