Elon Musk is one of the most celebrated and successful entrepreneurs of our time. He has achieved notable success in several business ventures, such as Tesla Motors and SpaceX. However, it is important to consider the mistakes he has made on the journey to becoming a successful entrepreneur.
In 2017, Musk was accused of defrauding his investors with his 2017 “go private” Tweet. This led the U.S. Securities and Exchange Commission (SEC) to sue Musk for false and misleading statements. The SEC also charged him with violating federal securities laws and seeking to manipulate the markets. Ultimately, Musk and Tesla reached a settlement with the SEC, in which Musk agreed to a $20 million fine and to step down as Chairman of Tesla’s Board of Directors for at least three years. The settlement also resulted in the company hiring two independent directors to its board and overhauling of its corporate governance procedures.
Musk also made costly mistakes with Tesla’s money. Tesla had reportedly burned through $4.5 billion in cash during the first nine months of 2018, according to the company’s third-quarter earnings reports. This is in part due to Musk’s ambitious plans for expansion, such as building the new Gigafactory in Nevada that would produce batteries and electric vehicles. Musk also made the mistake of not emphasizing the company’s core business and instead focusing on expensive projects such as solar roofs and Tesla Semi trucks.
Furthermore, Musk’s relentless focus and overambitious approach to Tesla has caused him to be accused of not heeding his own advisors. Experts suggest that Musk’s prides himself on being able to do and think better than anyone else. This leads to his ignoring advice at times and not allowing team members to contribute to the company’s projects, as well as assembling a top-heavy management team that leaves lower levels of the business understaffed.
Another problem for Musk is his tendency to take massive risks and defy convention. He has taken huge risks, such as investing heavily in the development of fully autonomous vehicles and the launch of reusable rockets. This approach often leads to spectacular successes, but also runs the risk of catastrophic failure. Musk’s ability to take on and eventually solve huge problems often attracts more attention than his missteps and setbacks.
Musk’s determination to succeed can, however, lead to a lack of transparency. On many occasions, he has made prospectus-level promises and declarations without making sure that the underlying facts would verify the statement. This gamble can not only be costly but could also put his reputation and his companies in a difficult position.
Public Criticisms
Musk also receives a lot of criticism from the public for his personal style and his ability to remain focused on the Tesla mission. He is often labelled as a perfectionist and a micromanager, two traits that can be beneficial but can also lead to over-scrutinizing the operations of the company and intimidating people who work with him. His reluctance to delegate tasks to subordinates or take advice from supervisors further exacerbates the problem.
In addition, Musk often promotes himself and his companies in a way that alienates potential customers or shareholders. He constantly seems to be in the limelight and often makes grandiose statements that capture attention but may not be backed up by facts. These statements can lead to expectations that Musk will not be able to fulfill, damaging the credibility of both himself and his companies.
Lack of Finance Understanding
Musk has also been criticised for his apparent lack of financial understanding and his tendency to base business decisions on flawed assumptions. Rather than taking a more cautious approach with Tesla’s finances, Musk has often risked large sums of money with little understanding of the basics of finance. This has caused serious financial issues for Tesla and led to massive debt, multiplying the risk for the investors.
Furthermore, Musk has been accused of not taking the shareholders’ interests seriously. He is often seen as more concerned with his own success and fulfilling his own vision than doing what is best for the company and its shareholders. His actions often create the impression that he is more concerned with the short-term objectives and the prestige they bring than long-term stability.
Toxic Work Environment
During the early days of Tesla, Musk was lauded for his unconventional approach to running a company. But as the company has grown, this approach has been criticized for creating a toxic work environment. Employees are allegedly treated like disposable pawns, with long working hours and low salaries, which has caused morale and turnover to drop significantly during the last few years.
Musk’s behavior has also been branded as unorthodox, with him often receiving protests from those who strive for more ethical business practice. His culture of aggression towards employees and press has taken a toll on Tesla’s ability to attract and retain talent, as well as its public image.
Hiding Losses
There have been allegations that Musk also tried to hide losses from investors by hiding them in Tesla’s balance sheet. Whilst trying to appeal to Wall Street and potential investors, Musk and his team would hide losses in order to put Tesla in a better financial position. This approach could potentially lead to legal prosecution in the future, as hiding losses is illegal in many jurisdictions.
Musk has made a lot of mistakes over the years, but he has also produced amazing results. His vision and ambition were essential in getting Tesla and SpaceX to where they are today, and his attitude and approach to running a business has provided inspiration for many entrepreneurs. Whilst mistakes have been made, that is also just part of the journey to success.
Excessive Spending Habits
In addition, Musk’s spending habits have been criticized for being too excessive. As a notorious risk-taker, his ability to invest in ambitious projects has often led to the company burning through its resources faster than expected. Tesla’s spending during the second quarter of 2018 reportedly declined by 50% compared to the first quarter, raising worries about the company’s ability to spend efficiently and build a successful business.
At the same time, Musk’s pursuit of excellence and his often risky approach have been credited for a large part of the company’s success. The ambitions of Musk and his team have enabled Tesla to develop products that were once thought to be impossible. This approach, while costly, has given the company the edge it needs to stand out in this highly competitive market.
Inappropriate Relationships with Employees
Musk’s relationships with Tesla employees have also been questionable in recent years. Musk was accused of fostering an inappropriate relationship with a female engineer supervisor at one of the company’s facilities. This ignited tension between Musk and the Tesla workforce and revealed a culture of sexism and sexual harassment throughout the company.
Employees have also accused Musk of fostering an atmosphere of fear, with those that don’t agree with his decisions often being punished or silenced. This kind of behavior has created a high-pressure environment whereideas and opinions are only valued if they can further Musk’s interests or the Tesla mission.
Risks to Investors
Musk’s mistakes and miscalculations have also put Tesla’s investors at risk. His tendency to disregard the advice of advisors and to take on extremely risky projects can cost investors large sums of money. And whilst investors have often seen a return on their investment with Tesla, there have been reports of individuals losing money due to Musk’s ambitious, if risky, approach.
In addition, by not focusing on Tesla’s core business, Musk has placed Tesla in a difficult position. With competitors such as General Motors and Volkswagen making great strides towards developing their own electric vehicles, Tesla has been left lagging behind in terms of market share and technology. This is mainly due to Musk’s decision to focus on ambitious projects such as solar roofs and Tesla Semi trucks, rather than focus all of the company’s resources on producing the best electric vehicles possible.
Project Delays
Musk’s ambition and his tendency to take on complex projects have often led to delays. Providing insights into the potential of Tesla vehicles and ambitious projects such as Hyperloop have often caused delays in products and services that were expected to be delivered by a certain deadline. These delays lead to investors becoming frustrated and increasing the risk of them pulling their investments out of the project.
Musk’s autocratic approach to running the company can also be blamed for the delays, as his unwillingness to accept criticism or advice often hinders the progress of projects. This leads to projects taking longer to come to fruition and often puts Tesla in a difficult financial position.
