Tesla’s path to a $1 trillion valuation
How one product will get Tesla to that insane valuation - before Apple does!
A $25 billion to a $735 billion valuation in 10 years…
This was what Elon Musk personally wagered would happen during Tesla’s Q4 earnings call. What exactly was his vision in his mind that allowed for such a bold statement about Tesla’s valuation?
The Valuation
Valuation, especially such a large valuation, is the result of beliefs, not numbers.
These beliefs are shared among every type of investor, from hedge fund managers, to regular folks that don’t even partake in the stock market. A company, however, can’t inspire a large group of believers without a record of causing fundamental changes in consumer behavior.
The Vision
If the goal is to replicate Apple’s stock performance, it is probably easier to decipher Elon Musk’s vision with some backwards analysis of the rise of Apple.
- iPods/iTunes changed people’s behaviors and expectations regarding listening to music.
- Apple Stores changed people’s behaviors and expectations of the retail experience.
- iPhones changed people’s behaviors and expectations of communication and software.
Behind these shifts, there was a vision (Steve Jobs’ vision, to be exact) that the future could be better than the present, but the present was the driving force to make it happen.
The Formula
Looking at from Apple’s 10-year stock performance, let’s hypothesize that a large valuation requires at least three consumer behavioral changes that shifts expectations from existing solutions.
Tesla had its first shift with the cars (the iPod/iTunes moment). It might achieve another shift in energy storage (the Apple Store moment). So what will be Tesla’s third shift (the iPhone moment)? What is Elon Musk’s vision to push us all to believe in the future?
Tesla’s iPhone moment
In Zero to One, Peter Thiel categorized three types of innovation: continuous improvement, breakthroughs, and complex coordination.
Complex coordination is a type of innovation that brings together various existing elements and makes something new, with this innovation being ten times better than the current solution.
The iPhone is an example of complex coordination, where Apple did not invent any of the parts. Still, with careful consideration of the user experience, the whole became greater than the sum of its parts.
The vertical advantage of an end-to-end solution is that it provides monopolistic profits.
This is how Tesla’s iPhone moment will come to be, and how only Tesla - specifically Elon Musk - can pull off the trillion dollar valuation. It will be a complex coordination between Elon Musk’s threecompanies, Tesla (autonomous driving / supercharger network / batteries), Solarcity (solar energy) and SpaceX (LEO satellite Internet). This will result in:
The Model H
The Model H will be the first usable smart mobile home, not unlike how the iPhone was the first usable smart mobile phone.
Here is a sampling of the killer apps that the Model H can offer. With these features, the Model H will deliver the 10x factor and fundamental human behavioral changes that will propel Tesla’s valuation.
1)Teleportation
Take eight hours of a person’s nightly sleep and add autonomous driving into the equation. It gives you an effective teleportation range of 480miles (8x60mph) from when you shut your eyes to when you wake up.
2)S.E.N.S.E.S.
The Internet has provided visual images to show you every corner of the world by way of a screen. But even the best VR headset is capable of delivering input to only two of our five senses.
With the entire drivable continent as your backyard, you can experience the real world with all five senses. Instead of looking at images of places you hope to visit someday, all you have to do is say the word and you’ll be there sooner or later, depending on your physical distance from your destination.
3)Weather Guidance System
With ever-improving weather forecasts, the Model H can reduce atmospheric-based insurance premiums to almost zero. Hurricanes? You’ll be long gone. Flooding? Not an issue. Is it too cold outside? Move to a warmer place. Weather’s too hot? Move to a cooler place.
4)Perpetual Energy
Combining Solarcity’s panels, Tesla’s batteries, the Supercharger network, and the weather guidance system, you get a perpetually running home.
With the weather guidance system, you can plan and forecast energy consumption to maximize efficiency. The energy usage can also be reduced by moving away from extreme weather conditions that require spikes of energy usage for heating or cooling.
5)Automated Maintenance
The Supercharger network can be outfitted with docking stations that automate waste removal and water replenishment. Major hubs around large cities and popular tourist attractions can be staffed with Tesla Genii for scheduled checkups.
6)Tesla Destinations
The hubs around large cities will effectively act as community centers serving as destinations in and of themselves. They will also serve as distribution areas for additional technologies to upgrade the Model H.
- Want a VR headset that gives you a 360-degree view of your surroundings while your Model H is traveling so you can make a movie? Sure.
- Want a scout drone so you can switch the VR view to simulate the flying experience after you launch your drone from the roof? Why not?
- Want bullet proof glass that frosts to provide privacy and turn your Model H into your own personal Ground Force One? Of course!
The destinations will encapsulate the spirit of the World Fairs of the past by showcasing the latest and greatest technological advancements ready for your Model H.
7)Freedom
You can be free of Comcast/Time Warner’s tyrannical monopoly.
You can be free of your local electric utility even when the Supercharger is still on the power grid.
You can be free of having to pay property tax.
You can be free from waiting in a TSA security line.
You can be free from delays at airports.
You can be free of holiday traffic.
You can be free from doing yard work.
You can be free of the monotonous daily commute.
Doubts
Naturally, there will be doubters regarding this specific version of the future, just as there are always doubters of innovation. The doubts will come from questions related to education and work.
Remote working is already a viable option. Online learning has proven itself as a viable means of education and it does not have the draconian baggage traditional education carries. Through quick iterations and a variety of modes for interactions within the online learning community, online education can surpass the efficiency and effectiveness of traditional education.
Future
The future is the future; and the question is, and should always be: Does the change take us to a better place? Humans are creatures of comfort. We need certainty, but we also want adventures that come from uncertainty. The Model H vision can deliver on both counts.
Is this the vision that Elon Musk has in mind when he boldly states that Tesla will surpass Apple in valuation?
Nobody knows. But if enough people share this vision, Elon Musk has the fundamental pillars to bring it to fruition, and propel Tesla to be the first $1 trillion company as Model H changes people’s behaviors and expectations of the home, community, and living.
At the end scene of Back to the Future, Marty warns Doc the road isn’t long enough to get the DeLorean up to 88mph. Doc said in response, “Roads, where we are going, we don’t need… (puts on aluminum sunglasses)... roads.” Indeed, Doc, indeed. Except this version of the future is, “Housing? Where we going, we don’t need... houses.”
Welcome to the future.
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