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True. The point I was making was one about emotion in finance - when I’m making money it’s easier to ignore rational doubts, and when I’m missing out it’s easie

True. The point I was making was one about emotion in finance - when I’m making money it’s easier to ignore rational doubts, and when I’m missing out it’s easier to focus on the negatives because a little voice in the back of my head wants it to fail.

deleted 5y ago
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danielmarkbruce 5y ago
You want it to fail or you want to be right? Nothing wrong with wanting to be right. If Tesla stays at a crazy high valuation for the long term, then several mental models I use and find valuable fall to pieces. That would be very annoying for me on several dimensions because it's likely they wouldn't be replaced with useful mental models. They'd be replaced with "ITS ALL JUST CHAOS".
- tim333 5y ago
  Markets look to the future. The Tesla valuation makes sense if they are going to do a trillion of business at some future point.
  - danielmarkbruce 5y ago
    Everyone thinking about the Tesla valuation is aware markets look to the future :) Even then - your statement is simplistic - the future cashflows are discounted back to today. As an example, if their revenue is $1 trillion (assume no inflation for simplicity) in 50 years, and we assume 10% net income margin (probably in the ballpark of reasonable) they make $100 bill which is discounted 50 years to today at maybe 8% (?), that year's earnings is worth around $2 billion today. You may reasonably counter that they will grow much faster than that - and this is where people (like me) question it. The total industry is ~$3 trillion or so, globally. 85 million units. Telsa will hit maybe 900k units this year. So its a tough sell that they'll get to 25-30 mill units anytime soon (from a demand or supply side). Don't get me wrong - Tesla is brilliant, Elon is brilliant. It doesn't mean the company is worth infinity. There is some concrete number which makes sense... and to many folks, 1 trillion is an order of magnitude too high.
    - tim333 5y ago
      Yeah but re mental models you combine that with "...Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business..."
      - danielmarkbruce 5y ago
        Sure. But old Ben Graham also said that in the long-run the market is a weighing machine. Note above I said "long term". If Tesla stays long term at current prices or above, I've completely misunderstood several things in a pretty fundamental way. As an example - gold has stayed at prices which don't make much sense to me for a very long time. So my mental model for that market is "it's crazy town, stay away". That's not a very useful model. I hope I don't arrive at the same place on what is a pretty simple company - they sell cars.
        okhobb 5y ago
        The market assumes that Tesla will be much more than selling cars. The scope is more "anything electricity or climate change related" (i.e. very broad) combined with a focus on vertical integration in each business unit.

deleted 5y ago

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danielmarkbruce 5y ago

You want it to fail or you want to be right? Nothing wrong with wanting to be right. If Tesla stays at a crazy high valuation for the long term, then several mental models I use and find valuable fall to pieces. That would be very annoying for me on several dimensions because it's likely they wouldn't be replaced with useful mental models. They'd be replaced with "ITS ALL JUST CHAOS".

tim333 5y ago
Markets look to the future. The Tesla valuation makes sense if they are going to do a trillion of business at some future point.
- danielmarkbruce 5y ago
  Everyone thinking about the Tesla valuation is aware markets look to the future :) Even then - your statement is simplistic - the future cashflows are discounted back to today. As an example, if their revenue is $1 trillion (assume no inflation for simplicity) in 50 years, and we assume 10% net income margin (probably in the ballpark of reasonable) they make $100 bill which is discounted 50 years to today at maybe 8% (?), that year's earnings is worth around $2 billion today. You may reasonably counter that they will grow much faster than that - and this is where people (like me) question it. The total industry is ~$3 trillion or so, globally. 85 million units. Telsa will hit maybe 900k units this year. So its a tough sell that they'll get to 25-30 mill units anytime soon (from a demand or supply side). Don't get me wrong - Tesla is brilliant, Elon is brilliant. It doesn't mean the company is worth infinity. There is some concrete number which makes sense... and to many folks, 1 trillion is an order of magnitude too high.
  - tim333 5y ago
    Yeah but re mental models you combine that with "...Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business..."
    - danielmarkbruce 5y ago
      Sure. But old Ben Graham also said that in the long-run the market is a weighing machine. Note above I said "long term". If Tesla stays long term at current prices or above, I've completely misunderstood several things in a pretty fundamental way. As an example - gold has stayed at prices which don't make much sense to me for a very long time. So my mental model for that market is "it's crazy town, stay away". That's not a very useful model. I hope I don't arrive at the same place on what is a pretty simple company - they sell cars.
      - okhobb 5y ago
        The market assumes that Tesla will be much more than selling cars. The scope is more "anything electricity or climate change related" (i.e. very broad) combined with a focus on vertical integration in each business unit.