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Please, Apple - don't buy Tesla!

Mar 11, 2015, 01:17 IST

My colleague Jay Yarow reports that some Apple shareholders think that the company should buy Tesla.

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It's a provocative, scintillating idea: Apple buying Tesla would create a New Economy Dream team, unifying the most admired company in the world with the one that actually wants to change that world.

Not incidentally, Apple buying Tesla would bring about a synthesis of Silicon Valley and Tesla's game-changing vision for mobility that many people have been yearning for.

At the level of pure awesomeness, it makes perfect sense for the company that Steve Jobs built (but not by himself of course) and that Elon Musk built (also not by himself) to be joined. My pulse races just thinking about it.

But then my cool head prevails and I settle down.

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When I wrote about this last year, we hadn't yet learned about Apple's Project Titan, which could be a car - perhaps a driverless car, like the Google self-driving car that's been in development for a while now. Or it could be some kind of in-car infotainment system. But Apple is certainly up to something in the transportation space. So there's a greater justification in early 2015 for Apple to use some of its vast cash pile to buy Tesla than there was in late 2014.

But apart from bringing Tesla CEO into the Apple fold, it's hard to see why Apple buying Tesla makes any sense.

Manufacturing a car is orders of magnitude more complex than manufacturing a consumer electronics gadget that's designed to be sold for less than a few thousands bucks and destined to be thrown out or recycled in a few years. The effective life of an iPhone is - what? - three or four years, max? The effective life of a $100,000 Tesla Model S is at least a decade and really more like two or three decades.

Teslas are built to last. iPhones are built not to.

It's also doubtful that Apple could solve Tesla's production challenges - the company is currently ramping itself up to build far more than the 35,000 cars it managed in 2014. I don't think Apple CEO Tim Cook, adept as he may be at dealing with touchscreens and processors in the Asian supply chain, could breeze in and streamline the production of a car that needs to be very fast, very safe, uses all manner of never-before-seen drivetrain and power technologies, and is currently assembled by huge robots and human beings in California.

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Apple is certainly full of guys who dig cars and want to reinvent them - guys on the Apple board, guys who design Apple's products (Jony Ive, Marc Newson), guys who run the business. These guys love hot cars: Ferraris, Aston Martins, Porsches, Bentleys. They want to design and build awesome cars that blow your mind!

But the reality of the business is that while Ferrari, for example, makes wonderful cars and also tons of money, it's a miniscule part of the global market. Just as Apple wants to sell millions and millions of iPhones and iPads, carmakers want to sell millions and millions of cars. And not hot cars, but boring cars: mass-market sedans, workhorse pickup trucks, and versatile SUVs.

After setting a tone for his brand with the the exhilarating, high-performance Model S sedan, Musk can now say mission accomplished and move on to developing the mass-market Model 3, which he hopes to produce in the hundred of thousands.

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I doubt that Cook and Ive and all the Apple guys with their Porsches and Ferraris want to grow up just so they can buy a company whose overarching goal is to create the electric Toyota Corolla.

Additionally, few enterprises in human experience are as good at taking cash and making it go away as car companies. At full-tilt, using state-of-the-art "lean" production methods refined over decades, a highly skilled workforce, and selling their product to people who are happy to go into debt for years to sit in traffic for hours - car companies burn billions per quarter, face the constant threat of cyclical downturns when people just drive their old cars and don't upgrade to new ones, and generate moderate profits with limited prospects for significant future growth.

What person in his right mind would want to get into this business?

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Then there's the matter of Elon Musk himself. As we learned last October when the "D" all-wheel-drive version of Tesla's Model S sedan was launched, Musk isn't just Iron Man - he's Iron Man plus Steve Jobs.

But really, he's better than Jobs, who only got to walk around with nifty little glass-and-metal devices and talk about how nifty they were.

For his part, Musk brought out a giant orange robot and commanded it to sling around a thousand-pound car chassis. Then he gave people dragstrip joyrides in the actual vehicle.

Then he drove home and probably switched over to being the CEO of his other company, SpaceX, and worked all night on designs for a rocket big enough to send people to Mars.

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When Steve Jobs left, we did need another Steve Jobs. But we got someone who's aiming higher. We got Musk.

Tim Cook is fantastic, but I really don't see Musk going to work for Tim Cook. Musk is now playing for a level of importance in the human race that far transcends Jobs' very meaningful and important contribution, and whatever advice Cook can offer to improve Tesla's manufacturing processes.

Tesla is ultimately a solution to global warming. SpaceX is supposed to make us "multiplanetary," because you never know...

Musk is in it for the species.

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It's necessary to understand this about him. He doesn't care about money, except as a means to an end. His companies aren't companies in the traditional sense - they're solutions to enormous problems, solutions that take advantage of the power that entrepreneurs now wield to gather funding for their dreams. His two main companies - Tesla and SpaceX - are doing the kind of astounding things that capture the imagination.

Smartphones and social networks are super. But they don't do o-60 in 3 seconds with nothing coming out of the tailpipe, and they don't want to go back to the Moon.

Additionally, if Cook wants visionary advice, I think he can just call Musk up and ask him what to do. Frankly, I think Musk would consider it something of a distraction.

So what about the notion that Apple is jumping into cars and should buy Tesla while Tesla is small and (sort of) cheap, in order to accelerate whatever plans are taking shape in Cupertino.

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That would be extremely risky. Tesla is operating in our existing world of getting around, which still involves cars and drivers and roads. Musk's plan for the next few decades is about improving that situation.

Google, meanwhile, is building the actual car of the future, which is small and driverless and something that Apple's car lovers can appreciate at an intellectual level but would very much not like to drive. Or be driven in. It's actually more of a node in a futuristic mobility system that treats your physical location as something to be overcome with very complex maps and extremely powerful artificial intelligence.

It's pretty much the opposite of what Tesla wants to do, although Tesla will likely be incorporating more and more "autonomous" driving technologies into its cars in coming years.

Apple buys Tesla now to avoid having to buy Tesla later. But then later arrives and and Apple discovers that it bought the wrong idea.

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To me, this is the biggest risk for Apple if it does listen to a few shareholders and conclude that Tesla is worth gobbling up.

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