I believe the greatest thing I’ve learned from playing poker is the ability to be motivated by process rather than results. Even assuming that as an experienced, informed, and intelligent player you have an edge against the field, you are going to lose 40% of the time. That’s an incredibly difficult fact to deal with emotionally. The way to handle that truth, without letting it affect you, is by believing enough in your decision making process to know you will eventually win. Allow me to use a recent back and forth about Tesla to illustrate my point.
I recently tweeted out this small write up about driverless and electric cars, while in the same breath bad-mouthing $TSLA. It seems like this information struck a nerve with a Tesla bull.
I attempted to engage him about the process underlying his assertions but he didn’t care to address my main concern; namely, what makes Tesla unique? When I searched for this question myself I was mostly presented with 2016 articles that made two primary points: 1) Teslas had the largest battery charge and were able to travel the longest distances, and; 2) Teslas were the fastest charging electric cars around. These two features, to me, make sense in accounting for the brand’s popularity but do not seem to provide a guaranteed edge moving forward..
Competitors are catching up with Tesla. The Chevrolet Bolt, which starts at $36,000, has a full charge distance of 238 miles. Tesla’s Model S will run you $44,000 if you want to achieve its maximum of 310 miles. Legacy car makers are investing more and more money to compete with Tesla at the same time as Musk & Co. are continuing to hemorrhage investors’ money. Volkswagen, for instance, has approved a plan
to invest $40 billion by 2022 to develop electric cars, autonomous cars, and other mobility solutions. That’s a lot of billions. And as an article from IBankCoin points out, “Our Millenial Youth weren’t getting Tesla buzz cuts on race day at Lime Rock Park. BMW Coolness Factor. Real, no vapor.”
Another key element to Tesla’s success has been the vehicles’ fast charge capability. The legacy auto manufactures are tackling that, too: “Currently, there are two new separate ‘ultra-fast’ electric car charging networks with charge rates up to 350 kW coming up in Europe right now. The first station was brought online today – making it the first ‘public ultra-fast charging station in Europe.’” This quote was taken from Electrek article, written by Fred Lambert, that includes this statement from the leading manufacturer: “We are delighted to be setting a milestone for future electro-mobility in Europe with this new generation of fast chargers.” - Allego COO Ulf Schulte
While we may not see these in America for a while, ‘ultra-fast’ electric charging stations are being built across Europe and not by Tesla. The stations are being funded by all the biggest players in the auto market and we can expect more production of their corresponding electric vehicles.
While these points don’t constitute a robust enough analysis to recommend shorting Tesla stock, they give me plenty of reason to doubt the company’s future success.
Now, back to the “process vs. results” dilemma: A few days after I had the argument with the Tesla bull he responded with a chart of Tesla stock, presumably to rub in my face how wrong my concerns were. This was a perfect example of results-oriented thinking and why it’s bad. Stock goes up I’m right, stock goes down I’m wrong. This should not be the way we evaluate our decision-making process.
How comfortable are Tesla bulls when they go to bed at night? Can they properly articulate their bullish position besides linking to a Stanley Druckenmiller CNBC clip talking about how he likes the way they drive?
How many electric vehicles has Druckenmiller been in? Does his simple statement, based off a presumably tiny sample size, give you that much confidence?
As humans we naturally care a lot more about results than the process of acquiring said results. An A student in school who puts in very little work will receive more praise than the C student who studies eight hours a day. But we would be more inclined work with the C student rather than the A student because he has a superior process, regardless of the results. While in the long term results may be the only thing that matter, the only way we can obtain positive results for that extended period of time is if we are confident enough in our process and believe that in the long run things will work out for the best.