Tesla stock price....!

[Ogre]

Centralisation / Decentralisation

There was this theory floating around.

When a product category is new, there are few reliable/ affordable options to outsource to so vertical integration makes the most sense. As the product category matures, the third party providers are able to scale enough to create economies of scale and efficiencies a single supplier cannot match and outsourcing starts to become more cost effective because individual providers can benefit from scale without the capital expenditures it takes to scale.

This was the case with PCs and some other industries and seemed to be the rule with technology companies. Companies would outsource CPU design, OS design, and many of the critical components on their system. RAM, video cards, the entire industry was commoditized and standardized and it was by most measures the most cost efficient way to provide computers.

Until it stopped working. The iPhone essentially broke this chain. The iPad and the Mac have continued this trend away from outsourcing and towards a tall/ robust vertical stack. Apple instead has built their own ecosystem of components and has built their entire stack of devices, every thing from headphones, PCs, tablets, speakers, iPhone, … heck, even their new monitor runs their SOC and runs a variant of their Darwin (Open source FWIW) kernel.

Apple is by far the most profitable computer company in the world. (Microsoft‘s cloud has become their growth engine).

Turns out a technology company being differentiated enough and having a strong enough vertical stack can be ever bit as efficient as multiple providers.

Apple has their silicon and their operating system which allow them to squeeze more performance out of a given chunk of metal and glass. Tesla has their battery tech and their own operating system which also allows them to squeeze more performance out of a chunk of metal and glass.

Apple has things like iMessage that keeps their ecosystem “sticky”, Tesla has the Supercharger network.


The big question is how difficult it is for competitors to collectively match Tesla’s efficiency, battery tech, and ecosystem. Seems like a pretty steep hill to climb.

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[Ogre]

Sorrry. Wrote a book.

 

[Sirfun]

There was this theory floating around.

When a product category is new, there are few reliable/ affordable options to outsource to so vertical integration makes the most sense. As the product category matures, the third party providers are able to scale enough to create economies of scale and efficiencies a single supplier cannot match and outsourcing starts to become more cost effective because individual providers can benefit from scale without the capital expenditures it takes to scale.

This was the case with PCs and some other industries and seemed to be the rule with technology companies. Companies would outsource CPU design, OS design, and many of the critical components on their system. RAM, video cards, the entire industry was commoditized and standardized and it was by most measures the most cost efficient way to provide computers.

Until it stopped working. The iPhone essentially broke this chain. The iPad and the Mac have continued this trend away from outsourcing and towards a tall/ robust vertical stack. Apple instead has built their own ecosystem of components and has built their entire stack of devices, every thing from headphones, PCs, tablets, speakers, iPhone, … heck, even their new monitor runs their SOC and runs a variant of their Darwin (Open source FWIW) kernel.

Apple is by far the most profitable computer company in the world. (Microsoft‘s cloud has become their growth engine).

Turns out a technology company being differentiated enough and having a strong enough vertical stack can be ever bit as efficient as multiple providers.

Apple has their silicon and their operating system which allow them to squeeze more performance out of a given chunk of metal and glass. Tesla has their battery tech and their own operating system which also allows them to squeeze more performance out of a chunk of metal and glass.

Apple has things like iMessage that keeps their ecosystem “sticky”, Tesla has the Supercharger network.


The big question is how difficult it is for competitors to collectively match Tesla’s efficiency, battery tech, and ecosystem. Seems like a pretty steep hill to climb.

When a product or category is new. The most important thing is for a company to be nimble, and quick to change/adapt. Otherwise, as new ideas and changes happen, the slow companies get left behind with last year's junk. This is when vertical integration is a massive advantage. You talk about other competitors matching Tesla. That hill to climb, will only get them to where Tesla is currently. How long will it take those slow companies to get to the top of that hill, only to find Tesla has moved on?
Tesla puts way more money into R&D than these other companies. And in a new category, that's huge too!

 

[Ogre]

When a product or category is new. The most important thing is for a company to be nimble, and quick to change/adapt. Otherwise, as new ideas and changes happen, the slow companies get left behind with last year's junk. This is when vertical integration is a massive advantage. You talk about other competitors matching Tesla. That hill to climb, will only get them to where Tesla is currently. How long will it take those slow companies to get to the top of that hill, only to find Tesla has moved on?
Tesla puts way more money into R&D than these other companies. And in a new category, that's huge too!

I think Teslas knows what the next hill to climb is and they are charging hard to get to the top of it.

Whoever cracks vehicle automation first wins.

The only way I see someone beating Tesla there is if Google or Apple crack it and partner with someone. I’m not entirely sure how close they actually are. Seems like Tesla has a big lead, but this machine learning stuff can move in weird ways. Nobody yet has a clear or decisive advantage in the personal assistant thing and they’ve been around for year.

 

[John K]

Sorrry. Wrote a book.

I have to admit to skimming it. ?

 

[jerhenderson]

I have to admit to skimming it. ?

I went to the last page.

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