Tesla Isn’t Worth More Than GM Or Ford


Sometime last week, Tesla’s equity share price topped $300, which means the company is worth more than GM or Ford.

Only it isn’t.

I see at least three lessons for communicators:

First, forget telling your stakeholders (or worrying) that stock valuation has any connection to reality. There is no objectively reliable math that supports Tesla’s price; it’s what James B. Stewart in the New York Times calls a “story stock,” which means that investors have bought into a narrative of future success that is qualitatively hopeful instead of quantitatively likely.

The phenomenon is far larger than Tesla, however, which actually sells what it makes for real money, versus the digital tech darlings that give stuff away for free.

A vast infrastructure of financiers, lawyers, marketers and their advocates in the media are dedicated to creating and promoting such story stocks. A generation of potential employees has come of age only to find no real jobs available to them, so they presume they’ll become the startup entrepreneurs who’ll be the subjects of the next one. Governments and universities spend tons of money hoping to enable it.

It almost never works out.

Equity is a measure of the value other people find in a company’s story, not an a priorimetric of a business and, obviously, some stories are more compelling than others. One could argue that there’s an inverse relationship between the amount of excitement over a company’s story, and the likelihood that it’ll ever live up to expectations.

The good news for communicators is that your work is more important than ever. The bad news is that the Disruption Hype Complex I mentioned earlier is utterly biased against what you have to say (if you work for an established company).

There’s a startup tech story being told in your industry right now, if not many of them. Equity valuations reflect the simple fact that those stories might be better than yours. You can’t operationally perform your way out of the challenge.

You have to communicate.

Second, you can start by taking back ownership of the word “value.” Just think about how much GM or Ford are truly worth: Add the amount of money paid in salaries and buying from vendors (not to mention the productivity and living its products enable for its customers), plus the taxes everyone pays, and throw in the benefits accrued to families and communities that can depend on stable jobs for good measure.

The resulting worth is incomprehensibly large and should make the “value” that those story stocks promise — digital disruption creates it, apparently — seem gauzily unbelievable, but few established companies have figured out how to make that case (or make it sexy and compelling). Instead, billions are spent on “content marketing” and “storytelling,” often intended to emulate the narratives that companies with no customers, revenue, or real hope for future success propagate.

Good luck with that.

My firm has a saying, “It’s tough to pretend you’re a startup. So don’t.” It means that established companies need to discover a voice that communicates the value of real activities, like things sold, people served, pollution reduced, whatever.

Changing the world is far more compelling than hoping to do so maybe, sort of, in some way, someday.

Tell the story that no other business can tell.

Third, dream bigger. The Conventional Wisdom is that you have to be an outsider to truly think differently and boldly about a business or marketplace. Those ideas are “disruptive,” and are valued more than the plans of established companies, at least according to the stock market.

In the past, this naiveté was considered stupidity.

The truth is somewhere in the middle, but it very likely skews toward established companies that have the experience, expertise, and market reach to effect change. The alternative vision is wholly dependent on the magic of technology, and nothing else, to rewrite the rules of human behavior, economics and government, and even the laws of physics.

So why aren’t the bigger dreams coming from established companies?

There are many valid reasons why, from concerns of spooking investors (remember, they expect you to make money, not just wax poetic) to being held accountable for not delivering on them. Executives immersed in the responsibilities of profit and loss statements have difficulty talking about what if, and so it falls to innovation or startup execs hired to do the job specifically…and who are thereby predisposed to talk with the words and even terms that big companies can’t own.

I would bet that right now, buried somewhere in a research department at GM or Ford, there’s a vision for the transportation future that puts Tesla’s best dream to shame.

There are probably dozens of them, ranging from slightly wacky to wildly strange, and that they’re all based at least somewhat in the realities of the economics, politics, cultural, and experiential changes that might impede or enable them.

In other words, they’re better stories, only nobody is comfortable telling them, so we don’t hear them. Instead, we get reams of storytelling (and social media campaigns, and the other detritus of corporate campaigns) about stuff that isn’t inspiring.

I hope Tesla succeeds; its cars are cool, and Elon Musk’s ideas for batteries and home use are brilliant and necessary. But what’s ultimately valuable, and therefore compelling, is what’s real, not merely what’s possible.

Unfortunately, GM and Ford aren’t telling investors about the difference.