Last night, Elon Musk puffed on a blunt with Joe Rogan, and this morning, Tesla’s share price is cratering. The footage has already spurred a dozen memes, and Musk’s notoriously loyal fans are already rushing to his defense. This time, they have a point. Marijuana’s legal in California, after all, and it’s not as if a few hours on a podcast are the most reckless thing a tech CEO did this week. (If you check the tape, it’s not even clear he inhaled.) But what’s really spooking investors is a much more serious problem that’s been lurking in the background at Tesla for years.
This morning, news broke of two mid-level executives departing Tesla: chief accounting officer Dave Morton and head of HR Gabrielle Toledano. (Morton in particular seems to have left after “conclud[ing] he wasn’t being heard or understood,” according to a CNBC report.) Today was also the last day for the company’s head of communications, Sarah O’Brien, although her departure had been known for some time. The departures are easy to skim over — how hard is it to hire a new accountant, really? — but for dedicated Tesla-watchers, they’re the latest turn in a slow-motion crisis that’s been unfolding for years now. Tesla simply can’t hold onto executives, and the ongoing stream of mid-level departures is quickly becoming the single biggest sign that something has gone wrong inside the company.
In fact, Morton and Toledano aren’t even the only executives to leave this month. Before them was 10-year veteran James Cahill, who ran Tesla Energy, preceded by the global director of service. Tesla’s active short community has made a sport of tallying up executive departures: they count at least 30 gone since June, including the chief information officer, a senior project manager for the battery supply chain, and the system leads for both architecture and design on Autopilot. If you look at the past year, the number rises to 64.
None of those are big names, and it’s easy to miss the executive departures amid the production crunch and Musk’s bizarre buyout attempt. But many investors see executive retention as the most important signal for the long-term health of the company, far more reliable than short-term quotas or profit margins — which is a good reason to think it’s what inspired today’s nosedive. The general argument is pretty simple: Tesla is competing for the best people. If the company can’t hire and keep those people, it’s going to lose out to competitors that can. Beyond that, these people know Tesla better than anyone. If they’re heading for the exits, it suggests they think the future will be brighter somewhere else.
While other CEOs split their time between a dozen different mid-level managers, Musk is sleeping in the factory
Of course, Tesla isn’t a normal company and Musk isn’t a normal CEO. It’s easy to see how the last few months could have been hard on mid-level executives. In some sense, this is Musk’s basic proposition: ambitious goals, borne out by intense deadlines and flat-out suffering. As Musk put it, “the reality is great highs, terrible lows and unrelenting stress.” It’s not so shocking that some folks bail out early.
But there are steps Musk could take to alleviate that grind, and the executive exodus is one more sign that he isn’t trying to. While other CEOs split their time between a dozen different mid-level managers, Musk is sleeping in the factory and redesigning the production line by hand. Not coincidentally, Tesla’s longtime director of manufacturing engineering left the company in June. Every public indication is that Musk simply doesn’t want to delegate those tasks, which is an even scarier thought for the company’s long-term prospects.
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In the background of all of this is the general challenge of running an outsider electric car company in 2018. Tesla has been public for eight years, and it’s now competing against some of the largest automakers in the world. It isn’t the world’s only electric car company anymore, now competing against Porsche, Audi, and Mercedes, while the subsidies that spurred its US growth are already tailing off. The company faces the real prospect of running out of cash in the next six months, all while launching a factory and struggling to fix well-documented labor and safety issues. Tesla needs to be firing on all cylinders (or all induction motors, I suppose), which is hard when the mid-level managers in charge of those problems are rushing for the door. For investors wondering if Tesla will make it through, that’s the clearest signal — and today, the signs were not good.