A few months back, my niece earned her doctorate in physics and I attended her defense of her doctoral thesis (whatever it's called). Talking with one of the physics professors who sat in judgment afterward, the topic of clean energy came up. This particular professor emphatically stated that solar or wind wasn't the answer that it had to be nuclear power. It was the only way because there is no way to harvest enough solar energy to be practical and the sun is gone half the day. This professor, btw, is a specialist in nuclear power. Colliding atomic particles is her thing. Last week, the power company in South Carolina said that it was abandoning building two nuclear power plants because of cost overruns. In Georgia where I live, the nuclear reactor Georgia Power is building at Plant Vogtle is already costing twice the original estimate and Westinghouse, the contractor building it, declared bankruptcy. Despite tangible evidence that nuclear power is horribly expensive to build, costs a lot after the station goes online and is dangerous to boot didn't sway this professor at all because she's personally invested in nuclear power.
Conventional wisdom clouding thought take two: Yesterday, an article appeared authored by Larry Downes and Paul Nunes in the Harvard Business Review titled "Is Tesla Really a Disruptor? (And Why the Answer Matters)." After grudgingly admitting Tesla is "wildly innovative," the authors then chime in with a warning: "But is its automotive business a disruptor, poised to transform the entire transportation sector? That's the question that has dogged the company from the beginning, inspiring heated debate among Wall Street analysts, fanatical customers and tech-related online communities." A note about innovation: the steam engine had already been around for a while when James Watt made it practical and Robert Fulton figured out a way to put it to practical use. Tesla has taken on the shortcomings of EVs and is solving them. What's different from what Tesla is doing to Watt and Fulton two centuries earlier? Nothing.
They cite $10 billion debt warning that Tesla must outright dominate a future that features autonomous vehicles, sustainable energy consumption, and the ability to upgrade easily as both hardware and software is resolved. If not, then the investor money dries up and Tesla goes belly up.
The bulk of the article is then devoted to their definitions of what qualifies a company as disruptive:
1. Offering a more expensive product whose superiority shifts consumer buying patterns that creates a new market space with growing revenue with shrinking profits that lead to industry collapse and reincarnation based on a new value proposition.
2. Big Bang Disruption - rapid evolution of new technologies leads to introduction of substitute products that are both better and cheaper right from the beginning, triggering consumer abandonment of incumbents for new entrants.
They proceed to argue Tesla fits neither model because:
1. Electric cars have been around a long time but the technology is still neither better or cheaper than internal combustion. (They ignore forecasts predicting BEV's will reach cost parity with ICE cars in a few years and then surpass them).
2. Tesla still hasn't solved the autonomous vehicle issue.
3. There is no guarantee Tesla will win the automotive technology arms race.
They finally forecast that the BMW, Mercedes, Volvo and Lexus will beat up Tesla and take its lunch with a gentle chiding of Musk's decision not to defend early patents.
What I see here is the same attitude the physics professor displayed to me: Intellectual and emotional investment in the status quo.
But what if few LIKE the status quo?
I'm taking deliver of a Model X on September 5th. I ordered it for several reasons knowing as an early adopter I'm paying around a $25,000 premium over buying a similar ICE equivalent. I'm doing it knowing that the range on my MX will cause some headaches when I take a trip. I'm buying knowing that range for EVs is likely to increase exponentially over the next few years.
Why am I doing this?
1. I don't like the existing car companies. Does anyone enjoy buying a car from a franchised dealer? I've had more than enough of guys with 10 gold chains around their neck going, "What can I do to put you in this car today?" For one, dress better.
2. I LOATHE the oil companies and want to be shut of them forever. This has been true since I watched them use the OPEC embargoes in the 1970s to gouge us for fuel so that we could go to school (which I was doing in those days) or work. It was so blatant Congress passed several laws to claw back windfall profits from the likes of Exxon and Texaco.
3. I intensely dislike the fact that for decades the oil companies knew they were a big factor in causing climate change and covered it up. They've known since the 1960s and that the fumes from their product were killing people not to mention making life dangerous for dolphins and other living things.
4. I can no longer look a young person in the eye knowing what they're being condemned to if we don't get off fossil fuels fast. I can afford it now, my personal time clock is ticking and the end is a lot closer to the beginning, so I'm doing it to do my part.
Why Tesla? Why not wait for Mercedes or Volvo?
1. They had their chance. They are invested in protecting their existing infrastructure of dealerships and suppliers for ICE vehicles.
2. They would never offer electric cars (or hydrogen or any other alternative fueled vehicle) if Musk hadn't come along. Somebody had to disrupt the status quo or it would never change. Tesla's very existence, tiny little Tesla, is creating a tsunami that is forcing the auto industry to change. Would governments be setting dates to ban ICE vehicles? Would the legacy automakers be scrambling to catch up if Tesla hadn't come along? Of course not.
3. If Musk took a chance on us and our planet, shouldn't he and the dedicated people working to change the world be rewarded? I think so. There would be no EV revolution without Musk and Tesla.
4. It's a damned good car.
The authors conclude by citing that the Model 3 is no iPhone and that the Apple Watch's slow start after an initial rush is reason for caution. They opine that the initial rush will not translate to long term sales stability for the Model 3.
Here we have two guys who learned all the traditional business models and stick to them. Here are some fallacies I see:
1. EV costs will come down. They already are. Tesla just cut the price for the MX by $3,000 for example.
2. Their citation of Apple's existing production fails to take note of the obstacles Musk faced. He had a concept but no production facility so he had to buy and equip one. Apple, in its early days, didn't have an established supply chain and production facilities either. Equating Apple circa 2005 instead of Apple circa 1984 (when the first Mac was released) is intellectually dishonest.
3. They figure that Musk won't change his batteries as technology will improve. Ridiculous. In 10 years, the MX I'm buying will look like a Model T compared to a 1964 Mustang. The speed of technological advance is accelerating not decreasing. Musk will rip out those lithium ion battery making machines as soon as something better comes along. Will the ICE companies newly invested in EVs do the same? Their track record says they won't.
This is what can happen when even intellectuals adhere to conventional wisdom, even when they do so unconsciously. They look but they do not see. Of course, solar is going to leave nuclear power in its wake. It already is as costs continue to fall dramatically. BEVs are here to stay. The batteries will change, the doodads will get better, it's all good. As for autonomous driving -- how many of you are buying a Tesla because you don't want to drive at all any more? Not me. If autonomous driving comes, okay, that's great. If it doesn't -- and that's a ridiculous assertion to make -- so what?
Tesla is wildly popular with a lot of people because it's giving us something we've always wanted even if we didn't know it -- freedom. Freedom from a hidebound industry that tinkered and improved its product incrementally but lost the will and ability to truly innovate decades ago. Thinking outside the box is a slogan not a reality in big corporations. Freedom from what many consider to be evil oil companies willing to kill us all for the almighty dollar. Freedom from a corporate culture that stresses profit over its customers wants and needs, not to mention an entire planet's. The 21st century is going to be substantially different from the 20th and that's a good thing.