Years before Tesla Inc. became a household name, the late Berkshire Hathaway Inc. Vice Chairman Charlie Munger had the opportunity to invest in the company but declined.
Tesla CEO Elon Musk recalled Munger’s prognostications with a blend of respect and resolve, acknowledging potential challenges while maintaining his commitment to Tesla’s mission.
In a February 2022 post on X, Musk detailed the meeting, writing, “I was at a lunch with Munger in 2009 where he told the whole table all the ways Tesla would fail. Made me quite sad, but I told him I agreed with all those reasons and that we would probably die, but it was worth trying anyway.”
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Even as Tesla’s market capitalization soared, Munger maintained his skeptical perspective on Tesla’s viability. In 2021, at the Sohn Hearts & Minds Investment Leaders Conference, he reportedly remarked, that Musk “thinks he’s even more able than he is,” a trait he believed contributed to Musk’s success.
“Never underestimate the man who overestimates himself,” Munger said, acknowledging that overconfidence could lead to extraordinary achievements.
It wasn’t just that he thought Tesla would fail. He wasn’t sold on investing in electric vehicles (EVs) at all.
“The electric vehicle is coming big time,” Munger said at the 2023 Berkshire Hathaway meeting. “It is imposing huge capital costs and huge risks. And I don’t like huge capital costs and huge risks.”
The conversation between Musk and Munger 15 years ago, which highlighted Silicon Valley’s balance of caution and ambition, has become more relevant in 2024. As Tesla faces market challenges, these issues mirror Munger’s early warnings.
Despite achieving an impressive valuation and emerging as the world’s most valuable carmaker, Tesla has faced a tumultuous 2024. The company’s stock has plummeted by nearly 29% year to date, erasing about 40% of its value from a 52-week high of $299.29. The downturn has been attributed to a softening demand for electric vehicles and a fiercely competitive sector that has forced Tesla to lower its average selling prices, which has impacted its profit margins and, consequently, its stock price.
Munger’s decision not to invest in Tesla reflected his preference for more stable and established companies, indicating a conservative investment approach in contrast to Musk’s determination and readiness to tackle risk. This contrast emphasizes the varied approaches to investment, where some investors seek stability and predictability, while others, inspired by the potential for groundbreaking advancements, are willing to face uncertainties.
A financial adviser can assess an individual’s risk tolerance and assist in diversifying their investment portfolio, aiming to balance potential risks and rewards according to their financial goals and risk tolerance.
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This article Charlie Munger Told A Table Full Of People ‘All The Ways Tesla Would Fail’ — Elon Musk Said It Made Him ‘Sad,’ But He Agreed originally appeared on Benzinga.com
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