There are _LOTS_ of cases where an early leader got wrecked by some combination of established firms catching up (and surpassing) them, newer competitors understanding their market better than they, and a weird mix of consumer loyalty (to others) and fickleness (in terms of what they’ll pay for).
5- and 10-year predictions of massive change are notorious for optimism bias. 20- and 30-year predictions tend to be too conservative. Your estimates fit this pattern − 50% chance to hit $1T in 7 years is at least an order of magnitude too high.
That said, Tesla is run by a mad genius, and does have a good indication that they’re willing to bet big, so the outcomes are seriously bimodal. There _is_ a chance to see those big numbers. And a chance to completely implode. I have no objection to investments in TSLA, but I wouldn’t put a significant portion of your bankroll into it.
The other major confounder between long-term predictions and stock picking is the pathing. TSLA is _not_ likely to be a slow, steady stock. It’s going to have HUGE ups and downs, even if it does work it’s way up to the levels you hope. So the question becomes “when”. Market timing is silly and you shouldn’t do it. But you’re not betting on a market here, you’re betting on an individual pathology of business and it’s investors.
I agree with what you’re saying. My point is that public stocks rarely can be said to have a startup-like “chance to see those big numbers” (10x+ upside). When such a chance is say 20%+, then you don’t need to worry too much about the 80% chance of a 0.5x or 1x downside.
I think you’re overestimating at 20% as well. More importantly, you don’t have any information that other investors don’t, so it’s hard to see that the full value of your prediction is available (some of it may be; the competing investors may be more short-sighted or conservative than they should be). As evidence for this, TSLA _already_ has a p/e around 200, compared to an automotive segment average around 20. So the first order of magnitude is already baked in.
disclosure: I drive a Tesla Model S, which I love and am convinced it’s the best car on the market at any price (superseded only by more recent model years). I work for and my investments are slightly overweighted toward un-vested stock (which I routinely sell for diversity as soon as possible, which makes me SIGNIFICANTLY poorer than the counterfactual me who just kept it all) a large tech company. Taking my financial advice is even dumber than investing based on high-level semi-random probability estimates based on an outside view of a complicated market.
There are _LOTS_ of cases where an early leader got wrecked by some combination of established firms catching up (and surpassing) them, newer competitors understanding their market better than they, and a weird mix of consumer loyalty (to others) and fickleness (in terms of what they’ll pay for).
5- and 10-year predictions of massive change are notorious for optimism bias. 20- and 30-year predictions tend to be too conservative. Your estimates fit this pattern − 50% chance to hit $1T in 7 years is at least an order of magnitude too high.
That said, Tesla is run by a mad genius, and does have a good indication that they’re willing to bet big, so the outcomes are seriously bimodal. There _is_ a chance to see those big numbers. And a chance to completely implode. I have no objection to investments in TSLA, but I wouldn’t put a significant portion of your bankroll into it.
The other major confounder between long-term predictions and stock picking is the pathing. TSLA is _not_ likely to be a slow, steady stock. It’s going to have HUGE ups and downs, even if it does work it’s way up to the levels you hope. So the question becomes “when”. Market timing is silly and you shouldn’t do it. But you’re not betting on a market here, you’re betting on an individual pathology of business and it’s investors.
I agree with what you’re saying. My point is that public stocks rarely can be said to have a startup-like “chance to see those big numbers” (10x+ upside). When such a chance is say 20%+, then you don’t need to worry too much about the 80% chance of a 0.5x or 1x downside.
I think you’re overestimating at 20% as well. More importantly, you don’t have any information that other investors don’t, so it’s hard to see that the full value of your prediction is available (some of it may be; the competing investors may be more short-sighted or conservative than they should be). As evidence for this, TSLA _already_ has a p/e around 200, compared to an automotive segment average around 20. So the first order of magnitude is already baked in.
disclosure: I drive a Tesla Model S, which I love and am convinced it’s the best car on the market at any price (superseded only by more recent model years). I work for and my investments are slightly overweighted toward un-vested stock (which I routinely sell for diversity as soon as possible, which makes me SIGNIFICANTLY poorer than the counterfactual me who just kept it all) a large tech company. Taking my financial advice is even dumber than investing based on high-level semi-random probability estimates based on an outside view of a complicated market.