Duration 10 years (02020-02030)
Adam J Mead
will go to Boys and Girls Club of Greater Derry if Mead wins,
or 350.org if Ulrich wins.
As of December 21, 2020, Tesla is set to join the S&P 500 with a market capitalization of over $650 billion. Such a valuation implies the ability to deliver earnings that seem at odds with reality. Tesla has barely begun to show a profit and must earn billions soon (or many billions later) if it is to come close to justifying that valuation. Berkshire Hathaway, by contrast, has a market cap of approximately $525 billion and earns about $25 billion after-tax. It also has over $125 billion in excess cash that can be put to profitable use. Benjamin Graham said that in the short run the market is a voting machine and in the long run it is a weighing machine. I believe it more probable that the market will correctly reappraise Tesla's market cap down to a more reasonable level over the next nine and a half years. Tesla is an amazing company whose success I am rooting for as a citizen. Elon Musk is pushing our civilization in a direction it needs to go, and making science/engineering fun for the next generation. However, enthusiasm for the future of electric vehicles and related products should not be translated into unbounded enthusiasm for the valuation of a company. Shareholders of Tesla at current valuations could be in for a shock.
Tesla has invented the equivalent of an iPhone that sells for $40,000. Their prospects are much better than the broader stock market, so I expect them to outpace Berkshire during the 2020s. Of course, there are many ways they could stumble or fall behind their competition, but I think the outlook is excellent.
In the case of Berkshire Hathaway or Tesla being purchased or merged with another company, Long Now will find a reputable source for the valuation of the parts of the company formally associated with the previous company (e.g. if SpaceX buys Tesla, we will find the 2030 value of SpaceX's electric car, battery energy storage, and solar panel division)