Tesla (ticker: TSLA) investors love CEO Elon Musk. Musk is a visionary genius and entrepreneurial billionaire who is often compared to "Iron Man" superhero protagonist Tony Stark. But while Musk fans are excited by his insatiable thirst for innovative technology, Tesla investors may be getting uneasy about his growing number of outside commitments.
Ironically, the visionary engineering genius that Musk named his electric car company after was eventually driven to financial ruin by his pursuit of technology. Tesla investors are hoping to avoid the same fate.
Musk's track record of success is impressive. He famously dropped out of Stanford University during his freshman year to found online city guide software company Zip2. Four years later, Musk sold Zip2 to AltaVista for more than $300 million.
Without missing a beat, Musk founded online payment company X.com, which later merged with PayPal Holdings ( PYPL). EBay ( EBAY) purchased PayPal in 2002 for $1.5 billion before spinning it off in 2015.
Now, of course, Musk's primary world-changing objective is a complete overhaul of the global auto industry. Musk wants Tesla's electric, affordable Model 3 to replace the internal combustion engine vehicles that have defined the auto industry since its inception. The only problem is that Tesla rivals Ford Motor Co. ( F) and General Motors Co. ( GM) are pillars of American industry. For a startup to steal market share from such established giants is a very tall order, especially when both Ford and GM are working around the clock to innovate themselves.
Obviously Musk is fearless and extremely business-savvy, as his track record demonstrates. However, in addition to changing the world with Tesla, Musk is also attempting to change the world with an ever-growing number of new startups. Musk is also CEO of space travel company SpaceX. Musk is the brains behind the tube travel transportation proposal known as Hyperloop. Musk is also a founder of nonprofit artificial intelligence research company OpenAI. Within the past year, Musk founded two more companies -- The Boring Company for advanced transportation tunneling and Neuralink for developing brain-computer interface technology.
Clearly, Musk is not a one-trick pony and has more to offer the human race than an affordable electric car. However, one of the best examples of the dangers associated with the risk of relentlessly pursuing technology is visionary engineering genius Nikola Tesla.
"Elon Musk is a brilliant visionary and is currently one of the greatest technological innovation entrepreneurs in the world," says Rose Faghih, assistant professor for the University of Houston Cullen College of Engineering. "Tesla was a brilliant innovator and creative genius whose extraordinary technical depth and vision revolutionized the field of electrical engineering."
In the late 1800s, Tesla invented an alternating-current power system that the world still uses to power electrical devices to this day. Tesla also contributed groundbreaking ideas in the fields of radar, X-ray and remote control technology, as well as rotating magnetic field science.
Unfortunately, it was Tesla's obsession with wireless communication and power transmission that led to his downfall. Tesla had a vision for a global network of devices that could wirelessly transmit information and electricity from place to place around the world. Obviously, Tesla's vision was extraordinarily accurate and is the basis for cell phones and other wireless devices we use every day. But in 1900, the technology was simply not advanced enough for Tesla to realize his vision. He eventually declared bankruptcy after years of failed attempts to develop his idea.
Tesla investors are hoping Musk can deliver an inexpensive electric car that can compete with Ford and GM. At the same time, Musk is developing implant technology to facilitate the upload and download of online information from a computer directly to people's brains. While Faghih says direct comparisons between Elon Musk and Nikola Tesla are difficult to make given the two men were born more than a century apart, it's understandable for Tesla shareholders to be concerned about the direction Musk's vision is leading him. At the very least, Tesla investors must read a seemingly constant flow of headlines about new Elon Musk side projects during the most critical period in Tesla's history.
According to JJ Kinahan, managing director of client advocacy and market structure for TD Ameritrade, shareholders of any company are right to be concerned about a potentially distracted CEO, but they should also keep in mind that side projects may actually be more relevant than they originally seem.
"I believe that in any venture, the more a person's attention is divided, the harder it is to focus narrowly. However, in situations where the companies' technology and target audiences are highly correlated, there may actually be some economies of scale in the CEO overseeing multiple companies," Kinahan says.
For example, Musk's involvement with solar power company SolarCity may have initially seemed irrelevant to Tesla investors until Tesla acquired SolarCity in 2016.
Nicholas Colas, chief market strategist for Convergex Group, says investors should care about their CEO's side projects, but wealthy CEOs may not be as involved in the side projects as they seem.
"This isn't a normal person picking up a part-time job. They have support to do it, and, properly executed, it should not be a hindrance to their publicly-held business," Colas says.
Robert W. Baird & Co. analyst Ben Kallo says Tesla investors shouldn't overlook Musk's word-class Tesla staff, as well.
"There's always a question that could turn into a concern over whether or not Musk is spreading himself too thin," Kallo says. "The one thing that gives us a little bit of peace of mind regarding all of his projects and him losing focus is that he has a deep bench of teammates at Tesla. That's one thing that's probably underestimated at Tesla is their ability to recruit top-level talent."
Part of effective leadership is the ability to delegate responsibility, and Musk has certainly earned the trust of investors up to this point with his past success.
There is no denying that both Elon Musk and Nikola Tesla are rare visionaries whose technology will leave a lasting impact on the world. Tesla investors are simply hoping that Musk's insatiable drive to pursue futuristic technology won't lead Tesla investors down Nikola Tesla's financial path.
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