Transcription
The all investies have some thoughts on Tesla's Q3, Optimus, Elon's compensation package and plenty more like that.
All right, Tesla reported their earnings on Wednesday. As you guys know, we record on Thursday as you listen on Fridays. Record revenues, 28 billion, up 12% year-over-year. Massive amounts of free cash flow, 4 billion. I think they're up to 40 billion in cash. Uh which is always great when you're going into uh some big capital intensive projects like Optimus and like self-driving. Downside, operating profit fell 40%. Uh stock dropped a bit 4% but bounced back and uh on the earnings call Elon emphasized the importance of his trillion dollar pay package which would give him just but 12% uh additional stake over the next 10 years if he hits absurd targets that would make everybody who holds the share uh shares in the company extremely wealthy uh and they would benefit uh more than Elon himself. And here's his quote. My fundamental concern with how much voting control I have at Tesla is if I build this enormous robot army, can I just be ousted in the future? I don't feel comfortable building that robot army if I don't have at least influence over it. And he called Glass Lewis and ISS corporate terrorists. These are the people who vote on behalf of passive index funds for things like who's on the board of Tesla. Vote for Elon's pay package will be number six. Poly market thinks it's going to pass. As we talked about before, they they tend to get it right. 85% of the time in this time frame. Uh actually, for what it's worth, personally, I would be very surprised if the compensation package isn't approved. Overwhelmingly, in fact, I said a few weeks ago, I was guessing probably around 75% of shareholders who vote likely to approve. That is accounting for a lot of the dumb institutional investors who don't think for themselves. And listen to the so-called corporate terrorists advising them to vote against this package. It accounts for a lot of the pension funds, index funds, and others as well. Potentially voting against this, not because they're looking out for the best interest of their clients and therefore the company, but instead for virtue signaling reasons, but a portion of the big institutional investors, and I suspect the vast majority of Tesla retail shareholders will approve this package because it directly incentivizes Elon Musk to hit absolutely absurd milestones, not just in terms of market capitalization. The final branch of course being $8.5 trillion certainly will make a lot of Tesla investors quite wealthy. But in addition, there's a ton of performance metrics including million FSD subscribers, a million robo taxes operating, a million humanoid robots sold. Oh, and then a mere $400 billion in Ebida. In short, you'd have to be absuckingly brain dead to vote against this if you own Tesla stock. And the only reason you would have vote against this if you own Tesla stock is so you can tell people you voted against it because you believe that it's better to get some gold stars from your ideological social circle than it is to vote in the best interest of your investment. Now, I could be proven wrong, but that would be my guess. So, if my guess is on point, then the poly market 79% chance is actually really low. I'm not saying it's a low percentage. I'm just saying I'm not predicting it's going to just slide in at like 54% approval or something. Let's check the updated poly market actually on this. Wow. As I'm recording this couple of days after that podcast, the money's now got this at a 93% chance. By the looks of it though, oh 91 now it looks and 92 as I'm recording. It's moving a bit. This appears to be extremely low volume. Unless this is in millions of dollars. $9,299's volume. Is that in the last 24 hours? It'd be very easy to manipulate this outcome if that's all that's been bet on this. With all of that said, it is imperative that everyone listening who owns Tesla shares, even one share, vote. It's not just your right, it is your duty and obligation to vote on these matters. Cuz if you don't, you can rest assured some of those who seek to harm Tesla, harm Elon Musk will be voting against the compensation package. And that is the worst possible outcome for Tesla. Don't just vote yourself, but make sure your friends, family, colleagues have also done so.
79% chance as of Thursday afternoon. I guess chimoth there's a couple of ways to go at this. There's the performance of the legacy business. There's the potential of the future business and then there's governance the company moving to Texas and this pay package and this transition period for Tesla which is going from an you know somebody who sells cars uh really nice ones at a at a very nice margin but a lot of competition now and then these this business that obviously Elon himself is obsessed with which is the Optimus as we saw when he was at the oil and summit. Take it wherever you want. Jamal.
I'll say three things. Stan Ducken Miller has this very useful comment about stocks, which is when you buy it today, you're trying to buy what that company's going to look like in 18 months from now. And well, this might be true for a lot of investors. In fact, the majority. It might explain a few things, but certainly not true for me. 18 months is basically 3 seconds into the future. This would explain why most investors, and I use the term fairly loosely, more like traders, repeatedly and consistently miss massive disruptive opportunities. If you're only looking 18 months into the future, and as a reminder, Tesla stock analysts, all stock analysts publish mere 12 month price targets. They're not even looking 18 months. If that's as far as you're looking into the future, you're going to miss just about every meaningful transformation, disruption, and opportunity to ever manifest in public markets. And I don't say that lightly, but accurately, this would also explain the decision of many so-called investors to sell shares in a company about to undergo a massive transformation or currently undergoing a massive transformation. A company currently planting seeds, watering them, nurturing them that will germinate into, let's just say, hypothetically, multi-trillion opportunities, but not in the next 18 months. This would explain a lot of things about some of the absolutely brain dead decisions investors make about buying and even worse selling stocks.
What it's doing today doesn't matter. The thing about earnings and P&Ls and quarterly reporting is that it's looking backwards and it's trying to give you a sense of what happened, not what will happen. So I think there are three critical critical things about what will happen that I think are important with respect to Tesla. The first is at the foundational technology layer. Nick, I sent you this tweet, but it's what he said about AI5. I I've made these comments before, but he had these multiple efforts with Dojo and other stuff that he merged into one unit, and the the quote is pretty incredible. We're going to focus TSMC and Samsung on AI5. The chip design is an amazing design. I have spent almost every weekend the last few months with the chip design on AI5. By some metrics, it will be 40x better than AI4. We have a detailed understanding of the entire stack. With AI5, we deleted the legacy GPU. It basically is a GPU. We also deleted the image signal processor. This is a beautiful chip. I've poured so much life energy into this personally. It will be a real winner. Why is AI5 so important? What AI5 is is the building block of a system that I think you'll start to see not just in the cyber cabs, but also in Optimus. So from a functional technology perspective, there's been a leap and that leap is going to come into the market. That was the first thing he said which I thought was really important. The second thing was what he said about his energy business which I think is the critical adjunct to believe robotics and autonomous cars. If robotics and autonomous cars work, what you really need is an energy business beside it that is humming and on all cylinders. Why? It's how you make LFP battery cam that will be the limiter. Energy will be the limiter. But what he's showing, and Nick, I sent you this tweet, is that business is just on a tear. It's printing three and a half billion dollars a quarter and its operating margins, an energy business, 30%. And so what you're going to see are battery packs of all shapes and sizes, the huge battery systems that's going to go into data centers, but then all the way down, I think, to the small LFP cam that he's going to need to power all these things. And then the third thing is his comments on Cyber Cab, which is that this thing is just going to be a shock wave. So, I read all of those things and I was very bullish. I think that he is humming on all cylinders on the critical layers of the stack that he needs to build this next version of Tesla. My concern I think there's a real concern that I have that this vote is going to go down to the wire. I think that ISS and Glass Lewis I think that these organizations are pretty broken. I think the way that they make decisions are hard to justify. An example of this, they asked to vote down Ira Aaron Prize as a director of Tesla because he didn't meet the gender components, but then they wouldn't vote in favor of Kathleen Wilson Thompson even though she does technically meet the gender requirements. So, it's very confusing where ISS and Glass Lewis are coming from. So, I think there's a risk that this that this package gets voted down.
Now, in fairness, technically there definitely is a risk. I think it's extremely low. But hey, I mean have been surprised before. But to point about ass house and ISIS and their recommendations and their supposed reasoning behind them, I scrutinized some of this in a recent video. It doesn't make any sense. One of the primary concerns about Elon Musk's compensation package was that it would dilute existing Tesla shareholders. But I went through the math with Grock's assistance showing that even in the very first tranch factoring in dilution, Tesla shareholders would have an investment that had roughly doubled in value and the final was about seven or so times what it's currently worth. Factoring in the dilution. So the reasoning made no sense. None of the reasoning makes any sense. They're not doing this for logical reasons. They're doing this for DI/woke/ virtue signaling/political reasons only. Musk on Tesla's earnings call rightly described these proxy advisory firms as corporate terrorists which they are.
Shine a spotlight on one of those points that you made with these proxy advisory services. So I think for years people have wondering why did corporate America go so woke especially in the early 2020s.
It's coming. He's about to say it's because of these proxy advisory firms etc. Everything got captured by the work mind virus DEI every institute. Then they apply pressure on companies on and in this particular case on index funds on mutual funds to vote a certain way because you don't want to be shown to be anti-di which is in fact anti-meritocratic. Therefore you must comply. This is what's happened. This DI insanity also known as didn't earn it proactive racism, sexism and discrimination based on things that do not matter. Not merit but arbitrary factors. What's your body mass index? Who do you like to Not who's the best candidate for this job. most competent, most capable. It's entities like this that have put pressure on index funds and so on to vote certain ways. They've captured huge portions of corporate America and other parts of the world as well. Very few of these companies or entities have the backbone to stand up and go, "Now get mate. You're insane. We're not following your recommendations. They make no sense."
Where they created all these DEI departments and you know, they didn't have to do that. And a big part of the reason is that those initiatives came from Glass Lewis and ISS. I think Elon's jokingly called ISS ISIS. But basically what happens is they make recommendations for how shareholders should vote on different resolutions and the index funds basically just defer to them for whatever they should do. So they effectively control or almost control the voting for all these board level resolutions that every public company has to make. And so they've been the ones who've been imposing all these DEI requirements, all these ESG requirements. If you're wondering where those things came from, because just these two companies, which no one's ever heard of, they were captured a long time ago. Meaning, they were captured by the woke crowd years ago. And so, this has really been the root of why corporate America has gone woke for a long time. And look, there's also pressure from the outside, from boycots or, you know, there's some pressure sometimes from employees and that kind of thing. But a lot of it came from these two companies that no one's ever heard of. And I think it would be a good idea for someone to take a look at this and figure out what happened. Maybe someone like Chris Rufo should investigate what was the impact of Glass Lewis and and ISIS on corporate America going full woke for so many years because it certainly didn't help corporate profits.
It didn't help profits and they don't have logical explanations for a lot of their decisions.
He's right and this actually is quite important. There's definitely something to look at here. These proxy advisory firms are a massive scam. They do not have skin in the game. They do not own shares in any of the companies. They're advising investors to vote this way or that way on. They don't own the company. Therefore, if their recommendations harm the company financially, harm the company's performance, their competitive advantages. If they harm the company in any way whatsoever, makes no difference to the advisory firms because they don't own the investment. They have no skin in the game. Yet, they're making direct recommendations to those who do have skin in the game. Importantly though, you're not going to find many retail investors following the recommendations of these proxy advisory firms. While you will find index funds who own enormous numbers of shares in companies, mutual funds, pension funds, a lot of money tied up from entities that themselves don't directly have skin in the game either, but instead provide a vessel for others to own a slice of a particular market or to have their pension and so on. It is a very messed up situation. A proxy advisory firms with no skin in the game are advising let's say big index funds who also only indirectly have skin in the game because they're not investing in stocks because they think say for example Tesla's a great investment by their own rules. For example, S&P 500 is required to own Tesla and all of the 500 largest companies in the US based on their market cap and weight them based on market cap. Then investors purchase the S&P 500 to capture that slice of the 500 largest companies in proportion to the market cap. Yet, it's not the investors who've purchased the S&P 500 who get to vote. It's the S&P 500, which again itself isn't deciding, oh, I think Apple's a great company to buy or buy a bit of Apple stock or buy a bit of Tesla stock, but instead is rules-based mechanical brain dead and must buy or sell based on the waitings, the market cap, and whether they're in the top 500. Those with the least skin in the game have the ability to control outcomes on many of these shareholder votes, especially if there's low participation from retail shareholders or low percentages of retail shareholders in general. And if all these fuckfaces are deferring to woke politically ideologically motivated proxy advisers for their voting, this is a very dark situation. It's very lucky for Tesla. There's so many retail investors making up the shareholder base that we can still have enough input. That's why it's so important to vote to change the outcome on these matters. Otherwise, we'd be toast.
Yeah. And why aren't there active investors or active managers in these passive groups who would make a decision on these things?
They're too small. The banks call me every week. And one of the things that I get is sort of like they tell me like, "Hey, here are the big trades. Here's here's the flow. Here's if you want to be in market, here's what what I recommend." That's what they're telling me. One of the things they told me this week, which I thought was really shocking, is there's so few active managers left. It's so overwhelmingly passive money. The next largest group is now retail. And so what a lot of these professional money managers do now is they basically wait to see where retail is going and they follow them. So there isn't the people with a diversified asset base to be able to stand up and say, I don't think what ISS and Glass Lewis are doing is right. And so what happens is they kind of sack says they can just kind of run a muck and they build a very healthy business being this interloper to provide opinions. It's not clear where their opinions come from. It's not clear what they're rooted in. It's not clear that there's a way to adjudicate and go back to them and say, "Well, you got this wrong." It's just not clear. But, you know, they probably make a very healthy margin doing it. And everybody, as Sax says, just kind of turns over responsibility to them. It is an interesting fact that we kind of just say, "Hey, the guys who are the actual custodians of the shares don't have to do the job of holding the shares." Like the job of being the holder of the shares is to vote the shares. That's all there is to do as a as a shareholder. You make your you cast your vote. And these guys are abstained. They could also abstain, right?
Yeah. And these guys are getting paid a fee to actually do that work, which is
Quick detour here on the same topic. discussed this recently in a few videos as well as posting on X and I agree. At the very least, I personally do not believe that an index fund that has a product for consumers to invest in that happens to own shares in companies should be voting on these matters. At the very least, they should choose to abstain if, this is important, if they're entirely passive and they would be willing to follow the advice of these corporate terrorists, the proxy advisory firms, they should automatically abstain. If you as the custodian of the shares, the shareholder are not willing to do the thinking and make the decisions yourself, you should not be outsourcing your thinking to somebody else, that's insane. However, as I posted on X, a case can be made for index funds specifically to not have voting rights on shares held, as in they can't vote. Not just that they should abstain, but they can't. And here's why. They do not invest in companies for any reasons relating to the company itself. Eg. Well, Tesla looks like a good long-term investment. They invest to replicate the performance of the index rather than in companies per se. It really is worth having this conversation because right now if we look at the top institutional shareholders for Tesla, by the way, 56.12% of all Tesla shares publicly available held by institutions. Vanguard Group itself is the largest Tesla shareholder, the biggest institutional investor. Over a quarter of a billion Tesla shares held. Tesla's public float total is about 2.8 billion shares. Total shares outstanding maybe 3.3 billion or so. Now think about this. If the Vanguard group, eg Vanguard has the S&P 500 ETF follows the recommendation of these corporate terrorists and votes against Elon's compensation. We're approaching 10% of Tesla's public float as a no. Batshit insane. Is it fair? Is it right for such a significant shareholder or any shareholder? but especially when you can meaningfully almost single-handedly change the outcome of some of these shareholder votes. Is it really right? Is it ethical? Is it reasonable? Is it fair for them to vote on these matters, yet not to actually make the decision what's in the best interest of the company, but to instead outsource that thinking to an external entity who claim to be providing their best possible recommendations, yet whose reasoning doesn't stand up to scrutiny isn't at all rational and in many cases is clearly and directly harmful to the company's financial performance and future prospects. This really is a conversation that needs to be had. In fact, here's a proposal. No institutional investor period should ever act on the advice of a proxy advisory firm. And in fact, should they choose to vote on any of these matters for any company ever, they must in writing explain that they have themselves drawn the conclusions that led to their decisions on these matters. Explain their reasoning and why that reasoning is likely to be in the best financial interest of the shareholders in their product, which happens to own a slice of the company whose matters they're currently voting XYZ way on. and here's why they're voting that way. At the very least, if you are going to vote, surely you must articulate why, explain your reasoning and how it's in the best interest of the company or abstain.
Call it half a percent or quarter% or tenth of a percent of the assets that they hold. So, like what are the people they're doing? If it's all automated trading, why aren't they just
I don't know if you guys own a lot of equities, but just to give you a sense, there's people that manage the stocks, right? There's people that transfer the stocks. There's people that then give you a recommendation on how to vote the stock. Then there's people that hold a virtual representation of that stock. Then there are people that transfer that virtual representation and they will not stop calling.
So the point is like we have so financialized everything that there are billion-dollar businesses that sit at every single step of the way. And to your point, Freeberg, I think this is where no one's actually a shareholder. The tokenization of stocks may be a really good thing because it'll put the responsibility back into the owner of the stock because the wallet will centralize all that activity because you won't need to have all this other stuff.
I have been getting phone calls from Invesco QQQ cuz I own a bunch of QQQ and like you know some accounts or whatever and they were calling three times a day for the I don't pick up my phone. I was calling me on the phone unless it's one of you four is calling me to say good night. I don't. That's the only time I pick up. It's when, you know, and so I finally pick up and they're like, "Hey, we need you to vote." And I'm like, "Yeah, I'm not voting. I don't know who you are." They're like, "Well, let us explain to you how to vote." And I'm like, "I I don't want to vote my shares. I just want to own QQQ. I'm good." You guys some of this infrastructure is so decrepit and old, like trying to get shares, for example, that you that you've bought in the private markets. When a company goes public, just getting them registered and transferred in the position to be sold can sometimes take three or four weeks. Can you imagine the markets move an entire order of magnitude in three or four weeks? It's the crazy.
Here's Elon's pay package milestones. Market value 2 trillion. Uh I think they're at 1.4 trillion right now. Something around there. Operational milestone, 20 million vehicles delivered. And then you just go right down to 6.5 trillion. But on the operational milestones, 10 million active FSD subscriptions, which they're far away from right now. And 20 million vehicles, I think they've delivered six or seven. 1 million robots delivered, 1 million robo taxis in commercial operation. That's those are big numbers.
They are astronomical when you actually think about the implications. By the way, I just noticed uh missing a few of the final market cap milestones here. It's actually cut off. Goes all the way to 8.5 trillion. But regardless, who in their right mind as a Tesla shareholder votes against an incentive structure that lays out these goals and milestones by law must be fully compensated. As I've said many times, you'd have to be completely brain dead to own Tesla shares and vote against this. At the time this plan was first proposed, Tesla was about $1 trillion market cap. The very first market cap milestone, which needs to occur in conjunction to an operational milestone. You can pick and choose, right? But you need one from each of these columns. Company had to double plus one of these. These are some astronomical targets. They are achievable. Not easily, but they are achievable. What shareholder would vote no? You're creating phenomenal incentive to make this happen. Incentivizing a guy with a phenomenal track record of making the absolutely impossible happen over and over and over across multiple domains and in record time. You really would have to be brain dead.
50 billion adjusted IBIDA and then straight down the line to 400 billion IBIDA. If you were to look at this Optimus business just back of the envelope, these robots are going to go for 20K. He said ultimately maybe they're 30. They'll probably have a 30% margin like the cars do or something similar. You'll make a little bit off the software sack. And if you were to just if every millionaire owned one of these or you know they took some number of the uh jobs the TAM for this just in the United States
is going to be huge. We're talking hundreds of billions of dollars.
If I had to bet I think a very fine poly market is where do the first million robots go? I'm willing to bet dollars to donuts that these robots go to Mars. I don't think they're going to
Oh wow.
They'll be in the Tesla factory.
So SpaceX buys them and sends them to Mars. Yeah.
Some to Mars obviously. I've discussed this for plenty of time. I mean, obvious things are obvious. You send the hardware and the great thing is if you've got the hardware nailed, software updates over time can become increasingly capable, can work autonomously. Obviously, there's going to be a ton of Optimus robots going to Mars, but I don't think that's got to be the majority of the first million Optimus humanoid robots produced. Not even close to it. Most of those will be deployed in factories and warehouses, which is more training data and more capabilities for further deployment for next generation. Don't get me wrong, like I said, plenty of Optimus will be headed to Mars, but I think relative to the number of Optimus humanoid robots that don't go to Mars from Gen One, I think it's going to be a fairly low percentage.
How else are you going to get a fleet of
or they'll go into the mines? I think they're going to mine.
Coal. Send them in to get that clean, beautiful coal. So clean, so beautiful. We could send those opport. It's actually, it's the fact that our mining is really limited by the human exposure from the pressure and the heat. If we can mine slightly below the area that we mine um as our maximum depth today, it would unlock an extraordinary supply of minerals that we can't access today. And so automation and you don't want to figure out like how to create portable water and breathing mechanisms on Mars for the first 5 years sent robots. Guess what? They don't need to eat or breathe or pee or poo.
And they can get charged with solar.
And that may sound that may sound like a really stupid thing to say, but it it becomes a
Not stupid at all. I mean on this again I absolutely agree. A robot doesn't need a space suit. Doesn't need anywhere to Doesn't need food. Just needs to be able to charge. Here's how you do it. Send some solar panels over and some batteries and a bunch of optimist. Next minute you got everything you need to start and continue. I do think for the first many years, humanoid robots will be almost the entire workforce on Mars. Early infrastructure, extraction of some resources. Obvious things are obvious, but the opportunity on Earth is absolutely gigantic. And we've heard the first Optimus production line will be set up ultimately to do around a million robots per year. If you sent just 1% of that output per year for 5 years, that's 50,000 Optimus robots, 10% would be half a million. And even in that scenario, got half a million humanoid robots on Mars, you're still the other 90% here on Earth. So to point, maybe you just wanted to flex about realizing how obvious it is that Optimus are going to help with Mars. Duh. But I think it seems to be overstating the proportion of these robots that are headed to Mars on Gen One versus will be used here on Earth.
Huge amount of infrastructure that you otherwise wouldn't need to build on.
That's right. They just got to power up. You just got to give them a plug.
Solar a couple solar panels.
Guess who makes those batteries? Tesla.
Yeah.
And guess who makes the brain? Tesla.
Is Is Elon gonna turn into Jared Leto in 2049? Bladerunner 2049.
What is that? Uh that's the sequel to it's the sequel uh by Dennis Villain Noeva of uh it was my alternate background.
First of all, first of all get first of all his name is Denov and get if you're going to pronounce a Canadian's name get his get his name out of your mouth.
Get his name out of your mouth. You learn how to pronounce
my name out of your mouth. Get out of your mouth.
Isn't it nice to hear some people who aren't completely brain dead talking about Tesla for a change? even Jason if you know you know I found it quite interesting that Chamath believes that there's a at least a somewhat of a chance that Elon's compensation package does not pass isn't approved I mean god that would really not be good that's putting it lightly and obviously plenty of Optimus robots will be on their way to Mars but I don't think it's going to be even close to the proportion that Jamath thinks proxy advisory firms are an absolute scam and that quote Jamath provided most investors are looking at what a company's going to be like in 18 months Now, man, that really does explain a lot. If I was that and I was only looking 18 months into the future, all of the dumb decisions I would have made. I don't know how many times I would have sold Tesla stock in the last 10 years instead of buying it handover fist if I was only looking 18 months into the future, a short investment horizon is a guaranteed way to make very bad decisions and pile up regrets. And yes, 18 months is very short term. Want more content, early access, bunch of perks? Click the links in the pin comment. AG1 has been part of my daily health protocol for almost half a decade. It's packed full of vitamins and minerals and helps me fill in nutritional gaps while supporting energy, digestion, and immune function. It also has prebiotics and probiotics to promote gut health. I take my health very seriously, and so should you. Try AG1 today by visiting drinkag1.com/smr or click the link in the pin comment and enjoy a free welcome kit with vitamin D3 plus K2 and AG1 travel packs. That's drinkagg1.com/smr.