E Tesla's Executive Turnover Seems About Average (Updated)

Updated July 5, 2018

Tesla’s (TSLA) executive turnover is widely believed to be unusually high, although this belief seems to be based on anecdotal evidence, rather than quantitative evidence. Famed short seller Jim Chanos, for instance, calls Tesla’s rate of executive turnover “stunning”. He says it’s among the highest turnover he’s seen at any company he’s looked at. Chanos never mentions, however, whether he actually benchmarks Tesla’s rate of turnover against any kind of average, or even compares it on a quantitative basis to another company.

It is possible that Chanos’ firm Kynikos Associates has data or analysis that it hasn’t shared publicly. However, Chanos makes other bizarre claims about Tesla that cause me to seriously question his research methodology. For instance, in an interview with CNBC he claimed that Tesla was behind on autonomy because Enhanced Autopilot is a Level 2 system, whereas Waymo’s (GOOG, GOOGL) test vehicles use a Level 4 system. This is a basic misunderstanding that shows a surprising lack of due diligence. Tesla’s internal test vehicles, just like Waymo’s, are intended Level 4 systems in development. Tesla’s driver assistance system, Enhanced Autopilot, is a Level 2 system, like other driver assistance systems. Waymo has no driver assistance product. To not understand this distinction is to not understand autonomy. This is a mistake as big and glaring as not understanding the difference between all-electric cars and hybrids.

In another interview, Chanos expressed his view that Elon Musk will step down as Tesla’s CEO. As evidence, he cited the fact that in the photographs of Musk in a profile by Rolling Stone, Musk was pictured next to SpaceX rockets, not next to Tesla cars. This is a bizarre, bewildering thing to say. First, in the online version of the article at least, there is a stock image of Musk standing on stage next to a Tesla Model 3. Second, this is just such an odd logical leap to make. Presumably, Musk did not make these kinds of creative decisions for Rolling Stone. Maybe Rolling Stone thought photos of rockets looked cooler and more novel than photos of cars.

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Disclosure: I am long TSLA.

Disclaimer: This is not investment advice.

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T.A. Eady 2 years ago Author's comment

I should also mention: in the Cappelli and Hamori study, the standard deviation was 3.7 years.

Alpha Stockman 2 years ago Member's comment

Good unbiased take on #Tesla, which is pretty hard to find these days. I keep going back and forth on this company. People seem to love the cars and #Musk and tend to ignore some of the problems the company face. Others highlight Musk's somewhat unpredictable behavior, the numerous companies that distract him and only focus on the negatives. What's your personal take on $TSLA, Trent? Worth investing in?

T.A. Eady 2 years ago Author's comment

I think Tesla is one of the most exciting technology companies in the world. The opportunity that gets me excited is autonomous ride-hailing, which could be a $10 trillion market by the early 2030s (https://ark-invest.com/research/self-driving-cars). Unlike any other company, Tesla’s production cars are collecting real world training data every day that Tesla’s neural networks are learning from. The volume of training data is most likely the main bottleneck to the development of fully self-driving cars. This is an area where Tesla can sail ahead of the competition because of its data advantage.

That’s the primary reason I’m invested in Tesla. It’s primarily about the immense opportunity of self-driving cars. A 10% market share by the early 2030s would propel Tesla to a $1.5 trillion valuation (at a 1.5x revenue multiple) and a ~30x return. If you’re willing to invest on a 15-year time horizon and take a risk on an uncertain technology, then I think Tesla is a really exciting company to invest in.

Alpha Stockman 2 years ago Member's comment

This is a reasonable statement on $TSLA and makes much sense. I will say that I was much more gung-ho about the self-driving technology but I've become somewhat soured on it after reading several of Gary Anderson's articles on the subject. He seems to have much expertise and believes that it will ultimately prove to be a failed, unsafe technology. While I do believe we'll get there eventually it has certainly delayed my expectations of when it will be viable. I'm thinking maybe 20 to 25 years before I'd trust a car over myself.

Bill Johnson 2 years ago Member's comment

I don't think it will take that long. For one thing, if you look at the advancements in tech over the last 25 to 50 years, it is mind boggling and those advancements are coming at an increasingly rapid pace.

BreakingBad News 2 years ago Member's comment

Saying you don't want to use a self-driving car because there have been deaths and it is not safe is like saying you won't fly ("the safest way to travel") bcause there have been deaths. Hell, it's like saying you want drive a NON-selfdriving car because it's not safe.

Gary Anderson 2 years ago Contributor's comment

Ah, no. That is not a valid comparison. You can have the fastest computer in the world, but if sensor equipment is both flawed and way too expensive, the vehicles will be inherently unsafe. Even 5G does not fix the basic flaw. And add to that a fast computer does not guarantee sound judgement and it may be programmed to kill you on a moment's notice.

Harry Sinclair 2 years ago Member's comment

I don't think that's quite fair. Is self-driving technology perfect? No. But it's learning and gets better with more and more data. Is it completely safe? No, there have been some fatalities. But you need to ask yourself, would those deaths have occurred had there been a human driver behind the wheel? I believe yes. And probably many more too. Human drivers are the most dangerous.

Craig Newman 2 years ago Member's comment

$TSLA is not having a good day today. This may change your mind about them being a worthwhile investment:

"Tesla Tumbles Back Below $300 As Musk Attacks Analysts' 'Poor Track Records'"

www.talkmarkets.com/.../tesla-tumbles-back-below-300-as-musk-attacks-analysts-poor-track-records

Mandi Price 2 years ago Member's comment

So since when did Telsa own any thing over Telecom International who owns the full system and this telco thinks that they can make money when Telecom International will be closing down over all these illegal other companies who say they own everything.

Regards,

Mandi

Bill Johnson 2 years ago Member's comment

What are you talking about, Mandi?

Alexa Graham 2 years ago Member's comment

Fair article. There is so much mystery surrounding #ElonMusk. I think that's why so many people are so captivated by him.

Frank Underwood 2 years ago Member's comment

Gotta love $TSLA. Not sure why there are so many haters out there. Probably people who have never even been inside one of their vehicles.