Plenty of big firms outlive their visionary. Tesla will not
The carmaker has not yet reached a critical mass and presence, so that stupid tweet might be its undoing
There is plenty of competition for the title of stupidest tweet of all time. The social media site is perfectly designed for broadcasting every half-baked thought, flash of rage or momentary delusion to the world and subjecting it to global scrutiny.
Even so, Elon Musk’s brief comment, made while he was driving himself to the airport, that he was considering taking the electric car manufacturer Tesla private, is surely going to rank as one of the dumbest yet.
Musk’s turbulent, colourful career took yet another twist at the weekend when he agreed to step down as Tesla chairperson and pay a £15m fine to settle fraud charges, in a deal with New York’s Securities and Exchange Commission (SEC).
He remains as chief executive, but it is hard to see how he can survive in office now. It is just as hard to see how Tesla can survive.
Sure, plenty of companies outlive their founder. But they need to have reached a critical mass and presence before he or she departs – and, in truth, Tesla is nowhere even close to that.
There is no question that the SA-born Musk is, along with Steve Jobs, Jeff Bezos, Mark Zuckerberg and Google's Larry Page and Sergey Brin, one of the great entrepreneurs of the current tech boom. He was one of the founders of PayPal and made a fortune when it was sold to eBay. He bought into Tesla soon after it was founded and turned it into the first major new force in the global auto industry since Japanese manufacturers such as Honda stormed into the global market in the 1960s.
More than a decade ago, Musk had the vision to see not only that electric cars were the future, but also that the place to start was right at the top of the market. Its luxurious, environment-friendly vehicles were a huge hit, and as the company rolled out more and more models its growth started to escalate. Its market value raced past GM and Ford to make it America’s most valuable car company.
This year, however, Musk has grown more and more erratic. He appeared to be smoking dope in one recent interview, and he denied his suggested buyout price of $420 was a jokey reference to marijuana.
The SEC action, which accused him of misleading the market with a buyout plan that barely existed, looks like a setback too far.
Last week, Tesla’s share price was in freefall as investors decided a chief executive clinging desperately on to office was not acceptable. The real question now is whether Tesla can survive without Musk in the driving seat.
Of course, lots of companies ride out the departure of their founding spirit. The ranks of the Fortune 500 are filled with the surnames of long-dead entrepreneurs. There is no Walt Disney any more, but the theme parks and film studios he created are still huge.
Jack Cohen has long since left Tesco, even if the company has just resurrected his first name for its latest venture. Ford endures decades after Henry died. Daimler-Benz is a vast company long after Gottlieb Daimler, and Honda easily outlived Soichiro Honda.
More recently, Apple has just become the first company worth $1-trillion seven years after the death of Steve Jobs.
At some point, the founder inevitably dies, retires or sells out, but by then hopefully the corporation has a life of its own, and can still do very well. Against that, lots fail.
Hanson was one of the largest companies in Britain in the 1980s, but after Lord Hanson left it shrank to a mere shadow of its former self.
Wang Laboratories was one of the world's biggest IT companies in the 1970s, a genuine rival to IBM, but it went into steep decline after its founder, An Wang, left.
By definition, the failures are not so well known as the successes. The names that endure – a Will Keith Kellogg, for example, or a William Boeing – are globally recognisable from the businesses they left behind, while the failures are quickly forgotten. But there are plenty of them.
Indeed, failure is probably the norm. It is the companies that survive their founders that are the exception. So which will Tesla be? Here’s the test.
The ones that survive have invariably reached a certain critical point in their development by the time the entrepreneur leaves. They are financially strong, have an established brand, have a place in the market, millions of loyal customers and a stable management team in place that can keep the machine ticking over.
Apple had all of that when Jobs died and, while it is a less exciting company these days, it is still a brilliantly successful one, and in some ways better run as well.
All the companies that endure tick at least most of those boxes. But Tesla? It has a good brand within its niche, but not much else. It still doesn’t make a profit. Its management is chaotic, with constant production problems. And its product range is still limited. It has plenty of promise. But it still has a heck of a long way to go to become a stable business.
Of course, Musk may clear his name and bounce back. If not, however, Tesla will surely be a tempting target. It would be a perfect fit for a cash-rich Apple trying to muscle into the car industry. Google or even a hyper-expansive Amazon might be interested. So would the big automakers, especially the German giants.
If Musk had been able to keep himself together, he could have been the new Henry Ford or Gottlieb Daimler. But it is hard to see that happening now. In another decade, he may well be completely forgotten – or worse, only remembered for the “stupidest tweet of all time”.
– © The Daily Telegraph