Musk's brand damage

It hurts that Musk is so clueless about brand. He's got much to learn from Jobs.

Tesla’s stock has dropped — but proportionally to the rest of the market, car makers, and tech companies. There’s no evidence Elon Musk’s (pbuh) shenanigans at Twitter have hurt Tesla’s stock price. Yet. They will eventually. In the long term, a company’s only unfair advantage is its brand.

Let’s talk branding for a moment. Whenever a CEO speaks, they remind the audience what their company leads in. When Marissa won an award of some sort, her acceptance speech frequently mentioned how Yahoo was awesome, even though the event was about her and not her company. A CEO never misses an opportunity to promote their company’s brand.

You can see this in the announcement of a partnership between T-Mobile and Starlink, to provide space-based access to phones outside of coverage areas. The T-Mobile CEO focuses on the branding messages, such as mentioning his “un-carrier” tagline. He also praised SpaceX for leadership in their market.

But at that shared event, Musk did none of this. He barely mentioned his company at all. He instead went into technical details how the product worked, which went over the heads of most of the audience. He manifestly failed at what CEOs are taught is the #1 thing they should always do.

Musk isn’t necessarily wrong here, he’s got a technical advantage right now with SpaceX and doesn’t need to prop it up. But as a business person and social engineer, I find his lack of awareness of branding to be appalling.

Consumers are sheep. I don’t mean this as criticism, it applies to all of us, even me. We have limited attention span for all the products we buy. We rely upon short cuts. If companies have long spiels why they are better, we don’t listen. At most, we might remember the brand name, and just one simple thing that we associate with the brand. For Americans, think of the “Bounty” paper towels. Have you actually analyzed their performance? No, you haven’t, but most of you can repeat their tagline.

Take car quality. Most people still assume Japanese cars lead in quality. That hasn’t been true in a while. Toyota recognized it was investing too much in quality, more than customers were willing to pay for, and backed off. Simultaneously, the rest of the world adopted the techniques that improved quality. The latest JD Power quality survey, the one that everyone quoted 20 years ago proving Japanese cars were the best, now puts BUICK on top. This result would be inconceivable in the 1990s, but is true today.

Car makers are transnational businesses. There’s really no such thing as a Japanese or American or European car makers. There’s no such thing as Japanese or German “engineering”. But people still buy Mercedes or BMW because they like “German engineering”.

Whatever some car makers had as an inherent advantage quickly disappeared. They all work with the same supply chains, exchange engineers and designers who’ll quit one company to work for another, exchange executives, have the same sales channels, and so on. The only inherent, “unfair” advantage one car maker has over another is branding. A Buick customer would never buy a Lexus and vice versa.

Musk hasn’t yet been exposed to this. It’s a long term thing. In the short term, he can definitely have an unfair advantage in both technology and business model. These can be exploited to build a lasting brand for the long term, but he doesn’t need a brand in the short term.

Whether Musk was conscious of this, he did indeed exploit Tesla’s tech advantages to create a brand advantage.

While Nissan was building the (all electric) Leaf for soccer moms and daily commuters, Tesla was building his Roadster. It’s been known for 100 years that an electric car can accelerate faster than gasoline cars. Musk is a techie and cared about such things. So he built what excited him, and kept building it even as his cars went downmarket to compete with Nissan Leafs.

This is the only way to do it, from a branding perspective — build a high-end brand then go down-market. It doesn’t work the other direction.

Steve Job’s (pbuh) Apple did this with the iPhone. It sells a third of the world’s phones but has two-thirds the profits. It’s more valuable than all competitors put together. The reason is branding, producing an upscale product for a mass market price.

Such a thing is typically impossible. Upscale products sell at low volumes with high profit margins, or consume products with razor thin profit margins sell in high volumes. This is why VW and Porsche produce roughly the same profits overall: one high-volume/low-margin, the other low-volume/high-margin.

A high-volume, high-profit-margin product is an exception. Apple pulls it off for two reasons. One is their amazing control over the supply chain. They pay less for their components than competitors. The other reason is branding. They continue to do “cool” things that promote that Apple brand as the high-end product.

For example, back in the Steve Jobs era, he spent $100 million buying the most powerful lasers in the world simply to punch microscopic holes in the aluminum near the MacBook camera, where the “active” LED was located. This made the LED invisible when it was turned off, but still shine a green light when the camera was turned on, through the aluminum case.

This is utterly pointless, but it’s one of the numerous small details that made Apple the luxury product to have. And since these were the only available lasers in the world that could do this, it wasn’t something their competitors would be able to match.

Elon Musk (pbuh) follows this strategy well. For example, he has the “Plaid” version of his cars that accelerate faster than any other car on the market, even million dollar sports cars. His “Full Self Driving” (FSD) feature works amazingly well (albeit, not well enough to honestly be called “full self driving”). His cars have “fart mode” that’ll make farting sounds underneath the seats, surprising passengers.

He’s now shipping his cars in volume, especially the Model 3. He successfully reproduced the Apple model of high-volume/high-margin. He’s produced more electric cars than everyone else put together (outside China). And while he still struggles for profitability, because of continued investments in such things as the SuperCharger network, he’s made more profits than all other electric cars put together.

It’s a brilliant strategy — if that’s what Musk intended. I suspect, though, it was accidental. I suspect Musk just built what he thought was cool, because he’s a nerd. He doesn’t seem to have the sophisticated understanding of branding that Steve Jobs had.

Electric cars are easy. They exist partly because of a Moore’s Law effect of steadily decreasing battery prices. They exist partly because of the focus on non-carbon energy. Electric power trains are simple. Even the high-end Tesla’s “Plaid” speeds are achieved with straightforward application of such things as thicker copper wires. The only reason all electric cars doesn’t run at “Plaid” speeds is because it’s pointless to get into a pissing contest that you’ll still lose — you can’t beat Teslas by enough margin to challenge the brand that Teslas are fast.

Tesla has already passed the point of a commanding technical lead. Competing electric cars are really good. He might have a lead in the supply chain (like Apple), with first choice of such things as batteries, but existing car companies are really good at supply chain management themselves. He does have a distribution lead — the traditional dealership model of the automobile industry is broken and Tesla’s competitors are struggling to shed it. But he’ll eventually lose this lead, too.

In the long run, his lead will come down to branding. Tesla is still the cool car to have. If you want to impress your friends with out cool your car is, then you buy a Tesla.

But like Jobs with Apple, Tesla’s brand is intimately tied with the brand of its leader, Elon Musk. He’s destroying his own brand, a little bit with his erratic personality, but now a huge amount with his destruction of Twitter.

Jobs was famously the CEO who wore blue jeans. This was a powerful branding decision, setting up the difference between his Silicon Valley company vs. Wall Street style companies. This was conscious branding, fitting neatly into such things as the 1984 ad announcing the Macintosh, or his “Think Different” campaign (even though neither of which were actually Job’s creations). We know it was as careful plan because if you asked anybody, they all had the same reaction. The news stories all had the same story of the radical CEO.

When Musk went on Joe Rogan and smoked marijuana, everyone scratched their heads in confusion. Sure, it could’ve been a good branding moment, Musk could’ve fit this into his story. But instead, the various discussions of this incident were all over the map. The only story that Musk is creating here is that of an out-of-control CEO behaving erratically, rather than with purpose.

This is spilling over into his Tesla brand. His Twitter takeover is generating haters as fast as enthusiasts. That’s a problem. When you bring home your technical marvel and show your neighbors, the thing you don’t want is for them to start haranguing you about what a bad person the CEO is, how you should boycott the company, and that if you don’t you are a neonazi.

Musk needs to fix his branding. He needs to hire a high-end branding consultant, develop a conscious idea of what his brand should be, and then listen to the consultant and do what they say. It’s like the movie Hancock, where Will Smith plays an out-of-control superhero that eventually listens to a branding consultant. What’s especially relevant about this movie is that the consultant is a bit clueless, sometimes speaks in platitudes, and isn’t necessarily very smart. But the consultant was still absolutely right about branding.

The best time for Musk to shut up and hire a branding consultant was yesterday. The second best time is today.

Tesla’s brand will never recover its heights until Musk does this. It’ll continue to be a leading car company, but not with the commanding margins that Apple enjoys. Tesla’s (and Apple’s) stock prices are based purely on the brand. Musk won’t be the world’s richest man again until he fixes his brand.

Maybe he doesn’t care. SpaceX and Starlink still have commanding, unfair technical advantages in rocket launches and satellite Internet. This lead will jump ahead again if he completes his “Starship” next-gen rocket that’ll make space flight as cheap as international jet travel. But eventually, here too, the technical lead will vanish. Once he proves something can be done, competitors will try to do it too.

Musk has been wildly successful at business breaking business rules. He looks back on Bob Lutz, who served as a top executive at Ford, Chrysler, and GM at one time or another. Lutz predicted Tesla would failure because Musk didn’t understand the basics of the auto industry, like the importance of dealerships for distribution and sales. Musk conclusively proved Lutz wrong, and now everyone else is trying to figure out how they can sell their own electric cars directly to consumers bypassing dealerships.

I’m sure he thinks he can likewise break the rules on branding. He can’t. Jobs likewise broke all the rules, delivering an overly expensive phone, without a Blackberry-esque keyboard, sold from Apple rather than distributed through carriers. But Jobs didn’t ignore the basics of branding, he mastered them. Apple is worth more than all of Musks’s companies put together. (Apple is $2.1 trillion right now, Tesla is a measly $400 billion — Apple can buy Tesla in the same whimsical way that Musk bought Twitter).

The point of this post is that Musk probably thinks he’s good at branding, because look at his successes. The reality is that he’s terrible, his success are despite is poor branding, and that for the long term, he needs to fix this.

Update: I’ve made small corrections for spelling/grammar, but also changed the title slightly.