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Charlie Munger told a table full of people ‘all the ways Tesla would fail’ – Elon Musk said it made him ‘sad’ but he agreed

Years before Tesla Inc. became a household name, the late vice chairman Charlie Munger of Berkshire Hathaway Inc. the opportunity to invest in the company, but he declined.

Tesla CEO Elon Musk recalled Munger’s predictions with a mix of respect and determination, acknowledging potential challenges while maintaining his commitment to Tesla’s mission.

In February 2022 message on XMusk described the meeting in detail, writing, “I was at lunch with Munger in 2009 where he told the entire table all the ways Tesla would fail. It made me quite sad, but I told him that I agreed with all those reasons and that we would probably die, but it was still worth a try.

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Even as Tesla’s market cap soared, Munger maintained his skeptical view of Tesla’s viability. In 2021, at the Sohn Hearts & Minds Investment Leaders Conference, he reportedly noted that Musk “thinks he’s even more capable than him,” a trait he believes has contributed to Musk’s success.

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“Never underestimate the man who overestimates himself,” Munger said, acknowledging that overconfidence could lead to extraordinary achievements.

He didn’t just think Tesla would fail. He was not at all convinced about investing in electric vehicles (EVs).

“The electric vehicle is going to be big,” Munger said at the 2023 Berkshire Hathaway meeting. “It has a huge cost of capital and huge risk. And I don’t like huge cost of capital and huge risk.”

The conversation between Musk and Munger from fifteen years ago, which highlighted the balance between caution and ambition in Silicon Valley, has become more relevant in 2024. As Tesla faces market challenges, these issues echo Munger’s early warnings.

Despite achieving an impressive valuation and emerging as the world’s most valuable automaker, Tesla has had a tumultuous 2024. The company’s shares have tumbled nearly 29% year to date, wiping out about 40% of its value from its 52-week high of $299.29. The downturn has been blamed on declining demand for electric vehicles and a fiercely competitive industry that has forced Tesla to lower its average selling prices, impacting profit margins and, as a result, its stock price.

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Munger’s decision not to invest in Tesla reflected his preference for more stable and established companies, indicating a conservative investment approach in contrast to Musk’s determination and willingness to tackle risk. This contrast highlights the varied investment approaches, with some investors seeking stability and predictability while others, inspired by the potential for breakthrough progress, are willing to face uncertainties.

A financial advisor can assess an individual’s risk tolerance and help diversify their investment portfolio, with the goal of balancing potential risks and rewards based on their financial goals and risk tolerance.

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This article Charlie Munger told a table full of people ‘all the ways Tesla would fail’ – Elon Musk said it made him ‘sad’ but he agreed. originally appeared on Benzinga.com

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