He bought a tech company that was about to run out of gas, and he sold its shares too soon. They sold off to some other buyer, who in turn sold them to another buyer who in turn… ummm… he sells them to someone else. He may well have been smart enough to realize that the best way to become a billion dollar investor is to have a multi-billion dollar company, as much as anyone in the Universe. With the stock price so cheap, he thought, he’d be able to put his personal money in and buy stocks along the way. But he is the CEO of a $70 billion company, and they aren’t buying everything he touches… they’re buying everything he touches. That’s the smart thing to do, not a dumb thing to do.
The problem is that it doesn’t work very well. Here’s what I mean.
The best part about Elon Musk is that he’s still running something, even if it isn’t as successful as he had planned. And that helps us understand the need for a fundamental change in investor investing. I’m sure he’d agree that being wrong in the sense of being profitable is ok, but not being able to turn your company into the world’s next great energy company is not. If he can make solar cheaper, more efficient, and allow the market to decide, then it is still great company to be, even if the numbers are a bit shaky. But even if they couldn’t, he would not be able to drive the price down any further. If solar is even half as efficient and half as affordable as he says it will be at the end of his time, he will have no financial incentive to make the switch, and so his motivation is going to be much weaker than it ordinarily would be, because the decision was already made.
So here is what I, and many others in my field, have been suggesting. It is this:
You, the investor, are the boss. No, it is not your company. The company has no business or personal involvement in your decision-making. And no, you cannot go “down the road” in ways a non-executive knows little about, because your job depends on your relationship with the company.
The point is that shareholders are simply another customer. Don’t feel obligated to buy every single piece of stock you see that is down in prices. You have the right to do that, but you should not have to make it a requirement. Keep your ears and your eyes open for opportunities to invest in a company that’s been successful enough that you’re not just looking for stock value gain, but also the chance to see if this CEO can create value too. He may well have done so already, even if you don’t recognize it at this stage. He may also have done so a year ago, if your company invested a significant amount of money in an early stage company that is no longer in production, and is just as profitable and profitable now. So the point about management of your business is not that it’s required, but rather that it is a part of the equation .
The simple fact is that stock ownership is not an impediment to performance… for most companies . It is a part of the calculation. I am not sure how it can be otherwise if you have this kind of stock, but they are pretty darn common.
You also don’t have to get on the board just to have voting rights at the company. I have yet to hear of anyone who owned 10% of a company who did not actually have some stake in the company, and even some that held more than 10% were only given votes and did not benefit from the company’s wealth.
And in fact, I think you should be able to own more than 1% of a company if you choose. If you don’t like the way a company behaves, or the way a CEO handles his job, or even the type of person you would like to see running the company, then just own a stockholder stake when you buy the shares. If you already own one and don’t mind voting, not using that as an excuse to stay out of the decision process, then go for it. But I don’t think you should get your hopes up on doing things if they don’t seem possible to you, or you feel you have no reason not to.
How to have a conversation about how to create a market that is more fair for everyone? I’ve known some of these companies who have made moves in this direction, and I feel like they are slowly creating a market that’s less inequitable than the one they were created to prevent. I’m not trying to make it sound like companies are making the whole world go ‘round in ways that