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Tesla CEO Elon Musk and his security team leave the company’s local office in Washington, January 27, 2023.
Jonathan Ernst | Reuters
Elon Musk’s multiple projects and the relationships between them are facing increased scrutiny as the Tesla CEO continues to add more to his slate.
During Tesla’s second-quarter earnings call on Wednesday, Truist analyst William Stein asked Musk about another tech project he recently started and integrated in Nevada: xAI. Musk recently said that the AI startup aims to one day compete with OpenAI’s Google Bard or ChatGPT, and plans to collaborate with Tesla on both software and silicon.
Stein asked, “For investors who believe there may be a significant amount of value in Tesla’s AI features and products, it might be troubling to see you pursue another endeavor where AI is the focus. Can you talk about how xAI overlaps with, and possibly competes with? Tesla or in other ways possibly enhance the value of what Tesla does?”
musk claimed that xAI and its focus on artificial general intelligence would bring some value to Tesla, and he spoke of recruiting as an example.
“There were only some of the best AI engineers and scientists in the world who were willing to join a startup but weren’t ready to join a fairly large, relatively well-established company like Tesla.” He added, “So I was like, well, I better run a startup than they go work somewhere else. That’s kind of the genesis of xAI.”
In addition to the example of xAI, he said he was only able to lure a high-level materials science engineer away from his job at apple By promising that the engineer can work concurrently with SpaceX and Tesla. The engineer in question, Charles Kohman, joined Tesla in late 2015 and is now SpaceX and Tesla’s vice president of physical engineering, reporting directly to the CEO.
The issue of Musk and his multiple projects also came to light earlier this month, when Sen. Elizabeth Warren, D-Massachusetts, urged the Securities and Exchange Commission to investigate its Twitter connections and related corporate governance issues.
Musk led the $44 billion purchase of the social media company last year and named himself interim CEO there. He is now the controlling shareholder, CTO and CEO of Twitter while holding the CEO position at both Tesla and at his aerospace and defense company, SpaceX. He is also the founder and financier of brain-computer interface startup Neuralink and tunneling venture The Boring Co.
Tesla is the only public company among the group. And it never disclosed to shareholders how much talent, time and money it spent helping Musk with his other projects, or why sending people to Twitter would be a reasonable use of Tesla’s resources. Musk previously enlisted employees of Tesla, SpaceX and The Boring Co to help him with his Twitter acquisition, as reported by CNBC.
At least one senior Tesla employee has jumped to Musk’s X Corp. Twitter’s parent company. Court filings revealed this Dhruv Batura, who has worked at Tesla since late 2013 and was a senior director of business operations finance there, is now a senior director of finance at X Corp. Batura has been posting job advertisements for X Corp. On Twitter on Tesla’s second day – Quarterly Earnings Report.
in May 2023 In the proxy filing, Tesla revealed some details about related party transactions. Among those, Tesla disclosed, “Twitter is a party to certain commercial and support agreements with Tesla. Under those agreements, Twitter incurred approximately $1.0 million in total in 2022 and $0.4 million in 2023 through February.” Tesla hasn’t said exactly what Twitter is buying from the company.
Risks include lack of focus, and employee burnout
According to Randall S. Peterson, Professor of Organizational Behavior at the London School of Economics, “Musk makes a complex argument in saying “I am helping Tesla by preventing these great people from joining a competitor.” “It is an opposite fact that you cannot test or contest in an investigation.”
Peterson noted that most startups fail, and people who want to create startups are unlikely to join Tesla’s direct competitors in the auto industry.
Musk’s many projects could create risks for Tesla, Peterson said, and shareholders should seek more details.
“It’s hard to focus and excel at anything when you’re running multiple companies,” Peterson said. “That’s a risk surrounding the CEO himself. Will most corporate shareholders tolerate a CEO who runs several other companies at the same time? The answer to that is probably no. This raises the question of what Tesla’s board of directors is doing, and whether they are independent on any level, or too fond of Musk to not only tolerate his unusual way of working, but could miss out on major underlying problems as long as the money keeps flowing.”
He noted that boards of directors at companies that ended up in crisis, such as Enron and Royal Bank of Scotland, failed to rein in CEOs despite signs of trouble in many quarters.
Another risk, Peterson said, is that Musk’s employees could feel pressured to work on too many projects simultaneously for him at the same time, outside of Tesla. Trying to please him or gain new work experience, they may fail to recover from their work and burn out. He said burnout can lead to significant burnout or poor performance.
Finally, the professor notes that Musk may be causing distractions that impede focus among his staff, even if his intention is to swap polls between his works.
“You have to be very focused to be the best at something, whether as an individual or as a company. That’s why we’ve seen a trend away from the big conglomerates of the 1970s to the more focused companies of today,” said the professor.
Yet Musk appears to be doubling down on gratuitous corporate collaborations in his growing empire.
On Wednesday’s call, he was asked to provide an update on Tesla’s progress in developing a humanoid robot it calls Optimus. It sounded futuristic, and he said Tesla might one day collaborate with Neuralink to make robotic arms and legs to help amputees return to full mobility or dexterity.
Tesla did not immediately respond to a request for comment. Twitter responded with an automated response containing raw code.
— CNBC’s Rohan Goswami contributed to this report.
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