Elon Musk describes himself as "pathologically optimistic," which is a kind way of expressing his frequently incorrect perspectives. The boss of Tesla has made a number of bold promises, like quickly surpassing Toyota Motor's production levels and raising armadas of self-driving taxis. More realistically, he has been overly optimistic about when affordable, large, or long-range electric vehicles will be produced. He now claims that the company might be worth up to 25% of the current global GDP because of humanoid robots. The arithmetic is vexing.
Luckily for Musk, investors assign him a curve. Visible Alpha estimates that Tesla is trading at 76 times predicted earnings over the next 12 months, whereas Ford Motor is only trading at 6 times. It is evident that he manages more than just an automobile company.
However, his most recent formula is genuinely puzzling. Musk forecast last week that the world's population of 10 billion would eventually desire at least one robot, with 1 billion being produced annually, and that Tesla's Optimus will account for 10% of the market. According to his theorem, if $20,000 were charged, each would result in $10,000 of profit, or $1 trillion a year.
For a product that has become so common, the margin would be large. Musk has lowered his valuation goal to 20 times, but even so, this still amounts to $20 trillion in market value from robots, not to mention the additional $5 trillion that self-driving cars are expected to bring in. According to the International Monetary Fund, the profit from robots alone at Tesla accounted for 1% of the global economy last year, while the profits of Saudi Aramco, the world's largest oil company, are expected to account for just 0.1% this year.
Musk's practice of multiplication resulted in subtraction. The day following his address at the annual meeting, Tesla's market value dropped by two percent. Every time he updates the market on Optimus, there is a consistent trend in which the stock either declines or barely moves.
Concepts that are simpler are easier to comprehend. Tesla's stock increased 12% as Musk reiterated his commitment to producing a car that is affordable. The company's initial, rapid ascent also coincided with rises in production and profit margins.
The issue is that his calculations are becoming wilder. Musk's prediction that by 2027, half of all cars sold in the United States will be electric is likely to come up terribly short. His target of 1,000 kilometers for the Tesla Model S's range was off by a factor of two. When discounted back at a rate of 10% and anchored to 2030, the robot estimates indicate a stock price of $4,425; in reality, it trades for less than $200.
These miscalculations may seem scholarly, but Musk's consistently high numbers rely on full autonomous driving soon, in addition to other irrational assumptions. There are times when simple math will do.