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Trading Lessons From Tesla

Aug 16, 2017 | Dr C K Narayan | Interesting Read | No Comments

Trading Lessons From Tesla

Many of us have ideas, sometimes brilliant ones. One of the clichés of the world is that genius actually abounds in the world but execution of the genius ideas is next to nil. That is sad because so many things may have become possible much earlier than they did! The fatalists among us would say that everything will happen in its own time but that certainly is not a rule that someone like Elon Musk plays by. Ten years ago, the traditional auto manufacturers dismissed him as a maverick, who will soon ‘learn what is what in this industry’, they said. But ironically, it these traditionalists who are having to learn what is new in this industry! Volvo, a Swedish automaker not known for its flair, announced recently that all of its cars would be either electric or hybrid by 2019, and Ford’s CEO was displaced for not being more future oriented. A little more than a decade after it burst on to the scene, it is a testimonial to Elon Musk that he has started the disruption of one of the most tradition-bound sectors in business.

Elon Musk is succeeding because he maintains complete faith in what he is doing. It is an amazing feat that a company that has been making losses continuously (right upto year ended 2016) has been hitting newer highs every passing year and has burst thru any and every valuation metric thrown at it. Tesla 3 is launched and is going to ramp up production. For funding, Musk announced he is going to seek more than a billion dollars thru some junk bond sale. What is driving this is Musk’s conviction that Tesla is capable of delivering a car that can appeal to a much broader market than prior models, putting the Co on a pathway to higher revenues. Will Tesla be able to make and sell millions of cars and can this lead to the company making a truckload of profits in the future? I have no idea but Elon Musk seems to think so.

What is the lesson we, as small traders and investors, can draw from this example? Investment may be a pretty straight forward process but trading can have a variety of approaches. Normal pattern is for most traders to hear, see, read or learn something new and then start applying it. It works, like anything else, in fits and jerks- mainly because you have not internalised the best ways that the method has to be applied and implemented. But, as happens most times, we are all looking for almost instant solutions, immediate results. When these don’t show up- they simply cannot, except by coincidence- we get disheartened. Rather than looking at the issue in a holistic way, most of us are quick to consign the method to the dustbin and move on to the next one.

If all the inventors and discoverers of the world approached their craft the way traders do, we would all probably still be living in the Dark Ages! If Elon musk had approached his Tesla model this way, it would long since be part of history and the traditional automakers would have been toasting the end of yet another maverick!  If you look around you and examine the successful traders and investors you will notice that the common thread that runs thru them is their devotion to the method that they follow. This is the same feeling you will get if you read the Market Wizard series by Jack Schweger. Indeed, Schweger himself comments on this aspect in the first book.

Not all of us can become an Elon Musk. But most certainly we don’t need to behave like five year olds in the market, paying scant attention to details and having the attention span of kids of that age or lower. The way to become a better trader is to adapt to a method, an approach in which you believe and where you can develop the conviction to stick thru thick and thin. Elon Musk is holding his conviction thru all the difficulties he is facing in ramping production and delivering on sales and service. To succeed, Tesla will require vision, focus and operating discipline. With Elon Musk at its helm, the company will never lack vision. But the Company will also need to execute well, take care of delivery deadlines and supply chains. Similarly, it is not enough to just know superficially some method or approach. We need proper execution, follow thru and consistency in our action to see those vision come into existence. It is the same as it is for Mr Musk.

We all don’t have to just improve as traders. We need to Transform. Therein lies the key. It is a much bigger game, a much bigger challenge. On the other side of this effort lies the rainbow and the pot of gold. Keep Elon Musk and Tesla in mind and go for it!

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