Almost a Tesla-naire

In case you’ve been living under a rock since March, here’s what’s happened to Tesla stock over the course of 2020.

The stock is up an insane amount. If you’re wondering how Tesla shares started the year at $100 a share, this is all after the 5-for-1 split that occurred around August. Tesla stock is now worth hundreds of billions of dollars – the market cap is now roughly worth Ford + Honda + BMW + GM + Daimler + Volkswagen + Toyota, combined (to be fair, it’s unlikely that the same statement could be said about enterprise value, which is a much more representative measure of a company’s worth). The P/E ratio is stratospheric. Elon himself said that he thought that the stock price was too high… back when the shares were worth a fifth of the present value.

This post isn’t about the current valuation of Tesla, though. Whether it’s too high or too low or just right isn’t an argument I could confidently have a strong opinion on. What’s interesting is seeing articles like these on Bloomberg: “Elon Musk Has Made Millionaires Out of His Most Loyal Fans”. It’s strange to hear these kinds of stories – people going full-send into a company that was up until earlier this year viewed as innovative as it was volatile; risky as it was exciting; dangerous as it was futuristic. I’ve heard stories of friends of friends that YOLO’ed their cash into single stocks that happened to pop: QuantumScape was the most memorable (due to my interests), though I also heard of people that owned Moderna among others. Bitcoin and cryptocurrency is somewhat similar: there are the stories of kids who HODL’ed Bitcoing or Ethereum or some random esoteric coin that happened to explode in value.

I’ve been privileged to a point where I’ve been investing since I was 12. Throughout that time my strategies have transformed from “I didn’t know what the fuck I was doing, I was 12” to “let me try picking stocks because I clearly know more as a high schooler and Reddit lurker than people that spend 60-plus hours a week doing research” to “okay I guess index investing is the way to go”.

I was “nearly” a Tesla-naire. I went full YOLO into Tesla Motors Inc., and at some point I had 85% of my entire net worth being in this small little California car company that I heard of through a web comic that used the phrase “Ferrari that got porked by a luck dragon”. Eventually I realized that I was being incredibly brash – the level of volatility I had voluntarily introduced into my portfolio was insane. Even before Elon talked to the Saudis to take the company private at $420 a share (a personal favorite episode of mine), I recognized that the distribution of outcomes had a very real possibility of backruptcy.

And so, I decided to sell out. Every last share I had ever owned got sold, with the final trade happening after the Cybertruck unveiling. I was fine with a botched demo, though I was less okay with the “unique” and “avant-garde” design. And here I am, just 13 months later, not driving a Model 3 Performance or with 7 figures inside of a Schwab account.

Maybe all of this is post-fact rationalization, but I’m okay with the choices I made. Not being a millionaire at the age of 23 is surprisingly acceptable, and I still assert that, 13 months ago looking at all possible worlds, the decision I made to end the gambling period and move to the relative safety and boredom of index funds was a good one. For every video on YouTube of a day trader making thousands in a day, there’s another one that didn’t get posted with a similar magnitude loss. For every kid that earned $100,000 by “investing” in Bitcoin or WSBHypeStock, Inc. there’s another one that lost their life savings. Survivability bias is real; why would you hear about the story of your friend’s friend that bet their life savings on Nikola Motors? Who wants to admit that they lost $10,000 on Dogecoin?

There’s this amazing book called Fooled by Randomness by Nassim Taleb, with the basic idea that people confuse their own luck for skill. Am I unlucky? Do I lack investing skill? Whatever the answer, I think I’ll stick with index funds.

P.S. I debated for a bit whether to put this in the finance section or the main blog section of my website, since I feel like the themes are relevant to either section.