Charlie Munger’s Perspective on Elon Musk and Tesla Stock Volatility
The late investor analyzed Musk’s leadership style amidst Tesla’s significant market fluctuations.
1Tesla Stock Market Volatility
Tesla experienced extreme share price swings during the first week of February. Following an announcement to sell 2.65 million new shares, the price jumped nearly 5% on Thursday. However, after setting the sale price at $767 per share on Friday, the stock fell 2% during premarket trading sessions.
2Munger’s Stance on Tesla
During the Daily Journal annual meeting, Charlie Munger explicitly stated he would neither buy Tesla stock nor sell it short. He maintained a neutral investment position, avoiding the risks associated with shorting a volatile asset while simultaneously refusing to participate in the company's equity growth despite its recent market performance.
3Evaluating Musk’s Self-Estimation
Munger famously remarked that one should never underestimate a man who overestimates himself. While acknowledging Musk as peculiar and prone to overestimating his own capabilities, Munger admitted that such individuals are not wrong all the time. This paradox highlights the complex relationship between extreme self-confidence and potential business success.
4Prudence Versus Delusion
Reflecting on his 2019 comments, Munger emphasized a preference for prudent individuals over those living in states of delusion. He noted that while he would not personally hire Musk, he recognizes that these unconventional figures occasionally achieve massive results, despite the personal risks they take within their professional environments.
5Buffett’s Perspective on Innovation
Warren Buffett has previously expressed respect for Musk’s efforts to improve product quality. Speaking on CNBC in 2018, Buffett saluted Musk’s ambition, noting the difficulty of such industrial endeavors. He emphasized that the ultimate success of Tesla’s electric vehicles rests entirely with the judgment of the American public consumers.
6Market Capitalization and Targets
Tesla’s market capitalization recently surpassed $140 billion, having reached the $100 billion milestone in January. Musk’s compensation package is tied to aggressive financial targets, including a $14 billion annual profit goal and a stock price reaching $3,665, which could potentially elevate his total net worth to over $175 billion.
7Comparative Wealth and Rankings
Current data places Musk as the 24th richest person globally with a net worth of $41.1 billion. In comparison, Warren Buffett holds a net worth of $89 billion, while Charlie Munger is valued at $2 billion. These figures contrast sharply with Jeff Bezos, who maintains a $131 billion net worth.
8Insider Participation in Offering
Following the secondary stock offering announcement, Elon Musk pledged to purchase $10 million worth of shares. Board member Larry Ellison also committed to buying $1 million in shares. This internal investment signals confidence from leadership despite the broader market skepticism expressed by veteran investors like the late Charlie Munger.