Elon Musk deserves immense credit. The time of the electric car had arrived but it needed a catalyst. Mr. Musk provided it. As the late David MacKay made clear in his wonderful book, Sustainable Energy- Without the Hot Air, electric cars have a host of advantages over internal combustion engines, not the least of which is that they do not throw away kinetic energy in city driving. But being the catalyst for a new innovation and running a mass market car business are two separate things. One involves far-sighted thinking and the willingness to take major risk. The other involves the blocking and tackling of efficiently producing and servicing millions of cars. Mr. Musk is a great visionary. However, as his recent press conference revealed, he is not much for blocking and tackling.
It is for blocking and tackling reasons that I have been saying for years that Tesla is overvalued. Yes, electric cars are way of the future, but in my view Tesla will not be a big part of that future. It reminds me of an innovation that has played a huge role in my life, and those of anyone else who does valuation, – the electronic spreadsheet. The father of the electronic spreadsheet was Dan Bricklin who came up with the idea while he was an MBA student at the Harvard Business School. When I teach my valuation class at Caltech, no one has heard of Dan Bricklin despite the fact that every student makes daily use of his innovation. His company, Visicorp (the product was called Visicalc), was not so good at blocking and tackling and went bankrupt in the face of competition. I fear the same fate for Mr. Musk. I have owned three Teslas and love electric cars. But I have had to deal with innumerable glitches. As the competition comes on stream with a vicious focus on blocking and tackling, Mr. Musk may want to step back in time and study what happened to Mr. Bricklin.