Tesla is Right to Defend Itself

by Chris on July 7, 2016

Tesla is the first company to release a sophisticated auto-steer and adaptive cruise control system that we call Autopilot (or AP for short).  Since that software release Tesla Model S and Model X owners have collectively driven over 100 million miles using the AP system.

The system may be poorly named because those who are ignorant on the topic may read about it and think the driver can sit back and relax with his or her hands off the wheel.  This is not the case. Tesla insists that drivers pay attention to the road and keep their hands on the wheel so they can take over if something happens that the AP system can’t deal with.

There are lots of things that might fall into this category:

  • Some sections of highway have nearly no visible lines due to paint fading. The car will have trouble in this situation.
  • The Autopilot system can’t necessarily react to stationary cars blocking part of a lane (the human eye, on the other hand, can see much further)
  • Traffic that crosses in front of you, perpendicular to your direction of travel, may not be detected. So to avoid a T-bone crash you should keep your eyes on the road!

I’m sure the list could be made much longer, but you get the point. Autopilot is not meant for you to sit back and check email, etc. Every customer knows this and must agree to this before using the software.

There is an inherent PR problem with software like this, and it stems from human ignorance and stupidity, which appear to breed in abundance.  It goes like this:

  1. Tesla was the first to release such software.
  2. No matter how impressive, reliable or safe the software is for it’s intended purpose, it can’t be perfect.
  3. Even worse, customers are not perfect. Some are imperfect and stupid. Ignoring the driving environment is stupid and dangerous, yet people do this every day. One great example: Texting while driving.
  4. Some portion of unsafe drivers will be Tesla drivers, and they will do unsafe things while using Tesla Autopilot.  Some will crash.  Some will die. It’s sad, but it’s also true.
  5. These accidents are food for the media. In such reports, people tend to notice what is new or what is different rather than what is similar. The obvious difference is Tesla Autopilot. The (ignored) similarity is unsafe driving behavior by bad drivers.
  6. Some, and perhaps many of these people will fall victim to logical fallacy. They’ll assume that, because Tesla Autopilot came before the crash, it must have caused the crash.

The technical name for the logical fallacy described above is Post hoc ergo propter hoc. In English it means “after this therefore because of this”.

That, in a nutshell, is the problem ANY company in Tesla’s position would be facing if they’d gone first. Any company would face this problem no matter how incredible the software. Most executives know this and are scared by this, which is why the progress has been slow prior to Tesla.

Thankfully Elon Musk had the balls to go first. 

He, and Tesla, clearly understand that a bad driver outcome while using Autopilot is a statistical inevitability – whether by driver inattentiveness or by Autopilot being imperfect.  When we strip out the emotions, the pure logical conclusion is that we should absolutely push forward with these systems if the good they do is greater than the harm they cause.

Tesla knows it will be under the microscope and unfairly blamed in some situations. They know this will result in bad press. And in my opinion, it is important that they defend themselves from bad analysis that is easily spread across the Internet.

Decades ago Audi suffered in the US market because the public thought it’s cars were suddenly accelerating. The real issue was that some drivers were stepping on the gas instead of the brake, and (through mistake or lie) claiming otherwise.

Back then there was no Internet. Audi couldn’t defend itself on Twitter, or in a blog post. The Internet is one huge accelerator pedal, and it can amplify the speed at which news travels. The Internet does not care if the news is correct, incorrect, logical, illogical, whatever.

I’ve seen many journalists claim that Tesla is not handling the PR situation well.  I’m not sure what they think Tesla should be doing.  When a magazine like Fortune publishes wildly inaccurate articles to a large audience, Tesla is hurt. It’s obvious to me that the correct thing to do is go on the offensive and point out the errors. As a shareholder I hope they continue to do what they are doing. It helps move the world forward.


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Why You Need People to Insult You

by Chris on April 11, 2016

If you’re going to invest in stocks AND expect to get big results then you absolutely must be attacked by insults. Here’s an article I published for the Globe and Mail a little over two years ago. The message is evergreen. It will never become old. Read this and learn this.


When you invest in exciting long term growth ideas, one way to gauge the upside potential is by how many people think you’re stupid or crazy. If people aren’t willing to argue with you about a call, there probably isn’t much upside. On the other hand, if you want to buy stocks that have huge upside potential I think it’s an absolute requirement that you’ll be called every name possible.

Look no further than the comments section in the online version of any article I write about stocks such as Netflix, Facebook, or Tesla Motors. I’ve seen people call me all kinds of names, or even suggest that publishing my opinions the way I do should be illegal. But guess what? If all of the comments were sunshine and roses it would be a sign that the upside I think exists doesn’t really exist at all.

Stocks go up when people think that business prospects have improved compared to their prior expectations. It’s that simple. Sure, you can get a lot more complex by looking at short term trading psychology where traders are trying to predict what other traders will do in the near future. But once we move past the short term noise a stock will move up or down based on how investors feel about its future. If people feel better about a stock because of an actual improvement in the business, the stock goes higher and stays higher. If people get fooled into believing a business has stronger prospects when it really doesn’t, then the gains are short lived since the truth is eventually understood by the market.

When it comes to long term investing I look for stocks that are making big differences in how an industry operates. And if you’re planning on doing the same with a portion of your investing dollars I suggest you get used to the idea of being called stupid or crazy.

Assuming that I’m right on any particular call, it is the folks who currently think I’m crazy who are responsible for my future upside in a stock. I can only make oversized returns if I end up being right against a lot of people who don’t buy into my way of thinking about future earnings potential of a business. The more names I’m called the more I see it as a sign that the payoff will be quite large.

In the late 2000s I published a sell recommendation on a small Canadian company manufacturer of fibre optic components for the telecom industry. In my opinion, investors had been sold a story that could never pan out. Since I knew the industry better than most of the investors, and I had a strong network of professionals to help me with my due diligence. I was very confident. That didn’t stop one client of our firm, who was a big shareholder, from calling me up and yelling at me. He’d done his own digging too, and his PhD contacts were smarter than mine, so he thought. He was wrong, and the stock soon came crashing down – and stayed down. If I hadn’t understood that I needed people to disagree with me to have a worthwhile call on a stock, I might have been bothered by what happened.

Today I’m invested in Facebook despite crowds of people who feel that it’s bound to fail as teens abandon the social network. But we know people are social creatures, and there is no meaningful competition for Facebook today. I’m invested in Netflix because I believe online delivery of video will be the primary way people watch TV in the future. Yet there are scores of people who think cable TV will never die. Most of the growth-oriented technology stocks I invest in are ripe with controversy. Without controversy, there is no opportunity. In a theoretical world where everyone shared my opinion these stocks would already trade much higher.
I’m certainly not always right. I’ve made plenty of incorrect investing decisions over the years. Each time, whether I was right or wrong, there were crowds of people who disagreed with me, and it used to bother me. But as soon as I truly realized the market is built on conflicting opinions I stopped worrying about what anyone else said.

If you’re going to invest in stocks, not only do I recommend you adopt a long term focus, but start to expect people to strongly disagree with you and look forward to it. You can safely ignore the amateurs who hurl insults and instead focus on the business rationale behind an argument. By expecting people to disagree with you and sidestepping emotion to only focus on the merits of an argument, you’ll become a better investor.

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Tesla Driving Update: Aftermath of Winter 2015

by Chris June 9, 2015

I’ve been kinda busy lately. I haven’t posted anything here since January! That’s just crazy. So when I got an email last week asking me how the Tesla Model S faired during the deep freeze of February 2015 (the one we all thought might NEVER end), I figured it was time for an update. In […]

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Here’s Why My Tesla is the Best Winter Car I’ve Ever Owned

by Chris January 8, 2015

Since taking delivery of a Tesla Model S this past June, I’ve enjoyed plenty of summer driving with the car. But now, up here in Ontario, we are in the thick of winter. Yesterday we drove the car in temperatures ranging between -17 and -23 Celcius. That day was the coldest day I’ve ever stepped […]

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Sorry … No, Electric Cars Will Not Cripple the Electric Grid

by Chris September 6, 2014

I spend a lot of time reading about Tesla, electric cars, etc. My wife things I’m obsessed with the topic. I think she’s right. Anyway, today I came acrsoss a typical bearish comment where a person wrote, “What I want know is where are the generating stations going to be built to supply the power […]

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Tesla probably should do another financing

by Chris August 11, 2014

This week I’m up at the cottage in vacation. Like any good tech investor my leisure reading included the latest Tesla 10Q filing. I know. I should expand my sources of literature 🙂 I’m aware some bears think that Tesla is burning cash and therefore must raise more money through an issue. This view is […]

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Getting Fired: 3.5 years later

by Chris July 17, 2014

Three and a half years ago I was working at TD Securities as an equity analyst. I had been working on Bay Street as an equity analyst covering tech stocks for almost 11 years at that point. I enjoyed it tremendously for most of those years. But when I had my first daughter in 2004 […]

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Tesla: The Self-Marketing Car

by Chris July 4, 2014

After driving the Tesla Model S for about 3 weeks I’ve noticed that it attracts a lot of attention, and mostly when I’m parked. I’ve gotten used to the idea that when I get in or out of the car there are likley to be people staring at it, walking up close to it, commenting […]

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Cars are going electric. There is no stopping it.

by Chris June 24, 2014

Last week I picked up my Tesla Model S. I’m the first to admit this is an expensive car, and most people aren’t going to buy one. And I realize that it will be at least a couple of years before their Gen 3 car (expected at $35k) is going to arrive.  In the mean […]

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Is it wrong that Morgan Stanley upgraded Tesla Motors in advance of underwriting their convertible debt offering?

by Chris February 27, 2014

Ever since Tesla Motors announced its $1.6 billion convertible debt offering yesterday afternoon, market watchers have been crying foul. Why?  Because Morgan Stanley is one of the underwriters on the deal. Their analyst, Adam Jonas, put out a very bullish report and raised his target price on Tesla just a few days before the deal […]

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