“What’s going on with electrification transition and the demand for electric vehicles 
 is a reset that’s almost like the starting up of a new industry,” MacDuffie said on the Wharton Business Daily radio show that airs on SiriusXM. (Listen to the .) He pointed to predictions of a shakeout and consolidation within China’s EV , and said, “I’m sure we’ll see it here [in the US], too.”

For sure, any new industry will see many casualties as it evolves. “One out of ten is considered a decent success ratio for entrepreneurial ventures of any kind,” especially in industries such as EVs that call for large capital requirements, MacDuffie said.

Vertical integration is key to success

According to MacDuffie, vertically integrated EV makers like Tesla and China’s BYD can ride out a shakeout because they control large parts of their supply chains. Tesla, for instance, makes EV batteries and has invested in battery storage. It also coped with the recent global semiconductor shortage by redesigning its software to support alternative chips, as a Forbes pointed out. “You have more control, you can present a more coherent product and a more coherent brand and identity if you control the whole [manufacturing chain],” MacDuffie said.

Among the likely EV casualties that MacDuffie pointed to is Fisker, which appears to be on the verge of . But he expected Rivian, another startup that is also facing challenges, to survive, because it has an “appealing product that’s been well received,” which will help it continue to draw investment.

Legacy automakers have an advantage

Established automakers with EV products have another advantage over EV startups in that they can ride out the current demand slowdown by shifting to hybrid vehicles, MacDuffie noted. Several legacy automakers such as , Honda, and Ford have taken such a portfolio approach to increase their hybrid offerings.

Established automakers have another advantage over EV startups. “They already know how to do the design, the build, the supply chain, and the distribution,” MacDuffie continued. They also have the wherewithal to cross-subsidize their forays into new technology such as EVs, he added. “They can keep selling their existing product line and use those profits to cross-subsidize. That advantage is not available to a startup.” Such an advantage is especially useful when technology transitions get complicated or when demand growth slows down, he noted.

The demand slowdown hasn’t deterred new EV startups, especially those based on autonomous vehicle technology. MacDuffie pointed to Amazon subsidiary Zoox, an autonomous electric vehicle firm that is aiming for the robotaxi market. Another well-heeled EV startup is , an autonomous trucking company with backing from both Amazon and Toyota. “Where there’s a deep-pocketed investor that has a stake in you continuing, then you’re more likely to make it through this period of ferment than if you’re simply relying on the public markets,” MacDuffie said.

Building supply chains from scratch

Unlike with consumer electronics where an Apple could tap into an existing supply chain, the EV industry didn’t have “a bunch of contract manufacturing capacity sitting around just waiting for a great car design” that somebody comes up with, MacDuffie noted. The EV industry has faced hurdles in building out that supply chain from scratch. It has been hard for EV companies to obtain debt financing or venture capital financing because of the long wait before they can roll out their products and make profits, he explained.

As a consequence, companies like Tesla and Rivian have had to rely on the public capital markets to finance those investments, but that has made them particularly sensitive to the expectations of equity investors, MacDuffie noted. “Investors and everyone watching the stock market are hanging on every announcement about your sales. Anytime you don’t meet a sales projection, the stock tanks.” Not surprisingly, the drop in demand for EVs has the stock prices of Tesla, Rivian and Nio.

Policy support vital for EV makers

Government support has been crucial for the EV industry in these trying times. “If there were not government subsidies and priorities to advance the electrification transition, then I don’t think you would see all of the world’s automakers making big strategic bets on electrification, and you wouldn’t see as many startups either,” MacDuffie said. “They have the confidence that this transition will happen with so much government push behind it.”

At the same time, EV makers in the U.S. face a degree of policy uncertainty unlike their counterparts in China which has a “unidirectional government,” MacDuffie noted. “In the U.S., if there’s a change in political party, and a change in who’s in the White House, then we may see policy swings much more,” he said. “It makes American EV companies subject to more volatility and more risk because, what if all the subsidies are taken away all of a sudden in a few years?”

On a recent trip to Germany, MacDuffie found that EV makers there are confident that their policymakers are committed to supporting the electrification of transportation; they are therefore surer of making their investments.

MacDuffie said the impending consolidation among EV makers is a familiar theme for the auto industry. He recalled that after the birth of the auto industry in the early 1900s, there were hundreds of auto companies, but they consolidated into five or six companies in the 1920s and 1930s, and eventually into the Big Three of General Motors, Ford and Chrysler (now part of Stellantis).

As the EV industry braces for a shakeout, financial staying power will make the difference. “Anybody who succeeds in persuading the various sources of capital to come together, as Elon Musk did very well from lots of sources [for Tesla], you have more chance to survive,” he continued. “But any time you lose one of those incoming streams of capital, boy, you’re much more on the edge.”

[ first published this piece.]

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The power demand isn’t going to slow any time soon. The advent of cryptocurrency and generative AI is creating an exponential rise in demand for more data centers and more electricity. We’re witnessing a revolution in electric cars, trucks and appliances. Electric companies will have to meet the demand while moving us toward a carbon-neutral world. We can do this by taking three key steps.

The first step is to accelerate the ongoing revolution in renewable energy.  In 2022, of all new energy added globally by utilities was renewable, and renewable energy is to surpass coal by 2025.

While the accessibility of renewable energy has increased, the better news is that costs continue to decrease. Solar manufacturing costs drop every year and will only get more competitive with fossil fuels.

Wind projects have decreased in costs by  over the last decade. The Inflation Reduction Act is an essential step in the right direction with an estimated  in incentives for clean technology by 2032. Clean energy is not only better for the planet, it’s becoming cheaper by the day.

Unfortunately, the sun doesn’t always shine, and the wind doesn’t always blow. That’s why advancing battery storage is a key bridge to a clean energy future. When I served on the board of Tesla in 2010, the energy cost for batteries was over per kilowatt-hour. This was part of why electric vehicles were prohibitively expensive. Just ten years later, the cost of battery storage had dropped by an order of magnitude to $137 per kilowatt-hour. Tesla has cut electric vehicle prices in 2023 alone.

Battery manufacturers are driving decreases in battery costs that are leading to a revolution in power storage. Tesla’s energy/battery division is a prime example, deploying   of power storage in the third quarter of 2023 alone. That’s to power all the homes in Chicago and LA combined. Expect to see some form of battery storage in most homes, offices and schools in the coming decades. Batteries are rapidly becoming a cheaper alternative to natural gas or nuclear, and they are a lot easier to permit next to a school or apartment building.

The toughest problem to solve will be building a resilient, multi-directional grid that will connect this new mosaic of storage and energy devices. This new grid will enable utilities and homeowners alike to generate power and store it when the wind is blowing and the sun is shining, as well as to transport it to the areas that need it the most based on the time of day. This will enable us to avoid building excess capacity and help us solve for those critical times of peak energy demand (both winter and summer) by saving up power when it’s cheap and using it during peak demand.

The electrical power grid is the largest and most important machine in the world. The Internet wouldn’t function without the power grid. Transforming the grid from a one-way transmission system to a multidirectional grid will enable everyone to play a role in slowing climate change.

Renewables, batteries and a new, multi-directional grid won’t solve all of our problems. We will still need to develop green hydrogen for energy-intensive industries like steel and cement. Over time, we will need more nuclear energy plants because of their efficiency and baseload power. California’sPacific Gas and Electric Company that electricity demand will increase by 70% over the next 20 years. Bill Gates and Elon Musk think it will be closer to 2–3 times that. But, in a race against climate change, renewables, batteries and the grid are the three best tools we have today. The world’s utilities are our best chance to help us win that race.

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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To address the problem with any hope of achieving success, humanity has two choices. The first would be to remove inequality itself as the founding principle of the dominant economic system. That would mean inventing a form of capitalism that downgraded personal and institutional greed as the essential factor of motivation. The second would be simply to change the economic system and its political infrastructure. 

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Because the second solution is deemed radical, most people have eliminated it from consideration. On the pretext of responding to the pandemic, the first solution has been awkwardly formulated as an ideal to aim for by members of the economic elite who have given it the “The Great Reset.” Given its lack of real impact, cynics might conclude that it serves primarily to comfort the idea of those members of the privileged elite that, as individuals, they possess a moral conscience. As a class, they pretty clearly have none.

The pundits will explain that changing the economic system is out of the question, citing history as proof. It has already been tried, in Soviet Russia. It catastrophically failed. Capitalism won. The idea that there may ways of inventing an alternative to a failed and a now visibly failing system has been excluded from polite thought by the economic and political elite. 

They have crafted and imposed on successive generations a deterministic view of history, dutifully transmitted through our dominant educational and media culture. It is the same deterministic view of history that the late David Graeber and David Wengrow have critiqued in their recently published book, “The Dawn of Everything.” The standard view of history implies a vision of progress from the age of hunter-gatherers to present times, leading to the current state of affairs summed up by US Speaker of the House Nancy Pelosi in her immortal : “We’re capitalists and that’s just the way it is.”

The question of wealth inequality has been given a boost this week by Elon Musk, who is no fan of Democrats, but who does share Pelosi’s existential belief. In the context of debate on the reconciliation bill that US President Joe Biden calls “Build Back Better” (a term by the same elite that have proposed The Great Reset), some legislators — notably Ron Wyden, chair of the Senate Finance Committee — have been pushing for the inclusion of a tax targeting the super-wealthy. In recent years, Senators Bernie Sanders and Elizabeth Warren, both candidates in the 2020 Democratic presidential primaries, put the issue in the public spotlight.

Polls and surveys show that the idea of taxing the wealthy, at least in proportions similar to the middle class, is a very popular idea across the US. And although Republicans are formally committed to a historical ideology that adulates the wealthy and will defend at all costs their essential privileges in the belief that that is the key to a dynamic economy, Democrats have begun to understand that there may be an electoral advantage in at least affirming publicly you want to tax the wealthy.

Markets Insider up the psychological position the Democrats find themselves in today during the ongoing negotiations to tax the wealthy that will figure in the reconciliation bill. “The White House hasn’t quite leaned into an outright wealth tax, even though polling consistently shows it’s popular with most voters, who want higher taxes on the wealthy to offset infrastructure spending,” the website reports.

Today’s Daily Devil’s Dictionary definition:

Most voters:

Those whose numbers represent a largely insignificant statistic in modern democracies because they cannot back up their convictions with the cash that serves to finance the campaigns of the people they will eventually have to vote for because there will never be given credible alternatives

Contextual Note

The entire debate took on new significance when Sanders — who , “We must demand that the extremely wealthy pay their fair share. Period” — drew the ire of his majesty of Twitter’s Elon Musk. The CEO of Tesla responded with this insulting : “I keep forgetting you’re still alive.”

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Musk has never tried to hide his hyperreal narcissism, but in this case, he makes it plain for everyone to see. His fans applauded and piled on with tweets such as this : “Bernie is the kind of guy that shows up to a potluck with no dish but Tupperware containers to take food home.”

But apart from his devoted fans, the public has no reason to care about what or whom Musk remembers or forgets. After decades of coddling by the media, Musk apparently believes his thought processes sum up the essence of humanity’s current concerns. After all, he recently became the world’s wealthiest human being. According to traditional US wisdom, if he’s hyper-wealthy, he must be hyper-smart.

Historical Note

Quite logically, in Elon Musk’s eyes, questioning the idea of excessive wealth is equivalent to attacking Musk himself. Seeing himself as humanity’s greatest benefactor, he continued his assault on Bernie Sanders with a mindless repeating the stale clichĂ© of Mitt Romney Republicans back in 2012: “Bernie is a taker, not a maker.”

Musk sums up with blinding clarity the oligarchic state not just of American democracy, but of the culture that for the moment keeps it firmly on the same path. But that very path must be understood in terms of its own historical trend. It has become increasingly risky. 

Comparing the much mediatized and constantly expanding wealth of Elon Musk, Jeff Bezos or even the officially retired Bill Gates (who should thus be excluded from the caste of “makers”) with the miserable wages of the majority of human beings who actually do make things for the pleasure and prosperity of the wealthy, the general public is undergoing a prolonged traumatic experience. The sophisticated wealthy of the international super-elite who gather in Davos every year appear to be aware of the danger. That is why they are calling for the Great Reset. The super-wealthy class in the US appears, in contrast, to wallow in their indifference to the public’s trauma.

How has the American elite managed to create a situation that encourages such indifference and ignores the risks? The answer is simple: an effective ideology. The United States finds itself today in a situation similar to that of the Soviet Union half a century ago. Soviet communism was sufficiently resourced and organized to maintain a fragile equilibrium for the general population thanks to their inculcated belief in an ideological belief system designed to protect the ruling elite. 

The Soviet system finally collapsed at the end of the 1980s due to the increasingly evident gap between the supposed truisms contained in the ideology and the physical and psychological reality of the global economy. In the early 1990s, thanks to US initiatives, Russia’s ideology based on the belief that communism defined the interest and identity of the people was brutally replaced by the ideological precept repeated mechanically by Pelosi that we are all capitalists.

Americans who admire Musk do so because of their own inculcated belief in the idea that society consists of makers and takers. This implies that the takers (aka “most voters”) depend on the makers, just as the average Russian depended on Soviet leadership. But, in the Soviet Union 40 years ago, the lived reality increasingly told a different story.

Something similar is happening in the US today. Awareness of the gap is growing. It contributed to Donald Trump’s election in 2016. The professional ideologues in the economy, the media, education and politics are doing all they can to counter it, to keep the takers vs. makers ideology alive. That includes all Republicans, of course, but also Pelosi and more recently Senator Joe Manchin, who argued that a wealth tax would be “overly punitive toward business and corporate leaders,” Business Insider .

The conflict between “most voters” and the ideologues will undoubtedly continue to play in favor of the ideologues, thanks to a system that makes voters (takers) less equal than donors (makers). But, as in Soviet Russia, a tipping point may be somewhere in the offing.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on 51łÔčÏ.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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Yes, he’s brazenly touted some things and complained about others, such as the dreadful prospect of seeing billionaires taxed by a spendthrift government. Musk it up in a tweet cryptically warning that “Eventually, they run out of other people’s money and then they come for you.” In another , he complained that “Spending is the real problem.” He didn’t bother to mention that the US federal government has done a lot of spending to support his megalomaniacal projects. 

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When wealthy US citizens say spending is the problem, they mean spending on human and social needs is the problem. True Americans pull themselves up by the bootstraps. Deprived of government spending, decent people would find ways of meeting their own needs. Musk’s particular needs appear to be situated in the $100 billion to $1 trillion range, but he is the first one to admit he is an exception. Ordinary people can get by with much less.

Things may at last be getting back to normal. Musk is still finding ways to be talked about. This breaks a dry spell when there were few of his blockbuster stories such as benign discipline by the Securities and Exchange Commission (SEC), getting sued for calling a heroic British diver a “pedo guy,” or promising and then postponing his conquest and subsequent colonialization of Mars.

Like any other multibillionaire during the COVID-19 pandemic, but on a greater scale, Musk augmented his wealth. He began overtaking the former number one, Jeff Bezos, earlier this year and now has become the undisputed world champion, reaching upwards of $320 billion this week, way ahead of Bezos, who hasn’t yet hit $200 billion. There are days during which Musk’s fortune can jump by more than $30 billion in less than 24 hours.

The reason for the latest leap in his net worth was the news that car rental company Hertz would order 100,000 Teslas. The only problem is that, even after the share price shot skyward following that announcement, Musk tweeted that no deal was actually signed. This led to feverish speculation in the media about what was going on.

CNN Business Dan Ives, a tech analyst at Wedbush Securities, who gave his point of view, analyzing it in terms of a negotiator’s psychology. “We view the Hertz tweet as a game of high stakes poker, with likely legal wrangling going on in the background between Hertz and Tesla. Hertz has already announced the deal and it’s a matter of procedure with getting the deal signed. Musk’s tweet this morning will likely force pen to paper for Hertz,” Ives said.

Today’s Daily Devil’s Dictionary definition:

High stakes poker:

Another term for capitalism, formerly believed to describe an economic system but now clearly understood to be a speculative game characterized by the player’s skill at bluffing

Contextual Note

On November 1, Musk , “If any of this is based on Hertz, I’d like to emphasize that no contract has been signed yet.” To those familiar with his special sense of humor, this was obviously a joke, since there was no reason to doubt — as Musk’s “if” clause seemed to suggest — that the leap in Tesla’s stock was based on the Hertz announcement. By pretending he doesn’t know, Musk cleverly plays the innocent. He knowingly gives the impression of not understanding or possibly not even caring about the absurd fluctuations of share prices as a result of mob psychology. It allows him to appear as a Warren Buffet-style economic realist who believes that share prices reflect, or should only reflect, economic fundamentals.

Ives may be right to speculate that Musk’s aim is to shame Hertz into firming up the deal, even though there is no reason to think that Hertz might be hesitating. Nobody forced the car company to make the announcement. But Musk may have another trick up his sleeve.

The day the deal is actually signed — whether it’s tomorrow, next week or in a few months — the psychology of markets tells us that the announcement of a finalized deal will send the stock price skyrocketing once again. Not only will that make Musk even richer, but it will also demonstrate his ability to control other people’s behavior in the stock market. That’s how bluffing can pay off in high-stakes poker.

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In recent weeks, Musk has also taken to playing with national politics by challenging the Democrats’ persistent chatter about instituting a wealth tax. He followed that up by engaging in a confused debate with a UN expert on the solution to world hunger. He suggested his possible willingness — on condition — to give away $6 billion. In terms of style, it was vaguely similar to his comments on the future share price of Tesla back in 2018. He did both in an offhand way that appeared to mock the “experts.” 

Musk demonstrates a masterful ability to exploit the trend of our civilization toward allowing hyperreality — a set of illusions about how the world we live in is constructed — to replace our perception of reality. It’s a game of appearances. Musk appears to be involved in national and world politics, but he isn’t. He appears to be grappling with real problems, but he clearly doesn’t care. It is a game he originally played when he created a non-existent equation between marketing electric cars and solving the climate crisis.

Historical Note

Elon Musk has managed to do what other hyperreal heroes have failed to do. That has positioned him at the center of a moment of US history marked by Donald Trump’s successful and enduring assault on reality. Like Trump, Musk has crafted his identity as the incarnation of an entertainer who pretends not to be pretending, while using every occasion to highlight his skill at pretending. 

At this game, Musk outperforms Trump in numerous ways. But the two have followed parallel paths. One created his own version of hyperreal political power, the other of hyperreal financial power. Any serious observer should have noticed that Trump has nothing to do with the reality of politics, in the sense that the term has been understood ever since Aristotle. Politics is the science of how a polis is governed. Similarly, Musk has become the world’s richest individual in record time, but what he has achieved has nothing to do with money in its traditional sense of being a stable measure of value.

Unlike Warren Buffett, who represents another brand of hyperreality, Musk insists on playing with the notion of hyperreality itself, bluntly and brazenly exaggerating every act and utterance to the extent that no one knows whether anything he says or does belongs to the world of concrete reality or exists as an illusion in an elaborate hall of mirrors similar to the device Orson Welles’ used in the final of “Lady from Shanghai.”

Welles should probably be credited as the first public intellectual in America to understand and dare to visually demonstrate the inexorable drift of US culture toward hyperreality. For his pains, Welles was understandably exiled from Hollywood and eventually from the US itself. In his day, reality still had enough of a presence in the nation’s culture to create discomfort with hyperbolic manifestations of hyperreality. Many intellectuals who were beginning to become aware of the drift toward hyperreality understood and admired Welles’ contribution. But they saw it as merely a facet of his personality as a cinematographer. More generally, Americans categorized him as an eccentric. They felt no motivation to understand the meaning of hidden messages in his work. Most stopped showing an interest in his work altogether.

Musk keeps getting richer while saying and doing things Americans find incomprehensible. His latest , in the context of solving world hunger, was to tweet the word “Humankind” followed by lines from an ancient Chinese poem. This has led to more lucid from social media users in China than from all the pundits in the US. When the Chinese say “Musk giving up his wealth is in line with the Communist Party’s push for common prosperity,” they may well be expressing the kind of deadpan humor that hyperreality is incapable of dealing with.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on 51łÔčÏ.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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One day of the week Musk is defending his unorthodox way of managing electric car manufacturer Tesla and his commitment to innovation by offering a choice of. The next day he is vaunting his glitzy Starship rocket from his interplanetary travel company, SpaceX, while dodging from NASA for not delivering his publicly-funded Crew Dragon on time. Another day, he may be promising to revolutionize urban transport with The Boring Company, unless, on that particular day, he’s more concerned with marketing recreational flamethrowers.

And in the same week — after fending off various lawsuits for libel and sanctions of the US Securities and Exchange Commission (SEC) — he may be claiming to have effectively countered humanity’s imminent fear of being overtaken by artificial intelligence (AI) by offering his own cyborg solution that promises to allow humans to control AI thanks to the technology he is developing at Neuralink.

Business Insider offers Musk some much-coveted PR for Neuralink in an article explaining the scientific basis of his solution to merging human and artificial intelligence: Elon Musk doesn’t want to stick with what is already possible. He said, in classic Muskian style, that apart from treating neural conditions such as Parkinson’s, he hopes that Neuralink could one day facilitate a ‘symbiosis’ between humans and AI.”

Here is today’s 3D definition:

Symbiosis:

Merging into a viable single entity two things that have no business being merged together

Contextual Note

Symbiosis in the realm of biology designates the shared interaction between two highly differentiated living organisms. The idea of symbiosis between humans and AI would appear to be either a misnomer or, more likely, a marketing ploy on the part of Musk. The Cambridge Dictionary this definition of symbiosis: “[A] relationship between two types of animal or plant in which each provides for the other the conditions necessary for its continued existence.” Musk may well be suggesting that with the advent of AI, humans need to foresee a symbiosis with AI to ensure their “continued existence.”

The article in Business Insider may not enlighten its readers on the question of whether symbiosis is either necessary, good or even possible, but it does tell us a lot about how Elon Musk has constructed a unique hyperreal cultural universe. And though it avoids explaining the working principles of Musk’s universe — the range of its components, how they are funded and managed and how the PR machine that gives them their external veneer can be put in motion with the complicity of media — it does provide a number of hints about the nature of its hyperreality.

It reminds readers that Musk started the company discreetly and a year later offered the scoop to The Wall Street Journal that he established Neuralink with a noble goal: to “merge computers with human brains.” Business Insider calls Neuralink “a curious side hustle” but then reminds readers that it “zeroes in on one of Musk‘s main fears — artificial intelligence.”

As a marketer, Musk appears to have learned the lesson the most expert politicians (aka electoral marketers) have taken on board as their essential strategic tool: create a climate of fear and then offer a marketable solution to confront that fear and overcome it. For several years, Musk has been claiming that AI is a menace to humanity,, as someone knowledgeable about how it works or will be expected to work in the future, “it scares the hell out of me.” If Musk himself is scared — and we know he knows a lot more than we do — people should be eager to buy into his solution, whenever it happens to be ready.

For all his flair for innovation and an unquestionable level of technical genius to match his equally apparent amateurishness as a business mind, Musk appears to be especially good at playing on people’s emotions, from adoring admiration to fear. He is the paragon of builders of hyperreality, on a par with Donald Trump and Steve Jobs, possessing the flair of the first and the technical wizardry of the second. And Musk shares with both the narcissism that has allowed all three of them to conduct experiments in the most outlandish ways in public (with other people’s money) while being admired and even adulated for their failures as much as their successes. Those three are the face of hyperreality and its master-builders.

Only one of the three himself a “very stable genius” or his “unmatched wisdom,” partly because his narcissism is so extreme that he has to keep praising himself. Over their respective careers, Musk and Jobs have consistently let other people make the claim, though their actions have always been programmed to elicit that description.

Historical Note

The Verge on the same “breaking news” about Neuralink’s innovations back in July, which makes it less of a scoop. Business Insider includes analysis by experts, which may not have been available before its publication on October 6, meaning it is legitimate news. But the repetitive and often redundant pattern of releases about Musk’s contributions to humanity’s future and the predictable complicity of the media in spreading the news represent a key operational feature of hyperreality. It must appear to be news at all times, not just because it’s new, but because it is constructed as suspense built entirely around the public’s sense of fear and foreboding.

Musk is the supreme exploiter of a trend born in the late 19th century that rapidly matured throughout the 20th century: the fascination with futurism. It fits perfectly into the capitalist ideology that sees innovation not so much as the key to human happiness, but rather as the shortest path to monopoly, the implicit ideal of every capitalist and entrepreneur.

Innovation responds either to an identifiable need or as a gain in convenience — from can-openers and light bulbs to smartphones and online payments (e.g., PayPal, of which Musk was a founder) — or to the response to a fear, something that politicians more than businesses tend to do to sell their attempts at a power grab. Musk has used fear as the basis for promoting SpaceX: We need to colonize space as the Earth is likely to become uninhabitable. And with more intensity, he has used it for Neuralink as humanity confronts the risk of AI’s “.”

Futurism fits well into the capitalist economy. It spawned the relatively recent phenomenon of venture capital, an innovation that in many ways goes against the grain of traditional capitalist culture. Futurist investment, which often quite literally aims for the stars, doesn’t always produce winners. But that isn’t a problem if you end up owning a star that will keep generating energy throughout its lifetime.

The problem with futurism for the rest of society — that is, everyone other than the investors and the entrepreneurs — is that though it starts with predictable and credible technological innovation that relies on solid science and promises to revolutionize our way of life, it typically, if not systematically, ignores all pertinent social and economic reality.

Neuralink, for example, promises some limited and realistic medical advances that may alone justify the investment. But it also projects a dream of symbiosis between human will and unlimited AI. It could easily fail to be profitable. More significantly, its most extreme promises — like those of SpaceX and even Tesla — could only concern a small, privileged segment of humanity: essentially, the largely white educated elite. But its impact could destabilize the rest of society.

So, why do investors fall for it? Because they don’t care if it fails — others like it will succeed and the resounding successes will easily compensate for the multiple failures — and because there is absolutely no financial reason for feeling any concern about the effects on society. If rich people buy into it, it was worth the investment. If it takes off, and it can realize economies of scale, the moderately rich will also buy into it. 

The investors also fall for it because they will always follow a charismatic marketer like Musk or Jobs. They believe in charismatic leaders whose best ideas are quite often borrowed from others rather than emanating from their own brains. It’s their marketing leadership that matters, not the quality of what they produce.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book,, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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The Daily Devil’s Dictionary regularly looks to Elon Musk for inspiration because of his status as a hyperreal superhero in the world of technology and his special place in the global celebrity economy. Wired dropped a bombshell last week when it of Elon Musk’s company, Tesla, from the inside, documenting how working under the authority of hyperreal human superheroes can be the source of extreme anguish and obvious injustice.

Like all superheroes, Musk lives in a world of danger, so that the very idea danger becomes the basis of the leader’s mindset and actions. Wired describes how Musk thought of so many of the brilliant engineers in his workforce. He typically deemed that “they weren’t smart enough to be working on these problems; that they were endangering the company.” And his employees and their managers came to fear that “a chance encounter, an unexpected question answered incorrectly, might endanger a career.”

Here is today’s 3D definition:

Endanger:

Create potentially fatal instability through a lack of conformity with the volatile will or vision of the leaderÌę

Contextual note

Musk’s life story illustrates the same feel-good and fundamentally kitsch scenario about ambition and the acquisition of wealth and power that Mark Cuban has been pushing. But with some interesting variations.

Musk, like Cuban, worked his way up from nothing (literally, $2,000 in his pocket when he arrived in Canada from South Africa). Like Cuban, Musk acquired his wealth through the acquisition of startups he was a part of. Both were young business heroes at the optimal time in history for anyone with the ambition of becoming an iconic financial guru (Cuban) or universal superhero (Musk).

Mark Cuban became an actual billionaire thanks to the in 1999, making his initial fortune by selling a company he created to Yahoo for more than $5 billion just before the 2000 crash. Elon Musk’s path to becoming a billionaire was more complex, stretching from the late 1990s, like Cuban, to 2012. But because he had an authentic scientific mind and actually designed and built things, rather than just selling them, he had the profile to attain superhero status.

We don’t know much about the first car Musk owned (unlike Cuban), but we do know that in 1999 he offered himself a $1 million McLaren F1 sports car, which he subsequently crashed. By then Musk had apparently been weaned of his period of initial frugality, though to this day he is an obsessive worker, both intellectually and physically, rather than a wealthy sybarite.

Musk requires of those who work for him the austerity of a monk, ready to sacrifice their ever-extendible working hours to realize the work of their god, who, in this case, isn’t necessarily omnipotent and is even given to gambling: “The Model 3 was a bet-the-company decision, he said. Everybody needed to work hard and smarter.”

The article reminds us of the rules in a hyperreal world: “In Silicon Valley, people are allowed to be strange. In fact, they are often celebrated for it.” After all, who wants a superhero to be normal?

Historical note

Contrary to what many people believe, Musk didn’t create Tesla. He arrived as an early investor in 2004 with the money he earned from selling his shares in PayPal in 2002. “Soon he would become chief executive and turn Tesla as much into a cause as a company,” writes Charles Duhigg for Wired. That’s what hyperreal superheroes do: They deploy their exceptional powers, not to dominate or acquire riches for themselves, but to respond to the needs of a noble cause. Musk was already rich. Now, according to one employee, he needed “to save the world.” It was only later that he thought to do so he might need to move it to Mars.

Superman was famously in a cause: “The never-ending battle for truth, justice, and the American way.” It was undoubtedly with Superman in mind that Musk quipped in 2015, “The rumor that I’m building a spaceship to get back to my home planet Mars is totally untrue.” But what is Musk’s cause? He framed it this way: To “expedite the move from a mine-and-burn hydrocarbon economy toward a solar electric economy,” which has the merit of being more concrete that battling for “the American way.”

The one constant is Musk’s combination of hubris and narcissism. He has always been a joker, as evidenced by his initiative earlier this year to sell recreational flamethrowers. But his irony has always been heavy-handed as well. In 2006, he announced, “As God is my bloody witness, I’m hell-bent on making it work.” Someone who is “hell-bent” would more likely be calling on Lucifer as his witness, but Elon Musk the comedian thought this might be a great metaphysical joke. On the other hand, playing the role of the rebellious angel, with his own unearthly domain, does seem to please him.

There may even be some Biblical irony here. The evolved from , where the prince of Tyre provided the model for the story of Lucifer, the fallen angel accused of making his heart “like the heart of a god.” Musk is the prince of a car some consider as worthy of the gods, making Musk, at least in one sense, the prince of four “tyres” (British spelling of American “tire”). The Atlantic article, identifying John Milton’s Lucifer as an “honorary ‘American” hero, describes him as “conflicted, brooding, alienated, narcissistic self-mythologizer.” That seems to sum up the Wired article as well.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, , in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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Elon Musk has never been shy about getting into the news cycle and has often been more inventive in finding pretexts for being talked about than in what most people consider his true calling: proposing revolutionary technologies. This time, at least in the eyes of both Tesla’s investors and suppliers, his talent for public relations may have taken a fatal turn, either for himself or his company, or both.

The Wall Street Journal a survey “sent privately by a well-regarded automotive supplier association to top executives [which] found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.” All well-managed enterprises do risk analysis to assess the likely impact of current and anticipated future events on their performance. We expect Tesla has done the same. But it rarely reports the results of that analysis to the public. No one knows how Tesla has taken on board the events of recent weeks, but Musk has assured The Journal in an email that “We are definitely not going bankrupt.”

Here is today’s 3D definition:

Definitely:

Possibly, when spoken by celebrity CEOs and politicians. With absolute certainty, when spoken by scientists and experts.

Contextual note

Events over the past few weeks have been, even by Musk’s standards, hyperreal. From a tweet that announced “secured” funding for taking Tesla private, to the belated revelation that the source of the funding was the Saudi Arabia sovereign wealth fund, followed by subsequent failures to confirm if not denials or , a bevy of lawsuits, to a soul-rending interview with The New York Times, and finally a telling him to slow down, to which Musk responded: nothing doing. David Gelles, The Times reporter who interviewed Musk, the events leading up to the interview and testifies to the uniqueness of Musk’s hyperreal personality.

Gelles reminds us that real CEOs never do what this hyperreal CEO does: deviate from prepared talking points. CEOs are not so much actors expressing themselves on the public stage than algorithms “programmed not to say anything that might make them appear vulnerable, and certainly not anything that might raise suspicions about their ability to lead a company.”

Gelles describes Musk as the very first CEO to have revealed “such vulnerability” and “candor,” which may be real or the latest technique Musk has found for reinforcing his hyperreal celebrity status. After all, earlier this year, in a calculated and financially successful move, he “shocked” the world by proposing recreational flamethrowers, something no other CEO of a serious company would be likely to do, now or in any foreseeable future.

Historical note

Tesla’s share price dropped by more than 20% in the aftermath of the current drama and now hovers around $300, making a mockery of Musk’s generous plan to offer $420 per share to take Tesla private. JPMorgan now estimates that the “stock should sink to $195 by December.” After promising that funding to go private was secured, investors and suppliers have lost faith in Musk’s descriptions of Tesla’s status and chances of survival, even when he says the car manufacturer isn’t going bankrupt.

Most experts, including former , believe that the best solution would be to replace Musk as CEO. But they are also asking themselves whether Tesla as a brand and a business has any meaning without Musk at the helm. Who could possibly replace him?

Lutz cites the case of Billy Ford who was ousted as CEO of Ford in 1999, but of course it was his grandfather, Henry Ford, who created the vision of the enterprise, not William Clay Ford, Jr. This may remind us of the story of Apple, when the board removed Steve Jobs as chairman and replaced him with John Sculley. But it was Jobs who appointed Sculley CEO, whereas Musk appears unwilling to share his baby with anyone, or even to delegate and a fortiori to ask for “” (as Jobs did before his exile).

The case of Tesla is unique. It has been successful technologically speaking, but its success in the stock market has been due to a belief in the force of Musk’s hyperreal personality, his capacity to make people believe that he — and he alone — understands the future of every form of transport. Investors understand that the global economy of the 20th century was fueled by oil and automobiles.

Immune to disruptive thought, they naturally assume that transport will be the locomotive of the 21st century’s economy. Musk has offered them the hyperreal illusion of being capable of designing every form of efficient transport — from underground tubes to rockets for the colonization of Mars. But not only has he not turned Tesla into a profitable company, he has also successfully undermined the hyperreal image he created for himself. And it was that image that founded the “perception of value” that determined Tesla’s share price.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book,, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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Elon Musk, whom The Daily Devil’s Dictionary has already crowned the king of hyperreality, has just confirmed our suspicion and even taken it to a higher level. Business Insider reports on , which will likely produce another startling innovation: “It’s pretty obvious that comedy is the next frontier after electric vehicles, space exploration, and brain-computer interfaces.”

Here is today’s 3D definition:

Comedy: ÌęÌęÌęÌęÌęÌęÌęÌęÌęÌęÌęÌę

A region of the cultural universe that appears to be open to conquest by persons with the requisite net worth, at least until the elusive nature of wit stings them with the reminder that humor is more than the ability to craft jokes

Contextual note

After claiming comedy as the next frontier, Musk added this statement: “Don’t know how anyone’s not seeing this.” Far-sighted as Musk is — with a vision that now extends — he failed to notice that here at The Daily Devil’s Dictionary we’ve been regularly following his comedic logic over the past few months. On February 8, we pointed out that “Musk projects himself as the ultimate 21st-century hyperreal celebrity,” positioning “himself as a purveyor of excitement.” In the age of uncertain leadership — think Donald Trump, Rodrigo Duterte, Kim Jong-un, Theresa May, Emmanuel Macron and whoever becomes the next Italian prime minister — what can be more exciting, reassuring and essential than comedy?

Historical note

Musk started with surface vehicles (Tesla), went upward into the heavens (SpaceX) before going underground with The Boring Company, and finally inside people’s head with Neuralink. Is he the modern Dante Alighieri, who seven centuries ago gave us the “” (originally just La Commedia, or Comedy)?

Dante started in the underground of hell before taking us up the mountain of Purgatory and into the celestial paradise. With his multiple enterprises, Musk has now covered every dimension of the material universe. His next step logically has to be the life of the spirit. And what better entry point than comedy, which may be the last opportunity of our civilization — contaminated by fake news and regimented by PC — to tell the truth unapologetically?

Musk reasons like all successful capitalists: If you don’t know the business you want to develop, buy a successful company or, if that’s off the table, the people that ran the successful business. What else is all that money good for? So, Musk is currently buying up talent from The Onion, a fairly sure bet. But Musk being Musk, expect something more exciting than a clone of The Onion’s now somewhat formulaic humor, something on an astronomically higher level. It is, after all, “a new frontier.” that Musk’s “investment in satire might just stave off our collective exasperation in these troubled times.”

But can someone who accepted to reinvent comedy? Trump is in some ways the current king of comedy, delivering on a daily basis the script of their jokes to late night TV comic luminaries such as Stephen Colbert, Trevor Noah, Seth Meyers, Jimmy Kimmel, Conan O’Brien and Jimmy Fallon.

Musk is — as we have repeatedly said — the ultimate hyperreal hero. Everything we formerly believed to be real becomes obsolete as soon as he engages with it. Space travel was once a collective endeavor expressing, in the words of John F. Kennedy, the ambition of a nation to reach the moon. Musk has turned it into an entrepreneur’s parody of 19th-century European colonialism, with the subjugation of Mars. Thanks to Musk’s vision of the automobile, the sleek, powerful, flashy cars that defined the 20th-century consumer’s identity have become symbols of a hyper-efficient future. His futurist hyperloops will replace the sinister urban sewers that fascinated Graham Greene in the Third Man and Thomas Pynchon in his novel, V.

So, let’s expect Elon Musk to give the world what it’s been waiting for, a post-Pythonesque brand of comedy, no longer focused on the real — which the Monty Python relished —Ìębut the hyperreal. His (only $500) in which he acts and which he probably scripted gives just a foretaste of what’s to come. Some in the media , but in four days it sold 20,000 units for a net haul of $10 million.

So sit back and relax. More jokes are on their way. A new age of comedy is about to dawn.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book,, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

Photo Credit: /

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In the age of Donald Trump, America’s first 100% hyperreal president, Elon Musk may be using his platform of fame to demonstrate the depth and breadth of hyperreality in today’s culture. He is doing this through what may turn out to be an elaborate hoax. On January 29, he claimed that The Boring Company — dedicated to futuristic underground urban transport — had worth $500 each that were admittedly “off-brand.” A day later, .

As of January 29, the story was reported earnestly by the media, though in some cases with a . The following day, a : “If this is real, I’m outraged and you should be too. If this is a joke, then it’s a terribly insensitive one given that we’re coming off of the worst wildfire season in history.”

Although Musk didn’t use the term hyperreality to hype his product, here at The Daily Devil’s Dictionary we feel there is a definite need to define it and apply it to this case.

Hyperreality:

A tool for manipulating crowds available to anyone who has acquired a level of fame that automatically confers credibility on anything they do, however outrageous, enabling such people to put together a project that crosses the borderline to the absurd without anyone noticing

Perhaps the most obvious example of hyperreality was the election of Donald Trump as president of the United States, a fact we jokingly predicted as a case of deliberate hyperreality, published at 51łÔčÏ a week before the 2016 election, on October 31. In December 2016, we cited other examples linking the recent obsession with fake news to the triumph of hyperreality.

Contextual note

Hyperreality is a serious sociological concept initially proposed by in .

Here is how the defines it: “[A]n image or simulation, or an aggregate of images and simulations, that either distorts the reality it purports to depict or does not in fact depict anything with a real existence at all, but which nonetheless comes to constitute reality.”

Musk possesses the celebrity and access to funding that put him on the same level as Trump in his ability to fabricate hyperreality and expect people to accept it as their reality. Unlike Trump, Musk may be sending a message that is meant more as a satirical demonstration, a cautionary tale and a warning than a genuine commercial initiative. It reads like an illustration of everything that is perverse in our current .

Musk plays on all the stops of today’s hyperreal commercial culture. The marketing pitch itself is so over-the-top it should logically discourage any rational human being from even considering spending money on the product. The language parodies the worst infomercials: “guaranteed to liven up any party,” “it comes with a free blockchain,” “definitely don’t buy one. Unless you like fun.”

Everything about it highlights the hyperreal workings of contemporary commercial culture:

1) Crass marketing opportunism consciously focusing on the notion of branding itself: “I know it’s a little off-brand, but kids love it.”

2) “Fun” as a legitimate justification overriding serious risk (the principle)

3) The appeal to aggressive instincts and weaponry that can harm others (related to the psychology of gun culture)

4) Naked greed (his allusion to cryptocurrency: “a free blockchain”)

5) The power of artificial intelligence (AI), which pundits predict will eventually become “sentient” like his flamethrower

6) The viral appeal of poorly made amateur videos

7) The appeal to everyday pragmatism in infomercial pitches (“good for roasting nuts”)

One wonders if the last one isn’t itself a pun — the “nuts” being those who are crazy enough to order it and who are being “roasted” (mocked) by this very campaign.

Historical note

When Baudrillard launched the concept, hyperreality was far less evident than it is today. We are now immersed in it. The imminent arrival of AI, predicted if not promised by nearly everyone, means that reality may someday be integrally replaced by hyperreality. Musk has but has also , dedicated not only to developing artificial intelligence, but to connecting it to people’s brains.

Elon Musk is a cultural icon who has proved his unique ability to suck money from both serious venture capitalists and gullible online consumers, to whom he has successfully sold and now costly flamethrowers advertised as party gear.

The (hyper)real question is this: As he tries to sell us something, is he also trying to tell us something? Or maybe his purpose is what he claims, simply to raise money from the gullible. Which is also telling us something. And perhaps something even more important!

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book,, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

Photo Credit: /

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California has been a global leader in renewable energy for two decades. In 2003, we mandated that 20% of our electricity would come from renewable energy by 2010. Critics scoffed, but we did that, and more. In 2011, California again passed legislation to raise the requirement to 33% by 2020. In 2015, we passed . Each time we acted, critics said the goals were too ambitious and could not be met.Ìę Yet, each time, Californians met and exceeded them. California’s economy has not faltered; it has grown, and we are about to pass France to become the world’s 5th largest economy, with 40% fewer people. It’s time to think even more boldly.

Recently, Governor Jerry Brown has expressed interest in barring the sale of internal combustion vehicles, and last week (D-San Francisco) introduced legislation banning such vehicles by 2040. California would be the first US state to take such a step, but the world is moving quickly toward electric vehicles. India, France, Norway and the UK have all passed legislation prohibiting the sale of cars with internal combustion engines in the future. It is time for California to do the same.

Why move to all-electric vehicles? According to the :Ìę Fresno, Bakersfield, Visalia, Modesto, Los Angeles and San Jose. More than four in 10 Americans live in counties where the air is unhealthy to breathe due to ozone or particle pollution. A recent , with a disproportionately high number of those in Southern California due to its legendary traffic.

Could California really go all electric? In short, yes. Today, every major car company in the world is making electric vehicles — and they are moving quickly. This year, both General Motors and Tesla began selling the first moderately priced, extended-range electric vehicles. Elon Musk expects that Tesla will ship over 500,000 electric vehicles over the next two years. Volkswagen, Nissan, BMW, Toyota, Ford, Daimler and Chinese automakers BYD and SAIC are also moving fast. As the home to 500,000 clean tech jobs and Tesla Motors, California is well-positioned to take the lead in speeding up the adoption of electric vehicles.

A ban on the sale of new internal combustion engines would be phased in over time, and internal combustion cars already on the road would not be banned. The cost of electric vehicles is coming down quickly and they will soon be cheaper than gas-powered cars. As production of electric vehicles is ramping up, the cost of lithium ion batteries is coming down. The cost of those batteries has dropped from $1,200 a kilowatt hour a decade ago to less than $200 today. Electric vehicles also cost roughly 75% less to operate and service than internal combustion vehicles. On top of all of this, the , making long trips convenient and more economical than ever.

Other countries have decided to get ahead of the curve. Norway has introduced a transportation plan with a target of selling only zero-emission passenger cars and vans by 2025. India has set an “aspirational target” of ending the sale of gas and diesel vehicles by 2026. The United Kingdom and France have both announced plans to .

Why aren’t these countries afraid that punitive laws like this will burden their citizens? While they understand there may be costs to the transition, policymakers around the world increasingly realize we are in the middle of a renewable energy revolution that is creating higher-paying jobs for the future.

California has led the clean technology revolution for decades. We have created new industries and hundreds of thousands of jobs in the process. Now that we are producing more clean energy than ever, and it is time to lead the way again. California needs to set a date for barring the sale of gas and diesel vehicles. If Norway, India, the UK and France can do this, so can we. California, what are we waiting for?

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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Electric-car maker Tesla is worth more than Ford, GM or Fiat Chrysler, despite booking only a fraction of Big Auto’s sales and losing boatloads of money.ÌęPhilipp Stauffer, co-founder and managing director of FYRFLY Venture Partners, who is an investor in Tesla, argues in this opinion piece that the company still is significantly undervalued. He sees Tesla’s market cap rising to 10 times the current level in a decade. Stauffer considers Elon Musk one of those rare entrepreneurs who boldly move mountains to accomplish a grand vision for the good of society. He compares Musk to Alfred Escher, who transformed Switzerland from a backwater country to a model of modern development today.

Market Value of Tesla

In June, I read Silicon Valley entrepreneurÌęÌębillion despite losing $700 million in 2016. It felt like dĂ©jĂ  vu. For five years, I have tried to explain to value investors why Tesla is undervalued, not overhyped. (I am an investor in Tesla.)

Tesla’s market value of $60 billion isÌęconservative,Ìęin my view. I believe that Tesla will grow to 10 times its market cap within 10 years — or go bust and be worth nothing. I give the “10x” scenario a 90% probability and the belly-up scenario a 10% chance. I base that argument on the remarkable achievements of Alfred Escher, a 19th-century entrepreneur known as the father of modern Switzerland.

If you are a traditional investor pitting Tesla against Volkswagen, Toyota, General Motors or other conventional automaker “rivals,” you misunderstand the company. We underestimate entrepreneurs like Elon Musk, Tesla’s founder and CEO, because we don’t have any good comparisons in this lifetime. Tesla is not a typical firm, and Musk is not a typical entrepreneur. He is more of a value-chain architect, and so was Escher.

If you want to understand why Tesla is on track for 10x in 10 years, Escher is the best comparison. And if you want to understand why I give Musk a 10% chance of failing, Escher is also the best comparison — more so than other business titans such as Andrew Carnegie, J.P. Morgan or John D. Rockefeller.

A Swiss Legend

I moved from Switzerland to Silicon Valley in 2001 to follow my passion for innovation and entrepreneurship and to build a bridge between these entrepreneurial communities. Last winter, my father, who has been a small business owner in Switzerland for most of his life, visited me in the Bay Area. One evening over a game of chess, he asked me, “What is early-stage investing?”

Sparing him a detailed explanation, I said that we look for entrepreneurs who are building companies that have the potential to transform industries, cultures and societies. We identify them early so that we can invest small amounts of capital for a potentially massive impact and return.

“Ah, I get it,” said my father. “You’re looking for the next Alfred Escher.” My father summed up his opinion with a name that few Americans know. Indeed, I have been searching for other Alfred Eschers and found Musk — but it was way too late for me to become an early-stage investor.

Value Chain Entrepreneurs

Scientists who study natural disasters categorize floods by their probability of happening over a given timespan. A 100-year flood, for example, is a flood that has a 1% probability of occurring in any given year. I use a similar system for entrepreneurs. Musk and Escher are 100-year entrepreneurs. More specifically, they are what I call “value chain entrepreneurs.” Four attributes distinguish value chain entrepreneurs from other types.

First, their “problem statement” addresses a dizzyingly complex issue that seems unsolvable to others but that they deemÌęmustÌębe solved. Not solving the problem will have severe and unpredictable consequences.

Second, no single company, project or category can solve the problem. Rather, the solution requires the introduction of a new or significantly changed value chain — a new series of activities (usually performed by firms) that add value to society.

Third, the value chain entrepreneur often operates multiple companies in parallel to construct that value chain. Of course, this produces voids and vacuums that the entrepreneur cannot address alone.

Fourth, the value chain entrepreneur always threatens powerful incumbents. Thus, he or she must influence policy to achieve acceptance and regulatory support for the new value chain. So they become active in politics out of necessity to change the social contract that sustains the incumbent value chain.

Value chain creation and, therefore, disruption looks chaotic because it creates a wild-west environment of sorts. The 19th-century oil craze, for example, created a semi-lawless industry depicted brilliantly in the movie There Will Be Blood. The chaos resulted in one man, John D. Rockefeller (1839-1937), controlling 90% of the US oil market at one point.

But then the US Supreme Court found his company, Standard Oil, guilty of violating antitrust laws. The consequent breakup and regulation created all the precursor firms to today’s giants (ExxonMobil, Conoco, Chevron and others). The hydrocarbon value chain went on to shape a century of international politics, economic development and material culture. Many products trace some part of their value chain to hydrocarbons.

Now, Musk is ready to demolish hydrocarbons with a sustainable energy value chain, which sounds impossible in a world still running on that fossilized organic matter. But again, value chain entrepreneurs try to solve problems that almost nobody else dares to touch.ÌęNotÌęsolving the problem is not an option, however, because they see failure as an existential threat — to the world in Musk’s case and a nation in Escher’s.

Switzerland’s Existential Problem

Escher was a hybrid entrepreneur with elements of 19th-century German statesman Otto von Bismarck and John D. Rockefeller combined — a politician in the realpolitik tradition who also built a business empire. Despite Escher’s status as a Swiss national hero, historians have written little about him, especially in English. Most of the details about Escher’s life come from Joseph Jung’s book,Ìę.

In the first half of the 19thÌęcentury, Switzerland had few of what Harvard Professor Michael Porter calls “competitive advantage of nations.” Landlocked in Europe, Switzerland is the origin of four major river valleys: the RhĂŽne, Rhine, Aare and Thur. The Alps historically made Switzerland difficult to invade or cross. The combination of mountains and rivers earned Switzerland the nickname “Water castle of Europe.” But the geography divided the territory into German, French, and Italian-speaking enclaves, which, as nation builders will tell you, isn’t ideal for national unity. Although the Swiss Confederation dates to 1291, Switzerland in the 19thÌęcentury was still a young, direct-election democracy plagued by internal conflicts.

Escher was born in 1819 to an outcast aristocratic family in Zurich. France, under Napoleon Bonaparte, had just failed in its latest attempt to conquer Eurasia (1815), and the continent was recovering. Switzerland, despite some progress in manufacturing and a worldwide reputation for watchmaking, was a laggard in the industrial economy. More than half of the national workforce was employed in agriculture at low productivity or subsistence levels. Even worse, railroads, arguably the most important technology of the day, were almost nonexistent.

In 1850, the United Kingdom already had 10,000 kilometers of train tracks, Germany had 6,000 and France had 3,000. Switzerland had a total of 23 kilometers of tracks. Switzerland lacked the infrastructure for an industrial value chain when Escher entered the University of Zurich in 1837 and earned the institution’s first doctorate in law. Despite wanting to become a scholar, he was nudged into local politics at age 26, winning a seat in Zurich’s cantonal parliament in 1844. He did almost too well and rose to the role of president of the National Council in 1849 for the first of four terms, which is still a national record.

Escher feared that Switzerland would fall prey to its neighbors given the weak economy and poor transportation infrastructure. His mission, put simply, was to make Switzerland an important and respected nation. So, Escher seeded value chains that created new profit pools that benefit Switzerland to this day. Now that we have the context, we can investigate how he did it, and why his story applies to Musk and Tesla.

A Means to Greater Ends

Musk creates and funds businesses to establish value chains, instead of merely competing in one industry. Escher did the same. Both had objectives beyond profitability and political influence. Escher knew that Switzerland would remain a backwater without a railroad tunnel through the Gotthard Pass, the only traversable north-south route through the Alps. Businesses were shipping goods through France, Austria and Italy to circumvent the Alps, and doing so cost much more money than taking a direct route. A tunnel through the Gotthard Pass would make Switzerland indispensable to Europe’s industrial economy. All goods passing between northern and southern Europe would go through the Gotthard Tunnel if it existed.

As Swiss politicians debated options for building such a railway, Escher advocated for private ownership and construction instead of a government project. Soon after winning that debate, in 1853 he launched Schweizerische Nordostbahn, a railroad company that could win the now-available government contracts. To be sure, a politician leaving office to privatize railroads and start a railroad company would raise eyebrows today.

Escher’s Gotthard project would be the most ambitious tunnel of its day. The main 41.4-kilometer tunnel would need 62 sub-tunnels, 34 bridges and 10 viaducts. It would take 1 million kilograms of dynamite, 1.7 million kilograms of oil and 10 years (1872-1882) to finish the project.

Early on, Escher realized that Switzerland lacked an indigenous supply of technical talent and engineers to build what he envisioned. He became the political force behind establishing the “Polytechnikum” (1855), now known asÌę, Switzerland’s first federal university. Today, two global rankings name ETH Zurich as one of the world’s top 10 universities. Escher’s new value chain creation began with a railroad company and university, and then went much further. Funding requirements for railway construction were onerous, and Escher did not want to rely on foreign capital for tactical reasons. It was untenable to the country that its most strategic infrastructure would be owned by the Germans, French or Italians. But Switzerland had virtually no commercial banking industry. So, Escher founded his own bank, Schweizerische Kreditanstalt (1856), which today is Credit Suisse, a global player in financial services.

To illustrate the great need for a bank like Credit Suisse then, take a look at its initial public offering. Credit Suisse wanted to raise 3 million Swiss francs by issuing 6,000 shares. The IPO, despite being ridiculed in the Swiss press, was oversubscribed by more than 70x. Credit Suisse ended up distributing more than 442,000 shares worth over 221 million francs — in the 1850s.

Escher didn’t stop there. His initiatives separated the new industrial workforce from rural village life where people could depend on family to help in the event of sickness, injury or death. Switzerland’s social security and insurance offerings could not meet demand, so the Swiss looked abroad for insurance products. In response, Escher helped create what is today Switzerland’s premier life insurance company, Swiss Life (1857). He then created the precursor to Swiss Re (1863), which today is the world’s second largest reinsurance company.

Switzerland is now one of the world’s wealthiest countries with a strong middle class, a high standard of living, and an economy that has ranked #1 in theÌęÌęfor six years straight. Escher was the key architect and entrepreneur behind this success. He epitomizes the value chain entrepreneur who creates a new value chain to solve seemingly intractable problems greater than any one business or industry.

Escher’s parallels to Musk, as well as some important differences, deserve some scrutiny.

Musk’s Value Chain Reinvention

Escher and Musk inhabit different worlds, but their approaches to solving problems are in sync. Escher recognized that Switzerland would decline without a value-chain reinvention centered on modern infrastructure. His “master plan” to create an industrial economy, which would be daunting to most people, is as follows:

1) Start a railroad company

2) Plan and start building Europe’s most strategic railway tunnel

3) Start a world-class university to produce technical talent for the railway

4) Create a bank to fund the railroad company, manufacturers and others

5) Create an insurance company to protect railway and industrial workers

6) Form a reinsurance company to protect the insurance company

7) Finish Europe’s most strategic railway tunnel to make Switzerland indispensable

Musk, comparably, sees the decline of humanity without a new paradigm for energy production and consumption. In a 2006 blog titled “The Secret Tesla Motors Master Plan,” heÌęÌęthat “the overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution.”

Musk chose a grand problem, not a little business-to-business annoyance. The steps he outlined in the blog to accomplish that goal are similar in ambition and scope to Escher’s plan:

1) Build a sports car

2) Use that money to build an affordable car

3) UseÌęthatÌęmoney to build an even more affordable car

4) While doing the above, also provide zero-emission electric power generation options

Today, I would argue the master plan looks more like this as it accomplishes itsÌęÌęto accelerate the world’s transition to sustainable energy:

a) Make mainstream electric cars, trucks, etc. () and provide convenience platform (super charging stations)

b) Create batteries to power those cars and trucks at high performance and low cost ()

c) Build solar panels and integrated solar tiles that can charge those batteries as well as automobiles, homes, businesses, and others. ()

d) Invent mass transit systems and infrastructure that take advantage of sustainable energy (ÌęandÌę).

e) Create self-driving cars that generate money through ride-sharing so that sustainable transportation is affordable to anyone (Tesla, I predict)

f) In case Earth becomes uninhabitable before the energy economy is transformed, colonize Mars ().

Musk, like Escher, works on multiple companies at once. Some investors label that as being unfocused or “boiling the ocean.” To Musk, it makes sense to consolidate SolarCity and Tesla, build tunnels under cities, and open source Tesla’s patents to accelerate mainstream adoption of sustainable energy.

In fact, I would argue that Musk wants competitors to make electric cars because it validates his model, builds momentum for infrastructure like charging stations, and ultimately leads to a more efficient and effective value chain. In early July, when VolvoÌęÌęthat its entire lineup of cars would be hybrid or electric by 2019, that was a win for Tesla. It’s all relative to the value chain entrepreneur’s problem statement.

Both Escher and Musk created network effects thatÌęappearÌęto benefit competitors but actually further the value chain reinvention. As I discuss in my last post,Ìę“,” this approach creates and therefore disrupts other profit pools. Self-driving cars, for instance, create data and intelligence that redefine how insurers price and package car insurance.

I cannot overstate the importance of these new profit pools. If early-stage investorsÌęonlyÌęinvested in value chain entrepreneurs, we would quickly be out of work. Too few exist, and rarely do we spot them in their early stages. But creating companies within the new value chain can be as lucrative as creating the value chain itself. Musk and Escher both created voids in which other entrepreneurs could thrive. These startups and incumbents both try to position themselves at a control point in the value chain where they can achieve high profit margins.

Value chain entrepreneurs cause whole industries to unravel and rebuild them stronger, the same way a 100-year flood destroys a city but leads to the next-generation of flood control systems. But one challenge Escher faced is also the same for Musk: politics.

The Burden of Being Political

Escher, who had a doctorate, became a politician and businessman to solve national problems. Musk was a physicist who became an entrepreneur and investor and eventually decided to solve an existential problem. Throughout Escher’s life, he used his immense network and political power to achieve business objectives — often by means that would land one in an American jail today. Musk doesn’t have Escher’s leeway, but he’s far from powerless.

Because value chain entrepreneurs focus on macroeconomic problems, they threaten an existing value chain and the powerful entities that depend on it. Electric cars have been possible for a long time, but the automotive and hydrocarbon industries had a vested interest in keeping combustion engines mainstream. The energy value chain is protected by incumbents, politicians, investors, lobbyists and social contracts because they support profit pools, jobs, elections, political power and other institutions that create stability, sometimes at the expense of sustainability.

While I’m bullish on Tesla, my 10% doubts stem from the American political system as well as global politics. Musk, to his credit, isn’t shying away from the game. SpaceX lobbied the federal government from day one because, as Musk himselfÌęÌęto The Huffington Post, “In order to have your voice be heard in Washington, you have to make some little contribution.” He tried a stint on Donald Trump’s business advisory council but resigned on June 1 after the president pulled out of the Paris Agreement on climate change.

What is Musk’s next move? Expect to see Musk even more active in local and state politics where leaders treat climate science seriously. For years, he has been fighting to deregulate state dealership laws that prevent Tesla from selling cars directly to consumers, and that battle is not over. Separately, Musk also is urging US governors to regulate artificial intelligence, which heÌęÌęis “the biggest risk that we face as a civilization.”

Musk has had some victories in the political arena. In July, The Boring CompanyÌęÌęto build a subterranean Hyperloop that would shorten the commute between Washington, DC, and New York to 29 minutes. With the Gigafactory in 2014 and now a Tesla SUV factory slated for 2019, Musk hasÌęÌęamong state governments, which are eager to stimulate job growth in their jurisdictions.

Most in Silicon Valley have little appetite for politics. Musk, by necessity, is becoming an exception, at least in the realm of public opinion. Can someone like Musk maneuver Washington the way Escher dominated Swiss politics? I’m betting that he can.

10x in 10

All of the reasons I gave support my belief that Tesla is undervalued and has a 90% probability that it will 10x its market cap within 10 years. Musk is a value chain entrepreneur who will reinvent global energy use. He is the modern-day Escher, who created an industrial value chain in 19^th-century Switzerland that elevated the country from a backwater to a global model of development.

Although I assume Tesla will benefit more from value chain reinvention than SpaceX, The Boring Company or other entities that Musk creates, I could be wrong. In reality, I am betting on Musk. If I could invest in the man himself, rather than one of his companies, I would do that instead.

A note of caution to would-be value chain entrepreneurs: Escher’s life was far from idyllic. At one point, the financial struggles of the Gotthard Tunnel made him such a pariah in Switzerland that he was disinvited from the ceremony celebrating its completion. More than a few times, anonymous detractors sent him silk cords, which were a not-so-subtle invitation to commit suicide. Escher was chronically ill as well and too overburdened to give time to his daughter and wife, who died young. He alienated quite a few people. But more than a century later, the Swiss recognize his achievements.

Future generations need someone like Musk to create a sustainable energy value chain that preserves Earth’s habitability. The risks of this value chain reinvention are nothing compared to the consequences of letting the hydrocarbon economy continue as is. Be bold, Elon. Our kids will thank you for it one day.

*[This article was originally published by , a partner institution of 51łÔčÏ.]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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As Barack Obama’s presidency comes to an end, the concern that climate change will take a backseat in the next four years has now become a reality. Throughout his campaign, Donald Trump’s vocal statementsÌęabout wanting the United States to pull out of the 2015 Paris Agreement created fear among the global community. Such pronouncementsÌęhave also signaled a over the direction that the new administration might take on the issue of climate change.

One such fear is whetherÌęthe United States pulls out of its commitments to the Green Climate Fund (GCF) and international development aid. The GCF is one commitment that calls on rich nations to provide money and technology to help developing countries mitigate and adapt to climate change, and is a key component of the Paris Agreement. Although this move might strike a blow to over a period of four years, there are ways to overcome the funding gap.

Some of these include , which allow for the flow of investment-grade climate-related finance across various countries. And even if the Trump administration does not support such instruments, it is the private sector push that has sustained the green bond market so far and will enable it to be a . However,Ìę to stay partially engaged in these international discussions will mount as climate change impacts begin to affectÌęcountries that are trading partners or close allies.

These concerns may be real, but such a reversal in policy is almost always easier said than done. On the international front, if the US chooses to back out of the Paris Agreement, the international community would most likely retaliate with a carbon tariff on imports of American-made goods. By doing so, it would only prove expensive to the heaviest industrial polluters, like those producingÌęgood containing steel and cement.

Even though the climate agreementÌędoes not explicitly state any enforcement measures (such as economic sanctions), the global mindset for reducing greenhouse gas (GHG) emissions is so strong that America’s biggest trading partners like Mexico and Canada could introduceÌęcarbon tariffs. As one puts it, forcing US industries to turn to cleaner energy sources under aÌęthreat of an import tariff is not a far-fetched idea.

Private Sector Switch

But itÌęisn’t just international pressure that makes it hard to slash climate agreements and end progress on environmental protection. The shift to renewables in America is making fast progress on its own. Recently, Google announced that by 2017 all of its operations and offices would be . This landmark moment for the internet giant is signaling a rising trend withinÌęthe private sector of switching to low-carbon sustainably produced energy.

Other tech giants such as Apple and Amazon have also started investing heavilyÌęin renewable energy, creating a market push for clean technology. This is great news as tech companies have increasingly been under scrutiny due to their fast growing operations and, in turn, generating a bigger carbon footprint. It is now said that the , even rivaling transport-heavy industries like aviation.

Such advancing changes are not purely because big corporations have suddenly become empathetic to the impacts of climate change. Sustainability itself has become a business case that advocates for better financial opportunity in renewables (), more resiliency from extreme climate events (like and polar vortexes), andÌęopportunities to grow their own profit margins (such as efforts made by ).

It is not only tech companies that are taking off, but auto giants like General Motors (GM), Toyota and Volkswagen are slowly getting in on the sustainability trend. This race to reduce carbon emissions really took off when companies like Tesla came out with a plan to . By using sleek electric vehicle (EV) models that capture a driver’s imagination using technology such as autopilot driving, Tesla and others are paving the way into the future. Their rising popularity is seen with in 2016 alone.

The market is also getting competitive as companies like GM are coming out with alternative options for the car owner. One such option being the newly released Chevrolet Bolt EV, an electric car that is not only efficient, but can easily enter the mass production market. Such competitive, technologically advanced and fuel-efficient vehicles not only signal a shift from traditional car manufacturing, but also make it harder for any government to curb technology growth that is dependent on clean power.

Ideological Challenge

The biggest challenge that the Trump administration poses, however, is an ideological one. As Catherine Abreu of the Climate Action Network Canada told me in an interview: “There will always be sub-national action to keep momentum alive for the climate agenda, but it is the moral impact of decisions taken by the new administration that will deal the biggest blow to the climate community.”

However, in such uncertain times, it is optimistic to know that strong market forces are fueling the , and in turn making companies abandonÌęcoal. It is againstÌęTrump’s anti-globalization rhetoric that different communities will continue to work together and rally around the mission of tackling climate change.

Environmentalists have always felt the urgent need to address climate change, but with changing political systems, this momentum and moraleÌęwill need greater protection than ever before. Whether or not Donald Trump believes that climate change exists, the rest of the world knows it does and is willing to work toward combatingÌęit—with or without the United States’ support.

In the gloomy times ahead, we must remember that happiness can be found even in the darkest of times, if only one remembers to turn on the light—powered by renewable energy, of course.

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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Four of the world’s biggest cities are to from their city centers by 2025 in order to improve air quality. The mayors of Paris, Madrid, Athens and Mexico City announced the plans at the on climate change. This bold move could lead other cities to take action and help to accelerate a shift away from diesel.

Diesel engines are seen as major contributors to air pollution in cities as they exude nitrogen dioxide and tiny particulates. These pollutants have a known impact on human health: They heart attacks, breathing difficulties and even .

Anne Hidalgo, the mayor of Paris, Ìę“we no longer tolerate air pollution and the health problems and deaths it causes, particularly for our most vulnerable citizens.” Mexico City’s mayor, Miguel Ángel Mancera, said the city would also increase Ìęso as to improve air quality and reduce greenhouse gas emissions. Meanwhile, Giorgos Kaminis, the mayor of Athens, he aimed to remove all cars from the city center and work with governments and manufacturers to promote electric vehicles and cleaner transport options.

Ditch the Diesels

Government attitudes had started to turn against diesels anyway. A year ago, the (now ex-) French prime minister, Manuel Valls, admitted that the promotion of diesel cars on the basis that they are more fuel efficient and emit less CO₂ than petrol engines had been a “.”ÌęHis comments reflected a wider shift in thinking in Europe, which has been accelerated by Volkswagen’s (VW) “dieselgate” scandal. Indeed, already had plans in place to ban older diesels from 2020.

These measures are likely to increase pressure on other nations, including the United Kingdom, to phase out diesel vehicles, or at least introduce clean air zones. London’s , for example, aims to stop the dirtiest diesels driving through the center of the city. The question now is whether this will be tightened up further and whether other UK cities such as Birmingham and Manchester will act to reduce air pollution too.

In the wake of the VolkswagenÌęscandal, we should see tougher testing of emissions and fuel efficiency by regulators which better reflects real-world driving conditions. If this requires diesel-powered cars to be fitted with systems that clean up their emissions, they may become . This would, in turn, affect their popularity.

It is as well that European nations are taking firm action to curb the use of diesel vehicles. For years now, diesels have been pushed by European manufacturers and governments as a supposedly clean alternative to petrol cars, producing lower tailpipe CO₂ emissions and offering better fuel efficiency. Diesel car sales account for just short of , in stark contrast to other major markets where diesel sales are tiny.

For example, in the UK, company cars (which account for about half of annual car sales) have a “benefit-in-kind” tax for drivers, related to the car’s CO₂ rating, which makes diesels more attractive from a tax point of view. As a result, diesel sales in the UK have grown dramatically in recent years. European governments have effectively subsidised diesels and, in doing so, have slowed a much-needed transition to cleaner vehicles.

Playing Catch-Up

Fortunately, a range of hybrids and electric vehicles (EV) have been developed to meet this need. Japanese and American car makers have gone down two different technological routes. Japanese car makers—and Toyota in particular—went down the petrol hybrid route, while US firms such as General Motors and Tesla have gone into pure electrics and plug-in hybrids.

With the exception of Renault-Nissan and BMW, European producers are now particularly exposed to a diesel downturn—it seems they may have placed the wrong technological bets. Petrol hybrids and electric cars could well emerge as winners from the VWÌędebacle, something which Tesla founder .

is trying to play catch up on EV development, while Jaguar Land Rover also recently announced a belated electric push with its . Meanwhile, VWÌęis trying to clean up its act in the hope that will be EVs by 2025.

But so far, apart from Tesla’s inroads into the premium market, sales of EVs have been something of a disappointment. EV take up has only really happened on a big scale , thanks to substantial government support.

This is partly down to huge over-hyping early on: Despite several years of high expectations for EVs, it’s only now that the first genuinely viable models have appeared on the market in the form of the BMW i3, Nissan Leaf 2 and Tesla Model S.

Other factors slowing the take-up of electric vehicles could include a lack of confidence in electric vehicle technology and performance, uncertainty over the lifespan of expensive batteries, a lack of awareness of the incentives that make electric vehicles cheap to run and a relative lack of choice, which results in the perception that electric vehicles are not particularly stylish.

Yet we can be hopeful that these attitudes will change. We’ll see a lot of new mass market EVs in 2017, with significantly greater range. Models such as the Tesla Model 3, the Chevrolet Bolt, as well as designs from Renault and Nissan, will be game-changers.

Let’s be clear. Diesels should be restricted in cities to improve air quality. Policy needs to favor public transport, as well as alternative car technologies such as hybrids and EVs. Viable models are already here—it’s time for governments to start encouraging and supporting citizens to use them.

*[This article was originally published by .]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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“,” is how Tesla Motors headlined itsÌęÌępost in early April, citing more than 325,000 pre-bookings for the Model 3 electric car it launched on March 31. “[That] corresponds to about $14Ìębillion in implied future sales, making this the single biggest one-week launch of any product ever,” the company boasted. Deliveries are set to begin in 2017.

Tesla may well be on the way to mainstreaming the electric vehicle market for itself and its competitors. In addition to the wide appeal the Model 3 seems to command, several other aspects point to a potential journey away from a niche market for Tesla. The car’s $35,000 price tag is half the price of the Model S ($75,000) and the Model X ($80,000). Bookings for the Model 3 have surprised even Tesla’s founder and CEOÌę, coming at a time when gasoline prices are low.

“Electric vehicles increasingly are being seen not necessarily as green or as a way to save on fuel costs, but as incredibly powerful, with amazing acceleration, and fun to drive,” said Wharton Management ProfessorÌę, an automobile industry expert. In fact, he noted that the organizers of the Formula One auto races (, or FIA) have launched a separate series for electric vehicles called the Formula E. Even the Formula One cars are all hybrids, combining the high acceleration of electric vehicles with traditional engines, he noted.

, marketing professor of management at Stanford University, said the Model 3 “is the make or break for whether the electric vehicle market will take off and whether Tesla will be a critical part of it, as opposed to being a niche player.”

MacDuffie and Hartmann discussed Tesla’s Model 3 and the challenges the firm faces in tapping the mainstream market on the Knowledge@Wharton showÌę. (Listen to the podcast at the top of this page.)

Kudos Flow In

MacDuffie said it was “telling” that Carlos Ghosn, chairman and CEO of Nissan of Japan and Renault of France, has welcomed the Model 3 bookings, “because it suggests a growing and enthusiastic market for these vehicles.”

MacDuffie also noted that bookings have been strong despiteÌę, indicating that gas prices are not the primary driver of demand for electric vehicles. “People buying a $70,000 to $110,000 car aren’t worried about what they pay out at the gas pump,” he said. “If the demand exists even with gas prices being low, it is [because] of that repositioning away from just an environmental pitch.”

Hartmann said the enthusiasm for the Model 3 “speaks to what Tesla has been able to communicate to the market in terms of the products they can develop and how much people would want those.” He likened it to “people lining up to get” the latest Apple iPhones.

© Shutterstock

MacDuffie put the pre-bookings for the Model 3 in perspective. The $1,000 down payment that Tesla requires is not an order commitment and is a refundable deposit, he noted. “But it is an extraordinary interest-free loan to Tesla to get in the queue and to have the bragging rights of being early to get a hot product,” he said.

Indeed, the excitement over the pre-bookings for the Model 3 were tempered this week, when Tesla announced a recall of 2,700 Model X SUVs after it found that the third-row seat backs could collapse forward in some accidents.

Braving New Competition

If other automakers are keenly watching the progress of the Model 3, they would want to jump in, too. “What if competitor products are available earlier and they are good [and] well-priced?” asked MacDuffie. That could affect Tesla’s bottom line, he noted, but “if it’s a growing market, there should be room for everybody.”

Wharton Marketing ProfessorÌęÌęis optimistic for Tesla. “Tesla will be fine because it is a strong brand that is positioned as and is seen as very different from the other car manufacturers’ attempts at creating an electric car,” he said.

Reed added that Musk’s own brand image has also helped build a moat around Tesla. “Part of [Tesla’s] brand is a clear futurist visionary who himself is changing the world,” Reed noted, referring to Musk’sÌęÌęas the founder of space transportation company SpaceX and co-founder of solar power company SolarCity.

“[Musk] is this larger-than-life character who makes you think of—in the computer industry—Steve Jobs, but [also] in the early auto industry history someone like Henry Ford,” said MacDuffie. “[Their] charisma and the boldness of their vision had an influence on people.”

Even so, questions persist about whether Tesla can pull it off, MacDuffie added. “The big question is: Can they really scale it up? What will the model look like when [the Model 3] hits the market at that price point? Will the price stay put or edge up?”

MacDuffie noted that Tesla has been a niche, low-volume producer, and the Model 3 would put it much more into the mass-market, mass-production range. “They haven’t done that before,” he said. “But they have learned to do other stuff that they didn’t know how to do, and so it would be risky to bet against them.”

Reverse Route

The Model 3 would also benefit from the luxury brand image of Tesla’s earlier models. MacDuffie noted that most automakers have historically started with inexpensive vehicles as they established their reputations, manufacturing capabilities, supply chains and dealer networks. They moved up-market at a later stage, sometimes by introducing new brands—as with the Lexus from Toyota, he explained. “Tesla did it exactly the opposite way; it established itself at the luxuryÌęend,” he said. “Obviously, it will benefit from the way in which that luxury brand cachet will rub off on the Model 3.”

MacDuffie noted that Musk has attributed to “hubris” his decision to move from the original Model S to a more expensive car with the Model X ($80,000 and upwards). “That suggests a willingness to learn from a mistake,” he said.Ìę“In a way, designing a lower cost car is a big design and engineering challenge.”

Rather than Tesla’s luxury brand cachet rubbing off on the Model 3, “the more interesting question is the reverse,” said Reed. “What will happen to the brand as a unique luxury high end vehicle if suddenly it is ubiquitous in the mass market? What will a high-wealth individual who paid $70,000 or more think when he sees these $35,000 versions?”

Value Proposition

Hartmann said that with the Model 3, Tesla may have hit upon a winning idea. It would have an electric vehicle for customers who cannot afford $70,000 but also don’t want to buy some other low-end vehicles in the market. “Most people expect that they’re probably not going to get half the car [with the cheaper model, but] a lot more than that—something somewhere in between,” he said. “That seems to offer an awful lot of value.”

© Shutterstock

The value proposition could get better for customers with the federal tax credit of $7,500 on each vehicle, but that has its limits. The tax credit scales back once a company has sold 200,000 electrical vehicles, said MacDuffie. Tesla has thus far sold 110,000 vehicles, which means the next 90,000 tesla buyers would get the full tax credit, he explained. The tax credit is subsequently scaled back, and it will disappear at some point, he added. “It is meant to prevent the big companies that have introduced electric vehicles from scooping up all the rebate monies; it is [meant to] encourage startups like Tesla.”

Hartmann expected Tesla to live up to the expectations built around the Model 3. He said customers of Tesla’s Model S “are incredibly happy with them.” Tesla had admitted that it had overreached in designing the Model X, and has tried to build a simpler vehicle with the Model 3, said Hartmann.

Challenges of Scale

As Tesla ramps up deliveries of the Model 3, it could find its current distribution model inadequate, MacDuffie suggested. “Tesla has tried to avoid setting up traditional dealer franchises,” he said. “Nobody likes buying cars from a dealer, but dealers also traditionally sell used cars, do servicing [and] provide parts and financing.” Dealers also invest in the inventory of vehicles and thereby absorb some of the risk if sales fall short of expectations, he noted.

Tesla so far has outsourced repairs and maintenance, and sales of used cars, but that model may work for a startup and not a company that grows bigger, said MacDuffie. “One speculation is Tesla is fighting hard against the franchise dealer model now, but once—and if—it grows big, it may find [itself] yearning for some of the [benefits] that the franchise dealer model provides,” he added. Hartmann agreed, and said that at some point Tesla may decide to go down that route.

Musk explained Tesla’s model of company-owned stores and service centers in aÌęÌęin 2012 that may hold true even today. “In many respects, it would be easier to pursue the traditional franchise dealership model, as we could save a lot of money on construction and gain widespread distribution overnight,” he wrote. “[However], existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars. It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business. This would leave the electric car without a fair opportunity to make its case to an unfamiliar public.”

Reed did not expect Tesla to be forced to change its strategies and embrace the dealer model as it scales up. “These customers will acquiesce to whatever Tesla wants them to do,” he said, betting on the company’s customer loyalties.

Changing Old Ways

According to MacDuffie, another hurdle for Tesla as it scales up is that it is vertically integrated and prefers to make most of its parts instead of outsourcing them. Making parts in-house would be harder to do at scale, although its vehicle batteries will be produced at its Gigafactory in Sparks, Nevada, that is expected to begin production in 2017. “Managing an outsourced supply chain, while very common in the auto industry, would be new for Tesla and bring coordination complexities.”

The limitations of the charging infrastructure for electric vehicles could prove to be another hurdle, said MacDuffie. He noted that Ghosn had identified the inadequacies of the charging infrastructure acting as a ceiling on the sales of electric vehicles. However, if the market grows to an attractive size, he expected public-private investments in setting up charging stations.

Tesla’s record of delaying deliveries beyond the promised dates could be another small worry if that persists. Hartmann noted that Musk has hinted at sticking to targets with the Model 3, but still “there is probably some uncertainty around the delivery date.” For example, Tesla began bookings for the Model X in February 2012, but postponed deliveries first from early 2014 to late 2014, and then to mid-2015 before deliveries began in the third quarter of 2015.

MacDuffie, too, said he expected delays in deliveries of the Model 3. However, he expected those missed deadlines to cause no more than a shuffling of customers between the Model 3 and other Tesla models. Would it hurt Tesla’s reputation at some stage? “At some point it would, but it would have to be a disastrous failure as opposed to just a slow rollout,” he said.

*[This article was originally published by , a partner institution of .]

The views expressed in this article are the author’s own and do not necessarily reflect 51łÔčÏ’s editorial policy.

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