Being Public

The back and forth that Elon Musk did over the last few weeks about being public begs the question about whether the challenges of operating a public company outweigh the benefits.

Elon wrote this in a letter to Tesla’s employees:

As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.

I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve.

A few weeks later, Elon wrote this:

After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.

So which is it?

I strongly believe that being public is the best form of shareholder ownership for the vast majority of companies and advocate for that path to the companies in the USV portfolio that have the opportunity to be a public company.

The pressure of quarter to quarter execution is hard on a team. But running a company is hard. And the accountability that comes from this quarterly reporting is a good thing too. If you have problems in your business, you can’t hide them. You have to come clean about them, deal with the implications of them, and fix them.

The long-term vs short-term thing is the critique I hear most often. But I don’t buy it. The best run public companies manage to think and act with a long-term focus while being public. I think it comes down to leadership, courage, and foresight more than whether you are public or not.

Stock price volatility is a factor no matter if you are public or not. At least when you are public, everyone knows when your valuation is going down. Private companies are able to hide that from their employees, the media, and others. Which is just kicking the can down the road and that always ends badly. I prefer the transparency of being public on this one.

And the short seller argument is nonsense. People are always working against you. Your competitors are working against you. The media may be working against you. The regulators may be working against you. Short sellers are just another group that wants to see you fail. But they are not the only ones and you can make them pay by executing against your commitments and guidance.

For me, it just comes down to leadership, courage, execution, and setting and meeting expectations. All good companies must have those in place. If you do, being public is not only manageable but preferable.

And I am pleased to see more and more high growth tech companies coming to this conclusion and taking the plunge.


Comments (Archived):

  1. Daniel Storm

    dude you talk too much

    1. fredwilson


      1. Daniel Storm

        dude, this whole bunch talks too much. just one of them is building something new. i know.

        1. fredwilson

          It’s a forum for talk. Some people talk. Other people do. Both are fine.

  2. Seth Godin

    The problem will public ownership is that many times, the public works at the company.When you’re in a meeting and you’re about to take a decision that will hurt the stock price in the short run, you might be thinking of your 100 or 1000 employees who will see their stock options plummet.Even as the enlightened CEO, you know you’re going to have to face them tomorrow, and you know that they don’t have the same narrative about money and net worth that you do.When I was at Yahoo, the sales force checked the price of the stock for two hours a day, every day.I know that sounds like an exaggeration. In fact, it was probably closer to three hours a day.Of course this changes decision making. How can it not?So the work is not simply making sure you have earned the trust of long-term outside investors, but that you’ve somehow managed to hire thousands of people who won’t get distracted by swings in their personal net worth that are wider than just about any human ever experiences.

    1. fredwilson

      Yes. This is hard. I believe that Boards and Senior Management should encourage the employee base to cash out a piece of their investment so they have the diversification that allows everyone to make the right long term decisions

    2. JamesHRH

      Disagree totally.Sales people who check the stock should get fired, especially in a hot company like Yahoo.Do the right thing first.

      1. PhilipSugar

        Yes, now the one thing I will say is that salespeople get evaluated on one thing: sales. And if people aren’t making hay and checking stock prices you have a wrong system set up.

    3. William Mougayar

      “When you’re in a meeting and you’re about to take a decision that will hurt the stock price in the short run, you might be thinking of your 100 or 1000 employees who will see their stock options plummet.”Not sure this is entirely correct. I’ve been an employee with 2 large, public companies and worked closely with the top executives. That wasn’t the case. The opposite was true actually. The general feeling was always that the stock price takes care of itself over the long term, and that management decisions are more titled towards business priorities, growth, profitability and operational efficiency. If employees are glued to their screens watching the stock price instead of doing their job, you’ve got the wrong type of employees, or the wrong type of company.

      1. Teren Botham

        Shut up

  3. jason wright

    what’s the best performing private company out there?

    1. JLM

      .Chick Fil AJLMwww.themusingsofthebigredca…

  4. François Flt

    “The long-term vs short-term thing is the critique I hear most often. But I don’t buy it. The best run public companies manage to think and act with a long-term focus while being public. I think it comes down to leadership, courage, and foresight more than whether you are public or not.” Hmmm… How would you define “best run public companies” ? We’ve had countless examples of public companies that were celebrated for years by the financial markets and then crashed because they hadn’t focused on business and consumers.

    1. PhilipSugar

      Same for private companies. I give you the ultimate small private company example: restaurants.There are some that are absolute icons because they fanatically concentrate on who, what, and why they are. They serve the best food and provide great service (whatever defines best) could be a Wawa Hoagie. And some that crash and burn.

      1. Dan T

        Wawa rocks, absolutely know what they are and damn good at it

      2. Lawrence Brass

        Do you think being public or private correlates with the size of the company?

        1. PhilipSugar

          None. Know who you are and what you are.

      3. LE

        Yeah but with a business that is doing well you also never know where the bodies are buried. With Wawa (who as you I also love ‘long time’) they sell cigarettes which greatly helps the model in terms of store traffic. Pull the cigarettes and the hoagies will go up in price (because of the decline in traffic very important).Funny in the annals of ‘how business really works’ (at the base level) is what I heard over the weekend from one of my wife’s acquaintances (by way of a child). She owned a pawn shop which she bought after her husband lost his job at Columbia. Anyway she starts to tell us both (I thought this was stupid btw) how someone would come to her with Dyson vacs that were clearly lifted and hot. And she would sell them for $500 and buy for like $70 (or something like that). Anyway she states this as if it’s no big deal and adds ‘how do you think we made money’? While laughing. Now this is exactly the type of business story that when you are in business you hear that you will never read on the internet unless someone is caught.Anyway further she knew that the person was stealing to pay for drugs. And once again didn’t have any problem with that at all. Later she says that one day the guy called her and wanted to do a trade at the local mall where he has apparently just lifted some vacuums (all Dyson). So she immediately thinks she is being setup and decides to not go. Her husband (the book smart guy with a masters) he is ready to hop in the car and do the trade.Anyway she ended up selling that pawn shop I guess she wanted to get her ass out of dodge after that event. She sold it to one of her employees.She was a big ebay seller.Couldn’t believe she told us that.

        1. PhilipSugar

          That works until it doesn’t. Funny I talked about my foreign guests, they love buying cigarettes there and hoagies.

    2. fredwilson

      You are right. GE was beloved until it was outed as a scam. There are plenty of other examples .But I think many of us would view Amazon and Starbucks under Howard as well run public companies. There is absolutely something about a founder CEO

      1. JamesHRH

        GE as a scam is a bit much.Jeff Immelt as a scam I will buy.

        1. PhilipSugar

          I would say once it’s financial engineering fell apart.It is an example of financial engineering comes to an end. They do have some really good product lines like engines, turbines, and locomotives.And some like appliances.

          1. JLM

            .GE sold commercial paper to fund their operation which was a function of their manufacturing supported by short term receivables culture.They used it to fund their lending operations which gave them a non-depositor low cost of funds which was a huge advantage.JLMwww.themusingsofthebigredca…

      2. JLM

        https://uploads.disquscdn.c…GE’s Jack Welch was named as CEO of the Century by Fortune magazine. He was CEO and Chairman from 1981 to 2001 and delivered extraordinary value to GE shareholders.The attached chart – stock price during the Welch CEO/Chmn tenure – is all the proof one needs to substantiate the point. A “scam” cannot deliver that kind of value for two decades.Jack Welch had a PhD in chemical engineering before he went to work for GE and worked his way up to the top with a stint as the head of strategic planning during which he developed his philosophy of only being either #1 or #2 in any operating business.He was also the innovator who used to get rid of his bottom 10% of managers. A lot of people say they do that, but he did it.When he took over, he slashed the size of GE in a dramatic fashion by a combination of downsizing and disposing of weak lines of business. He compressed what had been 7 layers of management into 3.The simple truth of the matter is that Welch was that damn good.I had a big relationship with GE Capital and knew the management from Gary Wendt on down. They were the best in the institutional quality commercial real estate space bar none. Smartest. Hardest working. Most innovative. Deal makers who were “backers” not just “bankers.”When I sold everything in 1995, I got a hand written note from Jack Welch. Whoever had actually written that note had gone to some considerable trouble to learn details of our relationship.I just don’t think Immelt could hold Welch’s jock when it came to running the company. Immelt spent too much time on politics.JLMwww.themusingsofthebigredca…

        1. JamesHRH

          GE was so focused on developing people that it is the height of irony that Immelt tricked them.How many GE leaders left and had immediate positive impact elsewhere?Mulally was obviously the person they should have chosen.

          1. JLM

            .In the CEO sweepstakes leading up to Jeffrey Immelt taking over from Welch, you had James McNerney and Robert Nardelli vying for the job with Immelt.The board picked Immelt.Nardelli left to become the CEO of Home Depot and eventually Chrysler when they were a PE funded private company.McNerney became the CEO of 3M and then Boeing.Strong bench.Have to say that both of the also-rans did better than Immelt.When Welch was in the saddle, he kept all three of those guys in line waiting for him to retire.JLMwww.themusingsofthebigredca…

          2. PhilipSugar

            Nardelli was a world class asshole.

          3. JLM

            .”was”? Is?He was not a charm school grad.Backstory – he became CEO of Home Depot through the efforts of Kenneth Langone – himself a very colorful character. Langone was on the GE board and when Immelt got the GE CEO job, Langone lured Nardelli to Home Depot.He managed to more than double earnings from $2.58B to more than $5.84B in 7 years, but the stock went nowhere because Lowe’s stole the oxygen. I never figured that one out.He gutted HD with a strategy that worked on the earnings line, but he ran off all the real talent.JLMwww.themusingsofthebigredca…

        2. jason wright

          it’s interesting how smartest + hardest working = success, isn’t it? each tends to be underrated by those who value the other.

      3. Richard

        Yep. John Malone, Micky Arison, Steven Adver-Asey, Sam Walton, Tom MurphyManagement with significant skin in the game buy low and take risks that agents can’t stomach.

      4. LE

        There is absolutely something about a founder CEOWell forgetting that Schultz was not a founder the important point is not that they are a founder or not but that they have the type of control and power that means there are not multiple people driving the bus or chiming in making a camel which is a horse by committee.I can tell you that personally that is what helps more than anything. Not having others second guess you and to be able to go with your vision of how things should operate. Because only you have the seat of the pants feel for why you think something should work (Twitter and at least one reason you invested in twitter is maybe an example of this).

    3. Girish Mehta

      “The best run public companies manage to think and act…”That sentence does not add much value as regards addressing the critique of being public.The best run companies think and act with a long-term focus (among other things). Whether Public or Private. Its a kind of non-falsifiable observation.Does that statement address the critique at hand ? I don’t know.

      1. Amar

        Maybe back into it?I am proposing the following as Axioms:1. Long term success requires long term focus2. Long term focus requires wise management and leadership on the helmCorollary:If 1 & 2 are unaffected by whether a company is public or private. Ceterus Paribus: if being public forces increased accountability and accelerates path to wise management, then public is superior to private

        1. Girish Mehta

          In short – the argument is that “Being public accelerates path to wise management” is not established. The 90 day shot-clock argument proposes that the opposite happens.The long-term vs short term thinking critique is not about what is impossible, but what is unlikely.p.s. Staying true to the argument, not saying that is my argument. My argument is that it is contextual to how the industry and the company is doing at that time. It probably made sense for Dell to go private when it did, Dell was also one of the best performing public market stocks of the ’90s.

  5. PhilipSugar

    I agree. I wish they would make it a bit easier or SOX. Doing SOC1 and SOC2 audits I do understand the point which is if you don’t make people prove things there will some that don’t actually do. But in general I believe in principle over procedure. Not saying procedure is not important. But when you have outside companies that get paid by the hour to setup procedures you get a ton of expense if you don’t control.You are right the revenge on short sellers is to execute and put on a “short squeeze”.I frankly wish more would go earlier as it would give savy investors the ability to profit.

  6. TeddyBeingTeddy

    Elon it’s trying to do an extraordinary hard thing, far harder than nearly any other public company. The negativity associated with being the most shorted stock isn’t about Elon, it’s about the damage it does to employee morale… exactly when he needs their hearts the most.But. If anyone can do it, he can

    1. jusben1369

      Sadly, many of Elon’s problems appear to be directly correlated to being surrounded by enablers who allow him to indulge in his more negative personality traits.

      1. JLM

        .Shrewd comment.JLMwww.themusingsofthebigredca…

  7. David A. Frankel

    1000% agree Fred. The companies that have trouble operating as a public entity mostly struggle with being courageous in their long term goal setting, being disciplined in their execution, and being nimble enough to make short term corrections as conditions change. It ultimately comes down to leadership — strong leaders are dynamic enough to foster a culture that enables long term growth with short term execution. What we are seeing is more a referendum on the weak state of corporate leadership than anything.

  8. William Mougayar

    What are your thoughts on the proposal to report every 6 months instead of quarterly?

    1. awaldstein

      As an investor owning a public stock, i would not be happy at all. Who would be?

      1. PhilipSugar

        I wouldn’t be happy as a private company owner. Monthly too often, all management would do (I have had people want), and things slip, you can’t push 12 times a year but 4 yes. Every six months? Not often enough. Just a cadence: April1, July1, Oct1, Jan1.

        1. awaldstein


        2. falicon

          I don’t think monthly is a problem – it’s all about routine, organization, and priorities. Even if you only push out the actual details quarterly, organizing and collecting it monthly will make that much much easier and more of a standard routine (in my opinion).

          1. PhilipSugar

            Here is the thing. You are going to have to explain and analyze and that takes time if you are doing it right. So the way I look at it is it will take you 2 to 4 days to do it right. So you are looking at 10% to 20% of your time or 2% to 5% of your time.The thing is this. Your customers don’t give a shit about you spending 8% to 15% extra of your time internally. And you are going to have variances. Weigh yourself every day. It changes. Literally depending on the second sentence.Now if you are financial engineering and have not set up systems to simplify things double my estimates.

          2. falicon

            I like that…maybe the middle is light ‘notes’ each month (distributed or not)…and that makes the quarterly detailed dive easier/better.We do monthly updates, but only quarterly board meetings (that include a deeper dive and detail than what we cover in our monthly updates)

          3. PhilipSugar

            Take it from somebody with experience: You will get somebody that is: nervous/detailed oriented/has too much time/only cares about numbers/etc. I am not making a value judgement, just observation.Once you have set the expectation you cannot go back without serious pain.And you can’t just quickly do those numbers. Look people should spend a day or two before the end of the quarter saying what did we do, and getting everything in line. Then a day or two after saying why did that happen and what are we goring to do.If you come in unprepared you will get skewered AND you and your team will flail and look bad.Giving people updates as they happen, this is what is looking good, bad, ugly. Fine. But make the expectation that we will really talk about it every 90days. Your job is to work with customers and employee doers. Otherwise you spend all of your time not working with those groups……and you die.

          4. LE

            Don’t forget the impact of anxiety as well. The reason I don’t research health issue on the internet.

          1. PhilipSugar

            Yup, but that doesn’t mean I have to or will buy the stock.

      2. Mostafa Maleki

        Many companies in Europe report twice a year. I’m not sure how much of a push there is by shareholders of those companies to switch over to quarterly reporting, but I haven’t seen or heard of campaigns pushing for that.

        1. awaldstein

          Cultural differences obviously and i’m respectful of that.As a personal investor who doesn’t have drinks with the CFO when in town, these reports are all i have so the more the better.As someone who has been on the exec team of 2 public companies i simply looked at it as what you have to do.

          1. Pointsandfigures

            What’s the difference? Better information to the market creates more efficient markets. The more relevant information that a company can safely issue without endangering its business the better it is for their shareholders. More info means shareholders can think longer term and weather ups and downs. Warren Buffett never looks at the stock price. He looks at financial statements and strategy and management teams.

          2. PhilipSugar

            To me it’s this. How long does it take things to go right or wrong?You certainly can’t control it on a daily or weekly, or even monthly basis.But every three months? Yup.Now people will say you have to manage to a quarterly number.That is a treadmill you decide to get on, and once you do it is for life.I am on record saying that I want people to know the real numbers. If the principle is to manage to the number then people will bend procedures to so it. If the principle is to report the number people will put in procedures to try and improve the number.

      3. LE

        Count me in to the view of less reporting is ok.As an investor owning a public stock, i would not be happy at all. Who would be?At the level that most ‘investors’ own stock it makes little difference. Unless you have so much tied up in one or a few stocks (which you shouldn’t) it’s a non issue. Period. You shouldn’t be invested in any one stock where it matters. And if you own a broad range of stocks (which you should) it will not matter what the market does as a whole will matter.Anyone who has placed a large enough percentage of their assets in a stock where the drop could cause serious financial pain is foolish. You have zero control over things going on in the back ground that you don’t know about. You are then a gambler. (A bigger gambler than just owning stock to begin with and trying to convince yourself that you will outsmart the market).This is all a red herring the fact is the stock market is a gamble at the core. 3 months disclosure vs. 6 months doesn’t change that at all.If you had a parent that was in the market you would almost certainly have them in an index or a portfolio of stocks whereby they would not be subject to the whims of that companies performance. (Or your retirement savings).This is the same nonsense as ‘do your research’ and ‘hold long term’.

    2. fredwilson

      I like the quarterly cadence. It works well for us at USV

  9. William Mougayar

    I liked Elon’s use of the word “smartish” in the interview describing the shorts on his company, “not dumb guys, but they’re not supersmart. They’re O.K. They’re smartish.”

    1. fredwilson

      That is arrogant. It basically says “they are not as smart as me”. Which may well be true. But those thoughts should remain unsaid

      1. JamesHRH

        Arrogant is totally bang on.His biggest issue is he thinks he is so smart that every thought he has should be reality.His parents have a lot to account for on that front.Tesla is a public company because he finally got around to calling all those ‘big investors who love us so much’ and they told him that there are these things called ‘rules’ that they have to follow and they would not be investors if he went private.I doubt he is capable of embarrassment. But he should be.I would expect my 16 year old to keep her shit together at a level higher than this……and I sure AF don’t want to hear about how hard he is working.He’s a colossal jackass and the #1 threat to Tesla’s brand.As I believe John Doerr said to Leonard Bosack the founder of Cisco, ‘Hey, here comes every problem @ Cisco Systems!’ and Bosack fired back with “Without me, there would be no Cisco Systems.”….to which Doerr said, ‘Yeah, same thing.’

        1. Girish Mehta

          From long time back, when I did media training. It was filmed, our head of corporate communications was role-playing the interviewer.It wasn’t just the gotchas about what to say/not say but also the body language and expressions (hence the filming). At one point, he deliberately misunderstands my response, and goes into a long-winded question. He then plays back the recording and says – “your face is too expressive. See that expression that flashed on your face when I was being deliberately slow. You need to be careful not to show impatience”.There was no question about using the words such as above. Also he deliberately dropped a word in a question that I avoided when responding (he says – good work responding to the question without actually repeating the word used in the question).Somebody who tweets out Funding Secured…wonder if they take Media training ?

          1. PhilipSugar

            Doesn’t it suck when you get filmed???? But in a good way. What amazes me is that people don’t prep like this.

          2. JamesHRH

            Um, no, they think they can provide it.

      2. William Mougayar

        The way I read it is that the shorts are short term focused and blind-sighted by what happens in the long term. That’s how far they can see things. Elon, who runs the company knows a lot more than they do about what’s really going, and in the long term, he will be right. Shorting is a short term game. Running a company is a long term game.

        1. PhilipSugar

          Shorts are very important for any market. Not that you have to like them.

          1. LE

            The best is when people say that something like shorting is bad. As if they could do it and profit from it they wouldn’t do it to make money. I can clearly state that if I could do it and knew enough to do it I would. And I would lose zero sleep over it. If legal it’s fair game.Reminds me a bit in a small way about restaurant owners complaining about street vendors. Ok then if it’s so easy to make a buck that way then why don’t you compete with the street vendors to sell hot dogs? Or hire someone. Sorry in business nobody is entitled to continue their easy route if someone else is willing to legally cut corners or even creatively skirt the law.

        2. Girish Mehta

          Not necessary that shorts are short-term focused. The reverse is also true. Shorts may be able to look past the short-term hype or short-term good results and question if the results are real and sustainable long-term.Consider this – Was Jim Chanos short-term focused when he shorted Enron ? (Bethany Mclean has talked about how he pointed her toward Enron/the research involved).

        3. LE

          if you can make a dollar and do it legally then it’s kosher in my book. If you are in business then stop whining about others getting in your way. We should all be so lucky to have people attacking success. That is the life that you have chosen. If not it’s simply entitlement that you should be left alone. Like the celebrity whining about the paparazzi. What did you think would happen if you achieved fame? Everything would be the same? Ditto for sports stars. To bad I don’t feel sorry for you at all.

      3. Lawrence Brass

        Even as thoughts that mindset is unhealthy.

        1. Girish Mehta

          Brilliant !

      4. LE

        He learned this from and is trying to imitate Steve Jobs.

    2. JamesHRH

      I did not.I once started a lunch meeting by saying to someone I respect a ton:”_________, I really respect you because I have figured out how smart you are but you are so good with people that not very many people notice how smart you are.”Big smile across the table.

    3. Girish Mehta

      “Things not to say” as covered in Media Training 101 before a company executive speaks to the media.

    4. LE

      but they’re not supersmartYou have to admit there is something off and insecure about a person with all that Musk has (money, fame, attention) really feeling as if he needs to say that shorts are not ‘supersmart’.This also assumes that intelligence is easily defined in a quantitative way. It’s not. That is part of the problem with the world and the media. They think that it is.

  10. Guy Lepage

    +1 on everything… Public companies work well because of accountability.

  11. Mark Cancellieri

    I think one of the problems is that Musk is painting Tesla into a corner. A CEO needs to think long-term, but a CEO also needs to ensure that the company survives to make it that long. If Musk wants to be successful in his long-term vision, he needs to get to positive free cash flow and fast. He also needs to narrow his focus and stop acting like an ADHD child.

    1. JLM

      .The world is divided amongst:Fire staters (entrepreneurs);Fire sustainers (managers); and,Those who enjoy pissing on your fire.Musk is a fire starter and he has begun to attract a bunch of fire pissers. He needs to step back and get a fire sustainer in the mix. Quick.JLMwww.themusingsofthebigredca…

  12. cavepainting

    There is no disinfectant like sunlight. What is bright can be harsh, but also illuminating.Darkness is cooler and feels more privateBut no one knows for sure what’s happeningUntil you realize the rot set in the day the light recededAnd has been building up heavily ever since.Hot and transparent beats cold and opaqueEvery. Single. Time.

    1. Vasudev Ram

      Were you trying to write a haiku (using the term loosely, I know there are specific rules about the number of words, or meter, and such), or did it just happen to sound like that? Anyway, cool one.

      1. cavepainting

        Yeah, I am not that good at concaving and writing Haikus though I wish I can be. As I get older, it feels like stuff that appeals to the heart is more powerful than written for the intellect. Writing for the heart is hard though because our education system has trained us to think more in prose than poetry. The conditioning needs to be overcome to write Haikus and free flowing poems.

  13. Pointsandfigures

    the real problem with Tesla is it’s balance sheet is a mess and they don’t make money.

    1. PhilipSugar

      AND. While their stock was hot they didn’t make 163 acquisitions like Cisco did:…Why don’t they own damn near every component supplier plus at least several car makers? Arrogance.

      1. LE

        Why don’t they own damn near every component supplier plus at least several car makers? Arrogance.How is that the case? Are you saying that arrogance was what prevented them from buying suppliers?By the way I think you could make an argument that ‘it’s the opposite’. We can call it the Dunkin Donuts effect (franchise). If you are the franchisor you can have franchisees do the hard work and cut corners and operate under the law with children helping and so on.. (Also applies to Chinese restaurants vs. PF Chang). So you make money on their backs and at their risk. If you own the stores (like Starbucks does primarily (they do have some franchise) then everything has to be on the up and up. And if you own the factory then there are simply things you can’t do that you can do if that factory is your supplier. (Noting that bought a factory but that situation is different).So my point is if Tesla owns the suppliers then they can’t as easily ‘bust their balls’ the same as if they are merely a big customer. This is what Walmart does. They get more by not owning than by owning. Why own a box maker (they might for all I know) if you can pit box makers against each other and get a better price that way with less risk (if you are large enough).Think of this in your own business. Would it be better for a casino account to own your company or to merely be a big account which you can lose more easily than what you would have to worry about typically? Which would be your job (and you can then also more easily make excuses or bullshit out of a situation not saying you would do this but you get my point).

        1. PhilipSugar

          I am saying when you can issue your own cash… shit.

    2. JamesHRH

      Elon doesn’t find making money very interesting.

      1. Richard

        Elon’s vortex dismisssed all forms of IP and moats. He believes that innovation will always keep Tesla one step ahead.

        1. JamesHRH

          Any leadership philosophy that has a single focal point is doomed.Ask the local expert – @jlm.

    3. JLM

      .Somebody like Volkswagen (VW, Audi, Porsche, Bugatti, Lamborghini & Ducati, Skoda, Seat) is going to take a big stake in Tesla and then take the company over.It was reported this morning that VW was prepared to step up to $20-30B of the $420/sh Tesla “offer.”VW knows how to make cars – 2MM per year.VW knows how to make the appropriate level of luxury cars.VW has stable management and access to capital in the secondary markets.Study the Skoda story (Czech car company acquired by VW in 1993) making 1.5MM cars a year to get an idea of what VW can do with German engineering and admin.JLMwww.themusingsofthebigredca…

      1. Girish Mehta

        Skoda is now the second most profitable brand in the VW group behind only Porsche. Ahead of Audi.In India, Skoda has been recently been give charge of driving growth for the VW group in the country.

        1. JLM

          .When they bought it, it was a disaster. I have heard folks say a Skoda is nicer than a VW. What say you?JLMwww.themusingsofthebigredca…

          1. Girish Mehta

            Haven’t driven it, I cared more about cars 20 years back when I used to drive a red, supercharged Pontiac Grand Prix GTP in Austin :-). Now I know very little about cars.

          2. Amar

            I don’t know about nicer but they are ubiquitous in India. Skoda is more popular than Ford, Honda, german cars all put together in India. I think Toyota might be the closest in terms of mind & market share.Note: These are opinions rife with selection bias. Bias 1: Seen through my eyesBias 2: Influenced by the purchasing habits of people in the Indian cities I have traveled to frequently recentlyBias 3: Reference bias. I remember Skoda particularly since I noticed them for the first time in India

          3. Vasudev Ram

            Never sat in one, but I’ve seen Skodas on the road in India, and they seemed to be of good quality (only judging by appearance though).IIRC, they advertise their quality too. so maybe it was a subliminal effect.

      2. JamesHRH

        Elon will never allow a big company in the door.He lacks the confidence to do it.His narrative has him at the Center of the story & the story is one of huge special success.He would be far better off to let VW in, cross the chasm with them & then hold 100B in VW stock and concentrate on his other ideas.That isn’t happening until he runs Tesla into a brick wall – or this fall’s debt payments.Seen this movie. Lots of times, just on a smaller stage.

      3. jason wright

        and it knows how to fiddle its emissions data. it needs the ‘halo’ of electric.

      4. LE

        If VW buys then it might be ‘catch and kill’ or at least ‘catch and control’.What I am saying is that long term paying to prevent a threat is not necessarily a bad business decision. The only reason car companies are putting money into electric is because of Tesla. The market isn’t there and the demand isn’t there. If you get rid of the infection all the sudden things might return to normal.By the way the issue with electric isn’t a brains and talent issue at all. If that were the case you could buy brains and talent (which is what Tesla is attempting to do). Electric is more like trying to overcome a brand advantage that an existing legacy manufacturer has (like Porsche or Lamborhini both owned by VW) using brains or talent you can’t do that. A perfectly crafted Porsche replacement has no value until it has been around for a generation and people grow up lusting for it.

        1. Lawrence Brass

          What is the average car renewal rate in the US? If we call that a cycle I think that when the conversion to electric begins, it will take 2 or 3 cycles to be complete. It will be fast, not gradual. The majority of people will want the new.

          1. LE

            I think Tesla is already planting seeds in the younger crowd and building a brand but I think that crowd is tech specific and located in only certain places and income brackets. And simply because the way cars are viewed today vs. when I was growing up there will not be anywhere near the impact going forward car wise.When I was growing up a car was a big deal to have to get away from your parents because they were not your friends and they didn’t cater to your needs and they busted you about things and kept you in line. And I am glad for that even though at the time it didn’t seem that I would be.

  14. falicon

    We’re still a small private company, but we do a monthly “investor update” that has had us operating with the mentality of a public company since day one of taking any angle/investor money.When going from zero to one, monthly updates are easy and everyone feels great…it’s as you enter the dip on any challenge that monthly (or even quarterly) updates start to stress you out…but they also keep us super focused and leave little room for excuses (or for exponential excuses)…sure we can talk around a problem for an update or two if we really wanted to, but it would still have to be dealt with sooner rather than later, because those monthly update deadlines just keep coming and there is no long term hiding.(luckily, or perhaps because of the practice, we haven’t had too many “down” updates through our short life — let’s hope that trend continues!!!) 😉

    1. LE

      I wonder to what extent the sports guy in you is on board with this because sports is something where results every day are what matters in terms of judging yourself.

      1. falicon

        I should also note that, while I’m on the founding team and involved in the collection of the information (primarily for the tech bits)…I’m not on the board and ultimately not the one that actually generates the monthly or quarterly updates…our CEO actually does all that stuff. :-)…but he’s a sports person at heart too, so I think you just might be onto something there…

  15. Tom Labus

    As a public company investor I’m very pro public markets. My concern is the decreasing number of individual investors that continue a long term trend. Companies talk to analysts and institutions but rarely to the indiviual. Elon needs to hire good CEOs for his companies and take a different role.

  16. Swatick Majumdar

    I agree being transparent may seem hard but it’s the best strategy, whether public or private. it takes courage but shows leadership. However, I don’t think all short sellers want public companies to fail- they just don’t agree with the current valuation and so go short instead of long. Yes, there are some nefarious characters in our midst but their actions are as short term as their myopic vision.

  17. JLM

    .Tesla is not a typical public company and Musk is not a typical public company CEO.It would be wrong to take much of a view of private v public view of things based on Tesla or Musk.As a public company CEO, Musk needs a firm hand from his board. What he did – open speculation about taking the company private and the potentially falacious assertion that the funding was secure is a violation of so many SEC norms as to defy reason.Prediction: both Musk and Tesla will get taken to the woodshed by the US SEC to the tune of millions of dollars.The second he whispered anything about a “going private” transaction, the company should have formed a committee of the independent directors and forced Musk off the board (even temporarily) and made him deal with the independent committee which should have had independent investment bankers and lawyers.A CEO engaged in a “change of control” activity cannot be both inside and outside the tent. A responsible, experienced, knowledgeable board could not fail to take swift action to protect the interests of the shareholders.A perfect example of how to do it right was Michael Dell’s going private transaction with Dell Computer.Tesla is on the top step of what is going to be a very bumpy ride as everybody else who knows how to make cars in quantity is getting into the electric car game.Musk is acting increasingly erratic and appears to be under intense personal pressure. He needs a solid right hand man to help carry the burden.As an aside, I went back and forth from Austin to Savannah four times in the last two weeks and noticed for the first time Teslas on the Interstate. I had been looking for them. I also noted that places like Cracker Barrel are now offering charging stations in their parking lots.JLMwww.themusingsofthebigredca…

    1. William Mougayar

      Austin to Savannah- isn’t that a 15-16 hour drive each way? wow.

      1. JLM

        .19 hours, including eating and refueling. I leave at 3:00 AM and am there by 10:00 PM. I listen to Sirius XM and memorize the news.JLMwww.themusingsofthebigredca…

        1. Lawrence Brass

          Curious about why don’t you fly there instead. In your plane. Does she have a name? Bonnie perhaps? 🙂

          1. Vasudev Ram

            Maybe Jeff just likes long drives. They can be fun. More so if on good roads and passing through good scenery – farms, wilderness, lakes, etc. I guess on that long road trip he went on, there must be some good scenery. The US has tons of fantastic nature areas.

          2. sigmaalgebra

            He had to go through several of Louisiana, Mississippi, Tennessee, the Ozarks of Arkansas, across the Mississippi River, maybe across the Tennessee River, the Smokies, Blue Ridge, of east Tennessee, the foothills in the Carolinas, great BBQ — Texas, Tennessee, Mississippi, Carolinas — all the way!

          3. JLM

            .4.5 hours to get out of Tx (Austin, Houston, Beaumont), La (Lake Charles, Lafayette, Baton Rouge), Miss (Gulfport, Biloxi, Pascagoula), Ala (Mobile), Florida (Pensacola, Tallahassee, Lake City, Jacksonville), Ga (St Simons, Savannah).Kolaches, biscuits, crawfish, boudin, BBQ, and the Georgia Sea Grill in St Simons.Big water crossing the Mississippi, Mobile Bay and Pensacola and around Brunswick, Ga. A whole lot of history enroute.Got to love a road trip.JLMwww.themusingsofthebigredca…

          4. sigmaalgebra

            Looking at a map, you definitely took a southern route, lots of miles near the Gulf. Checking where Savannah is, that makes sense.So, you were in Pensacola: When Dad got back from a trip there, he brought presents for my brother and me. You went to Jacksonville — I was born there.I remember seafood restaurants with hush puppies and butter — yum!

          5. JLM

            .Plane is being worked on.JLMwww.themusingsofthebigredca…

        2. sigmaalgebra

          My best was 9 hours from DC to NE Indiana. At night. Rarely under 90 MPH! 400 cu. in. Firebird! 12 MPG! Why? I was working in DC, and my fiance was in NE Indiana! Yup, 12 miles per gallon of each of gasoline and testosterone!

    2. Girish Mehta

      Remember our discussion about Musk and Tesla here. Over a year ago, I think.We said then that the Halo Effect was very strong with Musk.The Halo is starting to look like a Dark Shadow now.

      1. Lawrence Brass

        Recalling a more recent topic, I think he needs to tune his pills/drugs a bit.

        1. jason wright

          he’s certainly flaky.

          1. Lawrence Brass

            He is brilliant. I don’t understand why he needs to put himself through this. How many times I’ve had this conversation with other people I care for..

          2. JamesHRH

            His self worth is directly and wholly related to his ability to prove he is smarter than everyone else.Building Tesla was dead simple he said – 4 easy steps. It’s not & now he’s strung up on his own ego.Classic did not know what he did not know arrogance trap.

          3. Lawrence Brass

            Scalability is hard.

          4. JamesHRH

            1M times do when exec team is capped at the capability of the founder.Teams win. Geniuses rarely do so.

          5. jason wright


    3. LE

      Prediction: both Musk and Tesla will get taken to the woodshed by the US SEC to the tune of millions of dollars.How much will it ‘hurt’?I think that a personality like Musk may very well thrive and not care if he even personally has to pay a fine. Even a big fine out of his pocket. I don’t think that would even matter much to him and he may have even run the numbers prior to making that tweet at least in a napkin sense. And is cool with it. He can deal with that.The only thing that would work against someone like that would be to have the threat of them not being able to achieve their mission. Either by getting them so wrapped up that they have no time and get aggravated an annoyed or by potentially threatening them with not being able to do their job. [1] That would work better than a fine. People spend gobs of money all the time for fun. Very possible that simply the satisfaction of having the other guy (a short) loose is enough to spite yourself. And some may enjoy that. This guy is not normal in his behavior or the way he operates.[1] I have done this in the past and it works very well against a well funded adversary (of course details do matter this is not blanket sop or anything close).

    4. SFG

      I think that the 420 reference point is something to note and wonder about as matters unfold!


    There are too many people vested in the failure of this company. And Elon is doing what he does… finding a way to break the mold.

  19. jusben1369

    Musk is simply amazing at launching new ideas and rallying a group of people interested in changing the world. However, he is not a public company CEO – particularly one who really has to rely on the public markets for capital. Rather than look inward and honestly assess his strengths and weaknesses, he looks externally and blames the dynamics of being a public company as being at fault. It’s interesting no one around him has found a graceful way to have him exit the role that he is not suited for given he is so strong in other ways.

  20. Elia Freedman

    How did we settle on quarterly reporting? Would we better off with a different time frame?

    1. PhilipSugar

      When you think about it, it is very logical if you do it on a calendar basis. 1Q is about the start of the year, 2Q is about after things really get going, 3Q is the summer, and 4Q is about ending strong. If you did monthly let’s just say a promotion hit on the last day of the month, you spent the money but didn’t get the return for example. If you did it yearly on the other hand you are flying blind for a year.

  21. DJL

    This is a simple case of “shut up.” Anyone who is fit to run a public company should know better than to publicly discuss the merits of being public or private when you are already public.

  22. Mostafa Maleki

    The underlying problem, in my view, is the Wall St analyst community’s broken incentive structure. They are incentivized to produce ratings and 12-month target share prices. They are compensated according to how well these ratings/targets play out, and how accurately they can predict the next few Qs of earnings. It is therefore natural to expect their questions on earnings conference calls or their research notes to be concentrated around short-term predictions. Many institutional shareholders with very large AUMs in turn follow their advice, and their actions move share prices. For as long as Wall St’s incentive structure does not change, and for as long as the large Wall St banks maintain hold over distribution of advice, this short-termism problem will persist. Perhaps sell-side analysts should start getting rewarded on long-term performance, similar to GPs of private funds.

  23. Frank W. Miller

    While its an interesting question, the real problem is Tesla itself. The cars cost too much and are hard to build in quantity. Thats the real underlying cause of Musk’s behavior. There may yet be a profitable electric car company, but I don’t think we’re quite there yet.

    1. sigmaalgebra

      When a good electric car is built at a reasonable price, it will come from Ford, GM, Chrysler, Toyota, Honda, maybe a few more, but not from a startup.The high interest in electric cars was a fad from hype and the Greenies, and the Greenies are now widely discredited and in decline.The basic facts of electric cars remain: The range is too short. Electric charging time is too long. The batteries are too heavy and wear out too soon. Those problems are having a tough time competing with a 20 gallon tank of gasoline and the current highly refined, astoundingly reliable, e.g., commonly over 200,000 miles, piston engines.Sure, a series wound electric motor has, from the basic electricity and magnetism math, infinite torque at stall, that is, as it starts to turn. In practice, such an electric motor can have astoundingly high torque at low RPM. So, stoplight acceleration can be shockingly fast.But that stoplight acceleration does NOT mean a lot of power: Above 40 MPH, acceleration or going up hills requires actual POWER, energy per unit time, and energy is conserved, i.e., no free lunch. For that power, tough for some batteries to compete with some pistons and gasoline. Also heating, air conditioning, and power steering take surprisingly large amounts of power. There is no royal road to that power — again, a 20 gallon tank of gasoline is tough to beat.Besides stoplight acceleration, also an electric motor needs no transmission and can be used as brakes, actually returning some energy to the batteries. So, electric cars have some advantages.But in practice, now, we get rid of cars not because of anything an electric motor can solve, except maybe for brake linings, but because of corrosion, maintenance of some of the goofy little accessories, maybe electric seats with memory, wear of the interiors, tires, shocks, sagging springs, worn suspension bushings, worn, tricky constant velocity U-joints in front wheel drive, leaks in the air conditioning working fluid, collisions, etc.Long ago a Ford executive summarized the situation with:You build me a good battery, and I will build you a good electric car.That obstacle, among other significant ones, still applies.I know; I know; it’s also possible to have a hybrid where an internal combustion engine charges a battery.Apparently one version of a hybrid from Porsche now has the best record at the Nürburgring — there’s an astounding video with the car, with a LOT of aerodynamic down force, going around corners with, IIRC, 5 Gs of lateral acceleration!!!! IIRC, the engine had only 4 liters!I wondered about having a ceramic, centrifugal flow gas turbine of maybe 1500 HP charging a battery — then could charge up the Rockies, 100 MPH, uphill, in summer, big SUV, pulling a large trailer!But it appears that gas turbine engines are still quite expensive. That’s surprising because the turbochargers are not nearly so expensive.Hybrids can have some big advantages. When the 18 wheel trucks, interstate buses, and 50+ foot yachts ditch their Diesel engines and take gas turbine hybrids seriously, then I’ll look again.Uh, there’s a video of a guy who took a Polish bush plane, got rid of the Lycoming piston engine, replaced it with a Pratt and Whitney gas turbine, and did a lot of other modifications — he went many months sleeping only about 4 hours a day and spent ~$1 million. Sounds interesting until realize that the gas turbine, new, goes for about $500,000. And the 1/2 million still gets you only about 6:1 compression ratio when Diesels are commonly 18:1 and some decades ago US military jet engines had 27:1!!!!Right: The US military!!! The US submarines are hybrids — IIRC, nukes, steam, steam driven electric generators, batteries, and, finally for the propellers, electric motors. All it takes is a lot of engineering and a LOT of green dollars! For engineering like that, “If you have to ask what it costs, you can’t afford it.”.The basic facts remain: A good piston engine and a 20 gallon tank of gasoline are tough to beat.

      1. SFG

        Great post, Sig.

    2. LE

      The mass market does not want these cars and does not need these cars. Ditto for most forms of self driving technology. In limited cases it’s great (rush hour on a crowded freeway). Compare that with something like Ez Pass or similar. Quick adoption because it solved a very minor pain point (and before that tokens instead of cash). Or fax machines. Or cell phones. Or car phones before that. In those cases price mattered in terms of adoption.People buying electric because it’s cool to be green or because they have the money to spend on electric is a niche market for a long long time. Sure could change but why do I need to think at all about where I will get a fillup or plan where to get a fillup at all? I don’t get it. Hybred? Different story that’s possible for a larger niche if the price goes down.Disclosure bias: I like the sound of my gas engine. So do these kids when they heard it in the parking lot of the Whole Foods with their dad after I started it up…. https://uploads.disquscdn.c

      1. Frank W. Miller

        I’m going to have to disagree with both you and sigma on this one. Electric cars will continue to evolve and improve over the next couple of decades to the point where IC engines will become a niche. I base this opinion on two fundamental facts. 1) Electric cars have no emissions. I don’t really think much of climate change in the way its portrayed in the media but its clear that we cannot continue to burn gas as the primary source of energy. Its not renewable and its dirty. 2) Electric motors make more sense for ground transportation. As already observed they are more powerful at low rpms and perform better overall in the transportation role or they will get to that soon. They also do not expend any energy when they are not running. These efficiencies will come to dominate over the course of time when compared to the weaknesses of the IC engine.When you think of car drive trains you need to think of two elements, energy production and energy transmission. Today batteries and or small IC engines server as the energy source (or production) in cars. The nature of the IC engine or the electric motor serves as energy transmission to mechanical consumption but the moving wheels. As was observed in a previous by me and by many others, the problem is not with energy transmission to the wheels, electric cars win hands down there. The problem is with energy production for these electric motors. Batteries will get better and then that problem will go away. If one of my kids (or whoever) doubles the energy density of batteries, IC engines will go the way of the dinosaur. That may happen in my lifetime…

        1. LE

          over the next couple of decadesDecades. Exactly. You can name the invention if I can name the timeline. [1]but its clear that we cannot continue to burn gas as the primary source of energyA very large percentage of the population does not care about what happens in the future. If they did they wouldn’t take on risky behaviors that impact their own personal future like they do mostly in exchange for pleasure. You can’t escape this fact. [2]Will also add that a great deal of the global warming issue is driven by people who are impacted by rising level of the ocean. Majority of people don’t live anywhere near where they would be impacted by rising seas (taking only 1 way of impact). This is not a statement on whether it’s an issue or not or what I think in particular but just the reality of where the interest is driven from.I’ll give you an example. My father in law who is up there in the years and has numerous health problems will be lucky to live 10 years but doesn’t want to buy a place in Florida because he thinks the state will be under water sooner than he will die. He is not a stupid guy either or a simpleton (although the logic may make you think that). He just is not thinking rationally about his own future.I am younger and just bought another place with a beach view right on the beach where the Army core just dumped sand. I am enjoying it now and not really worried about what will happen potentially in the future (nor are many other people I might add judging by the pricing of the real estate). I would never though inflict public policy based on how the issue might impact me personally. It’s a risk I am taking by locating near the water.[1] Variation of ‘you can name the price if I can name the terms’.[2] Plus I hate this entire worry about the future when there are people in our own country that have it shitty right now and we have things that we need to focus on today.

        2. sigmaalgebra

          Yup, as I quoted, you build me a good battery and I’ll build you a good electric car.But add the Joules for a 20 gallon tank of gasoline and the Watts to put that much energy into a battery in the time it takes now to fill a 20 gallon tank of gas: When you connect that cable, assuming can lift it, let me get at least 20 yards away right away.I believe your concerns about gasoline are just not true:(1) Dirty. I don’t see that. Even the air in NYC is fairly clean. 70 miles north, the air is perfect, no signs at all from gasoline.(2) Supply. Apparently no one knows how much oil is available or will be decade by decade. We’re not nearly out of oil yet. We can still go for US fracking, Venezuela heavy oil, Canadian tar sands, fracking elsewhere (strange if only the US has fracking opportunities), Russia (11 time zones, a lot of land area for oil), South China Sea, Alaska, the Arctic, the continental shelves, etc.(3) If we do run out of fossil fuels for gasoline, likely no biggie: All it takes to make gasoline is carbon, water, and energy. WWII Germany did that. IIRC South Africa still does. We can get the energy from nukes, maybe even solar in, say, some deserts. And there are some possibilities from bio-engineered bugs.Till we have those dream batteries and fantastic charging stations will be many years when many alternatives can develop also.I’m all for electric powered golf carts, fork lift trucks, wheel chairs, electric razors, etc. and the battery in my HP laptop, never moved, always connected to the grid, is nice to have when occasionally the grid electric power goes out — the battery takes over and I don’t lose the dozen or so windows I have open and don’t reboot and, thus, risk another Microsoft Windows 10 update that takes me half a day to recover from — e.g., the last update changed the “user agent string” my Web browsers send which meant about 2 hours in telephone mud wrestling with my bank’s help desk in India — bummer. The update also changed several other settings that should not have been changed as part of an update. The update needs some updates.I have a problem with gasoline — ethanol and its propensity to absorb water and, then, in the gas tank of my lawn mower drop the water and stop the engine. The mower engine screams not to use gas with ethanol. Last week I got a warning: Suddenly huge clouds of blue smoke from oil burning came out of the exhaust and there was a small oil fire. Why? …. Apparently enough water and/or ethanol got into the crank case oil, and it boiled! The fire was caused by oil blowing out the crankcase breather tube.I have another problem with ethanol — it rusted out the gas tank and fuel line in my SUV. Also it ruined the plastic fuel line in my Weed Eater grass trimmer — I hacked a better fuel line.

        3. PhilipSugar

          Are you on crack? How do those batteries get made? How do those electrons get made? Why do all new cars from Europe turn off in 5 seconds at stop?

  24. JLM

    .Having run public and private companies for more than a decade each, I would opine that there is not much real difference between a well run private company and a public company.Let’s take a second and note the real differences:1. A public company is subject to regulation by the US Securities and Exchange Commission (Public Company Accounting Oversight Board, its little sister) which sounds foreboding, but is sort of a blessing in that they have an answer for everything.The SEC has regional offices and you can actually go see them to get your questions answered.2. You have to report quarterly (US SEC Form 10Q) and file an Annual Report (US SEC Form 10K) in a prescribed format with specific required footnotes (as an example, you file the CEO’s Employment Agreement annually). Again, you can take comfort that this is all spelled out for you.You get this written and loaded one time and then turn the monkeys loose – monkey see, monkey do.You will attach a bunch of schedules to your annual report which are extremely useful – as an example a list of all the leases and terms you have, the comp of your most highly compensated managers, your stock option plan summary.This discipline forces you to have all your stuff right by date certain which is a good thing.3. You have to have your numbers reviewed quarterly and audited annually. There will be an auditor. Let the CFO deal with the auditor; don’t even speak to them.If you do a good job on your PBC (provided by client) list, it is a breeze. If you do not, it can feel like a barbed wire enema.4. You have to conduct your affairs in accordance with Reg FD (fair disclosure, not full disclosure) which means that you have to provide “wide dissemination” of whatever you release with a safe harbor of making US SEC Form 8K filings.Whenever you send out a press release (using PR Newswire as an example, to meet the requirement for wide dissemination), you attach it to a US SEC Form 8K and send it out to swim in the safe harbor.5. You have to have a board with specific requirements – independent directors, charters, and proscribed meetings.You have to retain specific board admin – agendae, minutes, corp resolutions.6. You will get audited by the SEC every three years. They are very good and you will be surprised at the level of detail they delve into. They frown on using non-GAAP terms like EBITDA.7. You will learn the accounting treatment of non-cash compensation and the annual evaluation of the impairment of goodwill.8. Insiders will have to report their stock ownership on US SEC Form 3/4.9. If anyone purports to attempt to take control of a public company (talking to you, Elon), you have to file a US SEC Form 13D to alert the company and public what you are up to. This is a requirement of first impression.Once you learn the drill, it is very easy.What public company requirements create is a framework of discipline which ensures that stuff gets done on a timely and complete manner.The single most important thing any business can do – from a regulatory perspective – is to close their books on a timely basis every month. Once you do that, all the quarterly reports and annual reports flow from that.I used to bash the accountants to close within 3 days of the end of a month. Every company I ever ran had a problem meeting that requirement until they did.As you can see there is not much difference between public company requirements and what any well run private company would do.Based on my experience and in my dealings with YPO type companies, I would think that about 25% of US companies are “well run.”It is no big deal. Just find a CEO who has done it before and buy him a cup of coffee.JLMwww.themusingsofthebigredca…

    1. sigmaalgebra

      WOW! As a B-school prof, I never saw, likely there never was, so much practical business education per word and minute as in that post. Solid gold nutshell presentation.Learning that material and getting it so well organized by paying “full tuition” could be one of life’s bigger expenses in time, money, effort, and opportunity costs.Saved, indexed, etc. Thanks.

    2. Vasudev Ram

      >The single most important thing any business can do – from a regulatory perspective – is to close their books on a timely basis every month. Once you do that, all the quarterly reports and annual reports flow from that.>I used to bash the accountants to close within 3 days of the end of a month. Every company I ever ran had a problem meeting that requirement until they did.Interesting. What are the reasons why people have problems meeting that requirement? (I guess it could be a longish answer, pointers are fine.) I’ve worked in big and small companies, but not been much involved in the accounting side of things, except some related to getting and spending budgets for computer hardware.

      1. JLM

        .Accountants usually work with dead information, so they have no sense of urgency.If you get the general ledger right – meaning you accurately enter payables and receivables on the run during the month – then the rest of the enterprise level accounting is just consolidation.I used to make the accountants work long hours at closing time to provide management info to the operators.Three day old info is worth something while 15 day info is not.I used to provide excellent equipment, software, and working conditions so I could get the info in a timely manner. Lots of overtime, but lots of comp time also.JLMwww.themusingsofthebigredca…

        1. PhilipSugar

          I should have said this as well for finance people I think there are these double days (16 hrs) two a month for closing, four a for quarterly, eight for year end. So you accrue 12+16+8= 36. 7 extra weeks off but you bust your ass I don’t care weekends or what for those days.

        2. Vasudev Ram


    3. JamesHRH

      Perreto’s Square (80(80/20)/20) – 4% World Class, 16% Well Run 64% Meh 16% Disasters.

  25. JLM

    .The frequency of public reporting should be a function of the business cycle of the company – not the economy, the company.A big oil company (talking to you, ExxonMobil) doesn’t need to report fully on a quarterly basis – their revenue is primarily long term contracts subject only to pricing variation and their exploration programs are long term also.There is spot pricing info from alternative sources.OTOH, a consumer company like Apple or Amazon or Walmart can have huge fluctuations in seasonality, sales, product cycles, and other near term considerations.Big companies provide a lot of useful info on their websites and through their IR (investor relations) departments.The decision as to quarterly v semi-annual reporting will take 2-3 years to sort through and the answer will be, “Well, it depends on the company.”JLMwww.themusingsofthebigredca…

  26. sfrancis

    Appreciate this rebuttal of several straw-man arguments I’ve seen on this topic over the years.

  27. Mac

    Dan Primack called it the “slapdash saga” in his post this morning. I have to admit I had never heard that word until today. Now I realize I am one.

  28. LE

    Private companies are able to hide that from their employees, the media, and othersWell first of all if you are a private company the media does not matter. Other than publicity which can help you obtain (but also lose) business why does the media matter at all? What they think? Of course the media is more easily manipulated if you are private than public but all the media is in close to 100% of the cases is simply entertainment for the vast majority of people out there who would read a story. So the media is not motivated to be fair at all. Most people who would read about a company don’t have a reason to care about their financial shape. Sure it would be nice to know when making buying decisions or if you are a vendor but that cuts both ways. The negative info about the company is like discovering a lump and worrying about something that may not even matter long term. The anxiety will kill you.And don’t say that someone buying a car would like to know that info. Companies are always losing money for various reasons and usually the media hastens demise because they sensationalize and it becomes the issue of the month. So if you are a private company and the media decides to dig in you all the sudden have no breathing room at all. [1]And who are the others? Vendors maybe? Welcome to the world of business where we all eat ‘it’ but at different tables. Vendors take a risk and have the ability contractually to protect themselves if they want and not do business with a company if that company is not able to satisfy a credit requirement. The fact that your competitors are willing to take a risk (and make it harder for you to make a demand) is just in short ‘to bad welcome to the world of business). (Note there is also Dun and Bradstreet or similar ways to check financial health and manage it.) Honestly if I am a big vendor I don’t want a companies financial health to be public that could only be bad for me (if they do well others go after them as a customer and if they do poorly others might cut off credit and they won’t be able to pay me).I am sure that when you got your house renovated you were not able to obtain personal financial and/or health information for the (let’s assume) small contractor you were using. You basically just took a chance (based on prior use or reputation) that everything would work out ok. Sure you could have possibly obtained that info or a performance bond but you probably didn’t. And while it would be nice if you could have public info about the contractor (in some cases there are variations of course) that could also have hastened the demise of the contractor as well (just provided up and downside I typically want all info that I can but not all that info to be public for very obvious reasons).[1] A great case of this might be how Audi’s business was killed in the 70’s based upon a report on 60 Minutes which cast a whole cloud on the company. That wasn’t financial but illustrates some of the point.

  29. Fred Ehrsam

    It feels like there is something to the short selling negative, no? You’re right that people will be working against you no matter what, but shorting is a mechanism that can create a much more direct and widespread economic incentive for people to work against you.For example: there probably wouldn’t be any anti-Tesla memes on Reddit if those people didn’t have Tesla shorts open on Robinhood.This probably only gets more extreme in crypto, which is more internet native and faith based.

    1. fredwilson

      I think it is a positive that people are betting against you. Imagine if everyone was sucking up to you and telling you that you are amazing. We all need haters

  30. FKA Curmudgeon

    Unfortunately, despite that last sentence, the overall trend is fewer and fewer public companies and more companies owned by private equity. All part of the lopsided distribution of wealth in the US.

    1. jason wright

      not to worry. ‘public’ is a misnomer. such companies are very much in private hands. the future of lopsided distribution is assured. what is needed is a revolution in the nature of value assignment – ‘i am value’.

  31. Sean Saulsbury

    The short-sellers-as-enemies argument is bunk. Short sellers do not *want* you to fail. They believe you will fail and then are betting on it. If they believed you would succeed, they would buy the stock.

  32. David Albrecht

    Fred – absolutely. Anyone who complains about quarterly pressure, just hold up Amazon. Public going on 20 years and long-term from day 1.I do think they benefit from a popular CEO though. A less-popular CEO might need a dual-class share structure to ensure they maintain control. I used to think such dual-class structures were a negative but these days, I’m ok with the idea that if you don’t like how it’s being run, sell it and invest in/create something better.Would love to get your thoughts on dual-class shareholding in future post.

  33. Andrew Thomas

    I own a lot of Tesla stock and follow it closely. I am glad they are staying public but I feel like the concerns are being dismissed too simplistically here.Regarding short term quarterly reports, there are some minor problems. As an example, deliveries are prioritized for quarterly numbers and not what is in the best interest of customers. So, the beginning of the quarter sees a lot of foreign exports whereas at the end of the quarter is a rush of local deliveries.The short seller issue is the more serious concern. I was skeptical about it at first and thought the same thing… Life is tough. However, I now believe it’s a serious risk for any public company especially if it relies on financing. If you’re interested look at the case of Fairfax Financial. They sued the short sellers for $8 billion dollars… It’s like a Michael Lewis book.

  34. Dan Epstein

    After hearing Chanos on a podcast and beginning to follow some of the bearish folks on Tesla Twitter, I’m personally short via puts. It will be interesting to see what happens with Tesla.

  35. Nick Ambrose

    Well said, agree 100%

  36. Sierra Choi

    I really don’t think this negative publicity will hurt Musk. If anything it adds to Tesla’s eccentric brand, as Musk is a kind of Howard Hughes figure of our generation. People don’t get excited talking about Fords or Toyotas, but they do get excited talking about Teslas.As long as Musk a) delivers on the 650K-1million Tesla cars produced by 2020, and b) if he is able to continue to build Tesla as a luxury brand whilst c) building secondary brands for the East Asian demographic from the new Shanghai production centre, then he can be as eccentric as he wants.Although Faraday Future was initially considered a rival to Tesla, I really think the Volkswagen Group is the one to watch. They have all the market share from luxury to economy to electric: from Porsche, to Volkswagen to Skodas, they know how to dominate the entire car industry and this is something Tesla needs to do as well.

  37. Ryan Graves

    Great post. Fully agree that quality leadership can and does overcome the challenge of being public. “Taking the plunge” was an interesting way to end a post that was positive about going public however.

  38. YalieNE

    Musk is a whiner. HE has benefited immensely from all the media attention he has been given over the years, much of which comes from left leaners who love promoting his electric cars.

  39. Crativ Packaging

    I think being regulated in some sense is good for keeping companies in line and adherent to rules meant to protect others.

  40. Thái Sơn Nguyễn

    I think Musk had his point when mentioning all those cons about being public. It is undeniable that short seller will create another pressure on the firm, no matter how courage the leader is. Also, more people on the board means more pressure on the firm’s vision, some would only care about profit quarterly to quarterly thus try affect the long term vision which might take time and losses to actualize. It’s true that being public has its advantages, however i believe that the choice depends on each firm’s context and Musk has a strong base to propose his idea.

  41. KBK

    Raises the question dammit