Elon Musk, the CEO of electric-car startup Tesla Motors and rocket-launcher SpaceX, should be applauded for the mighty challenges he's taken on and the powers of persuasion he has deployed to build his companies. But along the way, he discovered that he could stretch the truth, casually and frequently, as a shortcut to getting things done.
Clad in a sheen of bubbly optimism, his mendacity nonetheless has consequences. Through Tesla's IPO, he has now taken hundreds of millions of dollars from taxpayers and public investors who expect not just a return but square dealing from the man who is managing their company for them.
So where has Musk spun the facts?
Critical reporting
Well, let's go with the most recent one: He's lied about me, and VentureBeat, apparently in retaliation for our aggressive and accurate reporting.
In an article published by the Huffington Post, he calls me "Silicon Valley's Jayson Blair." He accused me of making errors, but never once specified them. Here's the truth: I cited Musk's own words from court filings, which we had paid a freelance reporter to find and copy, legally, from a courthouse in Van Nuys, Calif. I also interviewed a host of other sources. I emailed Musk questions and called his lawyer repeatedly before publishing. We went to extra lengths to nail down the facts: Before publishing, VentureBeat editor-in-chief Matt Marshall called Musk and had interviews with at least three Tesla board members.
We make no apologies for seeking the truth about Tesla Motors and Elon Musk, a vital company and an iconic entrepreneur of Silicon Valley. Our reporting (here's one example of our series) helped investors get a more truthful picture of a company that was going public and the man behind it.
Musk also accused me of "collaborating" with the lawyer representing Justine Musk, his ex-wife, in their divorce case. Also false: I picked up the phone and called her lawyer, and he had the courtesy to answer my questions.
Now, we should all be used to Musk insulting journalists who don't report what they're told to. But calling someone a "Jayson Blair" is a troubling assertion to anyone who prefers his insults to have a factual basis.
When I ran fact-checking at Business 2.0 magazine, here's what I would have asked the writer to prove before I'd let him get away with that kind of factual assertion: So, you want to compare this Owen Thomas person to one of journalism's most infamous miscreants. Is Owen Thomas a drug addict? Is Owen Thomas mentally unstable? Has Owen Thomas plagiarized or invented facts? The answer to all of those, in case you were curious, is no.
And so out comes the chief of reporters' red pen.
The one specific claim Musk made about my reputation was that I had written that he was broke. Not true. If you review the story I reported on his personal finances and their impact on Tesla, you'll see I merely quoted Musk's own words from his divorce filing, in which he said that he "ran out of cash."
When VentureBeat first started raising questions about Musk's personal finances, his expensive divorce case, and the impact they might have on Tesla's IPO, a Tesla spokesman initially said that the company had no plans to update its IPO prospectus to reflect our reporting. However, in the end, Tesla updated its SEC filings to acknowledge substantially all of the concerns we raised as potential risk factors investors should consider.
That is the ultimate correction of the record, and it stands today.
Musk's personal spending
There are other whoppers in Musk's piece, such as the suggestion that of the $200,000 per month he's spending, a mere $30,000 a month is going to his own personal household expenses, with the rest going to legal fees in his divorce case. Actually, the figure he told a court is $98,023 a month, according to filings in that case, including $50,000 a month in rent.
The founding of Tesla Motors
An aside to Musk: Making false statements is something the law frowns on.
Oh, but wait, Musk should already know that. He and I met in San Francisco in 2008 for drinks, and over the course of the evening, he made several disparaging remarks about Tesla Motors cofounder Martin Eberhard's management of the company before Musk had ousted him as CEO -- specifically, Musk alleged, for misrepresenting the cost of making the Tesla Roadster. In 2009, Eberhard sued Musk for defamation, citing the comments Musk had made to me, among others. Musk filed a scathing response to the lawsuit, repeating many of his negative claims about Eberhard.
Then it headed to mediation, and the case was settled. Eberhard's lawyer declared himself "very pleased" with the result, and Tesla issued a press release in which Musk said that Eberhard had been "indispensable" to the company in its early days.
The safety of customers' deposits
When Tesla's finances were at their most perilous, in the winter of 2008 and spring of 2009, the company was dependent on advance reservation payments from customers for cash flow. The company's cash balance had run down to $9 million, and the company was struggling to raise $40 million in convertible debt. (He announced that that round had closed in November 2008, while in fact, according to Tesla's SEC filings, it did not close until March 2009.) To raise funds in the meantime, Tesla began taking deposits on the Model S sedan, even though that car was far from production, and continued taking deposits on Roadsters. Musk first told customers that he would personally guarantee the deposits they were placing, "even in the worst case of an Armageddon scenario." Then he said that their deposits were completely at risk and they could lose all their money. One of those statements had to be false.
Musk's history as an entrepreneur
In persuading other investors to back Tesla Motors, Musk has frequently traded on his past success as an entrepreneur at companies like Zip2 and PayPal. But Zip2 was so troubled that one of its venture capitalists, Derek Proudian, had to step in as acting CEO, a move rarely seen at venture-backed companies. And Musk was ousted as CEO of PayPal by his own management team. To this day, Musk tells a version of PayPal's history that few who were there at the time agree with.
Tesla's investors
Most dangerously, Musk has repeatedly made misrepresentations about Tesla's finances. In February 2009, he sent a letter to customers saying that Tesla would start getting funds from a Department of Energy loan in four to five months. In fact, it had not received the loan at that point and there was no certainty it would get it, a point a Tesla spokeswoman had to clarify. (Tricky, that, saying your CEO had misrepresented the facts without calling him a liar.)
He also said Tesla would turn profitable in 2009. Of course, it didn't, as the company's published financials later revealed. (Musk later claimed, using questionable accounting whose details have never been revealed, that the company had been profitable for one month of the year.)
In an interview for the May 2009 issue of Car and Driver, he told that magazine's readers that General Electric had become an investor. It hadn't, and it never did, according to Andy Katell, a GE spokesman who spoke with me at the time.
The Toyota deal
After unveiling an agreement to buy the NUMMI plant in Fremont, Calif., from the Toyota-backed joint venture which owned it, Musk claimed that Tesla and Toyota planned to jointly develop several models of cars and build them at NUMMI. It's true that he got Toyota CEO Akio Toyoda to stand next to him and make grand promises. But in fact, as the company later revealed in its SEC filings, Tesla and Toyota had no agreement to develop any cars, and there was no guarantee that they ever would.
The pity of it all is this: I don't believe Musk twists the truth out of malice. Rather, at this point, it may well be out of habit. He's so used to getting his way that future possibilities just seem like present realities to him. And pragmatically, it's worked. Whenever Tesla has been in a bind, Musk has spun his way out of trouble.
It's a character trait of which elements are found among many successful entrepreneurs: the compelling presentation of an alternate reality in the hopes that so many people will sign on to the vision that it comes true. Apple CEO Steve Jobs, for example, is so masterful at this that people speak of his reality distortion field. But Musk may have taken distortion to extremes.
The question now is whether Musk's past habits will serve him well as the CEO of a publicly traded company. Already, it seems the investors who have entrusted Musk with hundreds of millions of dollars are having doubts. With shares of Tesla having already fallen by nearly half since their post-IPO pop, perhaps Musk's bubble is finally deflating.
But those who are still sticking with the company should ask themselves this: Has Tesla adequately disclosed to investors the risk of its CEO's curious relationship with the truth?
Originally posted at VentureBeat.
"Some sources say that DeLorean spent little time on the car project, "certainly not as much time as I would have spent if it was my baby," said Collins. Another source accused him of spending "maybe an hour here and an hour there" in building the company. "A lot of the (company's) money was spent trying to build John's personal empire and other projects outside the car company. Everybody tried to stop him but he wouldn't."
Others criticize DeLorean for being arrogant, disloyal, surly and distrustful. Some say he takes advantage of the goodness in people, that he taunted executives and was vindictive toward former employees. Asked about these purported traits, Collins responded: "Well, that latter is certainly true. I've had a running battle with him on stock options and I've given up."
DeLorean also gets faint praise from Robert Dewey, financial officer with DMC from 1978-81: "Maybe not 'bad', as some have said. Certainly skillful as a promoter, but without managerial skills. Whatever he learned at GM, he unlearned at DMC. He didn't look to the future, only living for today. We had only one product and it was apparent that we would sink or swim with that."
"Our differences were over the level of spending and John's lifestyle. I believe you spend when you make it and told him he was spending other people's money. He didn't like that.""
http://www.home.no/delorean/dmcinc.htm
To succeed in obtaining massive amounts of capital, massive optimism is a necessity. Potential investors should take that fact into account.
As to the article, I agree with the many posters who find it difficult to separate the facts from the egos.
Need Owen to dig into SpaceX and report too.
I'd add that Tesla has only been public for a couple weeks and the price is already under the IPO......2 years before they even start production.
In journalism today, yellow is the default color. Whatever is juicy is good material, whatever is personal (like a divorce) is for public consumption. The public is being fed constantly in the ways of a Roman circus. Keep their basic instincts satisfied and you will help the establishment rule.
That how we go to war today, that how we destroy persons, thats how we keep the establishment happy and ruling the "dirty masses". All hail Caesar! Let the oil giants rule, let the innovator perish!
Mr. Thomas Owen, you make your fellows proud!
GM, and other companies, are still working to develop electric cars. I haven't read anything recently about the Volt, but I am optimistic about the idea of one of our major automakers continuing their work in this area. Japanese automakers have led the field for a while, hopefully the future will see our guys make more headway and at least keep pace. The oil monkey isn't going anywhere until the people that build the ground vehicle equipment used by millions of Americans can be propelled other than by conventional fossil fuels. Maybe a 3-way pair-up, Tesla, which is apparently in financial trouble, T. Boone Pickens, Mr. Energy, and General Motors, actually working on cars instead of bank loans and real estate holdings. Hope springs eternal!
Toyota, the world’s largest seller of hybrid autos, in May said it would invest $50 million in Palo Alto, California-based Tesla and jointly develop electric models with the startup. Both prototypes are modified Toyota vehicles, said JB Straubel, Tesla’s chief technology officer.
“Since our announcement in May, Toyota and Tesla engineering teams have made a lot of progress in a short amount of time and it is exciting to start seeing some initial results,” Straubel said today in an e-mail message. Tesla has signed an agreement “to deliver two electric vehicle prototypes to Toyota by the end of the month,” he said."
http://www.businessweek.com/news/2010-07-10/tesla-to-deliver-prototype-electric-autos-to-toyota.html
Seconded.
As I read this, I thought to myself, "Surely.... surely, there is some more *professional* way that this could have been written so that it didn't come across as the whiny airing of personal dirty laundry."
Keep digging and keep printing. We lowly Americans need the truth exposed and CEOs word to be watched and checked. It makes our nation and our economy stronger. Without such writing we are doomed. And writing such as yours is becoming frighteningly rare.
BTW - have you read The Girl with the Dragon Tattoo? You should. You will like the protagonist Blomkvist. He is a wiley investigative journalist unearthing and exposing crimes and dastardly CEO secrets that effect the world around them.
Mr. Thomas: are you so thin-skinned that you can't take criticism? What you have done through your counter-attack is to suggest unfair criticism must be confronted in a personal manner. I do not support that approach and think it is truly very poor journalism.
What is most unfortunate is I might have agreed with you if you hadn't personalized the article to persuade my view. Thanks for insulting my intelligence.