I am a long term Apple (2005–2012) and Tesla investor (2012- present). I have made over 10x return on both investments and I expect another 10x return on Tesla. This is a condensed recount of numerous conversations I have had with people who have lost money shorting Tesla. I have often been called a cult member… Yeh, the cult of making money.

Why are you invested in Tesla?

My thesis is to invest in companies with disruptive technologies in large markets and good management. All transportation will go electric due to the falling costs of batteries. Elon Musk is resilient and has strong business and technical acumen. He is heavily invested in the company. He has an inspirational and consistent vision and that has enabled him to recruit a world class team. He also has a lot of integrity.

How can you trust Elon Musk after he misses deadlines?

Forward looking statements are speculative, especially when you’re innovating. I don’t expect Tesla to hit all it’s targets, but I trust Musk to be honest about the current situation. With regards to the future, I trust him to only raise money on good terms. They typically raise money on the heels of good news.

What about competition from Big Auto?

This is the biggest mistake people make. I suspect most incumbent auto companies will go bankrupt, like Kodak and Blockbuster. They have crippling conflicts of interest with their existing products, dealerships, in house expertise, and they are relying too heavily on suppliers for innovation.

Aren’t you worried that Tesla doesn’t have any competitive advantage?

Teslas are awesome. Drive one. Tesla has numerous competitive advantages: GigaFactory, SuperChargers, Tesla Stores, over the air updates, and the most data collected for autonomous driving. Because of the GigaFactory, I suspect they have the lowest battery cost. The software and features such as ludicrous mode are difficult to copy due to vertical integration. But as Elon Musk states what matters most is the pace of innovation.

What about the exit of executives?

In Tesla and most organizations, the departure of CEO is the only person that will significantly change the company.

I am not concerned because they are mostly being replaced by better qualified executives. Also some key executives are still there, namely JB Straubel and Jerome Guillen.

The mistake many people make is that often with established companies executive departures are a signal the company is failing. They are like rats fleeing a sinking ship. It’s difficult to know the motivations of the departing executives. Often with high growth companies it’s burn out, or the job outgrowing their capacity to perform it (Doug Field). Some people like to work on new stuff and move on(Jim Keller). Many of the early employees have become rich and may want to retire(Deepak). Churn in high growth companies doesn’t necessarily signal problems.

Are you concerned about Elon Musk’s tweets?

No. We are living in a strange times due to political polarization, and social media disrupting traditional media. I think people are projecting other issues onto Musk’s tweets. I believe the use of social media is a critical tool for companies to get their message out directly and interact with customers.

What about the SEC settlement?

If you meet with the world’s largest sovereign wealth fund and they tell you to name your price… it speaks for itself.

The gist of the accusation was that Musk never intended to take Tesla private, and the announcement was intended to manipulate the stock price. I think he justifiably believes he could take the company private and that why he made the decision to make the announcement. It also sent a signal to the short sellers that he will fight.

Testing the limits of the law is common in growth companies. Steve Jobs was involved in an anti-poaching case. Airbnb and Uber’s business models were deemed illegal in some areas. Airbnb’s method of growth was alleged to be illegal. I don’t judge Elon Musk on accusations. I also draw a distinction between illegal behavior that is ruthless business practices as less serious than behavior that defrauds investors such as accounting frauds and misrepresenting what has been achieved.

What about Elon Musk’s behavior?

The Model 3 ramp was very stressful. High growth companies require maverick entrepreneurs to manage stressful growth. Many investors are uncomfortable with the founding CEO and want to bring in more conservative leadership. Some call it “adult supervision.” I believe investors are best served by keeping founding CEO as long as possible because they have credibility that is difficult to replace. Elon Musk is impossible to replace at this point. The fact that so many other auto and green tech companies have failed is proof of that.

What about all the bad press Tesla has gotten?

When I held Apple stock, I was worried over antennagate and bought insurance (put options). I lost money. When I see alarming stories about autopilot or fires, I reflect on antennagate. I try to keep a long term view and trust the management.

GM, Ford and other car companies advertise. Tesla doesn’t. How does that impact the media’s reporting? It’s hard to say. But it’s always in the back of my mind. Take for instance all these ridiculous articles claiming the Bolt would be a Tesla killer. They are a farce. The Bolt is not in the same class. It’s ugly.

When I hear naysaying in the media, I reflect on the original iPhone reviews to gain perspective. They are absurd now. Every time I see Bob Lutz on TV talking about how Tesla will fail, I think about this interview with Steve Balmer talking about how the iPhone will be a flop.

Steve Balmer predicts iPhone will be a flop

How can you invest when so many analysts are negative on Tesla?

I respect the analysts and read their reports in detail. However they have mostly been wrong about Tesla and repeatedly underestimate them.

I’m not sure why they get it so wrong, but they do have many conflicts of interest. Being positive on Tesla means being negative on many of the bank’s customers, namely the entire energy and transportation sectors. Their research departments are also conflicted with their other businesses. Analysts also don’t cover as many high growth companies as they used to because they are waiting much later for IPO than they did in the past.

Is demand shrinking?

Tesla sold about 250 thousand vehicles in 2018. There were about 80 million vehicles sold in 2018. So the total addressable market is large and they have barely scratched the surface.

As EVs go mainstream and battery prices continue to drop over the next year or two, I expect about 1/3 of consumers to be interested in them. I base this on the technology adoption curve.

(Also, see above question about competition)

What about the end of government subsidies?

My primary thesis is the falling cost of batteries. Government incentives accelerate EV adoption but the falling battery costs are an independent trend dependent on economies of scale and increasing energy density.

Isn’t Tesla overvalued because they worth more than GM?

The GM comp makes for a great headline, not a great comparison. GM has problems, massive debt, terrible unions and a shrinking business. Toyota or tech companies might be a better comp. However, Tesla really has no peers, so comps are not a practical way to value the company. Valuations are at their core based on risk adjusted value of future cash flows.

Isn’t the auto industry a tough, cyclical market?

Yes. Historically the auto market has been vulnerable because it has high capital costs and in a recession it’s an easy purchase to defer. In the short term, I think EV demand will still be strong due to the fact that it’s an emerging market with falling costs. In the long term, I anticipate Tesla Network (autonomous ride sharing) will be a more recession proof business model and less cyclical.

Let me know if you have any other question