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What We Can Learn From Elon Musk’s $700 Million Tesla Payday

Elon Musk

What We Can Learn From Elon Musk’s $700 Million Tesla Payday

Elon Musk made over $700 million last month after Tesla hit certain performance thresholds that triggered his compensation agreement. While the dollar amount got all the attention, there is a hidden lesson in how Elon was able to achieve it.

Ironically, that lesson is about attention itself, specifically Elon’s ability to capture it. And, if you think about the value of that ability, you might just conclude Musk was paid too little.

What We Can Learn From Elon Musk’s $700 Million Tesla Payday

Elon’s compensation was dependent on Tesla achieving some combination of market capitalization, revenues and/or adjusted EBITDA. How did Tesla meet these aggressive targets that triggered Elon’s compensation?

Many would be tempted to say Tesla’s revenue and valuation growth was driven by one of the following:

  • Tesla has a cool product
  • The technology is ahead of others
  • Tesla is going after big markets with multiple businesses

These may be true. But, to meet such aggressive targets to trigger his $700 million payout, they seem necessary but not sufficient. What really differentiates Elon Musk is something more basic: Elon Musk has the ability to get your attention.

Consider Tesla’s revenues:

  • 2011: $200 million
  • 2013: $2 billion
  • 2015: $4 billion
  • 2017: $12 billion
  • 2019: $25 billion
  • 2021: $38 billion (consensus expectations)

To grow like this, sure, you need a product people like. But before they can like it, before they can buy it – or aspire to buy it – they need to know about it. So the typical company spends on advertising to create buzz and build the brand.

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What do you think Tesla has spent on advertising?

Zero. Yes,  spends $0 on advertising. That is quite a difference from other automotive companies that spend $1 billion to $3 billion a year (Note: these numbers may be just for the United States, so the actual cost is likely much higher).

Elon Musk has a proven ability to get your attention without spending a dollar. Think about how many stories on Elon come up regularly. For example:

  • He announces the launch of the Model 3 to much fanfare
  • He gets into a public argument with the Thai cave rescue guy
  • Media reports detail a SpaceX rocket being confused for a UFO
  • He names his kid a symbol, a big debate on the pronunciation ensues
  • He announces an autonomous driving update on Twitter
  • He smokes pot with Joe Rogan on a live podcast

And it goes on and on. Each one of the stories above is real and got a very large amount of media attention.

In today’s digital world of Twitter, Facebook and Instagram, where everyone has a smartphone, stories can go viral at the speed of light. And, in such a world, Elon Musk’s ability to get your attention is not a party trick, it is one of the linchpins to Tesla’s success. 

It helps generate big revenues with no advertising cost. And it drives a brand recognition that likely causes a lot of investors to pay more for Tesla’s fundamentals than they would without it, whether that is logical or not. In short, attention has value.

For those that doubt the power of attention, consider Elon’s flamethrower tweets in 2018. He randomly tweeted that one of his companies, The Boring Company, was going to sell flamethrowers on a limited basis.

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The result? He sold 20,000 flamethrowers in 5 days. At $500 a pop, that is $10 million in sales for a few tweets.

What’s next? Elon launches a cologne? If you are not able to earn $700 million in a month, perhaps you could smell like it for $39.99.

Some may be tempted to say that “real” CEOs don’t engage in this kind of behavior. But focusing on a specific event or tweet likely misses the bigger picture. Mainly, that the ability to get attention has real value.

Now, you might be thinking, “Ok fine, attention has value. But how could you argue that he was underpaid?”

Consider this thought experiment: What would the uptick in General Motor’s sales be if Elon Musk tweeted about their cars?

It’s impossible to know but, if he can sell 20,000 flamethrowers in 5 days, you just might be surprised….really surprised.

And, if the average car company is spending billions on advertising each year when Tesla spends nothing, perhaps you would come to a conclusion that seems insane: Even though he made $700 million last month, Elon Musk just might be have been underpaid.

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