Earlier this week Tesla became America's most valuable car maker, with a market capitalization at Monday’s close of $50.9 billion, surpassing that of General Motors for the first time.
Last year, Tesla sold 72,285 cars, with revenues totaling $7 billion, and in so doing accrued $674 million in losses.
In that same time General Motors sold 10 million cars, with revenues totaling $166 billion and in so doing made $9.4 billion in profits.
So many found it interesting that sophisticated investors and market observers decided that Tesla was a more valuable company than GM.
But few found it surprising. Here’s why:
Tesla is led by Elon Musk, one of the most iconic and admired entrepreneurs of the past 50 years. A business leader who has driven fundamental change in two of humankind’s most fundamental technologies - ground and air (through his other company SpaceX) transport.
General Motors is led by Mary Barra, a 37 year veteran insider of GM’s notoriously ponderous bureaucracy.
Tesla's brand, even after just a few short years in business, ranks alongside Porsche, Mercedes, and BMW as one of the most valuable in the world, and its Model S was famously rated as “the best car Consumer Reports had ever tested,” with a perfect 100 score.
And yes Tesla is young (founded 2003) and General Motors is old (founded 1908).
While GM’s age offers some advantages - consumer trust and loyalty, institutional knowledge, assets acquired long ago at low cost basis - these advantages are outweighed by the burdens of age - legacy cost structures, cumbersome decision making, and the challenge of attracting and retaining change and innovation-focused talent to an older organization.
Contrastingly, Tesla’s youth, on balance, is a great advantage.
What it may lack in organizational maturity and depth of industry talent, it more than makes up for in the "Tabula Rasa" benefits of being organizationally new - simplicity and the ability to more easily put into use the best and newest "business things" - technologies, work processes, culture, etc.
In all of the most meaningful and important ways, it is these future prospects that most fundamentally drive business value.
Let us learn from this “Tesla versus GM” comparison and do everything we can to ensure our company’s strategies and tactics are focused more on what might and will happen in our industries and markets as technologies and buyer preferences evolve and far less in what has had and is happening.
Here is an easy shorthand to do so - just ask yourself “What would Tesla do?”
And perhaps even “What would General Motors do?"
The answers that come back will be surprisingly accurate as to what the future forward business decision should and should not be.
Ask and answer this question correctly enough times, and before you know it your company too might be valued as Tesla is...
...on its future prospects and not its past results.