Elon Musk’s businesses and the relationships between them have come under increasing scrutiny as Tesla’s CEO continues to push for more.
At Tesla’s second-quarter earnings call on Wednesday, Trust analyst William Stein asked Musk about xAI, another tech venture that the company launched and incorporated in Nevada. Musk recently said the artificial intelligence startup aims to one day compete with Google Bard and OpenAI’s ChatGPT, and plans to work with Tesla on both software and silicon.
Mr. Stein asked him. “For investors who believe Tesla’s AI capabilities and products have considerable value, it may be worrying to see you pursuing another AI-focused effort. Can you talk about how xAI could overlap, perhaps compete with Tesla, or add value to Tesla’s business in other ways?”
Musk claimed He said that xAI and its focus on general artificial intelligence would bring some value to Tesla, and talked about adoption as an example.
“The best AI engineers and scientists in the world were eager to join a startup, but they weren’t willing to join a big, relatively established company like Tesla,” he added.
Adding to the example of xAI, he said it could only pull top materials science engineers out of the job. apple Promised engineers could work at SpaceX and Tesla at the same time. The engineer in question, Charles Cuman, joined Tesla in late 2015 and currently holds the title of Vice President of Materials Engineering for SpaceX and Tesla, reporting directly to the CEO.
The problems with Mr. Musk and his ventures also came up earlier this month when Massachusetts Senator Elizabeth Warren called on the Securities and Exchange Commission to look into Twitter’s ties and related corporate governance issues.
Musk last year spearheaded a $44 billion acquisition of a social media company, temporarily appointing himself as CEO. He currently serves as Twitter’s controlling shareholder, chief technology officer (CTO), and executive chairman, while also holding CEO roles at both Tesla and his aerospace and defense company, SpaceX. He is the founder and funder of brain-computer interface startup Neuralink and tunneling venture The Boring Company.
Tesla is the only publicly traded company among them. And the company has never disclosed to shareholders how much people, time and money it has spent on Musk’s other businesses, or why sending people to Twitter is a reasonable use of Tesla’s resources. As reported by CNBC, Musk has previously enlisted employees at Tesla, SpaceX and The Boring Company to assist in the Twitter takeover.
At least one senior Tesla employee jumped on Twitter’s parent company, Mr. Musk’s Company X. Court filings revealed that Drub Bhatura has worked at Tesla since the end of 2013, where he was senior manager of operations finance, and is now senior director of finance at Company X. Batura posted a job ad for Company X on Twitter on the day of Tesla’s second-quarter earnings release.
and May 2023 In filing the proxy, Tesla disclosed some details about its related-party transactions. “Twitter is a party to certain commercial and support agreements with Tesla. Under these agreements, Twitter incurred costs totaling approximately $1 million in 2022 and approximately $400,000 by February 2023,” Tesla said. Tesla has not disclosed what exactly Twitter will buy from the company.
Risks include lack of focus, employee burnout
“Mr. Musk makes a complicated argument: ‘By preventing these great people from joining their competitors, I’m helping Tesla,'” said Randall S. Peterson, professor of organizational behavior at London Business School. This is counterfactual and can never be verified or challenged by an investigation. ”
Most startups fail, Peterson said, and those who want to start a startup are unlikely to join Tesla’s direct competitors in the auto industry.
Peterson said many of Musk’s businesses could create risks for Tesla and shareholders should ask for more details.
“When you run multiple companies, it’s hard to focus on one thing and do it well,” Peterson said. “This is a risk to the CEO himself. Would most company shareholders allow their CEO to run several other companies at the same time? The answer is probably no. So the question arises as to what level of independence Tesla’s board of directors has, or whether it not only admires Musk and tolerates his erratic way of working, but misses a major underlying problem as long as the money keeps coming in.”
Boards of companies that ultimately fell into crisis, including Enron and Royal Bank of Scotland, failed to rein in their CEOs despite many quarters of signs of trouble, he said.
Another risk, Peterson said, is that Musk’s employees may feel pressured to work on many projects for him simultaneously outside of Tesla. Trying to please his people or gain new work experience can lead to burnout, unable to recover from work. Burnout can lead to high turnover and poor performance, he said.
Finally, the professor said, even if Musk’s intention is to have interactions between businesses, it could be a distraction that keeps employees from concentrating.
“It takes a lot of focus to be the best in something, both as an individual and as a company. That’s why we’re seeing a trend from giant conglomerates in the ’70s to more focused companies today,” he said.
Still, Mr. Musk appears to be ramping up unapologetic cooperation between companies in his growing empire.
In a call Wednesday, he was asked to provide an update on Tesla’s progress in developing a humanoid robot called Optimus. With a touch of futurism, Musk said Tesla might one day work with Neuralink to create robotic arms and legs that would help amputees regain full mobility and dexterity.
Tesla did not immediately respond to a request for comment. Twitter responded with an automated reply containing crude symbols.
— CNBC’s Rohan Goswami contributed coverage.