On January 27, 2023, Tesla CEO Elon Musk (Elon Musk) and his security personnel leave the company’s local office in Washington.
Jonathan Ernst | Reuters
As Tesla Chief Executive Elon Musk continues to add more businesses, his various businesses and the relationships between them are facing increased scrutiny.
During Tesla’s second-quarter earnings call on Wednesday, Truist analyst William Stein asked Musk about another tech venture he founded and registered in Nevada: xAI. Musk recently said that the artificial intelligence startup aims to one day compete with Google Bard or OpenAI’s ChatGPT, and plans to cooperate with Tesla on software and chips.
Stein asked him: “For investors who think Tesla’s AI capabilities and products may have considerable value, it may be concerning to see you guys pursue another AI-focused venture. Can you talk about how xAI might overlap, potentially compete with Tesla, or otherwise enhance the value of what Tesla does?”
musk claim xAI and its focus on general artificial intelligence will bring some value to Tesla, using recruiting as an example.
“Only some of the best AI engineers and scientists in the world are willing to join a startup, but they are not willing to join a relatively mature large company like Tesla.” He added, “So I thought, well, this is a startup that I run, better than them going to work elsewhere. This is the origin of xAI.”
Beyond the xAI example, he said he could only lure one top materials science engineer out of his job. apple Commitment engineers can work for both SpaceX and Tesla. The engineer, named Charles Kuehmann, joined Tesla at the end of 2015 and is currently vice president of SpaceX and Tesla Materials Engineering, reporting directly to the CEO.
Issues with Musk and his various businesses also came up earlier this month, when Senator Elizabeth Warren, D-Massachusetts, urged the SEC to investigate his Twitter ties and related corporate governance issues.
Musk spearheaded a $44 billion acquisition of the social media company last year and named himself interim CEO. He is now Twitter’s controlling shareholder, chief technology officer and executive chairman, as well as CEO of Tesla and its aerospace and defense company SpaceX. He is also the founder and funder of brain-computer interface startup Neuralink and tunneling venture The Boring Co.
Tesla is the only public company in the group. And it never disclosed to shareholders exactly how much talent, time and money it spent on Musk’s other ventures, or why moving people to Twitter would constitute a reasonable use of Tesla’s resources. Musk previously recruited employees from Tesla, SpaceX and The Boring Co. to help him acquire Twitter, CNBC reported.
At least one senior Tesla employee has jumped ship to Musk’s X Corp. (Twitter’s parent company).Court documents show Dhruv Batura, who has been with Tesla since late 2013, was the company’s senior manager of business operations finance and is now X Corp.’s senior finance director. Batura posted a job ad for X Corp. on Twitter the day Tesla reported its second-quarter earnings.
in a May 2023 In the proxy filing, Tesla did disclose some details about its related party transactions. Among them, Tesla disclosed, “Twitter has entered into certain commercial and support agreements with Tesla. Under these agreements, Twitter’s expenditures in 2022 and 2023 as of February totaled approximately $1 million and $400,000.” Tesla has not yet disclosed what products Twitter will buy from the company.
“Musk saying ‘I’m helping Tesla by preventing these great people from joining competitors’ is a puzzling argument,” said Randall S. Peterson, a professor of organizational behavior at London Business School. “It’s counterfactual, and you can’t really test or challenge it in an investigation. “
Petersen noted that most startups fail, and that would-be startups may be less likely to join the ranks of Tesla’s direct competitors in the auto industry.
Musk’s multiple investments could pose risks to Tesla and shareholders should seek more details, Peterson said.
“When you’re running multiple companies, it’s hard to focus on and be good at any one thing,” Peterson said. “That’s the risk surrounding the CEO himself. Will most corporate shareholders tolerate their CEO running several other companies at the same time? The answer is probably no. So it raises the question of what the Tesla board is doing, are they independent at any level, or are they so enamored of Musk that not only are they tolerant of his unusual ways of working, but as long as the money keeps coming in, they might ignore big fundamental questions.”
He pointed to the failure of boards of directors of companies that ended up in crisis, such as Enron and Royal Bank of Scotland, to rein in chief executives despite signs of trouble in many quarters.
Another risk, Peterson said, is that Musk’s employees could feel pressured to work on many projects for him simultaneously outside of Tesla. In order to please him or gain new work experience, the employee may not be able to recover from work and burnout. Burnout can lead to high turnover or poor performance, he said.
Finally, the professor noted that Musk could create distractions that prevent employees from focusing, even if his intention is to cross-pollinate his businesses.
“You need to be highly focused to be the best at something, both as an individual and as a company. That’s why we’re seeing a trend away from the big conglomerates of the 70s to the more focused companies of today,” the professor said.
Still, Musk appears to be doubling down on unapologetic collaborations between companies in his growing empire.
During Wednesday’s conference call, he was asked to provide an update on Tesla’s development of a humanoid robot called Optimus Prime. Musk continued in a futuristic tone that Tesla may one day partner with Neuralink to create robotic prosthetics and prosthetics to help amputees regain full mobility or flexibility.
Tesla did not immediately respond to a request for comment. Twitter responded with an auto-reply containing a rough symbol.
— CNBC’s Rohan Goswami contributed reporting.