All-In With This Crazy Visionary

Some people on Earth have superb business minds. Some are visionaries, without the mind for business. Some work harder than 99% of us, every day, for their entire lives. Very few overlap any combination of these three characteristics. But, one man on Earth, I'm convinced, embodies all three characteristics -- and wants to take them to Mars.

Elon Musk, founder and CEO of Tesla Motors (Nasdaq: TSLA  ) , as well as the founder of the predecessor to eBay's (Nasdaq: EBAY  ) PayPal service, is that man.

Leadership
Before describing why Musk is such a great leader, the importance of leadership itself must be explained. Some investors, like Warren Buffet, prefer companies that could be run by ham sandwiches. And depending on your view of ham sandwiches, Peter Lynch is either more or less pessimistic about investing in management when he says, "Go for a business any idiot can run -- because sooner or later, any idiot is probably going to run it."

It's true that superb leadership typically isn't sustainable -- no one lives forever -- but superb leadership can build a sustainable company for any ham sandwich or idiot to take over. And the market rewards the chance you take while that leader is turning a company from risky to rock-solid.

Thinking big
To understand how big Musk thinks, look at his company SpaceX, now the first private venture to have supplied the International Space Station. Musk "believes it's important for humanity to become a multi-planet species." He hopes to land on Mars in 10-15 years, to start, and also hopes to die on Mars, "just not on impact," he says in an interview with Businessweek. He's looking at taking SpaceX public next year, and possibly creating a parent company that would hold both Tesla and SpaceX.

On Earth, he's concerned about sustainable energy, which has led him to starting his electric car company as well as holding the Chairman position for SolarCity. Transportation is a big theme in his work, whether its terrestrial or extraterrestrial, and his latest idea is a "Hyperloop," which he thinks could transport people over the 300 miles from San Francisco to Los Angeles in 30 minutes and be built for a fraction of the cost of a high-speed train.

Working hard
In a recent Autoblog interview, Musk says that "if you're at Tesla, you're choosing to be at the equivalent of the Special Forces...that has pluses and minuses. It's cool to be Special Forces, but it also means you're working your ass off." Musk himself works seven days a week, and the minimum for workers at Tesla is 50-hours a week. In Businessweek's description of how he examines Tesla's designs, he sounds like Steve Jobs in pursuit of perfection:

...he zeroes in on a sun visor. He hates it. He examines the seam and, noticing how it pushes up the fabric, declares it "fish-lipped." The screws on the hinges feel like knives stabbing him in the eye. He announces he wants to find the best sun visor in the world, and then make a better one.

Making money
Most important for investing in Musk is how will his businesses perform. No matter how disruptive his vision or how hard he and his team work, only profits matter to shareholders.

Tesla's current worries center on its manufacturing scale and adoption of strictly electric cars. Earlier this year, Musk said Tesla should produce 5,000 of its Model S sedans. Recently, Tesla lowered that expectation and said it was between four to five weeks behind its delivery goals for 2012. The company cited focusing on quality and supplier issues as the reason for the delay in ramping up, as it has to train employees, and suppliers had a tough time delivering components to meet Tesla's demand for quantity and quality. It also announced selling 4.3 million more shares to raise cash, as the slower-than-anticipated production has cut estimates of revenue from around $600 million down to $440 million.

Tesla has faced financial issues before, however, and in 2008 Musk invested so much of his personal cash into the company that he had to take out a loan to pay his rent.

To help with consumer adoption of the new type of car, Tesla announced its future network of superchargers that can provide three hours worth of driving with a 30-minute charge. Today, there are six stations in California, but by next year Tesla hopes to have a continental network to enable true long-distance trips with an electric car. Charging will also be free for Model S owners.

Toyota (NYSE: TM  ) is less optimistic for electric cars. It ended plans to sell its eQ electric mini-car, stating that "the current capabilities of electric vehicles do not meet society's needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge." Meanwhile, General Motor's (NYSE: GM  ) Chevy Volt, while likely not going to reach the high original sales projection of 45,000 for 2012, has sold about 13,500 through August this year. This places it very close to the middle of the pack in sales when compared to all other models sold in the U.S. -- not a failure but not revolutionary. And Ford (NYSE: F  ) released its first all-electric Focus, to go along with investing $135 million in hybrid-electric vehicles that includes renaming the Advanced Engineering Center to the Ford Advanced Electrification Center.

Trusting Tesla
The risk and reward is clear for Tesla. I believe Musk's ability to innovate, execute, and create value will lead Tesla and his other future ventures to success. To that end, I am making a thumbs-up CAPScall on Tesla, and once I'm clear of the Fool's trading restrictions, I will be investing my own money into the upstart car company.

If you have more hope for the Goliath car companies who have greater experience and scale, read our new premium report on Ford's prospects and risks. Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. But Ford's stock seems stuck in neutral. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.

Fool contributor Dan Newman wonders if he gets a free Tesla with a purchase of shares. He holds shares of eBay, but does not hold shares of any of the other above companies. Follow him @TMFHelloNewman.

The Motley Fool owns shares of Ford Motor and Tesla Motors. Motley Fool newsletter services have recommended buying shares of Ford Motor, General Motors, Tesla Motors, and eBay. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On September 26, 2012, at 2:08 PM, Darwood11 wrote:

    I hope that Mr. Musk is as much the perfectionist on the engineering side of the Tesla S as he is about sun visors, leather seams, etc. I know, these design details are the visible manifestion of possible excellence, but after decades of stuff that looks great but doesn't quite live up to the hype, I am a true skeptic.

    BTW, I am really a fan of this guy. But each "vehicle" be it the Tesla S or the Dragon, must survive on its own merits.

    I assume that Musk's attention to detail extends far beyond the comfort features, and includesthe power plant, electronics, battery pack, brakes, etc. But to be honest, as a possible Tesla auto buyer, I'm a lot more concerned about the "running gear" than some of the cosumer design stuff. I also will not buy an "iPhone" style design award car built by serfs.

    After all, a $100K car will cost me $10K a year just to own should I be able to keep it running for 10 years, and that's assuming I pay cash. Then there is "fuel" and maintenance costs to deal with.

    That's the way I view every significant purchase. Where else could I put my money and what are the benefits?

    I like the Tesla S. But should I buy that, or consider a "Voltswagen" from GM, or even a Honda Fit and save for a short hop into space on the Lynx spacecraft? Now that's a dilemma!

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