Tesla stock dropped a bit after Elon Musk dismissed a some analyst questions, calling them “boring” and “bonehead.” The take from the business press was that Musk‘s behavior was “bizarre” (Marketwatch) and “irksome” (Wall Street Journal).
Musk later stated that it was “foolish” of him not to just answer the questions but then explained why the questions were absurd. Which indeed they were. As Musk explained:
“The 2 questioners I ignored on the Q1 call are sell-side analysts who represent a short seller thesis, not investors.”
In other words, these were analysts who had a drum to beat (hardly an unusual circumstance, as I’ll explain below). Musk continued that the first question was boneheaded because
“it had already been answered in the headline of the Q1 newsletter he received beforehand, along with details in the body of the letter.”
In other words, the analyst who asked the first question didn’t bother to read the materials he’d been given (again, not unusual with analysts) or, if he did read them, he wasn’t able to absorb the information because he was filtering it through his preconceptions.
Musk continued to explain that the second question (about Model 3 demand) was absurd because
“Tesla has roughly half a million reservations, despite no advertising & no cars in showrooms [and] even after reaching 5k/week production, it would take 2 years just to satisfy existing demand even if new sales dropped to 0.”
In other words, the analyst who asked the second question either can’t understand, or is willfully deciding to ignore, basic math and simple logic.
Now, I don’t know those analysts personally and, for all I know, they may be frelling brilliant, but in my experience financial analysts are a fairly dim lot.
Look, anyone can be an “analyst.” The title carries exactly as much weight as “consultant.” Maybe less. To be an analyst, all you really need is the ability to look credible, ask obvious questions, and then write a semi-coherent paragraph that fits within the parameters set by whomever is paying your salary.
The only other job requirement is the shamelessness to promote the few times your predictions turn out to be true and quietly bury the many times your predictions turn out to be wrong. And even then, you can hedge your bets by being vague about the time line.
Analysts are never, ever called to account when their predictions go wrong. For example, Lawrence Kudlow has has been predicting rampant inflation for decades. But rather than being laughed off the air, he’s now Trump’s Director of the National Economic Council.
While clueless Kudlow might be an extreme case, there are dozens of similar examples. Just look at what happened to the careers all the analysts who were predicting Y2K disasters. (Hint: they moved on and got promoted.)
As for the analysts who follow Tesla, Elon Musk surely knows that most of them are full of bullsh*t, because the games they play are painfully obvious. No CEO of any intelligence (much less Musk, who is genuinely brilliant) would give a two-cent stamp for the opinion of ANY analyst on earth were it not for the lemming-like behavior of a certain class of easily-bamboozled investors, not to mention a small army of business reporters who depend upon the analysts for juicy quotes.
Seriously, imagine what it must be like to be Elon Musk surrounded by people of average or slightly above average intelligence who continually ask silly questions. It would be like you or me being forced to spend 24 hours answering questions from toddlers. It’s a wonder he doesn’t go crazy.
Anyway, what’s truly “irksome” about this entire situation is that, rather than asking ludirous questions, the analysts could have asked questions that actually meant something, like:
- “Why are you simultaneously promoting the idea of self-driving cars and the notion that AI constitutes a threat to humanity?”
or
- “How can you prove 100% that the supply chain for all your component parts have zero child labor or slave labor?
Yes, I realize those aren’t the sort of questions that financial analysts are supposed to ask at an earnings call but that’s the point. If you want to understand the earnings, read the damn report.
Don’t waste Musk’s time–or ours–trying to work your own lame agenda.