Is Elon Musk, the serial entrepreneur behind SpaceX and CEO of Tesla Motors (NASDAQ: TSLA.US), a visionary? Yep.
Is Tesla Motors, the firm developing electric cars and their components, going to make the big money some day when such vehicles take off? I’m less convinced of that.
The thing is, history is against it. When conventional cars were first taking to the roads, it was very difficult to separate the ones that would be genuinely transformative from the many also-rans that would go bust — leading to Warren Buffett’s famous quip about how much safer it would have been to short horses.
The same goes for the pioneers of aviation. It wasn’t them who came to dominate the manufacturing businesses, or build and run the profitable airlines. No, instead it was the subsequent waves of newcomers who perfected the engineering and the art at the right time for the market to take off.
Graveyard?
Only last week, Mr Musk appeared to be mocking a company that has become a byword for biding its time and entering new technological markets when the time is right and its products are right, and which is widely reported to be developing a car to rival Tesla. That company, of course, is Apple (NASDAQ: AAPL.US), described by Mr Musk as “the Tesla Graveyard” because people, he suggested, only get jobs there when they’ve failed to get into Tesla.
I wonder if Mr Musk remembers Nokia, a company that was at the forefront of the early mobile phone revolution? At the time, investors would ask “Who but Nokia would you buy if you want to get into mobile phones?” But the industry was really in its infancy, and it was way too soon to work out who was going to be leading a future more mature market. Nokia is history now, having lost its lead and sold its mobile phones business to Microsoft.
The story with BlackBerry, whose early designs led the way into the smartphone sector, is similar. The firm’s quirky mini-keyboard things still generate affection in some, but the market has moved on to big-screen touchy-feely phones. And today people want iPhones.
History repeats
There’s a more recent example in the smart watch business, with a big demand from sports followers and health enthusiasts for the ability to do location and fitness tracking. Fitbit, which floated on the NYSE this year, was an early pioneer, and I have one of their devices — the watch-like Fitbit Surge. It suits me fine for now, but I’d describe it as a great bit of hardware, coupled with acceptable in-watch software, but with a dire proprietary web interface and mobile app. I can’t export my GPS tracks to the real-world Google Maps, and I can’t sync with the Apple Fitness app.
My next tracker will likely be an Apple Watch, which will “just work” with iPhone, iPad and Mac. And, of course, the Apple stuff all works with Apple Pay: Oh yes, there’s another business where early pioneers are falling by the wayside and Apple… well, you get my drift.
What market?
The thing with electric cars is that they might be a neat idea, but there’s no market for them yet. No, there really isn’t. There might be a few hybrid engines knocking around the roads, and battery-driven things that can go all the way to the shops before they need recharging. And the odd prototype might even be capable of competing with petrol cars in limited situations. But the proper mature market, the one that will test the viability of the car makers themselves, is still some years away.
Is Apple really working on electric cars? Is it in cahoots with car maker BMW and battery specialist Samsung as rumours suggest? Who knows? But if it is, we’d better remember that Apple has huge amounts of cash to invest in its research, and it’s a cash pile that’s growing ever higher by the day. And Apple won’t enter a market until the market is ready for it.
Will Elon Musk live to regret his “Tesla Graveyard” quip? We’ll see.