I really wonder about the stock market sometimes. Every day they’re either nervous or optimistic about some random event that might affect the economy specific to their particular investments. Snowstorm in Alaska? Better sell all the king crab futures you can. Hurricane in Indonesia? We should raise the price of Florida oranges. Wait, did someone just say that an iron core meteorite landed in Manitoba? Oh we better buy up stock in planetariums before the shares start to skyrocket. The display of emotions on the trading floor is only rivalled by the emotions at the Aqueduct when the 40 to 1 long shot takes the lead.
The recent event that led me to write this is the ridiculously ignorant reaction of investors to the Tesla fire. A Tesla Model S sedan “collided with a large metallic object in the middle of the road causing significant damage to the vehicle“. The car sounded a warning to pull over and the driver was able to exit the vehicle before it caught on fire. I have no idea what large metallic objects are in the middle of streets, but my mind keeps picturing the Sanford and Son pickup truck bouncing along in front of the Tesla with old file cabinets and radiator cores falling out as the possible source (this was written one day before Elon Musk released the statement about what the object was…I was close!).
For some reason, the people (mostly the individual investors) who have invested in Tesla apparently thought “electric” meant “fireproof”. This is what happens when we tell entire generations to ignore science and major in business and law instead. Nobody understands simple concepts such as electric current and impact force. When a fire breaks out in a battery powered car, the assumption is that the design is fatally flawed and therefore they should sell before Chapter 11 sets in. Any car that hits an object at a certain velocity runs the risk of igniting. In gas powered cars it’s usually hot engine or exhaust parts that set off gasoline vapors (gasoline the liquid doesn’t burn, the vapor does which is why an empty fuel tank can be just as dangerous than a full fuel tank). In an electric car, a short-circuit, thermal runaway or arcing can produce a fire provided the right conditions are met. This isn’t a design issue, it’s science. The design issue is how to provide sensible protection against the 1 in 100,000,000 occurrence without making the vehicle to heavy or too expensive.
Anyone who remembers the spate of laptop battery fires a couple years ago became rapidly familiar with the temperamental nature of lithium-ion batteries (lithium is very testy and tends to do things like ignite spontaneously when exposed to air). But before those accidents, the general public just assumed a battery was a battery. The advantages of lithium-ion batteries still outweighed the risk and after a recall and redesign by several manufacturers, we all happily use these types of batteries in our phones and laptops today. The Tesla fire was caused by the same temperamental battery technology which despite extensive safeguarding and crash-testing somehow found a way to ignite. To be fair, watch laboratory crash-testing of any gas powered vehicle and then go ask a firefighter about some of the wrecks they’ve seen. It’s one thing to have controlled conditions, a car travelling at a set velocity and a impact a flat wall. It’s quite another to be in a real car doing twice the posted speed, lose traction and wrap the chassis around a tree. The Tesla simply got a real world test that the lab was unable to produce.
Engineering and design are long-term processes. Often times there are long periods of time when small, almost invisible improvements are made and those who are not used to this type of progress assume nothing has been done. At other times there are dramatic setbacks which scare the crap out of people who do not take the time to understand the reasons for the setback. The stock market on the other hand is both a short and long-term process. Some people have the patience to see the 5, 10 or even 20 year potential of a given company. Other people want a return on their investment in 3 quarters or less and demand radical and often destructive changes to the company and its structure be made. Or they may simply remove their money and run to the next hot new stock to begin the process all over again. This is a problem for all companies but especially those which are involved in advanced or unusual engineering.
Why are people running away from Tesla as if they’ve never heard of thermal runaway before? Probably because they’ve never heard of thermal runaway before. The car is meeting design specifications and has extensive safety features, however the simple fact is that it is still a machine and it will have problems. Since it is the first of its kind (a high performance electric car that doesn’t take 12 years to accelerate to 60mph), every single one of its problems will be a “first”. That does not invalidate the basic design, it just means adjustments are required. Adjustments, which are part of the long-term engineering mindset that one bought into when the decision was made to invest with them. Have some patience and read a book or two on electric storage or power conversion. Or better yet, research the problems with Ford Pinto gas tanks and try to understand that what seem like clear-cut problems are not always so simple.
The responsibility to the shareholders is vastly overrated and there should be as much responsibility from the shareholders to be educated about the science and technology behind the company they’ve chosen. The company has a responsibility to the customers first. If nobody buys the product, the shareholders cannot get a return no matter what they request or demand. Don’t invest to get rich in 90 days…invest to help a company achieve something that you believe in. Do it because the company makes a product you like and you want to help the continual support and development of that product. The best investors are either customers, well educated on the technology, or both.