Tesla: The Improvisation Debt
By Jean-Louis Gassée
Aug 29 2016
No one would have given Elon Musk the money to start a “normal” car company. And yet, Musk went ahead, improvised, vaulted over one obstacle after another and created an iconic electric car company. In doing so, Musk incurred a deeply rooted Improvisation Debt, one he must now pay back in order to free himself from his heroic low-volume car-making past and become a truly industrial, million cars a year enterprise.
Critics love to point to Tesla’s misses. They’re right, Elon Musk’s company has a history of missed deadlines, quarterly deliveries below plan, higher than planned cash consumption and other sins, all summarized in an August 15th WSJ article:
“In the past five years, though, Tesla has fallen short of more than 20 projections made by Mr. Musk, ranging from car-production output to financial targets, according to an analysis by The Wall Street Journal. The company missed 10 of his stated goals by an average of nearly a year.”
Undoubtedly accurate but missing a larger point: In spite of its minuscule size (50K cars in 2015, perhaps 80K this year, vs 62M cars sold worldwide) and its many stumbles, Tesla has achieved a unique status, one for which the oft-abused iconicadjective is fully justified.
What Elon Musk has accomplished with Tesla goes beyond good and bad company numbers. Electric cars used to be associated with moderation bordering on self-denial. With the Model S, Musk has given us an electric car that looks like the luxury car that it is… and is a blast to drive (I know, my spouse lets me drive hers). As an impolitic Valley wag once said: Before Tesla, e-cars were for vegetarians; Musk made an electrifying chariot for carnivores.
I have no data on eating habits in my Palo Alto neighborhood, but this small university town has become Tesla City. No block without a Tesla in a driveway, sometimes two. Ten Teslas or more in the garage at work (plus one or two BMW i3s, and the odd Chevy Volt, Nissan Leaf or electric Kia). Granted, Palo Alto holds money and green politics in unusually high concentrations, but it wasn’t that long ago that it was Prius City, an early adopter of what became the successful hybrid genre.
Looking at Tesla’s trajectory, I’m reminded of the original 1984 128K Mac. It was a tour-de-force, complete with a LaserWriter driver and an AppleTalk networking stack, but its improvised software foundation lacked a fully functional OS. The Mac languished and almost died until Steve Jobs’ return for Apple 2.0, with a full team of computer scientists who finished the job. They made good on the Improvisation Debt by sliding a Unix foundation under the edifice and gave use the modern Mac.
Is this what we see, today, with Tesla?
Elon Musk didn’t start Tesla. Martin Eberhard and Mark Tarpenning did, in 2003. But it’s Musk who swooped in, changed management, and saved the company by investing $70M of his own money and leading rounds of financing. By January 2009, Tesla had narrowly avoided bankruptcy, raised $187M, and delivered a grand total of…147 cars.
A few months later, Tesla announced the Model S and took the company public, raising $226M in its IPO. Of course, the Model S was late, by a lot: First deliveries didn’t start until June 2013. Another model, the X, a quasi-SUV derivative of the S was announced in February 2012 and delivered more than three years later, in September 2015. Plagued by bugs, mostly because of it unusual “falcon doors”, the Mode X led Musk to confess his hubris — in those very words — an honest admission well received by his many fans.
And the Tesla fans spoke loudly, putting down 375K pre-orders for the upcoming Model 3, a $35K (or a little more) sedan with a 200 mile range, to be delivered “mid to late” 2017 (or a little later).
With this in mind, we can now turn to skeptics who doubt Elon Musk’s ability to join the league of “real” automakers, to fulfill the 375K Model 3 pre-orders, to make 1M or more cars per year in the 2018–2019 time frame. With Musk’s preternatural skill to overcome mistakes, delays, and cash incineration, is there any doubt that Tesla will find the resources, people, time, and money required for Tesla 2.0?
The answer can be found in two places.
Tesla: The Improvisation Debt