Game Design, Programming and running a one-man games business…

Tesla in 2020. A good investment?

Tesla’s stock price recently surged past $1,000. it has since fallen back slightly, but I have no doubt it shall return. The last few months have been a roller-coaster for TSLA stock holders. What can it all mean? Is the company now over-valued? or is this actually the market catching up with reality?

It always helps to get some of the big important numbers out there as a basis to analyze this sort of thing. Numbers are always open to interpretation, but you still need them…

  • In 2019 Tesla produced 367,500 vehicles. source.
  • The market cap of the company is currently $180 Billion.
  • The automotive gross margin is approximately 25%
  • YoY revenue growth is 38%

If you look at the number of cars Tesla makes, its still quite a niche player. How can it possibly be worth the same as Toyota, or SEVEN times the value of the ford motor company? How is this a sensible valuation? Here are some points to consider:

  • Tesla has decent profits on each car

Teslas automotive margin is actually REALLY good, and its been growing too, from 20% a year ago to 25% today. How? Tesla do NOT advertise. That already saves them a fortune. They do NOT have any middlemen (you buy online, or in store, direct from tesla), which cuts out a whole other bunch of middlemen, and tesla have such a reputation for good tech that they can attract top talent without exorbitant salaries. The promise of tesla stock is worth way more to potential senior hires than any actual cash anyway.

FWIW Fords gross margin has varied between 18% and 12% over the last 14 years. Thats ford, one of the biggest car companies on earth, and one of the oldest, yet they aren’t as good at making profit from a car as Tesla…

Plus Tesla is the first car company to make actual money from software. The FSD (full-self-driving) hardware is in every new car (they don’t use LIDAR so its cheap), and you can upgrade your car after purchase to enable FSD or in some cases extra range or speed. Thats pure 100% profit.

A culture of constant re-investment and expansion has meant the company has not posted a full year profit yet (although it has multiple sequential quarters of profitability. Expect that to change very very soon, probably in a few months.

  • Tesla is growing like crazy

The global car market is in real trouble, but the company that is not only bucking the trend, but seemingly accelerating into space (literally) is tesla. check out production:

Tesla Has Best Ever 1st Quarter — 102,672 Vehicles Produced ...

Note that Tesla is selling every car it makes. These are not cars made to sit on showroom forecourts for months hoping someone walks buy. There are waiting lists for these cars all around the world.

Remember that its PROFIT in the FUTURE that determines a company valuation. Ford has historically made a LOT of relatively unprofitable ICE (internal combustion engine) cars that suddenly people don’t want. Thats not a good thing, but more of a liability. Hundreds of thousands of employees, and many factories designed and trained to make internal combustion engines are basically a stranded asset (worthless). Ford is well placed to continue breeding horses just as the automobile has been invented.

Note also that the VAST majority of Tesla’s output is from a single car factory in Freemont, an ex GM/Toyota plant for ICE vehicles. Their first dedicated EV-factory in china is currently ramping up, so expect rapid growth. Plus they are already building the 3rd car factory in Berlin. A fourth is expected soon in Texas. This company has only just got started…

  • Tesla has zero competition

Fancy an electric Audi? you can get $20,000 knocked off the price of a new e-tron, a supposed tesla-killer that nobody wants. Or maybe you want a jaguar I-pace? Both of these cars were heralded as the cars that would crush Tesla. Both are relative flops.

Tesla = 75–85% of US Electric Vehicle Sales | CleanTechnica

Even the chevy bolt, a car that GM LOSES money on, is no real competition.

  • Tesla dominates in a rapidly growing market segment

Electric cars are the exception to the declining car industry, in terms of growth. Would you want to be the biog player in this rapidly accelerating market, or a dinosaur left at the top of the crumbling mess that is ICE cars? Dieselgate was the first shot-across-the-bows, but the experience of clean air post-covid19 and the looming nightmare of climate change shows that there is no future for ICE cars. Countries all over the world have already set dates to phase out ICE sales. The leading car companies of the future will be electric car companies first and foremost.

Demand for battery metals strong despite weak EV sales

People always talk about Tesla as a car company, but thats similar to how amazon was a bookstore. Tesla is a transportation and energy/software company, whose current main seller is a car. Tesla energy is a little-appreciated but growing part of the business, and Teslas solar roof tile product is finally starting to ramp up. This diversifies the company and enable it to adjust to changes in demand across sectors.

Software is the real wild card, which brings us on to the topic of….

  • Autonomy

People do not generally appreciate the HUGE lead Tesla has over every other company on earth in the field of self driving vehicles. Everybody else is using HD maps and local geo-fencing, or LIDAR, neither of which actually scale. You can get a REALLY cool reliable little bubble car that drives around a geo-fenced and controlled environment like a retirement village right now, that will work amazingly 99% of the time. Lots of different companies are showing off stuff like this, as a way to grab the cash of ill-informed venture capitalists. Tesla is not trying to hype up specific cases, its driving to solve autonomy in the general case, globally, in all conditions, 100% of the time, and its getting there.

The difference between 99% autonomy and 100% doesn’t sound like much but its game changing. 100% means no steering wheel, no driver, and no worries. 99% means basically very good cruise control. My Autopilot v1 Tesla model S is VERY good on highways. It makes long drives safer and way more relaxing. Its not autonomous. When its 100%, I can get drunk in restaurants. I can watch a movie or read a book on long drives.

Tesla Self-Driving Demonstration | Tesla UK

A 2 hour commute is currently a nightmare, but when you can literally be asleep, or reading, or playing games, or working in the car… its not so bad. This will change where people live and work, and how they work. Imagine Uber, but safer, with nobody you have to talk to (or tip), and at one quarter the cost. You could play games/stream music/watch TV in your uber, because nobody else is in it…and thats safer for lone women too. Autonomy at 100% is a MASSIVE big deal financially, and there is a VERY good chance Tesla gets there before anybody else and just eats Ubers breakfast, lunch and all other meals.

Why?

Waymos autonomous cars have driven 20 million miles. In one country. AFAIK in one state. Woohoo. Tesla were at 2 BILLION in November last year. Don’t forget every car they make has autopilot hardware, and the rate they make them is accelerating. Some people value waymo at 30 billion. Lolz.

So to sum up, I don’t KNOW the true value of Tesla, because the companies output and capabilities are accelerating so fast its hard to pin a target on it. Given the actual number of cars shipped, it seems a high valuation, but that number will change a lot in the next year or so, and as EV incentives come out of the EU and the UK, and ICE sales continue to plummet, I can see more people seeing a $1,000 TSLA stock price as actually quite a bargain.

BTW the companies stock has tripled since the last time I blogged about why its a good buy.

My year => 2019 <=

I’ve really taken to trying to avoid social media use lately, which came to angry prominence once during the year and again recently during the UK election, so I’m likely going to blog more, and continue to tweet less. Anyway, here was my 2019!

Personal stuff!

We had a few short mini holidays this year, one of which was to Bruge (Belgium) which is a great place to go to because you can just get a train there (no flying! yay!), another to the southwest of the UK (which I drove to), and one long flight, which was to Canada. I always offset my flights, and try not to do it often, but it was justified as a combined holiday, and 50th birthday and biz trip to a games conference. Somehow, I have flown in 2 different helicopters this year. Thats just ‘indielife’ I guess.

By far the best thing I did was fly in a helicopter over the mountains near Banff. Truly amazing, and impossible to convey in mere pictures. It was an expensive treat but worth every single penny. Cannot recommend it enough.

Also somehow, in a drunken moment of panic, I booked a balloon trip (near where I live). This was a bit scary for me, as I dont like heights, but actually it was fine, a perfect day, and good fun. Something I always wanted to do.

I played the guitar more in the last year than I have in the previous ten years (at least). I got back into it a bit. I used to be pretty good, now I just cant physically keep my hands moving that fast, but its still something I find a nice distraction from constant work, and its a cool thing to be able to do now and then.

Charity Stuff.

Our second school in Cameroon opened, and I also re-did the war child thing at Christmas where we donate about $10k a year to children affected by war. Really proud to have done this for so long.

Eco stuff

I took part in an environmental demonstration locally (very low key), and also joined the extinction rebellion London protests, although did not get arrested, but did have a very heated ‘exchange of views’ with a fairly famous climate change denying media-whore who I will not dignify by printing his name. Really glad I attended. Current news makes it pretty clear that events are happening exactly as scientists told us they would. Future prospects depress me :(

Stock-market stuff

I still trade a lot on the stock market. I made some very optimistic trades as a day trader about a year ago, which forced me more and more and more into the red over the last year, resulting in a shockingly expensive margin call where I lost a bunch of money. I have now made every penny of it back, all on a single stock. This is an epic story worthy of its own HBO mini-series but is summed up in this simple chart :D

I am glad I stuck with it :D

Positech

Oh yes…I also run a games company. LoL. 2019 was a fairly stressful but definitely improving year. It was the year in which I made a shocking number of updates to my car-factory game Production Line, and also released not one but two pieces of DLC for it: Doors That Go Like This and the Design Variety Pack. Both have sold well, and broken even, but these things only really pay off over a few years.

As of this moment, the base game has sold a total of 114,000 copies on steam, plus a fair few pre-steam and on some other platforms. Its a $25 game, so thats not bad, plus I have a large back catalog of other games that continue to sell well on steam. We have sold 150,000 games roughly this year, a 24% drop of the previous year, which was boosted by being when Production Line was initially added to steam.

The stress of 2019 company wise has proven to be Democracy 4, which was originally slated to be shown to the public much earlier, but some stuff under-the-hood proved to be harder than expected, so although the current version of the game is now awesome and looks crisp and has some l33t new functionality, we are behind schedule, and probably going to go over-budget. However, I’m now working on it quite a lot, and have currently 1 SFX person and 2 artists working on content, and will very shortly be showing it off to people both on video, and in March at a show in London, which will be interesting.

Its hard to stay objective about Democracy 4. Lost of signs point to this being a successful game, and the ideal game for 2020, but I hate to be too cocky about how a game will do, and the release of any sequel is always plagued by people (normally the loud 0.1%) upset that you have dared make a sequel, or saying its just a re-skin, or whatever. I do dread having to deal with that sort of thing… but its part of selling to the public I guess :(

I expect 2020 will be just purely the year of Democracy 4. its a HUGE game (we rolled 4 expansion packs into the base game), and will likely be our biggest release ‘event’ so far, in terms of people wanting to play it. It will certainly be the most expensive game I’ve ever released. Fingers-crossed it works out, and I don’t look an idiot :D. I am optimistic though. Democracy 3 already looks old, clunky and tired compared to the new game.

Social Media & other Stuff

2019 is the year I clashed badly with social media, and the internet. Not in the usual sense, that if you have known me over the years you will know I have got involved in controversy a lot and drawn the attention of people a lot… This year, I actually managed to avoid that, at least in public.

Certain events during the year (nothing related to me) made me realize just how AWFUL social media is. The angry hate mob was out in full force, directing righteous furious anger at whatever individual or group was determined to be the hate-figure of the day. I’ve seen online hate mobs practically salivating over the potential to drive people to suicide, and its just horrible. Combine this with the mess that is modern politics and ‘fake news’ and people happily sharing stories that are not true, and I think 2019 is the year the internet broke, and became a torrent of abuse, not an amazing place filled with information.

I carried out a few steps to isolate myself from all this crap this year. I quit a newsgroup I’d been in for many years, quit a forum I’ve been on for over a decade, removed all my posts from one I’d been in for fifteen years, deleted 75% of my facebook friends, and left every single facebook group and page that wasn’t for one of my games. I vowed to tweet less, not discuss anything contentious online, and reminded myself I should freely block and mute anybody who is rude or abusive.

I just don’t need, or want any of this. Also its totally optional. A friend of mine has a VERY successful indie games biz and he tweets maybe once a month, and he does write-only, he never even reads twitter. He is a hero.

One of the reasons I intend to blog more and tweet less, is that this blog is mine. Its not even hosted by wordpress, its on a dedicated server. if you are abusive, you get blocked for life, no come-backs, no exceptions. ah… *bliss*.

Things I enjoyed

Succession. TV show loosely based on a fictional Murdoch family. Amazing. Watch it

Silicon Valley. TV show, final series was this year, fantastic, loved it.

The Goldfinch. Great movie. I didn’t expect to like it…not my kinda thing. but it was a very nice surprise.

Samsung stupidly wide monitor. Absolutely amazeballs. Couldn’t imagine gaming without it now.

Company of one. Business book, the joys of staying small.

So yeah…thats my 2019. Hope yours was cool :D

Stock Market Analysis ‘fun’

EDIT: lol. I had some serious bugs in my code, so ignore those numbers. The real ones are less extreme :D

To try and crack down on my almost comical tendency to overwork and be working 100% of the time, I decide to do some ‘fun’ coding today instead of work, to help me ‘relax’, which is something people keep telling me to do. Obviously I’m still me, so it involves programming..

I dabble on the stock market (I used to work up there many lifetimes ago) and something I have long found infuriating is the absolute awfulness of UK retail stock-market reporting. Its almost like they don’t WANT you to know if you are making money or not.

My broker (Hargreaves lansdowne) is great at telling you your current profit or loss as a percentage and in financial terms, on each trade, but this doesn’t take into account how long you held the stock, rendering it effectively useless. If stock A has been held 4 years and is up 4%, thats way less attractive than stock B, which I bought last Wednesday and is already up 1%. They make it IMPOSSIBLE to get the real ‘;annualized’ figure.

What I wanted was ‘the rate of return, if I held this stock for a year, and the stock growth was linear over that year, given its growth during the time I held it’.

It turns out, to do this, I had to copy and paste a bunch of PDF files into .txt files, then write my own code to parse it all and rearrange it into a CSV so I could visualize it using excel. This also meant grabbing a copy/paste of today’s prices for stocks I still hold and have not sold, and then doing the SUPER TEDIOUS work of copying and pasting dozens of names, because it turns out HL use ‘different text’ to describe a stock in their PDF reports than they do in their live prices (grrr). Its also annoying that they changed their formatting about 2 years ago to include the exchange code, so I had to detect those and strip those out of some lines of text. Plus there are other errors, and missed text here and there, meaning my results are (so far) probably not 100% accurate.

I suspect all the data I *do* have is correct, but in some cases there are some missing buys and sells, so I’ve effectively ignored those stocks.

Still…it amused me for over half a day, and means I can bask in my glory on these stocks:

And cry into my sleep about these…

None of it is as good/bad as it looks, because the results are annualized. For example I think I held my bitcoin for about 48 hours, and some of the others I held for very short periods as well. Its probably worth doing some sort of clever smoothing code to work out which are the ‘long term good picks’ versus me just getting lucky over a week or a month.

My TSLA stock is a good example. I’ve made a series of buys (and one sell) over a great many years, and although its been very volatile lately, the ROI on an annualized basis is looking pretty sweet. The Biotech Growth Trust is also looking pretty cool, and I’m also happy with Materialize and Teradyne.

I should probably do that pointless legalese bullshit here that says ‘this is not advice’, but frankly if you take stock picking advice from a British Chocaholic game developer who likes to drink a lot, then you probably aren’t going to listen :D.

Risking everything you have to make it as a successful….cliche?

I think the key to making money at something is to invest for the long term, be prepared to lose before you win, to put your money where your mouth is and take big risks…

…to an extent.

You probably know about survivorship bias, where you listen to nothing but the tales of success from people who took big risks. There are definitely many, many cases of people taking insane risks, those risks playing out and them making a huge, incredible success of it. In the world of video games, valve deciding to sink all the half life profits into HL2 AND also trying to create a digital distribution store when retail was still all-powerful was an insanely high risk venture. It worked, and the rest is history. Making a game which fits in no established genre such as the Sims or for that matter, ‘Democracy’ is also a big risk. Doing this entails being prepared to be wrong in a BIG way, and lose 100% of your investment.

This is something I am minded off today when reading a very long, depressing and complex email about a renewable energy investment I made that is being held up and rejected by government bureaucracy (with zero cause) which could, theoretically lose me a fair chunk of money. Real actual *OUCH* levels of money. It will be extremely vexing if this is the case. I tolerate that sort of risk, because when investments like that work, they work very well, and the returns are great.

I’m a high-risk investor who is happy to tick the ‘yes I know what I’m doing and may lose it all’ box on a regular basis. I have some money in lithium mines, some in palladium futures, lots in the electric car company ‘Tesla’ and a bunch of robotics and biotech stuff. Some of this has been a huge success. others… not so much. Overall… I think I’m doing well, but you never get to say that until you cash out. I’ve also invested in indie games, both as a publisher (Redshirt, Big Pharma, Political Animals, Shadowhand) and as a passive investor. Some of these made several times my money back, some have lost me money.

And right now…as I type this I have two CFDs (very short term bets) on Tesla, both of which I am DOWN on, and both of which cost me money each day just to keep the bet running. I have made 37 consecutive profitable trades doing this, but may be close to coming unstuck on these two. Only time will tell. You can probably understand why I thought I couldn’t lose: (The loss calls still make a profit, just at the lower range of my position)

The trick is… I’m never betting the farm. Do not bet the farm. Ever. I’m not even betting a small barn from the farm.

Don’t think I’m not tempted. I’ve seen stock market trades, AND video games, where I’ve thought ‘LOL, this is easy money. I should sell the house, car and liquidate everything else to really max out this sure thing’. Sometimes those trades shoot way up, and I hate myself for being such a coward. Sometimes they go up a bit. Very, very rarely, they crash like a meteorite. The end result of my level of caution is that I’m not a billionaire, but I’m not in the gutter either. This is a *good thing*.

Do not risk everything to make your dream indie game, or fund the writing of your first novel, or even your second or third or tenth. I’ve made a lot of games (at least 20), and even if I thought my next game was a sure-fire hit, I wouldn’t bet ANY money that I couldn’t afford to lose. Obviously this is much easier to say with no mortgage and some cash in the bank. Normally people cannot possibly make a game without spending their last dollar on it… or can they?

These days we have kickstarter, we have patreon, we have indie publishers. if you cannot persuade anyone to give you the minimum money you need to make an early access game through any of those three avenues, then that is a BAD sign and NOT a sign you should remortgage the house or sell a kidney. There is a myth that you have to ‘risk it all’ to become a hit, which is perpetuated by Hollywood movies, and TV shows where this trope of ‘risking it all’ and ‘succeeding just before they ran out of food’ becomes embedded in peoples idea of what it means to be ‘creative’. The romance of the ‘struggling artist eating out of bins who then becomes a billionaire’ is frankly bollocks.

Democracy 3 is a good example. Its a successful game that made me some decent money. Did I risk everything to ‘take a chance’ and make a hit? Nope. I risked fuck-all. I coded that in my spare time while I had a full time job (and a contract to ensure that was ok). I then made a sequel when I knew that the original was already popular. My wife and I both worked full time and we had no kids, so me then deciding to quit and make more games was zero risk, especially as I was already making more from my older games than I was getting in salary anyway. In all my times making video games from 1998s Asteroid Miner onwards, I’ve been unable to pay the mortgage for two months in total.

By all means take some risks. Risks are good. Risk is part of life. Don’t make any decision that could wreck your life and screw up your family.

 

 

Weirdly I seem to do well on the stock market (or do I?)

Not games related… I was being interviewed at rezzed for some BBC business thing about games & money etc, and they asked what I did with the profits and I mentioned trading the markets, and they asked if my success at making games translated to beating the market, and I had to confess that the data suggests that it does. Which is kinda weird and unlikely I guess.

Background: I used to work for a big trading IT company (like Reuters) on the UK stock market. I wasn’t a trader, but I was IT support. I stared at market dealing software all day. This was YEARS ago. I also studied at the London School of Economics, so I’m vaguely business / markets focused since late teens I guess.

I read a great book by this guy:

Nassim Taleb

Who was a trader, and basically points out how many people who think they are beating the market are just delusional, and idiots who mistake luck for skill. He also has a very interesting methodology for evaluating success. His system is essentially to calculate the downside risk into the upside calculation. So if you make (for example) a game about ducks who go skiing, and it makes a return on investment of 500%, that does not really mean you have made a return of 500%. You need to calculate in the risk. if it was 95% likely to flop, then the decision was a stupid one, even though the upside is 5x, the downside is greater, so your decision was dumb, and you should be fired, despite making a fortune.

We never think that way. Mark zuckerberg is a genius because he turned down billions of dollars for his company and is now worth much more. How clever! But we hear about Zuck, not all those people who were offered billions, turned it down, and then ended up flipping burgers five years later. We automatically discount them. Nassim doesn’t.

Anyway… this is all background to me illustrating that somehow, weirdly, I am doing well on the stock market. Not amazingly dotcom-well, but better than keeping the money in the bank. Right now, depositing the money in a bank in the UK will get you *maybe* 2% if you lock it away. Inflation is around that anyway, so you gain nothing.

My shares, since 2013 have earned me an annualized profit of 9.16%. Pretty fucking good.

How am I doing that?

Leonardo Dicaprio in The Wolf Of Wall Street

Firstly, I try to minimize charges. Some people buy £1,000 of shares. Pointless. You probably pay £15 to deal, so £30 to buy and sell (plus stamp duty and spread). I never buy or sell less than £5k, preferably £10k, rendering the dealing charge pretty trivial. (I invest enough, and trade often enough to get a lower trading cost, which is pretty handy. This opens up smaller price-swings to being worthwhile to trade against.)

Secondly I only buy and sell companies making a profit. it’s not that I don’t think get big fast works, its that I’ll let you gamble on it, not me. Thirdly, I keep an eye on the spread between buy and sell, and factor it in. This means I buy more large companies than small (which have lower liquidity and higher spreads). Spreads can really kill your profits. Fourthly, I set stop losses (I never used to…and have finally learned my lesson). The minute I buy I set a stop loss order. No more watching shares slide down…and down…and down.

In terms of choosing shares I’m pretty experimental. I’ve bought and sold UK equities, foreign listed equities, Italian Government debt and Kazakhstan copper mining. I’ve bought commodity tracking ETFs, and also leveraged and short ones. I’ve bought corporate bonds, and done quite nicely from them. I’ve also invested in investment funds for a more conservative long term growth strategy. When it comes to equities, I look for profit, preferably consistently growing over several years, and a relatively low Price to Earnings ratio. I also like a decent dividend, especially if profits are growing and the dividend cover is high, making me think dividend growth is imminent and thus the price will rise soon.

This all sounds very sensible, but its actually pretty much nonsense because despite my return (annualized) being 9.16%, the FTSE100 (Uk market) has grown by 7.26% in that time anyway, meaning I am only just beating a simple market tracking fund!

Still… I love looking at numbers and spreadsheets and doing calculations and also taking risks and business decisions, so this is my World of Warcraft, the game I keep coming back to and trying to win at. At least my hobby doesn’t cost me money.

Yet.