What I Learned Being Wrong
Indian Economy & Market|December 2021
I was wrong. Not the first time. Won’t be the last time.
Michael Batnick

A listener wanted us to reflect on Tesla.

Tesla is one of a small group of companies that has reached a 1T market valuation. For the most part, I’ve gotten the sense that you have always viewed the stock as overvalued, and as recently as a couple of months ago, you chose Tesla among a list of companies that will not be in the top 10 a decade from now. Can you reflect on watching this stock go to 1T? Did you get anything wrong?

It’s true. I’ve been wrong on Tesla the whole way up.

I remember in 2017 when Tesla passed GM and Ford in market cap.

I remember when it became bigger than the two of them combined.

I remember when it passed the top 7 car makers in the world.

I remember when it became the largest company ever to enter the S&P 500.

I remember when it passed the combined value of all the car makers in the world.

I thought Tesla was wildly overvalued at $50 billion. It just added $600 billion in market cap in 30 days.

Even though I was clearly wrong on the price of Tesla, and as an investor that is literally all that matters, I never valued my opinion enough to put actual dollars on the line. Never shorted the stock. Never bought puts. Nothing. I just watched in disbelief. So what did I learn being wrong on Tesla? It’s simple. Never get involved in a battleground stock. If a company or the founder is in the news three times a week, probably best to just let other people fight it out.

Now let’s talk about a company that I did care enough about to buy and lost money on.

What do you call a stock that was down 58% and then fell 27% in a day?

On last night’s earnings call, the company announced they were shutting down the Buying business. Rich Barton (transcript) said:

Put simply, our observed error rate has been far more volatile than we ever expected possible and makes us look far more like a leveraged housing trader than the market maker we set out to be.

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