Understanding this cult requires one to rethink what one knows about finance. Financial purists like to think of financial markets as neutral arbiters that merely record the value-creating activities of entrepreneurs. Financial pragmatists understand that prices need not always reflect value, as behavioral finance has demonstrated. But what if entrepreneurs can capitalize on these dynamics to manufacture fortunes and political power?
This trick is precisely what Mr. Musk has mastered. His messianic status, which was birthed in the explosion of social media, created a powerful cycle of outsize returns on ventures that lead to investors providing him with more and cheaper capital to diversify his empire that, in turn, attracts yet more investors fearful of missing out. Skyrocketing Tesla shares have made fans and investors so devoted that all he has to do is mention a new ambition to goad them into buying even more. And the larger the stated ambition, the more wealth and power they hand him. So why not try for Mars? The final step in this process is to consolidate power in the political sphere to ensure that the outsize ambitions can be nourished forever. If Mr. Musk had played it well, his empire may have been impregnable.
Instead, Musk’s business acumen and taste for politics are likely proving to be his undoing. Rather than relying on excellent managers who could help his businesses generate critical cash flow, Mr. Musk dismissed questions about succession even as he grew ever more distracted. Rather than save cash to provide insurance from bad times, he’s plowed it into overhyped schemes like brain implants and hyperloops. Instead of quietly pushing his political agenda from the shadows, he has stepped out in as visible a role as possible, appearing as convinced of his shrewd political instincts as he was of his marketing genius.
The resulting cracks in Mr. Musk’s empire are starting to show. Automotive revenues at Tesla in the fourth quarter declined 8 percent from a year earlier, profit in 2024 dropped sharply from the prior year and, 22 years after the company’s founding, it remains unclear if it can ever generate significant free cash flow for shareholders. Tesla appears to be relying more and more on price cuts — a practice that can increase sales in the short term but likely damages how much buyers value a Tesla in the future. The political backlash against Mr. Musk is also now hurting Tesla sales abroad and at home. Perhaps sensing the shifting tides, he has been suggesting that Tesla is an A.I. company to further nourish the investor cult.
The rest of the Musk empire also illustrates the gap between his business acumen and financial success. Solar City, Mr. Musk’s solar venture led by his cousin, needed to be salvaged by a controversial Tesla acquisition and has atrophied since. The Boring Company, which promises to revolutionize transportation by building high-speed hyperloops between and within cities, has raised nearly a billion dollars, yet it is unclear if it has any revenues or the prospects of profits. The possibility of revenues or profits for Neuralink, Mr. Musk’s brain implant company, seems even more remote. And, of course, X, formerly Twitter, is a shell of itself economically and culturally. SpaceX is more than 20 years old, has raised an estimated $12 billion and only now is rumored to have possibly $12 billion in annual revenue, mostly from Starlink, the satellite service, though profitability may be far off.
