Once upon a time, I was convinced that Elon Musk was a genius with a world-changing vision. I bought my first Tesla (TSLA 15.31%) shares in the summer of 2014, citing five unique company qualities. I liked the company's radical approach to research and development, the game-changing value of lifetime Supercharger fill-ups for free, and the dealer-less system of factory-direct car sales.
But above all else, I called Musk a "brilliant" innovator whose long-term vision "makes the world a better place." That was the heart of my thesis
So I bought a few Tesla shares that month and doubled down on that investment when the Tesla bears were running wild in October 2019. That turned out to be a good idea, and my Tesla shares skyrocketed over the next three years. All told, my Tesla investment netted me a 16-fold return on the original cash commitment.
But now I'm done with Tesla. I sold most of my shares in the summer of 2022 and the rest last week. The disclosure section below this article no longer lists Tesla as a stock in my portfolio.
I can't complain about the massive gains, of course. Still, I have learned a few painful lessons along the way.
And with the benefit of hindsight, an uncomfortable truth emerged: Buying Tesla before the surge of electric-vehicle (EV) sales was not a stroke of genius on my part. I just got lucky. Even if the real-world results are incredibly strong, that's not how I like to invest.
What Elon Musk got right
Let me repeat that crucial point: I got lucky with my money-making Tesla investment. A lucky bet isn't the same thing as a smart investment.
Three of the five main points in my investment thesis boiled down to trusting Elon Musk's innate genius. Converting a petroleum-addicted energy market into solar power and battery packs while replacing gas cars with electric vehicles still sounds like a good idea and is working out well in the real world. Tesla is a leading automaker these days, disrupting the oil-based ways of the previous era.
Musk deserves credit for kick-starting that unstoppable sea change. Thank you, Elon.
And his long-term vision used to excite me. After saving the world from the environmental carnage of burning fossil fuels, SpaceX will take us to Mars and beyond.
Space exploration. Sustainable energy. Reforming terrestrial travel with the Boring Company and Hyperloop trains. Never-ending innovation. Behind the scenes, artificial intelligence (AI) manages large projects, self-driving cars, and everything in between.
In Musk's ideal future, the Earth would be a better place, while humanity also moved on to new worlds. Tesla and its sister companies will power the revolution and pocket massive profits as a result. How could I not fall head over heels for these audacious plans?
A fresh look at Tesla's prospects
I still believe in many of Elon Musk's long-term goals, such as revamping energy consumption and getting serious about space exploration, again. However, Tesla isn't alone in the vanguard anymore, and I'm no longer sure that Musk is the right captain for this proverbial ship.
The imploding value of X (formerly Twitter) since Musk's $44 billion buyout in 2022 shows a dark side of the businessman's supposed genius. When things don't go Elon's way, a true visionary would adjust to a challenging reality and set a new path. Instead, Musk tends to defend bad ideas and actively look for controversial solutions.
Moreover, Musk seems to enjoy generating volatility in the stock and crypto markets through downright silly posts on X and elsewhere. That's not the type of personality I want at the head of humanity's grandest corporation, as Tesla would be at the end of Elon's far-ranging plans.
Moreover, Tesla has and will have real competition every step of the way. Yes, Tesla got the ball rolling on electric vehicles, but the final winners might still be found in Detroit and Japan. Today's oil giants are turning their massive research budgets toward sustainable energy and battery technology.
Even SpaceX isn't as unique as Musk would like. Old-school aerospace giants Lockheed Martin and Boeing run a joint venture exploring next-generation rocketry, and Amazon billionaire Jeff Bezos can match Musk's budget and vision with his Blue Origin space-launch business.
So it's possible to believe in Musk's original vision without supporting his recent misfires, such as the cash-burning X buyout and the thwarted Cybertruck launch. It's easy to find alternative investments for each part of the "electric Mars launch" vision. This way, you can still invest in making the world a better place without accepting the risks of having a divisive and unpredictable personality at the helm.
Lessons learned: Hero worship (and other emotional reactions) has no place in investing
So most of my reasons for investing in Tesla early on turned out to be wrong. It worked out anyway, but that's a stroke of blind luck on my part. There's no crying in baseball and no emotional antics in investing.
The next time I buy a stock because I admire the company's leadership, I need to make sure that the personality, rational quality, and ethics of my newfound heroes really are up to par. Otherwise, that so-called investment won't be any better than spinning a roulette wheel.
Sometimes, you get lucky that way. Most of the time, you don't.
