Elon Musk vs. The SEC: A Hypebeast’s Progress
The greatest tragedy in Tesla’s history is that a transformative company and a world-changing mission have become less important than one man.
Almost from the very moment that Tesla CEO Elon Musk settled fraud charges with the SEC, it's been clear that the underlying lesson was not learned. Even before Musk settled, the forums and comment sections that make up Musk and Tesla's online id sought to minimize and deflect the seriousness and validity of the SEC's complaint, with Musk egging them on by declaring his lack of respect for the stock market regulator. Now, the SEC is once again trying to rein in Musk by charging him with violating the terms of his settlement, prompting him to trumpet his defiance to his fans and enablers. Musk's inability to take those consequences seriously, even in the face of the possibility that he could be barred from serving as a board member or officer of any public company, seems downright incomprehensible... unless you understand the turning point that led inexorably to this showdown.
The most significant moment in the history of Tesla dates back to 2006, and has been widely ignored since its details were first published in 2014. When the electric automaker first came out of "stealth mode," with the reveal of the Roadster in 2006 the company was featured in a pair of stories in the New York Times, the first of which completely failed to mention Elon Musk and the second of which mentioned him only as an investor. These stories enraged Musk, prompting him to write furious emails, published by Business Insider's Drake Baer more than four years ago, to Tesla's then-PR manager Mike Harrigan fuming at his treatment.
"The way that my role as been portrayed to date, where I am referred to merely as 'an early investor' is outrageous," Musk wrote. "That would be like Martin [Eberhard] being called an 'early employee'... I'm not blaming you or others at Tesla — the media is difficult to control. However, we need to make a serious effort to correct this perception." This was the first time Musk had "really bumped heads" with Tesla founder Martin Eberhard, sowing the seeds of conflict that would eventually lead to Musk ousting the company's first CEO. Just days later, Musk published his "Secret Master Plan" blog post establishing himself as the visionary genius behind Tesla and ever since the company has been drawn more and more closely into orbit around Musk's high-gravity ego.
In the nearly thirteen years since Musk placed himself at the center of Tesla's burgeoning mythology, the man has become the embodiment of Tesla's world-changing mission. His predictions and pronouncements, particularly those on his free-wheeling Twitter account have repeatedly shaped the perception and trajectory of the company as well as the culture around it. After Tesla became a "story stock" phenomenon in 2013, Musk's centrality to Tesla's vision has made him the company's storyteller-in-chief and thus the most important thing about the company. As he has cemented this status, the company and its fans and investors have become increasingly unable to draw the lines around his behavior that might have prevented his current confrontation with federal regulators.
A single tweet to his 25 million followers can send Tesla's stock soaring, boosting his net worth by billions of dollars and earning the loyalty and trust of Tesla's investors. Though Musk has made apathy toward personal financial gain a central value of his personal brand, he has also become increasingly obsessed with guarding Tesla's stock market momentum from the vast conspiracy of short sellers and incumbent industries he believes are out to destroy the company. Unable to otherwise defend a valuation that is 43 times its projected 2020 earnings, faith in Musk and his tweets has become increasingly central to maintaining Tesla's share price at the levels that Musk's hype has inflated it to.
But what Musk giveth, Musk can also take away. The unflagging optimism, which has always been central to his image as a futurist visionary, has lately been turning from Tesla's greatest source of strength to its most fundamental weakness. As Tesla's stock has lost its momentum mojo, Musk's attacks on critics and predictions about Tesla's future have become increasingly unhinged. Over the last year, his Twitter-based flailings have embroiled Tesla in a war on the media, the defamation of a cave diver and a massive controversy around Musk's pronouncement that funding was "secured" for Tesla to go private at $420 per share. Like Midas, Musk's golden touch seems to have turned from blessing to curse.
Two factors seem to be underpinning this tragic shift: the financial gravity that Musk's tweets have successfully defied for so long and his insulation from any form of accountability. The former is easily understood by simply reviewing the history of Musk's stock-moving announcements and predictions. From 100% solar superchargers that would be "zombie apocalypse-proof" to a battery swap system, from a self driving system that was supposed to be capable of cross-country travel without a human occupant last year to a $50,000 Model S and a $35,000 Model 3, many of Musk's most important predictions about Tesla's future have turned out to be bunk. As these expectation-inflating targets have fallen flat, the only reckoning has been a stagnation in Tesla's stock price that has driven Musk to ever greater feats of hype. This trend culminated last year in Musk's premature announcement of a deal to take Tesla private, signaling both the lengths to which Musk was willing to go to boost Tesla's stock price as well as a tacit admission that public markets were no longer as receptive to his hype as they once were.
The second factor reflects the legacy of Musk's battle with Eberhard more than a decade ago and explains Tesla's (and perhaps modern America's) most fundamental dysfunction. In the years since Musk established himself as the central figure in Tesla's success, the "cult" of Tesla has become infamous online for being the most "toxic" fanbase around. Defending the indefensible and shamelessly picking and choosing facts to fit the narrative that Musk is invaluable to any form of progress on transportation-related emissions, the culture around Tesla has become incapable of holding their figurehead accountable. This is hardly a coincidence, as Musk's prickly defensiveness and paranoia have long set the tone that his admirers now almost reflexively enforce.
This problem extends deep into Tesla's internal problems as well, leaving the company's experienced experts unable to stand up to even Musk's wildest flights of fancy. Even after Musk's inexplicable obsession with creating an "alien dreadnought" that was supposed to make Tesla's production system the fastest and most "volumetrically dense" in the auto industry left the company flailing through a year of "production hell," the people whose hard work keeps Tesla rolling along are forced to either go along with Musk's madness or leave the company entirely. Even the board of directors who Musk ostensibly serves cowered and groveled when Musk demanded they "extol his integrity" after the SEC brought fraud charges against him for his "funding secured" tweet, rather than face the prospect of finding a new leader for the company. Musk's deep need for recognition has strangled all of the checks, balances and feedback loops needed to keep an organization healthy.
The road to Musk's unassailable position as the embodiment of Tesla motors has been long, and the opportunities to place limits on him that would preserve his positive effects on the company while minimizing the harm he is now causing have been many. Ironically, the fact that Musk has managed to make himself inseparable from Tesla's broader mission to accelerate the transition to sustainable transport, starting with his 2006 "Master Plan," has made that high-minded cause subservient to the whims of one man. As much as Tesla, its fans and its investors wrap themselves in the rhetoric of environmental altruism, their actions speak far louder and they consistently value Musk over a mission that must by definition be bigger than a single ego, let alone a single company that has yet to make up one percent of the global auto market.
Now, with Musk taunting the SEC even as it gives him a second chance to defend his open contempt for the rules that he has repeatedly flaunted, it appears that it is too late to turn back. Tesla, with all its potential for good, is completely at the mercy of a man who seems unable to understand the very concept of rules and accountability. Once again, history adds to its collection of examples of noble causes that have utterly lost their way due to the expediency of uniting around a single, messianic leader. Tesla's story holds a wealth of lessons about the auto industry, technology and human psychology, but of all of them the inevitably tragic consequences of elevating a mere man to the status of an untouchable symbol is perhaps the most poignant and universal.