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