While Elon Musk is still the world's richest man, Harvard Business School professor Mihir A. Desai believes that his fortunes are far shakier than they appear on paper.
Writing in the New York Times, Desai argues that Musk's massive wealth has a "soft underbelly," which is that "his fortune depends heavily on the inflated expectations of his rabid following."
Desai then goes on to explain what he describes as Musk's "high-wire act" that keeps investor money flowing to his many ventures: "Dream up a business so ambitious that any setback is trivial and every accomplishment heroic. Identify yourself as the manic genius behind this ambitious business in order to personally capitalize on outsize returns from excited investors. Enlist social media to cement your iconic status, keeping your believers so enthusiastic that their fervor beats back any skeptics who dare to bet against your ventures, even as you pitch more and more fantastical ideas."
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However, Desai believes that Musk has left himself vulnerable to hubris, and he thinks that his highly visible involvement in supporting far-right politicians could be the start of his undoing, as evidenced by the major hit his flagship electric car company has taken to its sales.
"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," he contends. "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."
Desai concludes by warning Musk that "if financial markets can manufacture wealth and power, they can just as easily dismantle both."
