Tesla is burdened with too many risks as Elon Musk ventures into robotics, supercomputers, and AI.

At least one senior-level Finance Director from Tesla had to transfer to work at Twitter’s parent company, as ordered by Elon Musk.

According to CNBC, many of Elon Musk’s ambitious projects and their interrelationships are facing increasing scrutiny as the CEO of Tesla continues to add to his already long list of ventures.

During Tesla’s earnings conference call on Wednesday, analyst William Stein from Truist asked Musk about another technology joint venture he recently formed and established in Nevada called xAI. Musk has mentioned that this artificial intelligence startup aims to compete with Google Bard or OpenAI’s ChatGPT someday and has plans to collaborate with Tesla on software as well.

Stein posed the question: “For investors who think there might be a lot of value in Tesla’s AI features and products, they might be concerned to see you pursuing another effort where AI is central. Can you elaborate on how xAI might excel, compete with Tesla, or in what way this joint venture can enhance the value of what Tesla does?”

Musk stated that xAI and artificial intelligence in general, which this joint venture focuses on, will bring some value to Tesla, especially in terms of talent acquisition.

“There are only a few of the world’s best AI engineers and scientists ready to join a startup, but they are not willing to join a relatively established large company like Tesla,” Musk said. “So, I thought, well, it’s better to have a startup company that I run than to have them go work somewhere else. That’s the origin of xAI.”

As an example of xAI’s appeal, Musk mentioned that he could only lure a top material science engineer away from his job at Apple by promising that he could work concurrently for SpaceX and Tesla. The engineer Musk referred to is Charles Kuehmann, who joined Tesla in late 2015 and currently holds the position of Vice President of Material Engineering at both SpaceX and Tesla, reporting directly to the CEO.

The issue surrounding Musk and his various business ventures also came to light earlier this month when Senator Elizabeth Warren called on the Securities and Exchange Commission to investigate the relationships with Twitter and corporate governance issues.

Musk led the $44 billion acquisition deal of the social media company last year and temporarily appointed himself as CEO. He currently holds controlling shares and serves as CTO and Executive Chairman of Twitter while maintaining his roles as CEO of Tesla and the aerospace company SpaceX. Additionally, he is the founder and financier of the brain-computer interface startup Neuralink and the tunneling joint venture, The Boring Co.

Among these ventures, Tesla is the only publicly traded company. However, the electric vehicle company has never disclosed to shareholders the exact number of employees, time, and money they have spent in supporting Musk’s other business projects. Tesla has also not provided a clear explanation for sending employees to work at Twitter during the early stages of Elon Musk’s tenure there. Previously, Musk had hired employees from Tesla, SpaceX, and The Boring Co. to assist him in taking over Twitter.

At least one senior-level employee from Tesla has moved to work for Musk’s X Corp., the parent company of Twitter. Court records reveal that Dhruv Batura, who worked at Tesla since late 2013 and held a senior finance position there, is now a senior finance director at X Corp. Batura posted a job advertisement for X Corp. on Twitter on the day of Tesla’s Q2 earnings conference call.

In a disclosure made in May 2023, Tesla revealed some details about its transactions with related parties. Among them, Tesla disclosed that “Twitter is a party to certain commercial arrangements and has provided certain support to Tesla. Under these arrangements, Twitter incurred total expenses of approximately $1 million in 2022 and $0.4 million in 2023 up to the end of February.” However, Tesla did not specify exactly what Twitter is purchasing from the company.

The risks involved include lack of focus and employee burnout.

According to Professor of Organizational Behavior at London Business School, Randall S. Peterson:

“Musk is making a complex argument by saying, ‘I’m helping Tesla by preventing these great people from working at a direct competitor.”

Peterson notes that most startups fail, and those who want to start their own companies are unlikely to join direct competitors of Tesla in the automotive industry.

Peterson highlights that Musk’s numerous ambitious projects can pose risks to Tesla, and shareholders should seek more detailed information.

“It’s challenging to focus and excel in anything when you’re running multiple companies. That’s a risk around a CEO himself. Would shareholders of most companies accept their CEO running multiple other companies at the same time? The answer to that is probably not. So, it raises the question of what the Tesla board is doing, whether they are independent at any level, or if they are so enamored with Musk that they not only accept his unconventional way of doing things but might overlook fundamental issues as long as there’s money,” Peterson said.

He notes that boards at companies have fallen into crisis, such as Enron and Royal Bank of Scotland, because they couldn’t rein in their CEOs despite signs of problems over several quarters.

Peterson adds that another risk is that Musk’s employees may feel pressured to work on multiple projects outside of Tesla. In their efforts to please Musk or gain new work experiences, they may not recover after work and become burnt out. Peterson says burnout can lead to high turnover or poor performance.

Finally, the professor also notes that Musk may be creating distractions and hindering the focus of his employees, even if his intention is to foster cross-collaboration between his businesses.

“You need intense focus to become excellent in a particular field, both as an individual and as a corporation. That’s why we’ve seen a trend of moving away from conglomerates in the 70s to more focused companies nowadays,” the professor said.

However, Musk seems to be doubling down on the non-compromising collaboration between his companies in his growing empire.

In a recent earnings report, Musk was asked for an update on Tesla’s progress in developing a humanoid robot named Optimus. He spoke about the future and expressed that one day Tesla could collaborate with Neuralink to create prosthetic arms and legs to help disabled individuals regain mobility or even full dexterity.

According: CNBC