After working out the financial, the thing that gets me with Tesla is their vision for the future. Tesla is the first company that gives me the feeling that I can have a part in a better future.
They gave hope to me too! With all these energy markets based on non sustainability, I almost gave up hoping for a sustainable fitire until I discovered Teslas vision
@@niederrheiner8468 It's all a matter of cost and EV's are close to price parity with combustion engine cars. When that happens sales of ICE cars will slow down. Because auto manufacturers have a very small margin of profit per car (about 1 to 2%), their overall profitability will fall. Basically that's the end for most car manufacturers. It will happen between 3 and 5 years.
Investing in Tesla at the beginning was more about faith and hope than about 'first principles' investing. The odds of failure were very high and remained high until the Model 3 emerged from 'production hell' only a couple of years ago. The payout potential, if successful, was huge, but there were so many real risks. It is hard to say if the reward/risk ratio was favourable in those early days. Today things are quite different. Today, first principles thinking is allowing you to see the enormous upside of this company while Wall Street is stuck with their old approach. If you were in it in the beginning you won a lottery. But if you aren't investing in Tesla now, you are mired in that old thinking.
Well said. I've been long since 2016, but it was a small stake because of the risk. I admire some folks courage, but Tesla was within one loan or an early model 3 recall of going under. However I do think it's worth pointing out the inflection points where we had the right information: (1) post model-3 ramp. (2) sentiment shift post Cybertruck reveal (once we saw more and more people change their minds). (3) model Y teardown by Sandy Munroe + covid effects I missed (1,2) because I wasn't very actively investing at the time, but did catch (3) but didn't recognize how profound it was and had to play some catch-up later (really should have bet the farm at that point but instead rolled in stages). I'm really not annoyed at my past-self for investing more in 2016, but I am for (2,3). When the Y was opened up and we knew the pace of innovation/improvement from Tesla in manufacturing, along with the fact that no traditional automaker now has the money/margin to make the ICE-to-EV transition, the future path was really clear. We had also already seen competitor startup failures start to get revealed. I try to think about filters and stages for my significant investments now, and be more ready to double-down (or exit) not just when thesis/business changes but also probabilities for scenarios.
I think the most important fact I got from this video(13:52 of this video) is why Tesla's approach in solving autonomous driving problem is the right way. I have heard a lot about different approaches that different companies develop to solve this problem, but as an outsider of this industry it is hard to get the conclusion which company is on the right path. Dave's explanation help me clear out the thought. Thank you.
Interesting. Like the examples as well. I think the biggest challenge is how do you know when you’re right? How do you go about continuing to verify? Below are some great companies but think you’d agree that it is less certain than the companies you mentioned. - Uber/Lyft. Very different performance since IPO - why Twitter isn’t the same as Facebook if it’s just about scale/sharing and turning on ads. Is Snap the same? - upcoming Airbnb IPO. Disrupting an industry - Beyond Meat. Great recent success but will it stick? - Peloton. Is it a fad at the right time? - Square. Distributive tech and providing personalized offerings (loans etc) based on data - Snowflake. Is it worth all the hype? I think so
Thank God for the Bears on Tesla. When I seen the bears drive down Tesla shares, I told my wife we have buy Tesla shares now. We sold personal things, bought Tesla at 219. average in July 2019 . Tesla changed our lives financially.
To me, a "first principles" analysis or review is primarily about exposing and questioning the axioms that form the boundaries of an existing model, domain or paradigm. More specifically, it is about asking if these presuppositions are still valid under current conditions. Some people refer to this as "out-of-the-box" thinking. For example, consider vertical versus horizontal integration. By being willing to question the dominant "horizontal" model used in the automotive industry, and asking if it was actually the best approach in a rapid development environment, Tesla correctly identified that vertical integration was superior in this scenario and quickly switched. Self-landing rocket boosters is another great example of how the constraints of the old model are no longer valid in the current reality of more advanced computer systems. Tesla has been a hyper creative "rule-breaker" along so many dimensions it is very hard to contain one's enthusiasm. I would also agree with other commenters that having a highly compelling and widely shared "Vision" is critical in driving so many people both internal and external to support Tesla. As Simon Sinek put it so eloquently, "Start with Why"!
Amazing video Dave. I take a lot of flack for my thinking about Tesla and investing generally. TSLA is the first stock I bought, and as I mentioned on these videos prior I knew at $400 pre-split that TSLA would be going 'to the moon' so to speak, to quote our friend SMR. That is, I saw the pent-up demand and the quality product when people were fixated on 'revenue' or thinking Tesla was going bankrupt. This was in 2018 so their fears were perhaps not totally unreasonable, but I knew they had to the best chance to make it, especially given customer interest and satisfaction despite initial quality growing pains. I urged my smart friends (and even family) to buy and none of them did. Then the stock went to $2500 or so before the 1:5 split and it's dinged 600 since then (with a strong future ahead). One friend derided my lack of 'experience' in investing, but I've always been known as a critical thinker and someone who recognizes logical fallacies (from FUDsters but long before then) as it has been a deep interest of mine. So, when I saw the long-term potential of Tesla it had nothing to do with revenue but potential, and I got it right. Plus, I knew after renting a Tesla Model 3 for two days how good the car was, and how it changed the game in so many positive ways that were undeniable to any honest observer, not the least of which was the compelling 0-60 speeds, Supercharger network, uncluttered styling, and a great driving experience. It was also not lost on me the effect SpaceX has on Tesla and consumer/investor confidence, as Elon runs both. This is a whole other conversation, but this fact matters. For many of the reasons you've talked about, I see Tesla as having a tremendously bright future and with little in the way of real competition for years to come. This doesn't even get into the killer app Tesla has; their Supercharger network. It's all well and good to buy a non-Tesla EV, but charging won't be nearly as convenient outside of home, and this assumes one even has home charging. Often, I bring up Amazon as a primary example of the simplistic fixation on revenue and how everyone thinking about revenue would have missed this stock in the early days (or already did). I remember when Amazon was operating at a net loss for years whilst changing the entire shopping paradigm via the still-new Internet. Wouldn't it be nice to have gotten into Amazon early, I ask? Yes. Yes indeed. I think the emphasis on First Principles and Critical-Thinking is crucial, because for a lot of winning companies and their stocks it's way too simple to simply focus on revenue. If investing were that easy we'd all be rich and few people would get it wrong (like those who invested in Theranos or Nikola). Thanks again for another fantastic video!
Very good point Dave! I usually pick that the majority make fun at the beginning, because disruption usually misunderstood. Second, I learn about the CEO, including his or her lifestyle. If too much showing off how their lavish life, forget it. It will impact the way of thinking in managing their company’s financial.
I agree with expanding our thinking. This way of thinking is something I've done naturally but I'm curious to know if anyone has actually learnt to think this way or completely adopted a new way of thinking from these types of influences. I hope this style can be taught but as many Tesla bulls will know it's hard to encourage others to appreciate this approach.
14:14 - Example #4.... I believe you're right Dave, this appears to be a potential first principles moment in transit. RUclips suggest your page. Nice find. Excellent approach to share ones thoughts on these intense subjects. On the journey, change. Like the cool, easygoing delivery brother. Peace
I have been watching and researching Blackberry QNX for 6 years. With analogy and first principle they have never had setback and with Headlines are partners with everyone. Could be the Private and Secure Platform the world needs more than ever.
I was a Tesla and Elon hater before. Thanks to you, Hyperchange, Tesla daily, Sandy Monroe, The limiting factor and book by Ashlee Vance, I understood Tesla and Elon very well. There was no looking back from then. I try to use first principles thinking often.... I am still learning to think in 1st principles. I also learned to never believe main and wall street media and to do own research. Thank you Dave for trying to change lots of lives
Great analysis Dave! There are so many aspects to it why people do what they do, which it could be a looong great video! I’m just reading the 100 Baggers by Christopher Mayer and (so far) he’s approach is also kind of different then some other investing books. I see a lot of common ground on your videos and how Elon runs the company! Disruptive companies with new technologies which think outside the box are difficult to understand and compare, to most of the people for a lot of reasons. That’s why adoption is usually first denied (beside children and jung adults) and then when adopted taken for granted. Great example like you said with the iPhone/smartphone only a couple of years from now. 🙏🏼Greetings from Germany George
Thanks David, fantastic video. You picked off a lot of huge winners that many people missed, and sure explained what happened and why, you nailed it. Since you mentioned them, what would you say happened to Blackberry since at it's core it had encryption so good that even President Barrack Obama was the first President to have a cell phone. That should have been a huge advantage over the Iphone and Samsung phones, but in the end, they almost capitulated, trading now at a mere fraction of what it once was, yet now Amazon has taken interest. You want to hear from us, I have a company (and a subsidiary) that you might be interested in. These guys are still a small outfit, but they have incredible depth in their creativity and application of their technology, with no real companies that you can compare to. At their core, they are using plasma technology to reduce greenhouse gas emissions in some of the largest polluting industries, they are creating new products to help solve the worlds energy problems, and building new materials that will revolutionize 3D printing. To me they have solutions to most of the worlds pollution problems, (it is already in place on US Aircraft carriers, aluminum and iron ore smelting industries, and very shortly will supply nano silicon particles, which for EV battery capacity is the holy grail), they have many different applications to chose from but are focusing on low hanging fruit, with strong management and even government support...if you dig deep enough, you may even find a familiar name circulating that may be part of a NDA...Nevermind their financials, tell me what you think of Pyrogenesis (PYR.TO and their partner HPQ.V)
Outstanding, Dave! What's the common thread between all of your examples? Products and services. When do you foresee game changers emerging in education? Healthcare? Even etiquette and living within means? First principles in being better humans (and producers) vs. consumers? . . .
I really love the video Dave. Appreciate your hard work and knowledge. You made me think differently about investing in a company now. Lol I like the First principle thinking 🤔👏👍😎
Amazing insights! Your right this is never covered in Investing. I have been following you for two weeks and I already have grown massively since then. Thank you so much :)
Enjoyed the show. One company that comes to mind, other than TSLA, is CRSP. What better way to solve genetic diseases than targeting and changing defective sequences.
Hey Dave, thank you for sharing your thoughts. I have been watching a lot of your videos recently. Would you mind sharing your a situation in which you are incorrect? Maybe you bet on the stock that didn't work out. It would be interesting to hear what happened.
I hope there are more logical and analytical yet creative voices in investing like you. I think so many people believe that an individual cannot pick a winner, and everyone should stick to passive index investing and move with the market. Having a clear mind is so important, and thanks for guiding me that way!
I understand your Analysis on Tesla, and the way you have analyzed it. Is there any similar stock that you are working on now? Need to understand your thought process with the current situation and new set of companies.
Hi Dave. On a different topic: have you considered interviewing former Nissan Chairman Carlos Ghosn on EVs. Leaving aside the controversy of his escape from Japan, he was one of the first global auto executives to argue for EVs over hydrogen and hybrids as the future. Nissan made a good start with the Leaf but Mitsubishi, Renault and even Nissan in recent years have failed to follow through. In exile in Lebanon now, he might have some very candid but well informed views about electric autonomous vehicles and Tesla.
My sniper shots are: TSLA, SQ, NNDM, potentially LMND. TSLA & SQ are frequently covered. I honestly believe that from a first principles perspective what NNDM is doing will change the R&D process of many industries. Potentially circuit board mass production as well, if they continue with their current ambitions.
Like the First Principles and the reference to physics. I love to read physics and to write about it. Theories such as QED indeed rely on probabilities, as Musk implied or said in the interview. Behaviour of light is indeed probabilistic (for instance). It's clear how studying physics helped shape Elon's thinking.
I think LMND is another example. Everyone focus on how much money they are losing and how long it will remain unprofitable comparing to traditional insurance establishment. In reality, LMND went deep into understanding why and how people bought insurance in the first place.
I think 1st principle thinking is important but need to analyze companies with a holistic approach. Studying a company from all different angles helps us understand it from its core.
Thanks Dave. Completely agree with this. We should listen less to what analysts think and more to the founders themselves. Can you help with a side note...? I'm trying to calculate potential future share prices of key disruptive stocks and would like to see how you view applying multiples over time. We can try to predict what future revenues or EBITDA should be, but to get share price, one has to multiply this by a multiple (ebitda or revenue). Question is, is it fair to apply today's multiples to ascertain future share price or should multiples be adjusted? Shouldn't multiples typically decrease over time (as anticipated growth is being realised and executed on)? If so, how? What can actually cause a multiple to change over time? Really grateful to hear your thoughts and how you derive at potential future share prices.
Spot on with the analogy. My first impression of Elon and Tesla was he was another Jon Delorean (or even Preston Tucker) Would make a cool looking car for Marty McFly then go bankrupt trying to compete with the legacy giants. It was not until the COVID recession I found a video by Cathy that opened my eyes that Elon was very different. Now I am a Tesla convert. Humorously in 2000 I got a D on a business class presentation where I argued Amazon could be an online Walmart. I remember my professor basically laughing that it would be impossible to inventory and real time price all of Walmarts items.
The biggest (and faultiest) shortcut that I see people make in their thinking is to go along with the crowd (aka FOMO, Fear Of Missing Out). It's the equivalent of trying to copy from the smart kid (or even just another dumb kid) during the test instead of solving the problem for yourself. Some people have never had an original thought their entire lives! Many so-called stock analysts are experts at *not thinking* original thoughts.
Hi Dave good video. your examples were good, Netflix is another one. I let Netflix pass because I was scared at the time of selling a few positions that had declined recently and I was 'certain' they would regain their losses. It was the end of 2011 and Netflix had recently raised their price by $1 per month and they had lost customers and the price went down to $60 ( before 7:1 split) I could FEEL the opportunity but didn't pull the trigger. June 2019 I felt the same way about Tesla and knew I could not let that opportunity pass me by again so went all in on Tesla and it has been because of this principle you are talking about. Netflix had something so revolutionary that I could clearly see they had a lead over anyone else ( no one else was even close to them at the time ) This is why I am not fully on board with LMND Lemonade at the moment. They are not able to scale in a Tesla, Apple, Facebook, Netflix way because they need to have cash available to pay any claims that come through in the process of their growth. There is little incentive for anyone to switch insurance providers to them. The CEO seems good ( I watched the full video you had with Daniel ) but good CEO and good Tech / user interface is sometimes not enough.
Analogies help us understand the unique and unknown. Tesla is not only a car company; but a software company, a battery company, and a sustainable energy company. All analogies that help us understand Tesla's uniqueness. Tesla, the company, is driven by first principles. Recognizing that Tesla is a company driven by first principles is an analogy!
Hi Dave, I love your channel! Wish I had discovered it sooner! I would really like to see you interview the CEO of Nvidia, Jensen Huang, or do an overview on what you think of the company. I think Nvidia is a very innovative company as well as Tesla but haven't seen too much deep analysis.
Very good analysis of what is first principle approach. Thanks I would really like to see how you can put this into some kind of models from which we can use to teach the kids.
As I already said in other occasions, I think that the analogy with apple is particularly accurate talking about tesla and ice vs ev. For how I see it the benchmark that should be used in the rate of adoption for electric vehicles is the smartphone, they are different products, at different price points and surely the cars will last longer before getting replaced, but the percentage of new product sold ice vs ev will be very similar to the old mobile phones vs smartphones in my mind. Being that the first real mass market smartphone was the iphone presented in 2006 and that the plateau for smartphones was reached between 2019 and 2020, so in roughly 14 years, and that the first real accesible electric car is the Model 3, presented in 2017, I think that Tesla's estimates to reach 100% of new car sales being electric for 2030/2031 are very accurate. Just many don't see it yet. Just like Ballmer, Blackberry or Nokia.
Love the deep dive on Elons principles, in this case case, first principles. 👍 Would you consider other deep dives on other Elon principles, I find it quite interesting 🧐.
So in other words, don't just look at the companies for what they seem to be, but for what they could become based on the company's foundations, mission and vision. With that said: Dave, what's your input on Virgin Galactic (if you haven't made a video about it, I would love to see one!)
I really like what Virgin Galactic are doing but find it hard to invest now. The reason is because it turned over 4 million this year and made a 403 million loss which is ok, but it's valued at 6.7 billion right now. The revenue multiple is X1676. I think by 2025 they are predicting to make 400 tourist flights that produce about 1 billion in revenue. If margin is 50% and EBITDA multiple is 10 (their own SEC filing suggested ebitda multiple of 5.5 so this is higher), that gives a 5 billion valuation and 21 USD share price - still lower than now. So you'd have to be really convinced that more revenue streams are coming but unlikely until after 2025? Or a much bigger multiple can be applied later? So my view is the price right now is built on a lot of hype as to what might happen after 5 years from now (with no upside included yet) but all the down side could still take place. What do you think?
@@janrkennedy Thanks for your input. Based on the fundamentals, definitely an extremely overvalued company. However, the company's vision, the current environment suggesting that a space race is coming back with force, the fact that the company partnered with NASA, and because technological progress tends to be exponential, I have high expectations that the company might surprise us in the near future. One thing is certain: price fluctuations, and sheer volatility is expected in the meantime. Mistakes, incidents, and delays are part of the process...I believe is definitely a long term investment with a long and very bumpy road ahead.
I want to let you know Dave, that I am following your and Chicken G. - s channel for the last 6 month, and you guys have definitely changed how I look at investing in a good way. I have doubled my investment, made more money than I could earn with my full time job in 2 years (I am a social worker in East Europe) . Thank you for your work! 👨🎓
First Principles is the reason why I think Palantir is a strong buy...I don't think many people understand what they truly do/what they are capable of under the surface.
I remember reading Netflix CEO first letter to shareholders and seeing how he laid out a vision and was executing. Later Amazon was similar. This might be a good first step for all IPOs. If the CEO vision isn’t revolutionary then they aren’t worth a deeper look
Hey Dave, i watch a lot of your content and like your view on disruptive Innovation companies. I would like to ask you to have a look at Aquabounty AQB Seems like a big oppertunity for the world but also as an Investment Thx
Excellent video. More please! An observation: in autonomy and in reusable rockets one could argue Elon is creating a new solution to a problem that was already solved. Human driving in the case of autonomy and expendable rockets in the case of reusable rockets. And yet, the new solution unlocks new capabilities, applications, services.
Even before Tesla, I saw the need for the conversion to zero emissions vehicles and that EVs had an advantage over fuel cell vehicles in terms of the fueling infrastructure. Once Tesla became public I swing traded or channel traded; I was not certain they would succeed. On Autonomy Investor Day it was clear to me that not only would they survive, having overcome Model 3 production hell (ramp), they would positively dominate. I had my own Model 4 within a couple weeks. On Battery Investor Day, I realized it would soon be the end of the ICE age because Tesla would win on range, purchase cost, fuel cost, maintenance cost. Now the rapidly growing cash flow and strong balance sheet is enabling Tesla to rapidly expand production worldwide. Now many countries are restricting the purchase of ICE vehicles, most by 2030. NZ just chose to purchase all zero emission vehicles for the government fleets, effective now. At a certain point, it will be cost prohibitive to manufacture gas cars for the few markets that haven’t been closed to them. That will be a sudden tipping point, I believe before 2040.
Your approach is correct when it comes to evaluating the potential of a company. But you need to apply the same rigorous “peeling away the layers of an onion” to the human element of a company, i.e. management and execution. Many have great ideas, but only few execute them successfully. To me, and lots of other investors, Tesla’s successful execution became obvious in Fall 2019 when it became profitable, which triggered the current second epic run-up (after the first one following model S).
1st Principle Tesla Investing:1)Save world,2)Best product -safe/fun/value/lowest cost,3)make&supplychain on every contingent,4)accelerate innovation,5)Vehicles platform for FSD,6)solar/storage platform for Autobidder,7)SAVE THE WORLD!
This lesson is unfortunately lost on most everyone you have been preaching this philosophy of first principle thinking vs reasoning by analogy thru every video you post but here you identify and clearly define what separates the genius of not only Elon but your thoughts on investments. That ability to think from first principle combined with the Buffet mentality is extremely powerful
I'm an absolute fan, Dave! Just some feedback. To be honest, you give great examples but could have explained better how to apply the first principle thinking to these examples.
Dave could you let us know why you are doing this channel? I am really grateful and know that you probably don't need to revenue. Just want to get to know you a bit better cheers!
A good three. However, I sold Facebook a while ago due to ethical reasons. Do you agree with their mission, does their platform truly make this world better? To me and many others it has just become a chatting tool, where everyone happens to be and its easy to connect. I'm not at all an expert in the company tho, just rather invest elsewhere. Kind regards, T
I’d argue that some of the BTC arguments are reasoning by analogy (starting with the starting point that BTC is a currency). In all his interviews, Dave’s been trying to get away from assumptions and get to the essence of what BTC really is.
The points I see Dave raising about BtC are scenarios about government control, which isn’t analogous to anything other than precedents in places like India.
One thing Dave always brings up on BTC is the government banning it but doesn't look like that will happen: decrypt.co/50457/the-us-wont-ban-bitcoin-says-occs-brian-brooks
After working out the financial, the thing that gets me with Tesla is their vision for the future. Tesla is the first company that gives me the feeling that I can have a part in a better future.
Same bro.
They gave hope to me too! With all these energy markets based on non sustainability, I almost gave up hoping for a sustainable fitire until I discovered Teslas vision
Same here. And much better to do something about our future than talk about it.
There is no future for cars with nearly a ton of batteries in it. We might as well stay with gas cars.
@@niederrheiner8468 It's all a matter of cost and EV's are close to price parity with combustion engine cars. When that happens sales of ICE cars will slow down. Because auto manufacturers have a very small margin of profit per car (about 1 to 2%), their overall profitability will fall. Basically that's the end for most car manufacturers. It will happen between 3 and 5 years.
This is one of the most under evaluated channels on RUclips.
Investing in Tesla at the beginning was more about faith and hope than about 'first principles' investing. The odds of failure were very high and remained high until the Model 3 emerged from 'production hell' only a couple of years ago. The payout potential, if successful, was huge, but there were so many real risks. It is hard to say if the reward/risk ratio was favourable in those early days. Today things are quite different. Today, first principles thinking is allowing you to see the enormous upside of this company while Wall Street is stuck with their old approach. If you were in it in the beginning you won a lottery. But if you aren't investing in Tesla now, you are mired in that old thinking.
That is very well said.
Well said. I've been long since 2016, but it was a small stake because of the risk. I admire some folks courage, but Tesla was within one loan or an early model 3 recall of going under. However I do think it's worth pointing out the inflection points where we had the right information:
(1) post model-3 ramp.
(2) sentiment shift post Cybertruck reveal (once we saw more and more people change their minds).
(3) model Y teardown by Sandy Munroe + covid effects
I missed (1,2) because I wasn't very actively investing at the time, but did catch (3) but didn't recognize how profound it was and had to play some catch-up later (really should have bet the farm at that point but instead rolled in stages). I'm really not annoyed at my past-self for investing more in 2016, but I am for (2,3). When the Y was opened up and we knew the pace of innovation/improvement from Tesla in manufacturing, along with the fact that no traditional automaker now has the money/margin to make the ICE-to-EV transition, the future path was really clear. We had also already seen competitor startup failures start to get revealed.
I try to think about filters and stages for my significant investments now, and be more ready to double-down (or exit) not just when thesis/business changes but also probabilities for scenarios.
Absolutely agree. So many tech start ups have promising ideas but most don't make it. When Tesla became concrete, it became a sure buy
I think the most important fact I got from this video(13:52 of this video) is why Tesla's approach in solving autonomous driving problem is the right way. I have heard a lot about different approaches that different companies develop to solve this problem, but as an outsider of this industry it is hard to get the conclusion which company is on the right path. Dave's explanation help me clear out the thought. Thank you.
Dave, I LOVED the statement: "by analogy is like comparing the surface of two things"
Ah-ha moment in my brain, thanks!
Anything that you talk makes complete sense and core simplicity that you bring in to the table.
Why am I having a stroke trying to read this comment..
A lot of people just lack vision. Great work as always, Dave 🙏🏾😊
Yup! Him, Ark, Sean from AvoryCo are the best!
Now I wish he pulls that crystal ball out of his behind and tell us what company is the next Tesla...come on Dave
Interesting. Like the examples as well.
I think the biggest challenge is how do you know when you’re right? How do you go about continuing to verify?
Below are some great companies but think you’d agree that it is less certain than the companies you mentioned.
- Uber/Lyft. Very different performance since IPO
- why Twitter isn’t the same as Facebook if it’s just about scale/sharing and turning on ads. Is Snap the same?
- upcoming Airbnb IPO. Disrupting an industry
- Beyond Meat. Great recent success but will it stick?
- Peloton. Is it a fad at the right time?
- Square. Distributive tech and providing personalized offerings (loans etc) based on data
- Snowflake. Is it worth all the hype? I think so
Thank God for the Bears on Tesla. When I seen the bears drive down Tesla shares, I told my wife we have buy Tesla shares now. We sold personal things, bought Tesla at 219. average in July 2019 . Tesla changed our lives financially.
To me, a "first principles" analysis or review is primarily about exposing and questioning the axioms that form the boundaries of an existing model, domain or paradigm. More specifically, it is about asking if these presuppositions are still valid under current conditions. Some people refer to this as "out-of-the-box" thinking. For example, consider vertical versus horizontal integration. By being willing to question the dominant "horizontal" model used in the automotive industry, and asking if it was actually the best approach in a rapid development environment, Tesla correctly identified that vertical integration was superior in this scenario and quickly switched. Self-landing rocket boosters is another great example of how the constraints of the old model are no longer valid in the current reality of more advanced computer systems. Tesla has been a hyper creative "rule-breaker" along so many dimensions it is very hard to contain one's enthusiasm. I would also agree with other commenters that having a highly compelling and widely shared "Vision" is critical in driving so many people both internal and external to support Tesla. As Simon Sinek put it so eloquently, "Start with Why"!
Amazing video Dave.
I take a lot of flack for my thinking about Tesla and investing generally. TSLA is the first stock I bought, and as I mentioned on these videos prior I knew at $400 pre-split that TSLA would be going 'to the moon' so to speak, to quote our friend SMR. That is, I saw the pent-up demand and the quality product when people were fixated on 'revenue' or thinking Tesla was going bankrupt. This was in 2018 so their fears were perhaps not totally unreasonable, but I knew they had to the best chance to make it, especially given customer interest and satisfaction despite initial quality growing pains. I urged my smart friends (and even family) to buy and none of them did. Then the stock went to $2500 or so before the 1:5 split and it's dinged 600 since then (with a strong future ahead).
One friend derided my lack of 'experience' in investing, but I've always been known as a critical thinker and someone who recognizes logical fallacies (from FUDsters but long before then) as it has been a deep interest of mine. So, when I saw the long-term potential of Tesla it had nothing to do with revenue but potential, and I got it right. Plus, I knew after renting a Tesla Model 3 for two days how good the car was, and how it changed the game in so many positive ways that were undeniable to any honest observer, not the least of which was the compelling 0-60 speeds, Supercharger network, uncluttered styling, and a great driving experience. It was also not lost on me the effect SpaceX has on Tesla and consumer/investor confidence, as Elon runs both. This is a whole other conversation, but this fact matters.
For many of the reasons you've talked about, I see Tesla as having a tremendously bright future and with little in the way of real competition for years to come. This doesn't even get into the killer app Tesla has; their Supercharger network. It's all well and good to buy a non-Tesla EV, but charging won't be nearly as convenient outside of home, and this assumes one even has home charging.
Often, I bring up Amazon as a primary example of the simplistic fixation on revenue and how everyone thinking about revenue would have missed this stock in the early days (or already did). I remember when Amazon was operating at a net loss for years whilst changing the entire shopping paradigm via the still-new Internet. Wouldn't it be nice to have gotten into Amazon early, I ask? Yes. Yes indeed.
I think the emphasis on First Principles and Critical-Thinking is crucial, because for a lot of winning companies and their stocks it's way too simple to simply focus on revenue. If investing were that easy we'd all be rich and few people would get it wrong (like those who invested in Theranos or Nikola).
Thanks again for another fantastic video!
You are one of the best educators on not only investing but also thinking!
Very good point Dave! I usually pick that the majority make fun at the beginning, because disruption usually misunderstood. Second, I learn about the CEO, including his or her lifestyle. If too much showing off how their lavish life, forget it. It will impact the way of thinking in managing their company’s financial.
This is another Gem. Great work Dave!!
Thank you, Dave! Love the wide variety of information you present. Always expands my thinking.
I agree with expanding our thinking. This way of thinking is something I've done naturally but I'm curious to know if anyone has actually learnt to think this way or completely adopted a new way of thinking from these types of influences.
I hope this style can be taught but as many Tesla bulls will know it's hard to encourage others to appreciate this approach.
in this video, you stated your mission statement. amazing thinking great work dave!
Thank you again for bringing clarity to a complex topic such as investing.
Thank you Dave, I like your gentle but direct approach, I've learned a lot from your posts. Keep being you.
Great reference to Paul Graham. I love his essays, such a great thinker. Thank you Dave for bringing depth to these topics.
Thank you Dave. As always great content.
14:14 - Example #4.... I believe you're right Dave, this appears to be a potential first principles moment in transit. RUclips suggest your page. Nice find. Excellent approach to share ones thoughts on these intense subjects. On the journey, change. Like the cool, easygoing delivery brother. Peace
I have been watching and researching Blackberry QNX for 6 years. With analogy and first principle they have never had setback and with Headlines are partners with everyone. Could be the Private and Secure Platform the world needs more than ever.
Hi, Dave. Are you going to take a look at Palantir?
Really enjoy your First Principles vision.
Damn Dave ,what a beautiful explanation for Tesla’s approach to FSD.
I was a Tesla and Elon hater before. Thanks to you, Hyperchange, Tesla daily, Sandy Monroe, The limiting factor and book by Ashlee Vance, I understood Tesla and Elon very well. There was no looking back from then. I try to use first principles thinking often.... I am still learning to think in 1st principles. I also learned to never believe main and wall street media and to do own research. Thank you Dave for trying to change lots of lives
Great video. Valuable information on how to value companies. This is much better than someone on RUclips just recommending a particular stock.
Another philosophy vid! Nice keep them coming thanks Dave!
Love the new painting from your kids!
Great analysis Dave! There are so many aspects to it why people do what they do, which it could be a looong great video! I’m just reading the 100 Baggers by Christopher Mayer and (so far) he’s approach is also kind of different then some other investing books. I see a lot of common ground on your videos and how Elon runs the company! Disruptive companies with new technologies which think outside the box are difficult to understand and compare, to most of the people for a lot of reasons. That’s why adoption is usually first denied (beside children and jung adults) and then when adopted taken for granted. Great example like you said with the iPhone/smartphone only a couple of years from now. 🙏🏼Greetings from Germany George
Thanks David, fantastic video. You picked off a lot of huge winners that many people missed, and sure explained what happened and why, you nailed it. Since you mentioned them, what would you say happened to Blackberry since at it's core it had encryption so good that even President Barrack Obama was the first President to have a cell phone. That should have been a huge advantage over the Iphone and Samsung phones, but in the end, they almost capitulated, trading now at a mere fraction of what it once was, yet now Amazon has taken interest.
You want to hear from us, I have a company (and a subsidiary) that you might be interested in. These guys are still a small outfit, but they have incredible depth in their creativity and application of their technology, with no real companies that you can compare to. At their core, they are using plasma technology to reduce greenhouse gas emissions in some of the largest polluting industries, they are creating new products to help solve the worlds energy problems, and building new materials that will revolutionize 3D printing. To me they have solutions to most of the worlds pollution problems, (it is already in place on US Aircraft carriers, aluminum and iron ore smelting industries, and very shortly will supply nano silicon particles, which for EV battery capacity is the holy grail), they have many different applications to chose from but are focusing on low hanging fruit, with strong management and even government support...if you dig deep enough, you may even find a familiar name circulating that may be part of a NDA...Nevermind their financials, tell me what you think of Pyrogenesis (PYR.TO and their partner HPQ.V)
This is amazing content, Dave! Thank you for sharing :)
Outstanding, Dave! What's the common thread between all of your examples? Products and services. When do you foresee game changers emerging in education? Healthcare? Even etiquette and living within means? First principles in being better humans (and producers) vs. consumers? . . .
I really love the video Dave. Appreciate your hard work and knowledge. You made me think differently about investing in a company now. Lol I like the First principle thinking 🤔👏👍😎
immediately think of Start With WHY (S.SINEK) when watching this one Dave
Amazing insights! Your right this is never covered in Investing. I have been following you for two weeks and I already have grown massively since then. Thank you so much :)
Enjoyed the show. One company that comes to mind, other than TSLA, is CRSP. What better way to solve genetic diseases than targeting and changing defective sequences.
Hey Dave, thank you for sharing your thoughts. I have been watching a lot of your videos recently. Would you mind sharing your a situation in which you are incorrect? Maybe you bet on the stock that didn't work out. It would be interesting to hear what happened.
I hope there are more logical and analytical yet creative voices in investing like you. I think so many people believe that an individual cannot pick a winner, and everyone should stick to passive index investing and move with the market. Having a clear mind is so important, and thanks for guiding me that way!
Always enjoy your videos Dave 👍
I understand your Analysis on Tesla, and the way you have analyzed it. Is there any similar stock that you are working on now? Need to understand your thought process with the current situation and new set of companies.
Hi Dave. On a different topic: have you considered interviewing former Nissan Chairman Carlos Ghosn on EVs. Leaving aside the controversy of his escape from Japan, he was one of the first global auto executives to argue for EVs over hydrogen and hybrids as the future. Nissan made a good start with the Leaf but Mitsubishi, Renault and even Nissan in recent years have failed to follow through. In exile in Lebanon now, he might have some very candid but well informed views about electric autonomous vehicles and Tesla.
Great video Dave! Can you give your thought regarding Arrival company and Luminar technology vs Tesla's. Thank you!
My sniper shots are: TSLA, SQ, NNDM, potentially LMND.
TSLA & SQ are frequently covered. I honestly believe that from a first principles perspective what NNDM is doing will change the R&D process of many industries. Potentially circuit board mass production as well, if they continue with their current ambitions.
Like the First Principles and the reference to physics. I love to read physics and to write about it. Theories such as QED indeed rely on probabilities, as Musk implied or said in the interview. Behaviour of light is indeed probabilistic (for instance). It's clear how studying physics helped shape Elon's thinking.
I think LMND is another example. Everyone focus on how much money they are losing and how long it will remain unprofitable comparing to traditional insurance establishment. In reality, LMND went deep into understanding why and how people bought insurance in the first place.
Again, great delivery in your talk. Very important details of investment thought process and approach.
Thanks a ton, Dave. The inner core of the goals of Tesla hard to reach but it is possible and it is on the way.
I think 1st principle thinking is important but need to analyze companies with a holistic approach. Studying a company from all different angles helps us understand it from its core.
Thanks Dave. Completely agree with this. We should listen less to what analysts think and more to the founders themselves. Can you help with a side note...? I'm trying to calculate potential future share prices of key disruptive stocks and would like to see how you view applying multiples over time.
We can try to predict what future revenues or EBITDA should be, but to get share price, one has to multiply this by a multiple (ebitda or revenue). Question is, is it fair to apply today's multiples to ascertain future share price or should multiples be adjusted?
Shouldn't multiples typically decrease over time (as anticipated growth is being realised and executed on)? If so, how?
What can actually cause a multiple to change over time?
Really grateful to hear your thoughts and how you derive at potential future share prices.
Spot on with the analogy. My first impression of Elon and Tesla was he was another Jon Delorean (or even Preston Tucker) Would make a cool looking car for Marty McFly then go bankrupt trying to compete with the legacy giants. It was not until the COVID recession I found a video by Cathy that opened my eyes that Elon was very different. Now I am a Tesla convert. Humorously in 2000 I got a D on a business class presentation where I argued Amazon could be an online Walmart. I remember my professor basically laughing that it would be impossible to inventory and real time price all of Walmarts items.
Perfect Dave ...! Waiting for your analysis on c3.ai , metromile
The biggest (and faultiest) shortcut that I see people make in their thinking is to go along with the crowd (aka FOMO, Fear Of Missing Out). It's the equivalent of trying to copy from the smart kid (or even just another dumb kid) during the test instead of solving the problem for yourself. Some people have never had an original thought their entire lives! Many so-called stock analysts are experts at *not thinking* original thoughts.
Great insight! Thank you Dave!
Hi Dave good video. your examples were good, Netflix is another one. I let Netflix pass because I was scared at the time of selling a few positions that had declined recently and I was 'certain' they would regain their losses. It was the end of 2011 and Netflix had recently raised their price by $1 per month and they had lost customers and the price went down to $60 ( before 7:1 split)
I could FEEL the opportunity but didn't pull the trigger. June 2019 I felt the same way about Tesla and knew I could not let that opportunity pass me by again so went all in on Tesla and it has been because of this principle you are talking about. Netflix had something so revolutionary that I could clearly see they had a lead over anyone else ( no one else was even close to them at the time )
This is why I am not fully on board with LMND Lemonade at the moment. They are not able to scale in a Tesla, Apple, Facebook, Netflix way because they need to have cash available to pay any claims that come through in the process of their growth. There is little incentive for anyone to switch insurance providers to them.
The CEO seems good ( I watched the full video you had with Daniel ) but good CEO and good Tech / user interface is sometimes not enough.
Analogies help us understand the unique and unknown. Tesla is not only a car company; but a software company, a battery company, and a sustainable energy company. All analogies that help us understand Tesla's uniqueness. Tesla, the company, is driven by first principles. Recognizing that Tesla is a company driven by first principles is an analogy!
Hi Dave, I love your channel! Wish I had discovered it sooner! I would really like to see you interview the CEO of Nvidia, Jensen Huang, or do an overview on what you think of the company. I think Nvidia is a very innovative company as well as Tesla but haven't seen too much deep analysis.
Dave nailed it
Very good analysis of what is first principle approach. Thanks
I would really like to see how you can put this into some kind of models from which we can use to teach the kids.
What are your thoughts on Palantir and Crispr?
As I already said in other occasions, I think that the analogy with apple is particularly accurate talking about tesla and ice vs ev.
For how I see it the benchmark that should be used in the rate of adoption for electric vehicles is the smartphone, they are different products, at different price points and surely the cars will last longer before getting replaced, but the percentage of new product sold ice vs ev will be very similar to the old mobile phones vs smartphones in my mind.
Being that the first real mass market smartphone was the iphone presented in 2006 and that the plateau for smartphones was reached between 2019 and 2020, so in roughly 14 years, and that the first real accesible electric car is the Model 3, presented in 2017, I think that Tesla's estimates to reach 100% of new car sales being electric for 2030/2031 are very accurate. Just many don't see it yet. Just like Ballmer, Blackberry or Nokia.
Love the deep dive on Elons principles, in this case case, first principles. 👍
Would you consider other deep dives on other Elon principles, I find it quite interesting 🧐.
Okay, so can you list 5 companies that are the next Tesla, based on first principles and probabilities of reward/failure?
Hey Dave! Have an awesome weekend man!
Hahaha youre just rebranding deductive/inductive reasoning ;) fantastic video, thanks
So in other words, don't just look at the companies for what they seem to be, but for what they could become based on the company's foundations, mission and vision. With that said: Dave, what's your input on Virgin Galactic (if you haven't made a video about it, I would love to see one!)
I really like what Virgin Galactic are doing but find it hard to invest now. The reason is because it turned over 4 million this year and made a 403 million loss which is ok, but it's valued at 6.7 billion right now. The revenue multiple is X1676. I think by 2025 they are predicting to make 400 tourist flights that produce about 1 billion in revenue. If margin is 50% and EBITDA multiple is 10 (their own SEC filing suggested ebitda multiple of 5.5 so this is higher), that gives a 5 billion valuation and 21 USD share price - still lower than now. So you'd have to be really convinced that more revenue streams are coming but unlikely until after 2025? Or a much bigger multiple can be applied later? So my view is the price right now is built on a lot of hype as to what might happen after 5 years from now (with no upside included yet) but all the down side could still take place. What do you think?
@@janrkennedy Thanks for your input. Based on the fundamentals, definitely an extremely overvalued company. However, the company's vision, the current environment suggesting that a space race is coming back with force, the fact that the company partnered with NASA, and because technological progress tends to be exponential, I have high expectations that the company might surprise us in the near future. One thing is certain: price fluctuations, and sheer volatility is expected in the meantime. Mistakes, incidents, and delays are part of the process...I believe is definitely a long term investment with a long and very bumpy road ahead.
I want to let you know Dave, that I am following your and Chicken G. - s channel for the last 6 month, and you guys have definitely changed how I look at investing in a good way. I have doubled my investment, made more money than I could earn with my full time job in 2 years (I am a social worker in East Europe) . Thank you for your work! 👨🎓
Great topic! I enjoyed listening to this topic. Def good advice for new investors. Thanks!
Hi Dave,
Can you pls do a video on Palantir(PLTR)..would love to have your insights in this company from a "first principle" analogy.
Thanks
First Principles is the reason why I think Palantir is a strong buy...I don't think many people understand what they truly do/what they are capable of under the surface.
Super
Excellent Dave
I remember reading Netflix CEO first letter to shareholders and seeing how he laid out a vision and was executing. Later Amazon was similar. This might be a good first step for all IPOs. If the CEO vision isn’t revolutionary then they aren’t worth a deeper look
Love it! Thanks for sharing the thought process. GOLD.
Good analysis Dave
Enjoyed watching this video very much!
Thank you Dave. I have shared this with many
Interesting video, thanks Dave. The video is lagging the audio however, you might want to look into that.
Great example with FB.
Hi Dave, a challenge for you. Apply first principles to diets and is keto diet better than the “normal” diet. Video idea💡
VR is going to be super huge for gaming or the future itself for gaming. VR has so much potential...
Slightly off topic, and apologize if you’ve already addressed this, but would love for you to do a deep dive into SPACs.
Hey Dave, i watch a lot of your content and like your view on disruptive Innovation companies. I would like to ask you to have a look at Aquabounty AQB
Seems like a big oppertunity for the world but also as an Investment
Thx
Hi dave like always good job god bless you..
Excellent video. More please! An observation: in autonomy and in reusable rockets one could argue Elon is creating a new solution to a problem that was already solved. Human driving in the case of autonomy and expendable rockets in the case of reusable rockets. And yet, the new solution unlocks new capabilities, applications, services.
The old romans already found out that analogy is a weak form of reasoning.
But like their aqueducts Elon says: “they forgot how to do it.” Hope it’s not the same for us.
Great stuff, Dave.
Even before Tesla, I saw the need for the conversion to zero emissions vehicles and that EVs had an advantage over fuel cell vehicles in terms of the fueling infrastructure. Once Tesla became public I swing traded or channel traded; I was not certain they would succeed. On Autonomy Investor Day it was clear to me that not only would they survive, having overcome Model 3 production hell (ramp), they would positively dominate. I had my own Model 4 within a couple weeks. On Battery Investor Day, I realized it would soon be the end of the ICE age because Tesla would win on range, purchase cost, fuel cost, maintenance cost. Now the rapidly growing cash flow and strong balance sheet is enabling Tesla to rapidly expand production worldwide. Now many countries are restricting the purchase of ICE vehicles, most by 2030. NZ just chose to purchase all zero emission vehicles for the government fleets, effective now. At a certain point, it will be cost prohibitive to manufacture gas cars for the few markets that haven’t been closed to them. That will be a sudden tipping point, I believe before 2040.
Do you have an NPV/DCF model for Tesla that drives your first principle estimates for valuation?
Your approach is correct when it comes to evaluating the potential of a company. But you need to apply the same rigorous “peeling away the layers of an onion” to the human element of a company, i.e. management and execution. Many have great ideas, but only few execute them successfully. To me, and lots of other investors, Tesla’s successful execution became obvious in Fall 2019 when it became profitable, which triggered the current second epic run-up (after the first one following model S).
👏🏽👏🏽thanks for the video
1st Principle Tesla Investing:1)Save world,2)Best product -safe/fun/value/lowest cost,3)make&supplychain on every contingent,4)accelerate innovation,5)Vehicles platform for FSD,6)solar/storage platform for Autobidder,7)SAVE THE WORLD!
This lesson is unfortunately lost on most everyone you have been preaching this philosophy of first principle thinking vs reasoning by analogy thru every video you post but here you identify and clearly define what separates the genius of not only Elon but your thoughts on investments. That ability to think from first principle combined with the Buffet mentality is extremely powerful
We love you Dave 💘....the other Asian Dave only tries to convince me to buy tech junk I don't really need. You help me make money 💰.
I'm an absolute fan, Dave!
Just some feedback. To be honest, you give great examples but could have explained better how to apply the first principle thinking to these examples.
great thinking
Dave could you let us know why you are doing this channel? I am really grateful and know that you probably don't need to revenue. Just want to get to know you a bit better cheers!
You gave an analogy about iPhone when talking about 1st principles and Tesla.
Interesting. I have 3 stocks. Tesla FB and Apple
A good three. However, I sold Facebook a while ago due to ethical reasons. Do you agree with their mission, does their platform truly make this world better? To me and many others it has just become a chatting tool, where everyone happens to be and its easy to connect. I'm not at all an expert in the company tho, just rather invest elsewhere. Kind regards, T
High quality content 👌 , can you demonstrate how you analyse new propositions with a real example.
Dave, isn't your reasoning about Bitcoin by analogy?
I’d argue that some of the BTC arguments are reasoning by analogy (starting with the starting point that BTC is a currency). In all his interviews, Dave’s been trying to get away from assumptions and get to the essence of what BTC really is.
Very much so. 😃
The points I see Dave raising about BtC are scenarios about government control, which isn’t analogous to anything other than precedents in places like India.
I find Dave’s criticisms of BtC very much first principles based. BtC promoters OTOH frequently compare it to gold.
One thing Dave always brings up on BTC is the government banning it but doesn't look like that will happen: decrypt.co/50457/the-us-wont-ban-bitcoin-says-occs-brian-brooks