Tesla will get bigger than we think, at least in some areas, and possibly not as big as
we hope in other areas.
Tesla is in the tech industry, and thus able to take advantage of any advances in technology,
it is almost always going to be a benefit to Tesla.
Well not just Tesla, but all tech companies.
Technology moves fast, and has break throughs, and step changes, that not just put wind in
these companies sails, but build even bigger sails to make them go further.
Opportunities are continually coming up for these tech companies, the next bubble perhaps.
However, they don't always jump on every opportunity that comes up, as much as they should.
Let's take Microsoft for example.
A juggernaut technology company.
They sold the IBM compatible operating system.
It was at the time far from the best operating system, but it meant that there was universal
software, and files.
Economies of scale for software developers having to only make software for one system.
Which is why it beat Apple, as there was so much more software available.
Microsoft sold other software of course too, like Word, Excel, and the rest of the office
suite.
But then along came the internet.
Microsoft wanted to jump on the bandwagon of the world wide web.
Netscape had created a browser with a great new interface to browse the web and Microsoft
wanted a part of this too.
So Microsoft went head to head with Netscape's browser called Internet Explorer, and made
it the standard browser with their operating system, and eventually destroyed Netscape's
market share.
Microsoft was too busy fighting Netscape, that they didn't realize where the true value
of the web was.
Which was actually being able to find web sites.
There were many companies trying to find all different varieties of offering ways to find
what you might be looking for on the web, in directories and search engines with different
kinds of algorithms.
But the value was in the advertising, and pushing up selling other services.
If a visitor used a search engine, then they are immediately leaving the site, to go to
the site they were seeking.
Why would you want to lose your visitors?
So these sites, like AltaVista, were cluttered to keep you on there as long as possible,
and get as many page views as possible.
Then Google came about, with a simple search bar, and very little else on the site.
It also used a new algorithm, called Pagerank, which was mainly about the popularity of a
web site, from other sites linking to it.
Eventually Google also monetized people leaving their site with pay per click advertising.
But it was search, that was where the real value of the internet was, that Microsoft
missed.
And Google eventually brought out their own browser, Chrome, which took away from Microsoft's
market share, along with their own suite of word processors, spreadsheets and email.
Google was competing back at Microsoft, but distracted that they didn't see Apple.
Apple was hanging by a thread before Steve Jobs returned, and tidied up the company,
and eventually launched the revolutionizing music player, the IPod.
Which of course eventually evolved into an iPhone.
Phones needed operating systems.
Google got in as quickly as they could with Android.
Again Microsoft missed the boat to late on the operating system for phones, a product
that is their bread and butter for PCs, a massive oversight.
Then the industry evolves more, and we have new concepts of software, where they become
a service, rather than a product.
Suddenly Microsoft can charge annually, and everyone always has the latest version, and
consumers are willing to pay.
There was also the whole cloud movement, a way of having all your files everywhere you
go.
Google had products like Google Drive, and Microsoft did well from Azure.
However, there was also Amazon, who managed to do really well from AWS.
Amazon hadn't been sitting idly all this time either, they had even launched their own phone
with its own operating system, a total failure, but you don't always know until you try.
Cloud based computing was a new era, and all these tech companies jumped on, Apple too,
with their iCloud.
Of course some of their cloud businesses did much better than others.
But all of them were in the tech space to at least be able to attempt some version of
service for their consumers.
Other new technologies came out as well, like streaming, Netlfix and Spotify.
Apple jumped on that bandwagon too with Apple music and Apple TV.
Google and Amazon too.
Tech companies get offered these continual opportunities of new industries, and can do
their version of them.
As long as they are able to some how get the current brand to match, and leverage their
existing technology.
Microsoft did actually try to compete with Google, spending billions on their own search
engine, called Bing.
Of course they also attempted to compete with the iPod, with their unsuccessful M3P player
Zune.
But somehow there are people out there that actually use Bing.
And Microsoft also bought Nokia and have a small market share with in the mobile operating
system industry too.
Bing probably is quite profitable, as search is just a huge cash cow.
Just ask Larry Page.
It is an established brand now, and has its place, but its not going anywhere.
Except until we have a new wave of technology, then Microsoft may be able to leverage it
into evolving into the next revolution.
But this was only possible if it existed and remained in the market.
Of course we are here now, with AI.
Microsoft is integrating chatGPT into Bing, and going to leverage that technology to finally
compete with Google.
Microsoft got on top of this one, this time.
They aren't entirely sure how to monetize it best yet, just like Google didn't know
how to initially either, but eventually they will likely find a way.
Google aren't taking this lightly of course and have their own in-house version called
Bard.
But it's possible Microsoft have a fighting chance now to increase their market share
again.
But this was mainly possible because they planted that seed long ago, called Bing.
Equally Apple's Siri, or Amazon's Alexa seem obvious brands to explore the AI capabilities,
but both are relatively disappointing compared to Chat GPT.
Wow, that must be the longest time I have ever gone without mentioned Tesla.
Right so how does this relate to Tesla?
Tesla started as a prevent climate change company, and went into energy and vehicles.
The solar panel side of the business has been doing very little, and to be honest I don't
think Tesla are going to ramp that up.
I think solar panels are likely going to be left to the Chinese and Koreans.
It's too small an industry for Tesla, relative to the rest of the potential, along with all
the hassle involved in installation.
It's not a tidy business.
Instead Tesla are finally branching out more with Megapacks, and have worked out how to
get the costs down significantly, so it can compete with peaker plants.
Power wall is a convenience product, but if they can switch over to LFP cells, and get
the price down to about half, then it could be a great product for a lot more homeowners.
Tesla were doing well with the Model 3, but the batteries were very capital intensive,
and it was hard to ramp up.
Giga Nevada was going to be the largest building in the world, when complete, because it takes
that much space to make that many 2170 cells.
But along the way, LFP cells suddenly started ramping, and had many advantages that made
them suited to electric vehicles.
Tesla was in the right place for this new technology, and could thus benefit from it
in a major way.
The next thing Tesla did was make a new Model 3 factory in Shanghai, where the cells are
made.
Then soon after that a Model Y factory for the same reason.
And thus Tesla could triple production, without having to build another massive Giga Nevada.
Which was not going to be a long term feasible solution.
Tesla also decided to build cells in-house, the 4680 cells.
Just like Microsoft developed Bing.
The 4680s are not a success, yet.
But Tesla have established themselves as a cell manufacturer, and can later benefit from
any new technologies that may arise, which in this industry is highly probable.
Sure, Tesla have clearly outlined their missions, but the plan never goes straight forward,
its never a direct path, but more a zig zag, and sometimes you go backwards before you
get further ahead.
For example for all we really know, FSD may not be ready by 2030 or so, it could take
that long.
Yes, it is absolutely incredible, and does amazing things, but there's a big jump until
it can do say 1000 consecutive trips without any intervention.
Meanwhile there are other advances or waves of technology, that may come up.
Like robotics.
Tesla may end up utilizing the FSD technology in robots more so, than robotaxis.
Tesla is an asymmetric investment company.
They put their chips down on various bets, and some pay off big, some do not.
However, unlike gambling, Tesla don't lose their chips if they don't pay off instantly,
they can stay there until a certain technology changes the game, and suddenly it becomes
a winning bet.
Again like Microsoft with Bing.
No one can predict the future, no one knows what technologies will come up or how they
will evolve, or what what black swan events might happen.
Investing is all about trying to spread enough bets so that you hit something big, and one
of these futures actually come into fruition.
Like how early on I though electric vehicles would be big, or how I thought Bitcoin was
an amazing form scarcity.
Over time, eventually something happens, and these investments gain massive leverage.
Do you think 10 or 20 years ago Microsoft had the business plan to turn into products
as a service pricing, start cloud computing, make an AI search tool?
No because they didn't know the future, and what was lying ahead.
Just like we don't know now.
But we know Tesla has spread itself into a lot of areas, and is becoming the technology
company of energy and transport, two very big industries.
Tesla may not go in the direction we think, but the world will move in a way that Tesla
can move with that tide, and it will grow through one or another.
We don't know what the future holds, but it sure feels like everything Tesla is doing
is
in the right direction.