No. of Recommendations: 1
But under this new scenario, will Berkshire management have to come to Washington, hat in hand, to declare their allegiance to Elon or something?
I posted this on May 5, 2024. Tesla was about $180. Musk is a big fan of WEB. He often quotes him. He wants WEB to invest in TSLA but I'd guess he'd let him in on Xai if he wanted. (Xai's value has doubled since I wrote the below.) Most notably, Tesla has an auto insurance arm that isn't getting the attention it deserves. If you don't cover connected, electric, autonomous vehicles your days are numbered. Partnering with Tesla insurance would give Geico access to Tesla's superior customer acquisition, billing, monitoring, repair, legal and underwriting technology. I'm of the belief that all American auto companies will end up licensing this from Tesla - if they survive. It also opens up markets outside the United States.
Musk recently said on X that WEB should invest in Tesla. Comments like this from Musk should be taken seriously. Remember the "Should I buy Twitter" statement. I put this in the same category, kind of an invitation.
In the past whenever anyone has speculated that WEB has or will buy Tesla shares I've always said there was a zero chance of that happening. We all know why: circle of competence, price and hard to predict earnings etc. Add WEB's sometimes mildly critical comments about Musk to the list as well.
But, right now there is a unique opportunity presenting itself: Musk wants out of many of the businesses he's in. Not because they are bad businesses - they're great businesses - but because he has better opportunities to focus his attention and limited resources on.
Musk started X.ai about a year ago. They're currently raising 6B at a 20B valuation. (20B out of nowhere ... nice.) Tesla is investing 10B this year on compute. I think Elon needs another 50 or 100B to fund his ambitions in AGI. (No small-ball here.) He seems very focused on AI/robotics and is cutting his Capex at Tesla to preserve the 26B that's already in the bank. (Musk recently commented on when Netflix spun off their DVD business in favor of streaming. He said to apply that logic to Tesla.) He's also commented that Tesla is "pivoting."
I won't go into whether a hard pivot to AI/robotics is a good idea. What's important is that Musk's open to some kind of transaction for his legacy businesses. Specifically, I think that insurance, stationary energy storage, Supercharger/Megacharger and lithium refining might be on the table. Less appealing would be solar and battery production. I could see hundreds of Billions of dollars deployed into these businesses over the next ten years at good rates of return. Combined, they have excellent products with huge and growing TAMs that are complementary to BRKs current businesses.
On the personal side of things. I think WEB and EM have always admired each other. Bill Gates was an issue but that is behind them.
What would a transaction look like? I have no idea. It needs to solve the capital deployment and growth stagnation issue for WEB and the capital needs and focus issue for EM.
Of course there's more speculation than fact in my comments above. A lot of connecting the dots with no clear picture. Still, stranger things have happened. I'll go back into my Tesla/BTC hibernation now.
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In WEB's words, you don't want to compete with Musk.
