People Before Business Model

As of November 23, 2020, Elon Musk surpassed Bill Gates as the second richest person globally. Number one being Jeff Bezos. Currently, his value sits at over $120b. Good lord!

Musk's staggering rise to multi-multi billionaire got me thinking about how he started at Tesla, where he is now, and where he may be going next.

An interesting fact I found out recently is Musk did not start Tesla. I just assumed. That honor goes to two brilliant engineers, Martin Eberhard and Marc Tarpenning. Musk funded $30m and served as chairman of the company, beginning in 2004. Around 2008, Musk took over as CEO, and the rest is history.

What fascinates me is Musk's rise to the second richest person globally and, more importantly, executive compensation.

I asked myself was, "Is Elon Musk's compensation plan justifiable?"

Executive compensations are more complicated than ever, using Monte Carlo methods from statistics to estimate plans.

Not many understand the underlying calculations to make a sound analysis of whether they are fair or not. Compounded by the estimates are, in fact, just that, estimates on future earnings. No one can predict the future, so who can judge?

These plans seem more like a roadmap for executives to get paid than taking in other considerations. I argue executives put in a strategy that maximizes their pay. Who wouldn't?

Tesla's meteoric rise is, no doubt, remarkable. I am on my second Tesla. However, I am not sure I will buy another one.

The cars are cool, but you'll notice several major problems brewing if you are an owner.

First, Tesla's customer service stinks. I could chalk bad service up to a growing company struggling to keep up. I worry Tesla is becoming another Comcast. Decent product but notoriously shit service.

After my lease was over, returning my car was a pain—confusion, and delays throughout the process. I am also past the early adopter forgiveness. Excellent technology has to be in sync with superb service.

For all those customers, who bought the fully self-driving car option with the hopes of one day with a software update, your car can drive itself. The promise doesn't seem very genuine. Tesla knew they could not deliver a fully autonomous experience anytime soon, yet they continue to push the option hard.

Musk's compensation plan is a bit complicated. As a second-time buyer, I notice that Tesla's key metric is to ship as many cars as possible. By making that the priority, Musk is driving the business to those metrics, yet the customer service is subpar. As well as quality is suffering per recent reports.

My intention isn't to criticize Tesla and Musk. Even though this article up to this point has done that exactly, it is more about whether CEO compensation plans are driving the business or are we focusing on solving people's problems.

Possibly there is a world where we can do both. I prefer to prioritize people, not the business model, and make customer satisfaction a big piece of executive compensation plans.

Subscribe to Fahad Shoukat

Don’t miss out on the latest issues. Sign up now to get access to the library of members-only issues.