Elon Musk has his fingers in a lot of pies. He’s CEO of automaker Tesla and rocket company SpaceX. He also founded tunnel construction firm the Boring Company and co-founded Neuralink, a brain implant startup. Now it looks like Musk will spearhead the effort to take Twitter private and potentially roll it into an “everything app” he calls X.
If that sounds like a lot, well, it is. Many observers have wondered whether Musk should step down from one or more of his leadership positions, particularly as CEO of Tesla, because he’s strapped for time. They might be right. Other observers see signs of Founder’s Syndrome, in which founders struggle to delegate, share the limelight and so on. That might also be the case.
Here’s another way to phrase that question: Is Tesla still in its early days? Or is it a well-established business that needs to focus on electric vehicles and distributed renewable energy? How you answer that probably dictates whether you think Musk should stay or go.
These questions address a challenge that all companies face at some point in their lives: Should they invest resources in exploring new niches or work on exploiting existing ones they’re already familiar with?
Does Tesla need a Tim Cook?
Many companies try to do both — the so-called ambidextrous organization — so they can continue to profit from an existing business while exploring new markets. That’s hard to pull off, and no matter how hard they try, every leader has tendencies that pull them in one direction or another. (This is why it’s important for founders to have diverse, empowered lieutenants and boards so they can draw on a range of views and competencies.)
Money makes this trade-off easier, of course. Apple has been able to do both with some success thanks to its substantial revenue. Few people would argue that Tim Cook is an exploratory-style CEO the way Steve Jobs was.
Cook is not averse to exploration nor has Apple stagnated under his leadership; both AirPods and the Apple Watch suggest the company is still good at finding new markets. But Cook’s legacy, if we were to write it today, would rest on his adept exploitation of the smartphone market. Apple was at a crossroads when Cook took over, and he had the right strategy at the right time.
Tesla’s decade-long foray into mass-market EVs has more than paid off, making it one of the top 20 automakers in the world by revenue, according to Fortune and the largest by market capitalization. That line of business has more or less matured. Despite continued growing pains, Tesla has figured out how to design, make and sell EVs. That maturity is pulling the company away from exploration and more toward exploitation.
The company’s P/E ratio is many times higher than other automakers, suggesting that investors think the company has significant potential for growth. The key question is whether that growth will come from its existing EV business or from something new.
Musk appears to recognize that Tesla has shareholders in both camps. During the recent introduction of the Optimus robot, he emphasized its use of existing Tesla parts and intellectual property while touting the robot’s potential in new markets. (In my opinion, robotics is very much a new line of business for the company, regardless of how much overlap there is between Optimus and Autopilot sensors and software.)
Musk clearly enjoys working at companies that are still in the exploration phase. His career is a laundry list of this — we have early endeavors like Zip2 and X.com, and more recent ones like SpaceX, the Boring Company and Neuralink. I think he’s trying to keep Tesla in exploratory mode, too.
The answer to whether Musk should step aside as CEO of Tesla probably depends on your reaction to Optimus. Is it a silly distraction for a company that should be focused on dominating the EV market? Or is it a promising entry into a new market that could unlock significant new value for Tesla shareholders?
If it’s the former, then Musk should probably make way for a CEO who can truly focus on the EV market and exploit it. If it’s the latter, then he’s in the right place and we can expect many more exploratory projects like Optimus in the years to come.