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Robert Scoble - My thesis of Tesla's future and why I became a shareholder.

June 7, 2018View for printing

On Sunday I met five of the programmers who are building Tesla's autonomous driving technology (now called Auto Pilot, but is the same team building "Full Self Driving.") I paid $3,000 for that feature that does not yet exist and the team members admit that they don't know when it will be done. I predicted three to five years and they didn't argue.

What most Tesla naysayers don't get is that Elon isn't going after car companies. He's going after Uber/Lyft and, if successful, will take out a few car companies just accidentally. Note that Uber's valuation is around $50 billion (about the same as Tesla). Both companies are already valued more than many car companies, if not all. Ford's market cap is about $48 billion and Elon, today, praised Ford as being the only other American car company that hasn't gone bankrupt, while noting that building a transportation business is very hard and risky.

If you study brands, like I do, whether Coca Cola, GoPro, or Starbucks, you'll note a few things:

1. The brands often are NOT producing the best possible product. Starbucks is the easiest to see what I'm talking about. You can get a better cup of coffee in many shops in Europe and in Seattle itself, where I lived and where Starbucks' headquarters are.

2. They are ubiquitous. You can get Starbucks in almost everywhere on earth, same with other major brands.

3. They are consistent. Starbucks is awesome because you get exactly the same crappy coffee everywhere in the world. That consistency is what keeps you addicted. It's "safe" because you have learned to trust it, and be OK with its faults, but trying some local coffee shop is not safe because for every "great" cup of coffee you might have some real swill, too. At least with Starbucks you know you won't get swill, just not quite the best.

So, now, let's look at Uber. It has two MAJOR brand faults. The driver who shows up is inconsistent. Some riders have been raped. Others get their heads talked off. Yet others have smokers for drivers. While, yes, many, if not most, have pleasant, safe experiences. But that inconsistency is open for a competitor to exploit and I predict Tesla is in the only position to do so.

It also has one other inconsistency: the car itself. Sometimes it's a nice Mercedes. Other times a beat up old Toyota. They try to ensure that you will have a decently consistent experience based on class (Uber X is supposed to have a luxury or Suburban show up) but that doesn't always work and, anyway, there's a difference in safety between all these vehicles, and, even if five Mercedes show up there's a huge difference in one that's 10 years old and one that's a 2018.

A new system could take on Uber (and Lyft/Didi). And Tesla isn't the only one aiming to do just that. Waymo, which spun out of Google, just made a multi-billion-dollar deal with Softbank and Chrysler to provide tens of thousands of totally self-driving taxis.

The problem with that? There's a HUGE amount of distrust of self-driving cars. Most of it uninformed, yes, but it is real. And now that I've had a Tesla for 6,000 miles and used its auto pilot on most of those miles, I can tell you there are many places where even I won't trust self driving technology for at least a few years. It will take years for the average citizen to build up the trust level to regularly take self-driving taxis. Plus, they just won't drive everywhere at first. This weekend I took my Tesla to Santa Barbara and took one road that autonomous cars probably won't be safe on for a decade. Yet I still could drive my Tesla there and that capability will never go away on this car. Elon, today, hinted that future cars might not come with steering wheels. I predict that world is at least five years away and, most likely, is a decade away except in city centers. Google's cars already work just fine in Mountain View, for instance.

Some of the things that make me knowledgeable. 1. I had the first video on YouTube of Google's self driving car. 2. I had one of the first interviews of the Stanford team up. 3. I had the first ride in the first Tesla (Elon gave me one before he gave his best friend one). 4. Mercedes gave me the first ride in its E class autonomous car, which had something like Tesla's auto pilot turned completely on, something which its shipping cars didn't have at the time. Along with cowriting a book on AR and AI, and interviewing quite a few people about AI all over the world. Oh, and Uber was invented literally in front of me in a Paris snowstorm (all true stories and can be verified by others).

Anyway, here's my main thesis about Tesla.

There are a TON of IFs.

IF he builds 500,000 Tesla Model 3s and IF he finishes full self driving technology then he'll be able to decimate Uber pretty quickly. Why?

Self driving cars will be more available than Uber ones will be. Self driving cars will be lower cost than Uber can be (electronic engines are cheaper per mile than gas ones, and Tesla's Model 3 and future designs are totally about making them cheaper per mile to run, something that Elon has started talking at length about. Self driving cars will be more consistent than Uber ones will be. Self driving cars will not come with any rapists, murderers, smokers, or loud talkers. Unlike a Google Waymo car, a Tesla can still be driven manually in places that autonomy doesn't work, and, it's damn fun to drive to boot. Tesla already has replaced the key fob with your phone, which holds all customizations to the car. Tesla Model 3's have better entertainment screens than any other car and a better audio system than any car under $150,000 that I've been in. Perfect for amazing augmented reality-based entertainment, which also will come in the early 2020s from a variety of companies.

I predict that when Tesla gets to this point it will get business travelers around the world to switch to its network nearly immediately.

How can Uber react to this? It can't. It will be disrupted.

How can Toyota (or, really, any car company) react to this? They could, if they understood why they should get rid of all knobs on the dashboard, put a big-ass screen in the car, and get rid of all key fobs. Hint: they won't, so they won't be able to keep up with Elon's disruption.

No other car company has the kind of brand loyalty and admiration that Tesla is building (I interviewed the first 100 people in line at the Dublin dealership and I've never seen a customer base who is willing to turn over $1,000 for a product they never have seen).

It also has the only nationwide super charger network, so is the only electric car you really can feel comfortable about taking on a long road trip.

But Elon has to make 500,000 cars AND get full self driving finished. Those are two HUGE IFs, but after touring the plant a few weeks ago and after meeting part of the team that's doing the self driving technology I'm extremely bullish on Tesla's long term prospects. Oh, and remember, Teslas are like Coke on Sand Hill Road (where much of the world's venture capital resides). If Elon needs $10 billion to put in place this master plan, he'll get it, without giving up much equity.

And, yes, I now am a shareholder in Tesla as well. There are risks. If Elon dies, for instance, the master plan will be a tough one to make happen. Or, if Elon stumbles far worse than he has so far, but after meeting him I'm betting on him and the crew he's put together.

Not to mention I'm the owner of a Model 3 and am constantly amazed at this car. The naysayers are so wrong.
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