Elon Musk in Twitter Space, talking about Tesla (Dec. 22, 2022)

Transcript made by VanlyWang9@twitter, with usage of Whisper

Stock Talk Weekly:

Elon, What's going on?

Elon Musk:

Yeah, I mean, it's a lot going on. It's a, yeah, a lot going on.

So I think, yeah, yeah, anything you want.

trendwhizo: 

Elon, we want to get a sense of your thought process for growth rates, and how do you overall contextualize it or conceptualize it from a Tesla standpoint for unit growth?

You probably have your pulse on the entire global macroeconomic aspects as well as demand for your product, right?

So one aspect was that what we were discussing.

And Elon, the second aspect was on Twitter side, it seems like you have kind of gotten to a good grip of the situation. What's your next step?

So those are things which we are bouncing around our ideas on. So it would be great if you could give a couple of thoughts of your own.

Elon Musk:

Sure. Well, I mean, on the Twitter front, I mean, I need to sort of deep dive on Twitter just to make sure the company didn't go bankrupt next year. So that was really just required, I don't know, about a month of intense work.

I was still doing Tesla work during that time, by the way. 

And I think it's really Tesla has not skipped a beat on execution. The Tesla team is doing an incredible job across the board in execution. So it's really can't say enough good things about the Tesla team and the progress that's being made in terms of fundamentals.

With respect to sort of global demand, I just do want to really emphasize, and I'm not trying to say this is the only reason, but it is certainly the primary reason, is that when interest rates increase, the cost of a car increases along with it.

So the radical interest rate changes that have occurred have increased the prices of all cars, actually new and used.

You can see what a bath Carvana and CarMax are taking. This will be true of anything bought with debt.

So that's on the demand side, is the interest rate changes by the Fed. And then everyone's basically forced to follow the Fed. So you've got Europe raising interest rates, even Japan raising interest rates.

And in my view, I've said a bunch of this already on Twitter, in my view, we are already in deflation. And the Fed is just dealing with old data. So if I'm correct that we're already in deflation, the real rate of return of T-bills is insanely high.

It's arguably above the long-term rate of the S&P 500. It's arguably above 6%, real rate of return.

Stock Talk Weekly: 

With the rate, from a macroeconomic perspective, that's why growth in tech stocks compress when interest rates are going up.

But taking that out of the equation, and I think most of us reasonable investors up here understand that, and I found it funny when you made that comment to Ross the other day as well.

But taking that out of the equation, we've talked about the 50% growth rate, and I find that to be really an arbitrary number, whether it's 40% or 45%, do you really think Tesla is going to stay at that growth rate in the next couple of years still?

Elon Musk:

Well, so I'm just laying out what I see as just the, this is my best guess of the future. It's not like I have some incredible crystal ball that is an exact predictor of anything.

So with all appropriate caveats, just, you know, but the reality is, if we are in a recession, I think we are in a recession, and I think 2023 is going to be quite a serious recession. And it's going to be, in my opinion, comparable to 2009. I don't know if it's going to be a little worse or a little better, but I think it's, in my view, likely to be comparable.

And that means demand for any kind of optional discretionary item, especially if it's a big ticket item, will be lower.

And then with the Fed increasing rates, which is really, this is quite unusual. Like when you're heading to a recession, you should be reducing the Fed rate, not increasing it. So that amplifies the difficulty.

So now you have sort of structural demand, which is obviously going to be lower in a recession. And you've amplified the effective cost of a car because they're almost all bought with debt. So now you get a double whammy, is what I'm saying.

So then the obvious choice in that scenario is, do you want to grow unit volume, in which case you'll have to adjust prices downward? Or do you want to grow at a lower rate or go steady?

It's sort of a choice there.

My inclination would be to still grow, as my bias would be to say, OK, let's grow as fast as we can without putting the company at risk, which would mean in that scenario, profits would be low to negative during a recession, provided the cash position is OK.

I think that's still the right move long term.

And because there's also something that Tesla possesses that other car companies do not, which is extremely fundamental. That is that the cars are upgradable to autonomy. And so unarguably, an autonomous car is worth many times what a non-autonomous car is.

So even if your margins are extremely low in selling the car, the subsequent upgrade to it being autonomous is worth a lot. And that's something that no other car company can do. Only Tesla can do that.

well, I stand by my prediction that long term that Tesla will be the most valuable company in the world, I'm actually fairly confident that that will be what happens.

What I cannot predict, because there are many things outside of my control, is what will be the valuation along the way there.

So that is subject to a lot of emotional elements on the stock market, subject to macroeconomic conditions. But let's say, long term, I would say Tesla's probably, in my best guess, most valuable company in the world in less than five years.

3 Aces: 

Hey, Elon, in terms of existing manufacturers...

StockMKTNewz - Evan: 

Sorry, I want to apologize. I don't know how much time we're going to have, and I want to make sure Omar has a chance to get a question in here. I know a lot of people in here want to hear.

Any thoughts or anything like that, Omar? I apologize for putting you off. But do you have anything?

Omar: 

Well, yeah, I think I definitely agree with Elon. I've been using the FSD beta. It's been driving me all around LA with no takeovers.

But just to give voice to a lot of people, Elon, you've blamed sort of the macro environment. And I think a lot of people don't understand the economy.

But what would you say to people who say that, oh, Elon bought Twitter. And he had to sell his shares. And he hasn't been doing anything at Tesla. He hasn't been doing his job. And he's turning people off with his political tweets.

They're all canceling their Tesla orders. And this is all his fault. And he won't acknowledge it. He's just blaming it on macro.

Elon Musk:

Well, the thing is that if you look at sort of automotive demand almost anywhere in the world, it's problematic almost anywhere in the world. And not everywhere cares about my political comments.

So I think this is really of minor, minor impact. I really just don't think this is a significant factor.

Omar: 

Yeah, I completely agree.

Elon Musk:

So yeah, I don't think it's a significant factor. But the thing that I think most people are just not realizing is just how, I sound like a broken record on this, but how big of an impact a Fed rate level is on the order of 5% is if we are in a deflationary environment, which I think we are in.

Special Situations 🌐 Research Newsletter (Jay): 

In autos, we are in a deflationary environment.

Elon Musk:

Objectively, we are.

Special Situations 🌐 Research Newsletter (Jay): 

And, you know, in 2021, we sold, you know...

Stock Talk Weekly: 

Your mic cut out there, I think.

Elon, one comment I wanted to ask you on Twitter, Elon, specifically, the other day you tweeted about, you know, if you were to step down as CEO, you'd stay on as head of software and servers.

And, you know, from my perspective, I've been a Tesla investor since 2015, Elon, and like, you know, my view of you at Tesla is that, like, a lot of your excellence comes from your vision and your ability to delegate talent. 

So I guess my question to you would be, and I'm not saying I'm in the school of thought of some people that believe that you're not working on Tesla and SpaceX, I believe that you are. And I think that people just have a misrepresentation by reading your feed that you're not.

But, you know, that being said, why is it that you feel, I guess, at this juncture, that you can't delegate, you know, a handful of talent that you trust who share your vision to run the Twitter side, while you focus on some of the bigger things elsewhere?

I'm just curious to hear your opinion on that.

Elon Musk:

I mean, as I said at the beginning of the call, you know, I had to have sort of a short-term, you know, a month or so of just getting the insane Twitter costs under control, or Twitter would just go flat bankrupt.

So now that is basically almost entirely done. And then I've got to make sure that the engine of engineering at Twitter is working, so otherwise Twitter cannot develop new features.

But in the grand scheme of things, the amount of actual cognitive load that Twitter represents is low. I mean, it is a much simpler problem than Tesla or SpaceX, obviously, by a country mile. 

So I would say it was like high cognitive load for about a month. At this point, it is a moderate cognitive load. A month from now, it'll be, I think, low.

And if I look back and say, like, okay, what are actions that could have been taken, was this something that I failed to do at Tesla that could have been done and would have improved our execution?

I literally cannot think of a single thing.

Omar: 

Yeah, this is really great to hear you say.

I think a lot of investors have sort of wanted to hear you say that and just reaffirm that you're committed to Tesla. I think those of us who know you know that your commitment to Tesla hasn't changed.

But the perception people see on the Internet can be very skewed sometimes.

Special Situations 🌐 Research Newsletter (Jay): 

Elon, can you talk about the issues in China and outlook on sell?

You know, Tesla has been able to sell an increased penetration market share in EVs for many years. But now that it's at a larger scale. Global auto sell was at 66.7 million units in 2021, US sell is at 14.1 million. Outlooks for next year in the US and overseas are on the decline. And prices are also declining.

Like you said, I agree, we're in an auto-deflationary environment when it comes to prices.

Elon Musk:

Yes, objectively so.

Special Situations 🌐 Research Newsletter (Jay): 

When it comes to unit sales, can Tesla continue to increase unit sales in this type of environment? Or will it have to provide more incentives?

This macroeconomic environment is pretty challenging. How do you plan to address some of these issues that are outside of your control?

Elon Musk:

I'm just telling you factually, since the vast majority of cars are bought on credit, the high real interest rate is literally just like increasing the price of the car.

So in order to keep demand constant, you would have to therefore decrease the price of the car. That's if you want to keep demand constant. And if you want to increase demand, you have to decrease the price of the car further. This is just like Econ 101 stuff. So that's the situation we have.

It's kind of blown my mind that the Fed has raised rates so high. They're just dealing with old information. Basically, the economy right now is like a car driving around on a cliffside road, and the Fed is driving it by looking at the rear view mirror.

In fact, it's not even looking at the rear view mirror. It's looking at a video taken out of the rear view mirror that's like three months old. So obviously, this is not a good way to drive a car on a winding cliff road.

So they're just very old school and traditional, and I think we're in for a hard landing. That's based on the...

Yeah, like I said, you have to think like...

For argument's sake, if you have a risk-free rate that is higher than the return on the S&P, which obviously has fluctuations, why would anyone have stock?

Special Situations 🌐 Research Newsletter (Jay): 

I mean, we're buying bonds. We're buying preferreds at 11%, 12% yields. You can buy the T-flow, everyone on here, there's ETFs. They're floating rate instruments.

You can easily earn high single digits, double digit return in very low risk securities today. So I 100% agree with you.

Why would you buy residual interest equity securities in risky companies? I 100% agree with your thought process in an environment like this. 

Now, we don't expect rates to stay here forever, but it's a good question everyone should ask themselves.

Elon Musk:

Yeah, I mean, exactly. So probably what's going to happen, it sounds like, based on the Fed signaling, it's going to increase rates by another 50 basis points next month.

And then my guess is though, again, I don't have a hotline to Jerome Powell, if somebody knows Jerome Powell, please tell them to stop increasing interest rates.

Unidentified Person: 

I feel like you could get him on the phone if you really wanted to.

Unidentified Person: 

I think so.

Elon Musk:

Is he allowed to talk to me?

Unidentified Person: 

Sure.

Stock Talk Weekly: 

I'm pretty sure he's allowed to talk to you.

Unidentified Person: 

Talk to business leaders totally.

Omar: 

Let's get this set up. Let's do it on Twitter spaces. That would be a conversation.

Elon Musk:

That'd be sick.

Stock Talk Weekly: 

Elon versus the Fed on Twitter.

Special Situations 🌐 Research Newsletter (Jay): 

Twitter's valuation would pop on that too, right? You'd get a whole new batch of listeners.

Elon Musk:

Well, it's the whole market, you know, but like I said, the thing that to appreciate about like interest rate increases is the double whammy effect of. 

If you're looking at... a stock price is...

Higher interest rates will reduce the profitability of any company selling something that is dependent on the price of debt. Like cause cars are bought with leases and loans.

So people look at their multi-payment. And so you have basically a demand slash profitability issue with higher interest rates, and then which then reduce the profitability, obviously.

And then in general, the valuation of all equities drops with the increase in the real interest rate. That's the double whammy effect that I'm talking about.

Now this will not last forever. I don't know, hopefully they'll see like, okay, they've gone too far and then start lowering the rate.

And then it's a question of, well, at what rate do they lower the rate? How long does it take them to get the rate back to something sensible?

Stock Talk Weekly: 

Elon, the point you made earlier about, you know, the raising, you know, the higher rates, obviously making cars effectively more expensive. You know. 

I agree with that obviously it's pretty basic notion, but I'm just curious and we've talked about this before and I know Gary has mentioned this before, what's your view on Tesla's path to the $30,000 vehicle or the next vehicle?

I know you said that you guys had kind of tabled that last time you spoke about it. Have you guys brought that back up?

Is it something you're considering again now, especially in this environment? I'm just curious.

Elon Musk:

Yeah. I mean, look, this is like not the forum to make product announcements. But you know, we're obviously want to make more affordable cars.

So the Tesla product pipeline is awesome. I think Tesla's got the most exciting product roadmap of any company on earth by far. So that's, you know, and the proof will be in the pudding.

Jeff Lutz: 

Elon, I'm just connecting some of the previous points together. I'm a 10 year owner of Tesla and 10 year investor as well.

Just connecting some of the previous points together. When I looked at the 08, 09 inflation recession, in 07 in US auto sales were at 16 and a half million cars, 08 and went down to 13.1, and then 09 and went down to 10.4. So if you go from 07 to 09, there was like a 36% drawdown in US.

I'm just looking at us auto sales.

and then you look at what Tesla is projected to do this year in the US in terms of EV as a percent of auto, it's going to grow 50% this year, go from 4.7% penetration of total auto to 7%, which is like a 50% jump in the US. And it's going to do about a hundred percent jump in China year over year. 

So these are unbelievable growth numbers of EV as a percent of auto.

And the thing I don't think we've layered in is that Tesla has increased prices, even with this inventory reduction in the last couple of days, like the model Y I think is still $19,000 higher than it was in the early part of Q4 2021.

So long story short, if you overlay like, you know, Tesla's EV adoption growth, and you overlay like what happened in the last recession, which was pretty gnarly, it feels like there's, and with in the fact that prices have gone up so much and commodities have come down so much over the last...

I wouldn't say so much, but commodities are starting to come down. How do you feel Tesla's positioned with all those factors in mind?

Elon Musk:

I think Tesla's position better than any other car company by far.

And like I said, the fact that the vehicles capable of autonomy with a proper update is gigantic. It's a gigantic thing. No one else has that.

So and we also, you know, are starting from a position where our gross margins are higher than I think anyone else, which gives us more room to lower them and maintain or increase demand.

So now does that mean that the profits are pretty picture in like a 2009 style recession? Of course not, that's just not physically possible.

And there's no human on earth or that, you know, me or anyone else who could change that.

StockMKTNewz - Evan: 

Yeah. Yeah. I want to jump in here quickly. I appreciate it.

Elon, I want to throw you out there a quick question and then I'll throw it over to Gerber. And then I want to hear Gary, if he has any thoughts,

But Elon, we're on Twitter spaces right now, is Twitter spaces something that's kind of core to you and Twitter and the long-term of it, Is it important to you?

Elon Musk:

Twitter spaces, you know, I think is a great forum for the public in general. And I think it's quite useful to get the message out obviously. 

It's, you know, basically being on Twitter space and then being able to receive the Twitter comments, the written comments at the same time. I think is Twitter at its best.

Gav Blaxberg: 

Yeah, I would definitely echo

Omar: 

All right, can I stir up some drama here? Because we've got Ross Gerber in the room and Ross has been saying, Elon's doing a shitty job. He's not there. And he wants to run for the board of directors.

Ross, would you like to confront Elon right now, while we're in this space for the audience as entertainment?

Ross Gerber: 

That's not what I've been saying at all.

I'm probably one of the biggest fans of Elon of anybody here. And I'm super grateful for the effort and success that he's put into making Tesla successful, or SpaceX.

And all I want to know, is what's going on. And that's all I've asked from the Tesla board too.

It's like, I just want to back at Tesla. I just miss you, Elon. I love Twitter and I love what you're doing with Twitter and I support it a hundred percent. And I've invested in it, and I would invest more. 

But I just like, I really think there's a huge community of people who just want to know like, what's the next move? Like how long is this going to be like, how much more stock are you going to sell? 

These are basic questions that I think are fair to ask.

Elon Musk:

Yeah, I'm not selling any stock for, I don't know, call it of minimum 18 to 24 months. So you can count on me, like no stock sales until probably, I don't know, 2025 or something. 

It was like, I needed to sort of sell some stock just to make sure like there's like powder dry that, to account for a worst case scenario.

Ross Gerber: 

Totally. I get all that, but I want to buy the stock, I just don't want to get whacked the next day. You know what I mean?

Elon Musk:

Yeah, fair enough.

So I say, you have my commitment that I won't sell stock until, I don't know, probably two years from now. Definitely not next year under any circumstances. And you know, probably not the year thereafter.

I just really want to make sure that I'm somewhat paranoid having gone through two really intense receptions.

Ross Gerber: 

I totally understand that.

Omar: 

Yeah. That's great news. Thanks for making that statement. That means a lot.

Ross Gerber: 

Can you answer my other question though? Like as far as what you're thinking as a timeline, as far as like when you're going to be back in Austin.

Elon Musk:

Yeah. I mean, I was back in Austin just last week, but you know, Tesla is still primarily in the Bay area. I'm in the Bay area.

Like literally there's not a single important, like Tesla meeting that I've missed this entire time. So it's not like, you know, I'm totally missing an action. That's just not the case.

Ross Gerber: 

I agree, maybe it's the optics a little bit. That's kind of where I'm coming from. It's like an optics thing.

And like, and then like a lot of things you're doing on Twitter, I'm like super like it needed to be done. Like, you know how I feel about the people who were running Twitter before. And I think you're doing a great job with the product, not to mention too, although it's not an easy task by any means. 

But I just think the perception is like, Oh, he's doing this now and he's not doing that. And maybe the media is doing that, but it's just something you should be aware of. And that perception is a reality to a lot of people.

Elon Musk:

Yeah. I mean, Twitter is obviously like mega catnip. If you cross catnip with crack, that's what Twitter is. A catnip crack.

So like any tiny little thing, the twitter is like front page news, you know. It's like, we have like some, you know, mid-level person left Twitter, front page news. They're like, it was ridiculous.

So, you know, it's just going to get like outsized attention. But literally, if I think like, is there anything that I could have done in the past few months that would have helped with Tesla execution? I literally can't think of anything. So, and there was not a single important meeting that I missed.

we're making great progress on future product developments.

And it's really just like, I think, you know, there's going to be some macro drama that's higher than people currently think, or higher than most people think.

And it's hard to predict exactly, you know, economic prognostication is fraught with difficulty. 

But, you know, if we do have another 2009 situation, that's, you know, the stock prices of everything is going to be lower. And then I think it's arguable that stock prices of anything that's bought with debt will... 

But you know, buying sort of food at the grocery store, people will still buy that. But things that are bought with debt, like basically housing and cars are going to be the two biggest, are really going to just get disproportionately impacted.

But then it's sort of, that's why I was trying to emphasize, but from a long-term standpoint, like this is, there's a natural economic cycle that happens. 

And frankly, we're overdue for a recession. It's like shocking that we haven't had like a serious recession since, you know, recession in any meaningful sense of the word, since 2009. That's like 13 years. Like, wow!

Economic cycles are just the way the economy works. Like you have up and down cycles, and it's just the way things go. So we're somewhat overdue for that.

I mean, I was talking to like, Brett Johnson is the CFO of SpaceX. And he was telling me about when he was at Broadcom in 2000. 

And you know, Broadcom is a good company making, you know, good products, it's not like Pest.com.

So, and I was like, yeah, it's pretty wild when there's panic in the stock market, you know, even high quality company stocks can drop. And he was like, yeah, when he was at Broadcom, the stock dropped 97%. I was like, wow, that's a lot. That subsequently recovered to, I think, above its previous all time high.

But, you know, when there's extreme panic in the markets, like things can go to like ridiculous levels.I'm not saying that they will, but this is a thing that has happened in the past.

That's why I've been just been very much encouraging people to avoid buying stock on margin and just avoid margin debt, because you just don't know if there's going to be some panicky situation in the stock market.

Ross Gerber: 

Well, we got the panicky situation in the stock market before we got the recession, it seems. But it seems like the market is clearly pricing in what you're talking about.

And I don't disagree with your viewpoint on Jerome Powell, and I would love to get him on a Twitter spaces, to be honest.

But I also think that Tesla has a certain level of recession proofness, because buying a Tesla does cut your cost of living from an ICE vehicle. 

And I also think, and maybe you can confirm this, that your margins are probably increasing now that the supply chain issues and a lot of the commodity prices are decreasing, which can allow Tesla to lower prices to continue to sell more cars without hurting margins.

Elon Musk:

So, I can think Tesla will weather what I think is an upcoming economic storm, maybe better than any company.

If a company is making bread or something, they'll probably be relatively recession proof. But compared to any company making large, complex manufactured objects that are bought with debt, Tesla, I think, will do relatively better than anyone.

But it's sort of like if you're a ship in the storm, even if you have a really high, great ship, you're still going to get bashed by the storm.

And there is, with respect to cost structure, somewhat of a lag effect, where there's latency in the supply chain. So the supply chain will take a bit longer to reduce costs than we'd like, because it's this, I don't know, call it six months of latency.

Stock Talk Weekly: 

Elon, on the supply chain side, Elon, just a question.

I'm a lithium investor myself, and I know you've made many comments on lithium refining and processing in the last few months. What's been your, I guess, anecdotal view from Tesla's perspective into the end of this year on battery metals prices?

And do you have a view on battery metals prices for next year as well? 

And any kind of commentary on how that's affected you, or any kind of strategy that Tesla's implementing to stay ahead of the battery metal pricing curve, as you will?

Elon Musk:

Yeah, so, you know, again, I keep emphasizing, like, all these things need to be taken with a grain of salt, because I don't have, you know...

Stock Talk Weekly: 

Of course, yeah, I understand we're asking you to speculate.

Elon Musk:

Yeah, it's like, if I had a perfect crystal ball, you know, it'd be great, but I don't. 

The price of battery-grade lithium is obviously insane, and it's constrained primarily at the lithium refining level, much more so than at the mining level. And that's why Tesla's building a lithium refinery in Corpus Christi.

So it's really to get out, away from that choke point of, or diminish the lithium refining choke point. Like, lithium is extremely common everywhere, basically. It's not like oil. Like, oil is much more localized and rarer than lithium. Lithium is basically everywhere.

Stock Talk Weekly: 

Elon, on that facility you guys are looking at, erecting Corpus, you know, I've done a lot of work on lithium refining and processing, 

And, I mean, typically, those facilities, you know, even with optimal Capdex, are taking a minimum of seven years to get to maximum.

So are you guys looking at a shorter timeline? Have you guys kind of broken that mold?

Elon Musk:

Yeah, I mean, seven years is insane. Maybe we're diluted, but we're aiming to have meaningful volume out of that refinery in, like, two years.

Stock Talk Weekly: 

Yeah, that's impressive. That's wildly impressive.

And then you guys, I'm sure you guys will make way on that.

And is that the only project you guys have considered so far, or is there?

A lot of this is speculation, but just curious.

Elon Musk:

Well, we're also doing the cathode refining,

but that's like pretty obvious,

because it's like there's a giant building on the other side of the GigaTexas factory.

That giant building is the cathode refinery that we've been building.

Stock Talk Weekly: 

Awesome. Awesome.

Elon Musk:

And that's obviously for nickel-based cathodes. So we're like, I think, taking the steps that are necessary to enable very high-volume output of vehicles, electric vehicles and stationary battery packs, and to reduce our dependence on the supply chain.

So I think we're making the smart strategic moves here.

But I think, depending on what happens with total automotive demand, or especially electric vehicle demand next year, especially in China, where they make the most number of EVs, I think we'd probably see some reduction in the cost of battery materials.

Special Situations 🌐 Research Newsletter (Jay): 

Elon, you mentioned earlier on the asset price conundrum when it comes to cars and autos and homes. The same applies to companies, right?

If you think about Charter, for example, it has an earnings yield of 10%, but it has a debt yield of 7%. It used to be 4%.

So corporate buybacks are less attractive in this environment. Would you agree that it makes more sense to reinvest in Tesla than it does to buy back stock?

Elon Musk:

Well, we're actually, I'd say, we're applying capital at pretty close to the fastest rate that we can spend capital and not be wasteful. So we're not saying, oh, let's not spend money on important long-term projects.

I just mentioned the lithium refinery and the cathode refinery, which are important for long-term growth. So we are making these investments, and I can't say too much about this, but we are close to picking a location for another gigafactory. But we want to be sort of careful and deliberate about that.

So there's a lot of good things that are happening.

But I think the smart move is we are coming into this recession in a very strong position. We don't have any debt. We've got on an order of $20 billion in cash equivalents. And that's a pretty great position to be going into stormy waters with.

But I think we want to make sure that, like, let's just see how stormy are these waters. And are we talking about a mild recession, moderate recession, severe recession? We don't know yet.

So I think we just want to keep our powder dry, and see what kind of economic environment are we going to see in 2023.

And, you know, the board is very open to doing a buyback, but I think it's like we just want to, like, it wouldn't be smart to do a buyback and then discover that the recession is, like, I don't know, for argument's sake, worse than 2009. And then I'm like, that was foolish to have, you know, used up cash reserves for a buyback in the face of a severe recession.

So we just need to kind of see what is the nature of the recession. And if it's looking like, hey, we're doing okay from a cash standpoint, and the stock price is, like, absurdly low, then, you know, at least my vote on the board would be to sort of do a buyback.

But that's, you know, that's subject to the rest of the board's opinion as well. But my vote would be to do a buyback if once we are able to properly calibrate the scale of the recession, and just make sure that Tesla is healthy and we're not, you know, spending cash reserves and putting the company at risk.

You know, that would be my concern.

Omar: 

Yeah, I mean, for people like me who love Tesla and love the products, it's just, you know, I'm really glad that Tesla got profitable when it did, because if it had to go through this storm when it was sort of where it was in 2018 or 2019, I mean, it might not have made it through it.

So it's really to tremendous credit of the management that we've gotten to this place where we're profitable. And we don't have to worry about Tesla going under with this storm.

You have the startups like Rivian and Lucid who are just burning cash like crazy. Terrible situation for them. The legacy automakers, they're not in a great situation.

Tesla is launching FSD beta. They're doing pretty well overall. They're in a better position than pretty much any of their peers.

And that's, I think, a huge credit to you and the rest of the Tesla team.

Elon Musk:

Let me tell you, the Tesla team is kicking ass. And like, honestly, to use an anachronistic analogy, Tesla is firing in all cylinders. So the actual, you know, execution of the company is, I think, outstanding. And the team is doing a kick ass job.

So I guess like Warren Buffett has got a lot of great sayings. But this is the sort of thing where like, you know, I suspect Warren Buffett is going to be buying a lot of stock next year, you know. Because if a company has like very strong fundamentals, but then the market is doing some sort of panic situation, obviously, that's the right time to buy stock.

And I stand by my prediction that Tesla will be the most valuable company in the world. I'm actually pretty confident that would be the case. But I just can't predict with accuracy the stock price between now and then.

Gav Blaxberg: 

On the Twitter X Tesla crossover that's happening there, I think...

Unidentified Person: 

Sorry, one more time.

Gav Blaxberg: 

Oh, yeah, sorry about that. Stock, do you mind if I go?

Stock Talk Weekly: 

Yeah, go for it, sorry.

Gav Blaxberg: 

Yeah, on the Twitter X Tesla crossover, and we're all power users of Twitter, Stock Market News, Stock token benign (?) and I have been using it for years. We've been hosting like 40 hours of spaces a week.

There was a lot of hope that when the acquisition happened that this could be a real synergy for Tesla, right, who notoriously doesn't spend money on marketing and now has access to this incredible community.

But of course, you know, there's been work that has to go into Twitter. There's been a lot of restructuring there.

Are there active synergies that you see or ways that you see these crossing over in the coming months or years to really supplement each other?

Elon Musk:

Well, I mean, I and Tesla have long used Twitter, frankly, for free to advertise Tesla. So, you know, like my account and the Tesla account have been incredibly effective in building awareness of Tesla and actually driving demand.

So I think there probably are some synergies there where, you know, Twitter can be helpful, perhaps even more helpful to Tesla. It certainly is. Yeah, so.

Ross Berger: 

Elon, is there a way to connect our Tesla profiles to our Twitter profiles and get it in the car?

Elon Musk:

Yeah. Yeah, I think we could.

Omar: 

Yeah, I think Twitter should be like the social graph of Tesla. Like, I want to go in my nav system and say, OK, I want to meet up with Ross. So like navigate us to this restaurant, we can see each other's location, that kind of thing.

Ross Gerber: 

And I can see all the other Tesla owners driving around me that want their visibility shared, and we can communicate through Twitter as the app.

Elon Musk:

That's a good point, actually. Yeah, I mean, it would kind of make sense to have a Twitter app on Tesla.

Ross Gerber: 

Yeah, we could listen to spaces while we're supercharging. I was just supercharging actually like a half an hour ago and you just sit there, you know, it's like perfect.

Special Situations 🌐 Research Newsletter (Jay): 

I mean, Elon, Tesla is the biggest source of your wealth. When it comes to Twitter, I mean, these ideas are all great. Does it make sense to have someone like, you know, David Sacks come in and help you manage Twitter?

And are there like three candidates that you think would be really interesting to support you, so that through this recession, you know, the focus can be more on Tesla?

Elon Musk:

Let me make it clearly, the focus will absolutely be...

I mean, Tesla just fundamentally is a far more complex beast than Twitter. So the things that are necessary to operate Twitter are just far fewer. It's a subset of Tesla complexity.

Obviously Twitter is like it's got, it's servers and software and, you know, phone apps and stuff. And it's, you know, it's a scale and stuff, but the complexity is more than an order of magnitude lower than Tesla. So my attention will be primarily on Tesla.

And I think I can still, you know, improve the Twitter product because I use it a lot. So, you know, just guiding for the product to become better and better. That's like kind of a natural thing since I have been using Twitter actively for, you know, since 2009. You know, it's basically not that hard to know what things need to improve, and then give that direction to the team and how to get it done.

So, yeah, I'm not trivializing Twitter, but it's just objectively it's like about maybe 10 percent of the complexity of Tesla.

Omar: 

So music to our ears. A lot of investors are so happy to hear you say that.

And I think ... you're coming on this space and talking to people.

Stock Talk Weekly: 

Elon, I just want to ask you briefly about Tesla and the launch of Tesla Electricity in Texas. I'm a Texas resident as well.

So, you know, I think that's pretty exciting additional vertical maybe for Tesla from the utility perspective. If you just want to comment briefly on Tesla Electricity and that starting up, and you guys outlook for for Tesla Electricity going forward, I think that'd be great to comment on.

Elon Musk:

Sure. Well, I mean, the overarching purpose of Tesla is to accelerate the advance of sustainable energy. And there's like just really three pillars to sustainable energy, which is sustainable energy generation for primarily through wind and solar, and then storage of that energy stationary battery packs because the intermittency of wind and solar, and then electric transport.

And those are the three core pillars for a sustainable energy future. And we're working on all three.

So and I feel like the demand for large stationary battery packs, especially at the utility level, but also at the consumer level with Powerwall is like quasi infinite, meaning assuming the economics are compelling to utilities for, you know, as long as like Tesla battery pack is cheaper, all things considered, than say a natural gas peaker plant, the demand is like gigantic.

Omar: 

Nobody's valuing that, are they? They're putting a value of zero on it.

Elon Musk:

I don't know, but I wouldn't put a value of zero on it.

As I've said before, we really want to be doing a thousand plus gigawatt hours a year of battery packs combined stationary and vehicle, and if not 2000. So, you know, it's big numbers. That's similar like that.

I do eventually need to just do this like master plan part three. The master plan part three is just about scale, just like you wouldn't even think of things in terms of like dollars, you need to think of things in terms of tonnage.

Like what tonnage of battery pack is needed? Like the fundamental rate limiter for humanity becoming self-sustaining from an energy standpoint, is how many gigawatt hours per year of battery pack can you make?

That fundamentally sets the rate at which humanity can transition to sustainable energy, is how many batteries can you make per year? what's the tonnage? You know, in storage terms, how many thousands of gigawatt hours per year can humanity make?

The faster that ramps, the faster one can get to a sustainable future. And our rough back of the envelope for transitioning civilization to a fully sustainable energy economy is around 300 terawatt hours of installed capacity-ish. I mean, other people may come up with different numbers, but it's not an order of magnitude higher than that and it's not an order of magnitude lower than that.

Stock Talk Weekly: 

We'll go to Monetive next. Monetive, I'm sure, has a great question. 

Monetive, you've got your hand up for a while, and then we'll go to Earl as well who's had his hand up.

Monetive, what's up?

Monetive Wealth: 

Thanks, Stock Talk. Hey, Elon.

I want to take you back a little bit to the comment you made about Fed being behind the curve and over-tightening. So I've been living in the valley here for close to 25 plus years now, so been through the thick and thin in the valley.

So certainly it looks like we are heading to a tech jobs recession, if nothing else, and probably a white-collar jobs recession and certainly a significant pullback in tech.

Do you think that data is going to cause further contagion from top down at the highest income levels? And is the Fed going to see that and take that into account?

Because clearly the overall jobs market is fine at the lower level, but certainly there's a lot of weakness at the higher level.

Elon Musk:

Sorry, you blanked out there for a second. Can you repeat the question?

Monetive Wealth: 

Sorry about that. So I was just saying, to your earlier point about the Fed being behind the curve, we're now seeing real jobs problem at the highest level within tech.

The high paying jobs are being lost at a furious pace. But overall, the job market seems to be fine because of the lower end jobs. Do you think the Fed is going to take that level of nuance into account before they go too far?

Elon Musk:

Look, I don't know. My insight into the Fed's decision making is zero.

So I don't know any of the people on the Fed board. I'm not sure I've ever even spoken to them. So I don't know what the Fed is going to do.

I've been surprised by their rate increases. And like I said, I think they're looking at data in kind of a legacy way where the data got a lot of latency. So then they're just making decisions with data that's really stale and not reflective of the current situation.

So that just means their reaction will be delayed. So they're raising rates more than they should. And then they'll probably take longer to lower the rates than they should. That's based on the past track record.

Special Situations 🌐 Research Newsletter (Jay): 

That makes perfect sense with structural unemployment. There are a million jobs without open immigration that we can't fill out of thin air. So I tend to agree with you that this tightening could last longer. 

And Musk, you're not the only one. I mean, they're the top hedge fund managers in the world. I mean, Tepper was on TV this morning. I've never seen the guy this depressed in the last 20 years. So he was the one in 2010 that was saying, hey, QE1, he went all in and built a $20 billion organization.

But even the best fund managers, prognosticators, no one has any idea on how this is going to play out. So all we can do is have our scenarios and play out various cases and manage risk for the best.

Earl of FrunkPuppy: 

Hey, thank you. Hello, Elon. Longtime shareholder, first-time caller. I have a quick question,

But before I get to that, I would like to point out that when you put Floki in the frog (?), Tesla was over $300 a share. I don't know if it was related, but you might want to consider that to pump the stock again.

Onto my question. I've always been a rabid fan. There's a lot of people who are similar to me, probably a little more liberal, very passionate about our Teslas, proud of our Teslas.

And over the takeover of Twitter and some of these comments, I think some of us have been feeling a little bit disenfranchised. Still big fans, still shareholders, but some of the magic is missing a little bit there. 

For example, I have a daughter and also a trans child, and they both were always very excited about our Tesla. We went and bought a Model X, and now they have mixed feelings about it. It's not always directly related to what you say, but some of the opinions or attention you draw to things like pronouns or something like that.

It's sad for me to watch that happen, so I've tried to speak out about that. It doesn't really go anywhere, but I do worry also as a shareholder about are we alienating certain people, not just extreme left people, but just kind of in the middle folks like myself. You know, it's just added in some politics and controversy that takes away a little bit of the shine off of our Tesla.

Now, I did sell my Model 3, but it was mostly because I live in Alaska. We're missing some chargers. I'm going to throw in a plug for that. 

Still a big fan, like I said, still have our shares, still love driving our Teslas around. But I was just wondering if you've thought about that at all as you're taking on this big Twitter job.

Elon Musk:

Yeah, I mean, it's like, I'm not going to like sort of suppress my views, just to boost the stock price. Something like that, I'm not going to do it.

Ross Gerber: 

So, yeah. Yeah, I don't think that's what he's saying though, Elon. 

I think when you own a media property, there's this perception of independence that's expected from the owner. And the Wall Street Journal is owned by Rupert Murdoch, but he doesn't write the opinion pieces, even though we know it's his opinion.

Elon Musk:

hahahaha

Ross Gerber: 

So I think it sort of like throws people off that the owner has an opinion. Now, I don't think your opinions are extreme, but a lot of people in the media take what you say. And by the time the customers read it, it's not what you said at all.

And, you know, I just think there's this big perception gap being driven on beliefs that aren't even yours, really, because you're saying something, you know, and I just think that part of it, it's almost like a trap that it's like a lose-lose trap.

And I hate seeing people get caught in that. 

Omar: 

I mean, Elon, you don't hate trans people, do you?

Elon Musk:

No, of course not. So, I mean, I'm not in general a hater of anyone, frankly.

But, you know, the thing that, like, it does bother me that people will use, like, pronouns to just be super judgmental. And actually, to me, it feels like a lot of these things are, like, they're a shield that allow people to be assholes. Like a moral shield that where it just gives them an excuse to be an asshole.

And that bothers me.

Earl of Frunk: 

Yeah, I get that. 

But I think what happens really easily in the media is it just appears that you're, like, punching down to a really marginalized group. Like, my kid is just trying to have, like, their pronoun used in school and stuff. And it's like, you know, then you have this really rich, popular person, like, crapping on pronouns, but it gets mixed up.

And it's like, I think the people that you're talking about, like, it gets mixed up. And then people just see it as a more broader thing that you're, like, you know, being negative towards trans people.

Stock Talk Weekly: 

Okay, let's move on to the next conversation.

We got Gary and Chuck with hands up. We're going to go to Gav first, who says hand up, and then we'll go to Gary.

Gav Blaxberg: 

I got just a simple question, Elon,

Because there's been a lot of this use of polls on Twitter. And as somebody, again, we're Twitter power users. We love that idea that we can have the opportunity to participate in major decisions that are going to affect us, right?

Like, my entire income comes from Twitter. With that being said, there's been a couple different ways around the polls.

There's been thoughts, are the polls being used to root out bots? There's been polls that are, of course, you abide by. There's been a tweet that polls would maybe just be available to Twitter Blue users.

I'm kind of curious if there's any clarity you can give on, are these major decisions going to be made by polls? Can those polls be trusted? Do you have systems to get rid of potential botting?

And then will those polls be available to everybody or just to Twitter Blue users?

Elon Musk:

I think that's the subject to debate.

The challenge with polls, maybe it could be open to Twitter verified or all. The challenge with all is that it's ridiculously cheap to buy a bot army. It's like less than a penny a bot. For not that much money, you could have 10,000 or 100,000 bots all participate in a poll, and shift the direction of a poll. It depends on how motivated is someone to use a bot army to shift a poll.

And then often you'll see basically what appear to be almost certainly warring bot armies, where two sides both have bot armies and they're trying to push a vote one way or the other.

So I think in order to have a vote that does not have a lot of bots and trolls, I think you would have to restrict it to verified users. Otherwise, obviously, it's just too cheap to scam the system.

Special Situations 🌐 Research Newsletter (Jay): 

Elon, is there an easy way to kick out bots like intraday?

Like a reCAPTCHA is a basic. I'm not an engineer by trade. But something like that, like intraday, kick everyone out, have them log back in, use a reCAPTCHA or something like that and just push these bots off the platform over time.

Elon Musk:

Yeah, I mean, bot is maybe not necessarily the right word, because there's degrees. There's a purely automated situation where reCAPTCHA would have some value. Although, you know, really, readily available AI is getting to the point where... it's certainly going to get to the point where it's better than humans at reading a CAPTCHA, not worse. So the value of a CAPTCHA is just diminishing over time.

Then there's the situation where they're not actually bots, they're people. But like somebody's got like a warehouse somewhere, you know, where there's like 10,000 phones. You know, you've got like 100 people or 100 people each operating 100 phones. So that's not a bot and they can all perform the CAPTCHA.

So there's a whole bunch of that going on. In fact, you can see pictures of that on the Internet. Google it.

So there's not like some easy way to get around this is what I'm saying. It's really difficult. That's why they use bots and trolls. It's like bots are cheap, but trolls are also pretty cheap, like a troll form.

So I think really to have a high quality poll, you have to have some verification. And that verification has to, you know, I think increase the effective cost of having a bot troll, by an order of magnitude or more.

Like so if it costs like, let's say a penny for a troll vote. Now, if that's instead they're paying like eight or ten bucks, now you've increased the effective cost by 10,000 or sorry, by a thousand, I should say, roughly. So that makes it much harder to scam.

I got to get back to work here, guys, taking care of work.

Mutiple Persons: 

Thanks for coming. Thanks for your time, Elon. Thanks, Elon. Really appreciate it.

Elon Musk:

I guess like my parting words were like there's stormy weather ahead, but then it's going to be sunshine thereafter.

Stock Talk Weekly: 

Come on more of these Tesla spaces. They love hearing from you and it's like really great for sentiment. So come on more of these spaces with us and we'll make sure that we give you a good blend of hard questions and easy ones as well.

Omar: 

When's the 11 coming? What's your best guess?

Elon Musk:

Well, we had hopefully, hopefully before the end of the year. 

I mean, we're on the 11.2 with the limited beta... But so it's probably 11.3?

It's pretty soon. It's not like far away. It's measured in single digit day, you know, sort of roughly.

Omar: 

Nice. That's exciting. Well, the existing version is amazing. It's been driving me around with no takeovers most of the time.

Elon Musk:

Yeah. The thing about the V11 is there are a bunch of neural nets that are architecturally much better than 10.69. But they've got much more room to improve. 

Like, you know, autopilot has been going through like a series of local maximums. And so when you exit local maximum, you first go down before you go up. And so the neural net architecture in V11 is actually much better. But it just takes time to hone the details.

But it's like, I mean, it's rare for me to intervene at this point when I drive around. Like, it's surprising to like the vast majority of trips that I take on autopilot are zero intervention.

So bode well for the future.

Omar: 

Chuck, do you have anything to say before he goes?

Chuck Cook: 

Hey, Elon, thanks for making yourself available.

I was going to say, first of all, thank you for working on hard problems and hard problems such as the unprotected left turn. Do you think that many of the hard problems are going to need that much effort? Do you think it's going to generalize across the space?

I know V11 is a good example of that. I'm just curious if you think that they're going to have to put that much effort towards a lot of these corner cases, or if that was just a good example of how to put engineers to work to create a solution both in the simulator and in real life.

Elon Musk:

This will just be my last answer.

But with every new architecture, every new neural net architecture is more generalized than the last time. So it actually ends up solving not just say extended unprotected left, but it ends up solving a whole bunch of things.

It's actually with each major rev, there's more and more generalization of solving what is effectively the real world problem.

And Tesla is, as far as I can tell, overwhelmingly the best at real world AI. And our rate of progress is increasing. So with that, it's good talking to you guys and look forward to talking to you in the future.

Omar: 

Thank you so much for your time, Elon. 

Thanks so much. Cheers, man. Thank you, sir.