Observations from the Consumer Electronics Show: Electric and autonomous vehicles; Who's buying Tesla?; Japan vs. China business cultures; Thoughts on the 12 questions to ask before you marry someone

By Whitney Tilson

Thursday, January 9, 2020

1) I got back at 1 a.m. last night from two days at the annual Consumer Electronics Show (CES) in Las Vegas, and I’m bursting with ideas and observations.

Here’s the first: I spent all day yesterday in the enormous North Hall visiting the booths of most of the major global auto companies and their suppliers. It’s clear to me that all of them are making massive investments in both electric and autonomous vehicles – in large part because of how disruptive Tesla (TSLA) has been, to give credit where it’s due. I’m now even more convinced that almost everyone is going to be stunned at how quickly the technology will advance and the rollout will occur in these distinct but related areas. It won’t be linear, but instead will follow an “S” curve.

My colleague Enrique Abeyta and I are doing a deep dive here, so stay tuned. In the meantime, here’s what I wrote in my November 7 e-mail:

At the Robin Hood conference last week, I enjoyed the presentation by author and entrepreneur Tony Seba, which he posted here (31 minutes – an earlier, longer version is here). He discussed “S” curves and how we tend to underestimate the rate of adoption of new technology.

Here are two examples:

One, Google estimated that its Lidar system, which cost $150,000 to build, would cost $70,000 by 2012. Analysts mocked and scoffed at the estimate – but Google was right: that’s exactly what it cost in 2012. But what’s more impressive is that by 2013, that same equipment cost $10,000… only a year later, a mere $1,000… and then three years later, $250!

And two, in 2000, a top computer used for nuclear warfare simulations had a capacity of 1 teraflop (1 trillion floating point operations per second), cost $46 million, used 850 kilowatts of energy, and took up 1,600 square feet. By 2017, Nvidia had developed a 2.3 teraflop computer that cost $59, used 15 watts, and was small enough to fit in your hand.

The lesson here is that humans think in a linear fashion – yet certain systems, including tech disruptions, are non-linear.

Seba’s conclusion regarding electric vehicles is that they will account for the majority of new cars sold within six years.

In a related prediction, he sees oil prices falling to $25 per barrel (from the current level of around $56). If he’s right – a big if! – there will be huge implications…

According to the U.S. Energy Information Administration, 69% of all oil consumed globally was used for transportation in 2018: 61% for cars and trucks, the other 8% for airplanes. Lower oil prices would be a huge windfall for airlines, as jet fuel is their second-largest expense after salaries. Other businesses with oil as a major input cost would likely benefit, too: chemicals, fertilizers, etc. But it would be devastating to the oil industry.

2) Speaking of Tesla, the melt up in the company’s stock that I warned my short-selling friends about continues unabated, with TSLA shares hitting all-time highs pretty much every day over the past month. At just less than $500 per share, Tesla now sports a nearly $90 billion market cap, more than General Motors (GM) ($50 billion) and Ford Motor (F) ($37 billion) combined!

I’m not yet recommending Tesla again as a short… but if you’re long it, you should certainly be taking some money off the table. In addition to the ever-sillier-by-the-day valuation, I heard two things yesterday that are often signs of the top of bubbles. First, CNBC’s Jim Cramer said the following on his Mad Money TV show yesterday: When Tesla’s double the value of Ford and GM together, then wake me. I’ve known Jim for 20 years and think he’s smart, experienced, and entertaining. But you have to know when to listen to him – and when to use him as a contra-indicator, as he and his viewers tend to follow momentum to absolute peaks and troughs…

The second indicator came when a group of us were discussing Tesla and someone asked, “Who the heck is buying this thing here?!” A Chinese friend replied:

I think the last leg up is from Chinese retail investors. When [CEO Elon] Musk took off from California in his Gulfstream G650 jet to fly to Shanghai for the grand opening of the new Gigafactory 3 recently, obsessive Tesla followers noticed that he took off after a China Eastern commercial flight, but soon passed it. China Eastern had a little fun with this and posted something along the lines of, “What do you expect from a guy who builds rockets?”

This story went viral on [microblogging website] Weibo. Also, the opening of the Gigafactory got a lot of press locally. [For a good laugh, comedian Stephen Colbert poked fun at Musk’s dancing at the opening ceremony – watch it here.]

My friends at brokerages who handle accounts for Chinese retail investors say they’ve been buying the stock like crazy.

I trust I don’t need to tell you that Chinese retail investors are notorious momentum chasers…

Lastly, while competitors have so far failed to make much of a dent in Tesla’s growth, I have to imagine that the dozens of companies I saw that are all rolling out cool-looking cars in the near future are going to have a material impact on Tesla, but probably not for a few more quarters…

3) Speaking of the Chinese, they were out in full force at CES… both individuals in the crowd and businesses in their booths – a few large, but mostly small. Relative to last year, I could detect no drop-off due to the trade war.

Another friend, who runs a venture-backed, cutting-edge-technology medical-device start-up in Silicon Valley, had a fascinating observation:

Look at the Chinese – they’re everywhere. They combine brains with courage, an incredible work ethic, and now real access to capital. But we didn’t see many small Japanese firms – mostly just a few large conglomerates like Toyota, Sony, Panasonic, and Nikon. This mirrors my experience in dealing with numerous Japanese and Chinese companies.

The Japanese are great engineers and have great technology, but they have minimal appetite for risk. When I talk to them about working together to develop a revolutionary new product, all they could talk about was how difficult it would be to get regulatory approval – which is nowhere near the most difficult part of the process.

In contrast, the Chinese companies I deal with are incredibly entrepreneurial. They’re excited to try new ideas and, if something doesn’t work, no problem, they reload and try again. What a difference!

4) Here are some follow-up thoughts regarding my 12 questions to ask before you marry someone, which I summarized in yesterday’s e-mail

I’m not saying that you must agree with every one of these questions. Every person might have a slightly different set of questions, prioritize them differently, and think differently about what’s a deal-killer. For example, can you live with someone who occasionally smokes marijuana or has very different political beliefs? What if you want to raise the kids in your faith, but your potential spouse wants to let them make their own decision? I can’t answer these questions for you.

A guy I met recently asked me an interesting question:

Once you’ve gone on a few dates with someone you like, is there a way to accelerate finding the answers to the 12 questions? The cost of waiting when the answer ends up being “no” is that you’ve lost time you could have spent looking for the right partner. One strategy I’ve heard of is going on camping trips together early in a relationship, where something inevitably goes wrong and you can see how the other person reacts.

Here was my reply:

My initial thought is that the real waste of time is to stay with someone you know isn’t right, out of inertia or “he or she is really nice” or “wow, the sex is great.” Worse yet, if you let it drag on long enough, you might just marry this wrong person – I’ve seen it happen. So keep in mind what Bill Gates once said: “Hire slowly, fire quickly.”

Another friend asked if I thought the decision to marry someone should be based on these questions or gut instinct. I think both… Any relationship has to start with genuine, emotional attraction. Don’t even think about these questions until it becomes more serious and you’re asking yourself, “Is this the person I want to spend the rest of my life with?”

And then, for sure ask these questions because it might help you avoid a terrible mistake. Someone close to me is twice divorced – and both times I’m convinced that, had she had this list, she wouldn’t have married either dud. Sometimes the smartest people can make the dumbest decisions when it comes to matters of the heart…

Best regards,


Whitney Tilson

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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

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