NEW YORK (May 11, 2016) — Tesla Motors Inc. CEO Elon Musk is known for making the future come early.
Yet somehow he's always running behind schedule. Some would call this a failure of management, but it might just be a business strategy. Call it the “Musk Doctrine.”
It goes something like this: People do paradigm-shifting work only when they're under tremendous pressure, so the key is to ensure deadlines are always impossible. This could help explain why Mr. Musk has never launched a product on time, yet no one seems able to keep up with him. It drives Wall Street nuts.
Mr. Musk, 44, tipped his hand on this winning-through-failure strategy last week when he set the launch date for Tesla Motors' widely anticipated Model 3 electric car astonishingly early: July 1, 2017.
But not really, Mr. Musk explained.
“Now, will we actually be able to achieve volume production on July 1 next year? Of course not,” he said on Tesla's earnings call. “In order for us to be confident of achieving volume production of Model 3 by late 2017, we actually have to set a date of mid-2017 and really hold people's feet to the fire, internally and externally.”
Calling his own bluffs
What makes Mr. Musk's deadline bluffs unusual is that he makes them public and lets investors hold him to account. Take what happened when he dropped his biggest bombshell last week, unveiling what is arguably the most ambitious production timeline in the history of cars. Mr. Musk said he plans to go from making about 50,000 electric cars a year to 500,000 — by 2018.
That's two years ahead of his previous target, which itself was dismissed by Wall Street as nearly impossible. And 2018? That's “too aggressive, setting up investors for disappointment,” wrote UBS AG analyst Colin Langan in a note to investors.
Some may even view Mr. Musk's strategy as having less to do with motivation and more to do with financing. Ryan Brinkman of JPMorgan Chase & Co. said the new target may be seen as a “perfect rationale for a large equity capital raise.”
But Tesla doesn't necessarily need a new justification for raising capital.
Wall Street was already anticipating such a move after the company took in 400,000 (refundable) deposits, at $1,000 apiece, for the Model 3 — showing a level of demand that was as unexpected as it was unprecedented. If anything, the head-scratching 2018 goal is making investors more nervous about the cash burn, not less.