I have a good friend who feels compelled to challenge conventional wisdom. If everyone else grows a normal beard, he grows a neck beard. If everyone is drinking golden lagers, he's drinking dark beer. Etc. My friend – whom I care for dearly – has an overwhelming compulsion to challenge the status quo. This compulsion sometimes overrules good sense, to the point where I question his sanity...
Which brings me to Elon Musk. When Musk decided to launch Tesla, I believe he had two things in mind:
- He wanted to change the auto industry so that the world would use more sustainable forms of energy.
- He assumed that he and the rest of his team were much smarter than the people running the “traditional” car companies, so much so that they could ignore the status quo.
While Musk and his cohorts freely admit to my first contention – they really do want to change the world – evidence of arrogance among Tesla's leadership is easy to find. Consider:
- Since Tesla's founding, we've heard Musk, Eberhard, and other senior Tesla management past and present brag about the smarts in Silicon Valley. In 2007, Musk told Business Week “Silicon Valley is the best in the world at everything it does,” a statement that's – at best – enthusiasm, and at worst incredibly arrogant. Do these people really believe they're smarter or more innovative than the brightest minds at Honda, Toyota, Ford, Porsche, etc?
- Elon Musk has never been bashful about criticizing others. From calling the Nissan Leaf primitive, to offering to help Boeing build a better airplane, to a litany of smart-alec Tweets, Musk has been incredibly vocal for a guy who's biggest claim to fame is founding two companies that have yet to turn a profit.
- There's simply no way to reconcile Musk's views against government subsidies with Tesla's acceptance of federally-subsidized loans without questioning Musk's lack of self-awareness.
- Finally, Tesla has made a number of baffling decisions that are difficult to understand without assuming a bit of good-old-fashioned arrogance is at play (more on that below).
Image copyright Steve Jurvetson.
While Musk is without a doubt incredibly intelligent – and possessing of some shred of humility, as described in this excellent article by Wired's Joshua Davis – his opinion of his own genius seems to know no bounds. While apologists are quick to forgive this behavior as “quirky,” I think a case can be made that Musk is far too arrogant for his own good.
What's more, I'd argue that Musk's arrogance has greatly harmed Tesla.
Why Re-Invent the Sales Process?
The retail auto business is a bit of a mess – and I should know, as I worked in dealerships for nearly a decade. I've worked with drug-addicted car salespeople, answered to poorly qualified management, and witnessed the ineptness of dealership owners who's only skill was inheriting their parent's successful business. I know first-hand how bad dealerships can be, and I understand why so many people dislike buying a car from a franchised dealer.
Tesla's one and only dealership in the state of Colorado. Can it serve all of the state's 5 million residents? Image from Tesla press release.
Still, love it or hate it, the franchise dealership business model makes a lot of sense. By working with franchised dealers, car manufacturers can outsource the day-to-day tasks involved with selling and repairing cars. Instead of appraising trades, arranging financing, negotiating sales prices, detailing and inspecting trade-ins, diagnosing and repairing vehicle problems, stocking replacement parts, etc., manufacturers can focus on designing and building great cars.
Yet in a decision that I can only describe as foolish, Tesla has rejected the franchise dealership model. While Musk does a good job of presenting the reasoning behind this decision on the Tesla website, there are two very pragmatic reasons for choosing the franchise model:
- Running a dealership is hard. Many people aren't aware that Ford Motor Company tried to sell cars at factory-owned dealerships in the 1990's. The venture was called Utah Auto Collection, and it was an abject failure. While it's certainly possible that Tesla could find success running their own dealership network, the retail auto business isn't exactly easy...others have tried (and failed).
- Many states have laws against factory-owned dealerships. Regardless of how you feel about franchised dealers, there's no disputing the fact that “48 states either prohibit or in some way restrict automakers from owning sales facilities” (see LA Times).
Think about that second point for a moment and imagine you're in charge of Tesla. Your company is struggling with cash flow and desperately needs sales. Do you a) challenge laws in 48 states or b) start finding franchised dealers to help you sell your cars?
The foolishness of Tesla's decision to break the model are acknowledged by no one other than Elon Musk himself, who admits “it would be easier to pursue the traditional franchise dealership model, as we could save a lot of money on construction and gain widespread distribution overnight.”
If this decision to reject the established sales channel isn't proof of arrogance and a lack of common sense, what is?
How Does Attacking The Press Help You Sell More Cars?
Selling cars requires a laser focus. At the dealership level, this means focusing on getting more leads and improving your sales process as much as possible. At the manufacturer level, it means building the best damn product you can at the cheapest price, then getting as many people behind the wheel as you can, even if this “behind the wheel” time is nothing more than a quick test drive.
Obviously, if you're in the business of building cars, the automotive press is your friend. Good reviews pay immediate dividends, as many consumer rely upon reviewers to help them shop, and positive reviews can be touted in ads, used by dealership sales people, etc.
However, Tesla's approach to working with the automotive media is nothing short of baffling.
The first example of Tesla's poor relationship with the automotive press is quite well-known – their feud with the BBC's Top Gear. While I won't delve into the details (as they've been covered at length), I will say this: Tesla could have managed that particular situation much better. Filing one unsuccessful lawsuit was bad enough, but two? At what point did Tesla's management decide that fighting a losing battle over a long-forgotten car review would help the company's image? At the very least, at what point does Tesla decide to stop spending money they don't have on a lawsuit that really doesn't matter?
The second example is much more recent, and still somewhat up in the air. While Musk has alleged the recent NY Times review of Tesla's Model S was “fake,” the data produced by Tesla shows that Musk talked out of turn. The Atlantic Wire painstakingly reviews every one Tesla's criticisms of the Times review and concludes Tesla has over-reacted.
I ask you: How does over-reacting to a negative review help Tesla move more product? I challenge anyone to find a PR crisis-management expert who recommends responding to a bad review by calling the reviewer a liar and a fake.
While it's easy to relate to Musk's very human response to what he perceived to be an unfair review, his attack raised awareness of the review he was trying to discredit. What was he thinking?
It's time for Elon Musk to step down.
The Bottom Line
From arrogant pronouncements of “silicon valley genius,” to impractical decisions to challenge dealership franchise laws, to poorly managed interactions with the press, Elon Musk's inadequacies as Tesla's CEO are obvious and well documented. What's more, it's clearer than ever that Musk's poor decisions have effected Tesla's ability to grow and damaged the automaker's public image.
While Musk is a visionary, it's time for a reality check. Tesla may one day become one of the world's largest automakers, but it won't accomplish that goal with a limited sales network and an adversarial relationship with the press. More than ever, Tesla needs pragmatic and humble leadership. While Musk is most certainly an asset to Tesla, his contrarian nature and arrogant personality have damaged the company.
If Musk really cares about changing the world, than it's time for him to acknowledge his limitations and take a smaller role at the company. It's time for Elon Musk to step-down as CEO of Tesla.