Tesla CEO Elon Musk and his security detail depart the company’s local office in Washington, January 27, 2023.
Jonathan Ernst | Reuters
Elon Musk’s expanding portfolio of ventures is facing heightened scrutiny as the Tesla CEO takes on more responsibilities.
During Tesla’s second-quarter earnings call, Truist analyst William Stein questioned Musk about his latest tech endeavor, xAI, a startup focused on artificial intelligence. Musk aims for xAI to eventually compete with Google Bard and OpenAI’s ChatGPT, while also collaborating with Tesla on software and silicon.
Stein inquired, “Investors who see value in Tesla’s AI features and products may be concerned to see you pursuing another project in the same area. Can you explain how xAI might overlap or compete with Tesla, or how it might enhance the value of what Tesla does?”
Musk explained that xAI, with its focus on artificial general intelligence, would bring value to Tesla, citing recruitment as an example.
“Some of the world’s best AI engineers and scientists were willing to join a startup, but not a mature company like Tesla,” Musk stated. “So, I decided it’s better to have a startup under my leadership than lose them to somewhere else. That’s how xAI came into existence.”
Additionally, Musk mentioned enticing a top materials science engineer away from Apple by offering the opportunity to work concurrently for SpaceX and Tesla. This engineer, Charles Kuehmann, ultimately joined Tesla and now serves as Vice President of SpaceX and Tesla materials engineering.
This issue of Musk’s multiple ventures also drew attention when Senator Elizabeth Warren requested the Securities and Exchange Commission to investigate his Twitter ties and related corporate governance concerns.
Musk acquired Twitter through a $44 billion buyout and assumed the roles of CEO, controlling shareholder, CTO, and executive chair. In addition to Tesla, he also leads SpaceX, Neuralink, and The Boring Co.
While Tesla is the only publicly traded company among Musk’s ventures, little has been disclosed about the extent of talent, time, and money devoted to his other endeavors. Previously, Tesla, SpaceX, and The Boring Co. employees assisted Musk in his Twitter takeover.
Furthermore, a senior Tesla employee joined Musk’s X Corp., the parent company of Twitter. Court filings revealed the transition of Dhruv Batura, formerly a senior manager at Tesla, to the role of Senior Director of Finance at X Corp.
A proxy filing from May 2023 disclosed that Twitter has engaged in commercial and support agreements with Tesla, resulting in approximately $1.4 million in expenses.
According to Randall S. Peterson, a professor of organizational behavior at London Business School, Musk’s argument that he is helping Tesla by preventing talented individuals from joining competitors is difficult to validate.
Professor Peterson cautioned that Musk’s multiple ventures pose risks for Tesla, and shareholders should demand more transparency.
Peterson emphasized the challenge of excelling at multiple endeavors simultaneously, suggesting that Musk’s ability to run several companies raises questions about the independence and effectiveness of Tesla’s board.
Musk’s employees may also face burnout and performance issues, as they may feel compelled to work on numerous projects concurrently for him. Peterson highlighted the importance of focus and specialization in achieving excellence.
Despite these concerns, Musk continues to pursue collaborations between companies within his empire. During the earnings call, he discussed the potential collaboration between Tesla and Neuralink to develop robotic prosthetic limbs for amputees.
As of now, Tesla and Twitter have not provided comments regarding these matters.
— CNBC’s Rohan Goswami contributed reporting.
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