READING THE FUTURE

The surge in Tesla’s share-price brought short-sellers losses to an estimated U.S $6 billion plus. More to the point it made Tesla the second most valuable car manufacturer in the world despite its unit sales, at this juncture, being relatively minuscule compared with its rivals.

In my view the short-selling of Tesla, which has been on a scale unmatched in financial history, is down to one bad judgement. That is it’s been motivated by not judging the product but instead it’s semi-mad, erratic and sometimes lying, but undoubtably brilliant founder/creator, Elon Musk. Less passionate clinical investors have piled into Tesla for the very good reason that the product is the future.

Professional Investors, like politicians, are singularly involved in trying to read the future. They do this by looking at the known facts, the empirical evidence and future probabilities. Invariably contingencies arise which could never have been anticipated and which either put a dent in their projections, or alternatively, a major boost.

I’ve been a professional investor all of my adult life, in commercial property. With my colleagues we’re constantly trying to anticipate the future. We’ve always been right on the basics but periodically come a cropper on timing because of events no-one could have anticipated. Conversely, such as in recent years, we’ve been huge winners for the same reason. No-one anticipated the advent of virtually free money which has collapsed yields on commercial property, driving up their demand and thus value to an unpredictable extent.

Will cheap money last? All commentators believe so. I’m more suspicious as one thing history teaches is when there’s unanimity on future projections with economists, invariably the opposite happens. This has seen a Chair established at Harvard, solely to examine this phenomenon.

But back to Musk and Tesla. The parallels between Musk and Trump’s electoral success are glaring. In many peoples eyes Musk is appalling, so too only immensely much more is Trump.

Thus on election day in 2017 Huffington Post, allegedly basing its projections on polling, had Trump’s victory chances down at 1%. That seemed reasonable as Trump is so abominable it seemed inconceivable he could be elected. But as we now know, his sheer ghastliness overwhelmed rational assessment and specifically that his messages were striking a chord with Hilary Clinton’s aptly named “deplorables.”

The plus side to all of this is that at least it makes life interesting. If future events were to be dictated solely by rationality, how boring things would be.

A classic example lies with sport. What sustains interest are periodic upsets. Were it not for those sports would be unwatchable when we always know the outcome in advance. Six months ago, for example, the Black Caps seemed invincible. Now I’d bet against them if playing the Chatham Islands.

The recent Australian Open women’s tennis says it all. There’s never been a more exciting series. Why? Because the top 14 seeds were all knocked out, a quite extraordinary and unprecedented occurrence.

Would I invest in Tesla? Nope, but not because I have a view on it, rather because logic and history says stick to your knitting as you’re less likely to be burnt.

 

One Comment

As controversial a figure as Musk apparently is, he is quite popular with younger people, partly because he is relatable to them in terms of things like humour which older people find inscrutable. Regardless of one’s feelings on the matter the furore when Musk appeared on the Joe Rogan podcast is an easy example to make of the disconnect.
I always finding myself thinking about something Peter Thiel said about how he would never bet against Elon. While certainly not the only consideration, since most new ventures fail, with that kind of track record (although not a guarantee either) it is worth giving considerable pause. Musk is doing a commendable effort making his vision for the future into a reality, which if even only half of it comes to fruition will change the world. I for one hope he succeeds.

Economists generally aren’t worth the air they breath (almost).
The concept of preference falsification being an effective example of something most economists would never even consider let alone account for, which also ties in well with mention of the 2016 US election.

There is a lot that could be said – but in the face of uncertainty, outside of (probably) specific knowledge, forecasting by subtraction is a more robust rule of thumb than the reverse, especially in regards to (new) technology, as the newer it is the sooner it is likely to be replaced with something else.

Some of my thoughts anyway.

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