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

Its 2022. Why you should still buy or hold Tesla stock (TSLA)

I last blogged about this in June 2020. The stock was about $1,000. Its now $937. OMG what happened? was cliff wrong? Nope, there was a 5:1 stock split, and if I check the data, the stock has risen from $187 (adjusted pre split) on that day, to $937 today (in the middle of Ukraine war fears, a pandemic, supply chain and chip shortages, and other geopolitical headwinds no less…). So I feel like my last stock projection on this blog was pretty good. Probably puts me in the top 5% of stock analysts. I should go work at a hedge fund. Haha. No.

So anyway, partly for my own benefit in terms of clarifying my analysis, here is my updated view on tesla, as an investment as of January 2022.

We just had the earnings release last night, and now have full financials for 2021, so its a good time to evaluate the stock. Lets look at some numbers to compare 2021 to 2020:

  • Automotive revenue: Up 73% YoY
  • Profit margins: Up from 6.3% to 12.1% YoY
  • Earnings per share: Up 666% YoY
  • Supercharger Network: Up from 2,564 to 3,476 YoY.

All of this is pretty darned good, given that every other car company seems to be flatlining or declining. Still, Tesla only makes roughly a million cars a year (2021, but with a current run-rate of 1.2million, and guidance of 1.5million for this year), which is peanuts compared to Ford, General Motors, Toyota, so surely the valuation is crazy right?

Actually no.

What matters in terms of being an investor is profit, not car production. If you value Tesla purely as a car company, (and this would be short-sighted), then comparing #units is meaningless. What matters is profit, and tesla somehow have a profit margin of about 29% on each car, compared to 0-5% for most car companies. The average Tesla sells for about $50,000 with no middle-man. Tesla are easily and comfortably making $10k pure profit on every car they sell…

Not only that, but their FSD (full-self-driving) software is now $12,000 per car, with virtually zero marginal cost. Currently only 60,000 owners have the FSD beta, but many more have ordered autopilot, and as that gets rolled out across all countries, and the performance of it improves, the take-rate should climb.

So we are talking here about a company that sells every car it makes, with no advertising budget and no middlemen, a huge backlog of orders, banking $10,000 per car as profit, with the potential for single-click software upgrade of another $12,000 per car. Thats insane.

By comparison, its worth checking out General Motors, who sold 26 EVs in Q4 2021 versus Tesla’s 308,000. (yes 26). Also…every single EV GM has ever made got an urgent battery recall that has wiped out the profit (slim though it was anyway) from every car. To put it bluntly: General Motors have so far not made a single cent in profit on electric vehicles. Oh and GM’s vehicle sales were down 43% btw.

To take another comparison, we have Ford, who actually have a decent EV in the mach-e, but sales are no where close to the model 3 or model Y, and there is no potential software revenue or subscription revenue. Like all the other legacy car companies, Ford leave it up to you to work out where to charge your car on a roadtrip. Tesla not only have the most reliable and largest charging network, its integrated into the cars route-finding, oh and its owned by tesla. So they sell you the car, the autopilot software (as a subscription if you choose), plus potentially the insurance (5 states so far, but expanding rapidly now), and also the fuel.

Imagine a world where all technological development at Tesla mysteriously vanished, and they never innovated again, and cancelled all current in-development vehicles. In this nightmare scenario, you have a company growing its sales of its $55k cars at 50% a year, with $10-22,000 profit per car, decreasing costs per vehicle, an unrivalled charging network and an unrivalled self driving capability. Thats the absolute disaster, apocalyptic scenario.

But then consider the reality:

Tesla has not yet fully rolled out its new line of battery cells (4680s) which mean quicker, cheaper production using dry-battery-electrode systems which vastly reduce required production space. They are just starting to produce cars at Texas with these batteries in a structural pack, which reduces the car weight and cost, boosting profitability and efficiency.

Together with this, they are also switching to using enormous casting machines for the front and back of the model Y, again a huge reduction in required factory footprint (way fewer welding robots), plus higher precision construction (no accumulative weld precision errors), and a lighter, cheaper construction. Again… boosting profits and efficiency even more.

Those two innovations will eventually be rolled to the model 3 and Y at Berlin, Freemont and Shanghai. The only reason they don’t do it now is that the cars are selling so well, and demand is so high, that they cannot yet justify the switchover time to retool the lines. Meanwhile other car companies are shutting down factories and sending workers home.

So the model Y and 3 are about to get lighter, cheaper to make, better range, more profitable.

…and then, we have future products, such as the semi, cybertruck and roadster.

The most interesting statements on last nights earnings call have been totally ignored by the incredibly poorly informed financial press. There were two BIG pieces of news in there which have gone over people’s heads. Firstly: Tesla production is no longer battery constrained. Secondly, they are confident of growing 50% this year in their existing factories, ignoring new ones.

BTW Tesla have completed the initial build out of two massive factories, about to come on-line. They are the biggest and most efficient layouts yet, designed purely to build EVs, with no legacy nonsense. The dry-battery process means the factories output per square meter is way higher than people are expecting, Ditto with casting. Absolutely nobody seems to be prepared for the volume of EVs that will roll out from Texas and Berlin. Tesla are already getting good at efficient production. (Even in old, legacy factories).

…which brings us to batteries. Tesla is the only large car company that takes direct control over its battery manufacturing. They still partner with CATL and Panasonic and probably others too, because their demand for batteries is insatiable, but their new factories are being built with battery production facilities on site. While other car companies are left to the free market to beg for supplies from the big players, Tesla have had gigafactory Nevada running for years already.

In theory, being chip or battery constrained would be bad, because both stop you reaching targets, but frankly if the battery constraint has now faded, that leaves tesla open to start producing real quantities of its semi truck quite soon. The company seems to be going out of its way to avoid mentioning this truck, and quite happy to leave people guessing, but as it is clearly a vehicle that requires more batteries than it does chips, its likely that we will see serious production of the semi sooner rather than later.

People get upset with the CEO on twitter, and err…ok, if thats your investment thesis, you do you, but frankly having a CEO with 77 million twitter followers seems a great way to keep a zero advertising budget. People also fixate on Elons ambitious timelines and obsession with FSD and humanoid robots and doge coin. Thats fine… but its blinding so many people to the fact that tesla is an industrial giant thats accelerating and accelerating. You don’t have to listen to breathless youtubers with backwards baseball caps rapidly spewing hyperbolic bullshit to believe in this company, you can simply look at the financial statements, and try out the vehicles (and comparison shop a tesla versus any other EV).

All the data is right there, in the open. Its like a cash-vending machine that people are walking past and ignoring because Elon said a mean thing once. You do you, but I’ll keep enjoying the profits.

…oh, and by the way, I haven’t even mentioned Tesla energy, or the fact that ICE car bans are rolling out in the next decade, or any EV incentives that Biden may get passes. Those are all extra icing on the stupidly profitable cake. I’ll leave you with a vehicle production chart

(I should probably state this is not investment advice. FFS I am a game developer, not a regulated financial whatever. This is just my opinion. Do your own research. Just because the company has grown 1,500% since I suggested investing does not guarantee future results etc :D)

non-political environmentalism

I’m an enviornmentalist. No surprise, because I have solar panels and an electric car, and am even planning to build a solar farm. However I am not any of these things:

  • A Hippie
  • Into drugs
  • A vegan
  • An ‘outdoorsy’ person
  • LGBT
  • A pacifist
  • Into face painting and bongo drums / festivals
  • A Socialist

I have nothing against any of those traits. I have buddies with probably all of them. (Not sure about the bongos actually), and there is nothing negative about any of them. It just so happens that they are not me. But if you see news footage of environmental activists they pretty much are always someone with dreadlocks and bongo drums face-painted as an owl, talking about how sustainable living is incompatible with the ‘capitalist system’. These are the people who are chosen to be on TV. Why?

They make more interesting TV.

I’m a fairly boring looking stereotypical middle aged dude with rapidly thinning grey-ish hair and glasses. I’m an office-bound company director. If you HAD to guess by looking at me, you would assume I’m middle-management, married, 2 kids, semi detached house, and listens to dire straits on his commute in his Ford Mondeo. You would not assume I’m an environmentalist.

The reason I’m an environmentalist is practical. Climate change is fucking up the environment, and I happen to live in the environment. I’m also 51. if I was 81, maybe I wouldn’t care (I suspect I would actually…), but in PURE SELF INTEREST, I am aware that unless we sort this issue, my retirement years are fucked.

There are a bunch of myths about the environment that are believed by most people in my position. Such as:

I’m too old to worry about it. I’ll be dead before it gets bad.

Firstly…you don’t have kids? I hope not, because you are just letting them have a fucked up life instead of you. Seriously, do NOT bother including them in your will, or educating them. Who cares right? whats the point of a house and an education if we hit 2 degrees warming in their life. (clue: none, they will be dead before needing either).

Secondly… even if you do NOT have kids…. your timescales are off. We are not ‘waiting’ for climate change to start wrecking us. its started. Do you not even *watch* the news. Sure…a catastrophic freeze in TEXAS that bursts pipes, and wipes out the power grid for days at a time is just normal right? (no). The number and severity of extreme weather events is accelerating. Already. And its going to get way way worse before it gets better even if we take this seriously. Like I said, if you are under 80, yes, it will fuck up your life. Also, just the texas event cost $195billion. Just 1 year, One state.

Texas weather: Deadly winter storm sweeps Texas and US southern states -  BBC News

This is all just socialism in disguise.

My close buddies would laugh at me having to argue this. NO. There is NO link between left/right politics and environmentalism as a goal. Sure, a powerful state could ‘fix’ climate change with massive taxes and massive state investment. SO could a revenue-neutral carbon tax that shifts the tax base purely towards pollutants and away from income. One of the most effective companies doing something abouit climate change is the car company tesla. A capitalist company run by a billionaire, and occasional worlds richest man. Elon isnt doing this because he is a communist.

True, a lot of left-wingers are also environmentalists. But there is NOTHING incompatible about capitalism and fixing climate change. It should be seen as a huge business and economic shift that is an opportunity for canny investors to make a fortune. My Tesla shares are up 800%. Thats not socialism.

Elon Musk: 620-Mile Tesla Roadster Will Be 'Part Rocket' & Can Fly 'A  Little'

Its an excuse for big government to control us.

Doesn’t have to be. We already have most of the tools in government to take drastic action. fossil-fuel cars are taxed (at different rates), gasoline is taxed, electricity consumption is taxed. Car efficiency is regulated. Major changes to the way we approach climate change can happen literally by changing some numbers in a database by the government. More drastic measures like a carbon tax would involve new laws/tax policy, but that can be a headache for power-plant operators and oil refineries. The government does not have to VAGUELY get more involved in anybodies life to fix this issue.

It will not affect my country / be good for my country

No. It doesn’t matter where you live, 2 degrees of warming is BAD news for the human race. It sounds like its trivial, whats 2 degrees right? The reason for it is simple, but not talked about, and its nothing top do with sea-level rise (although yup, your beach-side house is FUCKED btw). Its Food production. Food is VERY sensitive both to temperature, and to extreme weather events. Crop yields are vastly affected by climate change. And extreme weather events are generally infrequent enough that we tend to get a decent harvest almost every year. As that ramps up, food yields go down, combined with temperature change to yields and…our food production is going to start to collapse while our population continues to rise.

Crop failure and bankruptcy threaten farmers as drought grips Europe |  Drought | The Guardian

Honestly, even if food prices double, I’m fine.

Great news for you! But I hope you enjoy the idea of living in a gated community with armed guards then, because the fact that YOU can afford food does not mean your neighbors can. Also…even if they can, their disposable income has now collapsed, because food takes up so much of it. That basically collapses the economy. Not your economy, the global economy. Your retirement fund is now worth zero. How are you paying for that food now? Oh and… when entire regions and countries become useless for food production…people leave. They are desperate, hungry, poor and need somewhere else to live. If people think the last decade or so of problems with migration into Europe is bad, its going to get way way worse unless we do something.

Conclusion

You will not be ‘ok’ if we hit bad levels of climate change, and the current forecasts are catastrophic. You might not be ‘interested’ in it (you really think I’m interested in climatology?), you might think ‘its no big deal’ you might think ‘its just for people like X’, but I urge you to rethink all that. Like anything in 2021, Climate Change has been shoehorned into the culture wars and social justice wars. PICK YOUR SIDE! Except actually you don’t have to. People on twitter shout very loudly that sustainability is incompatible with capitalism! Just because its in a hashtag doesn’t make it true. No more than an Ayn Rand advocate saying freedom is impossible without capitalism. Do not let other people decide that environmentalism is ‘not for you’. At its heart, its actually just practical self-interest.

Why Positech Games has no discord server

Yes its true. Prepare to have your minds explode. Positech Games is not on discord. We have no discord server/channel. None. There may be people discussing our games on discord in unofficial servers, we do not no, or to be honest…care. Why?

Its because there are just TOO MANY different places on social media that an indie game developer needs to keep track of. When an indie dev has 8 employees and one of them is the dedicated marketing/social media/PR person, perhaps, maybe, just perhaps, there is some value in having a discord server where that person can be constantly replying to people and talking about the game… but even then I seriously doubt the ROI on that.

Right now, our social media and online presence consists of the following list:

  • My personal (cliffski) twitter account
  • reddits for Democracy3 and 4, also some older games which we never check now.
  • facebook pages for virtually every major game we made. (Only Democracy really checked now)
  • Our amazing forums, hosted by discourse, but paid for on a business subscription by us.
  • This blog
  • The widely publicized email addresses for me, which means a LOT of spam.
  • A keymailer account, that we barely check now (none of the key-requesters actually cover the game)
  • The steam forums
  • Steam curator connect
  • My youtube channel (effectively positech games youtube channel)

Thats ENOUGH. In fact thats WAY too much. Some of that gets constant attention (my forums, youtube, twitter), some less so (facebook, reddit, steam stuff), some is all but abandoned (keymailer, curator connect).

My feeling is that if people really want to find you, then they will. I am a member of a tesla forum, but also follow a spacex reddit. Why the difference? well all the tesla chat seems to be on forums, all the spacex chat seems to be on reddit. I am not (and I suspect few people are) so massively invested in a single social media platform that I only communicate with people that one way.

To put this another way, I suspect if we just closed down our democracy3 and democracy 4 reddits, and the facebook pages, a fair chunk of those users would eventually find their way to our forums or this blog, or my twitter account. I decide NOT to do that, because I really do not want to lose *any* existing followers/users, but the idea of possibly adding another split in the ‘fanbase’ to yet another format is not appealing.

When you think about it, I could also be trying to promote my games through instagram and tiktok and twitch too. Why not?

Its worth thinking about how many different forums you can possibly cope with communicating with your players when you have to also remember that you *need to also work on making the actual game too*. How much bandwidth do you really have? enough for 5 social media channels? 10? 20? Do not kid yourself that you can cope with all of them, as the number is only going to go up in the future, you need to pick your battles.

Plus…sometimes an entire social media platform turns evil (remember Facebook suddenly deciding to charge you money to message your own page followers? or that time they they totally banned me from ever advertising on Facebook because…I dunno, I make games about politics? (yes really)). And even when they do not turn evil, then can turn stupid, like completely deleting the entire online presence of the terraria devs for no reason and with no warning (yes really), or maybe just realizing they suck and giving up (remember google plus!).

I still maintain the best possible platform for an indie developer to communicate with players is their own forum. It can be hosted elsewhere, but NOT for free (they *will* either go bust or change the terms later…). You have NO SAY what the rules or membership of the steam forums are like. You have no real control or ownership of your Facebook or reddit pages, or your YouTube channel. It can all disappear at the whim of someone in silicon valley.

And so… discord, a company with no real business model whatsoever, and entirely funded by venture capitalists who will want to monetize (track/exploit) all the users soon… forgive me if I don’t get all excited about leaping into the setting up, promoting and running of a discord server. There are plenty of other more productive uses of my time.

The emotional satisfaction of physical creation

Long ago, before netflix, twitch, steam, social media, broadband or even Tony Blair, I worked in a boatyard nailing boats together. They were smallish rowing boats. This was hard work, as was building wooden bridges. here is a bridge I helped build.

The Chinese bridge - Picture of Painshill, Cobham - Tripadvisor

And here is a boat I probably helped restore/build etc.

Thames Camping Skiff Hire

To be honest, it was stupidly hard work (often involving lying on the floor while holding a lead weight above your head as someone hammers it.), and not exactly well paid or with great prospects. However, at the end of the day, something got built. You could point at it, and say ‘we made that’, and there was great satisfaction in that.

I definitely don’t miss the physical work, although I miss having very strong forearms and being super slim despite eating like a horse.

What I do miss, to an extent, is the fact that however hard I work, there is nothing *tangible* to show for it. I can point to stuff I bought with the money I made form doing the work, but thats not the same. The work I do rearranges some bits on a hard drive, which then get copied and put on hard drives around the world, but there is nothing to really SEE. I cannot grab a hold of my work and lift it up to the sky in that dramatic fashion people do with their first child in classic TV series ‘roots’.

sidebar: Did you know who played kunta kinte in roots? Here he is from the series:

Here he is older. Yes really. Amazeballs…

Israeli scientists develop prototype of Geordi's Star Trek VISOR

anyway…

I spent a lot of time reading about car manufacturing when I made my earlier strategy game, Production Line, about car factories. I also follow the progress of the electric car company Tesla, a lot, and have got sucked into reading about lithium ion battery manufacture as a result. I am now reading a book on solar farm financing, and solar panel manufacture, because thats the kind of person I am. And my conclusion from all this is…

Manufacturing is AWESOME.

We have gone through a big shift over my lifetime from a world where manufacturing was a big deal, and something people were excited to work in (my father worked in a factory, making various steel things), to a world where factory work is considered menial, and low paid and boring, and the smart people worked in offices…typing.

Now I know that there is more to computer programming than typing, and more to law and marketing than typing…but it still lacks that gritty sense of achievement you get from working somewhere where stuff is MADE.

Ultimately the real progress in society is not being made with an app. Uber is fucking useless unless someone makes cars. Deliveroo is useless unless someone is cooking pizzas. Facebook and Instagram are useless unless someone is making phones. Meanwhile, we all have to eat, need somewhere to live, need decent clothes and shoes, and a decent TV and we need power and heating…

I feel like society has lost respect for the admirable job of MAKING stuff. Real PHYSICAL stuff. We sit in our airconditioned offices looking down our noses at people who have to sweat for a living, or work somewhere with physical goods, without which our lives would be hellish. The scales have tipped too far and they need to tip back.

Besides which…manufacturing has moved on. Its not people working a lathe anymore. Here is a modern battery factory:

Someone had to design that, build it, maintain it, optimize it. This is AWESEOME. I would love to do this. I’m too old to re-train, but if a teenager asked me what industry they should aim for, I would be hard torn between tech (AI/programming) and manufacturing/logistics. I’m going to stick at programming for the rest of my working life, but I’m trying to get involved in another industry, one that actually makes things. I’m sick of just ‘investing’ in something built by someone else. Making things that other people want to invest in is the REAL hard bit, and I suspect the rewarding bit.

The simple pleasure of innocent drama

My wife has now firmly got me hooked on Korean drama series, or ‘kdramas‘ as we now call them apparently. On an average day, I’ll likely watch 2 or 3 TV shows, and almost certainly one of them will be Schitts Creek, Star Trek:TNG or some Korean drama. I think a lot about the appeal of this show and why I choose them, and not any of the more popular ‘trending’ TV right now.

Frankly, I think its a 2020 thing, or more a ‘the state of the world’ thing. Right now, a LOT of stuff is worrying. fake news, social media hell, the culture wars, the infighting in the USA, the looming catastrophic hell of climate change, coronavirus, and so on. There is, in other words, a lot of ‘real life drama’ and ‘real life misery’ in the world. We are surrounded by it, and can barely escape from it, thanks to twitter, smartphones and media everywhere.

real world stress

I think its no surprise then, that for those of us who feel bombarded by such negativity (especially if you HAVE to keep vaguely in-tune with it due to making a contemporary political strategy game), and who have problems staying calm at the best of times, there is some appeal in the idea of escapist TV drama.

But the problem is, too much of modern TV is NOT escapist. Or its escapism into hell, or conflict, or fear, misery, death, suicide and culture wars. In other words, writers are trying to AMPLIFY the current anxiety in the world as entertainment, instead of offering a much needed temporary escape from it. Its very rare these days to find a TV show that does not have a bunch of content warnings about ‘suicide references, addiction, injury detail, drugs, explicit sex’ and so on.

I started watching an HBO show (industry) about city traders. Kind of my thing, but in 2 episodes there has been one suicide, lots of abuse, and lots of frankly stupidly out of place and gratuitous sex and nudity. Thats fine, I’m not a moral crusader but…really? is it so necessary. I know what naked people look like, I know what sex is. You can easily imply that people had sex without us watching it. Its frankly not shocking, or edgy or artistic. Its just kinda tragic. The same is true in Game Of Thrones, or any other ‘gritty’ HBO/Netflix series that thinks its essential to have violence and sex in every drama.

5 times Jung Hyuk and Se Ri makes my heart skipped a beat in “Crash Landing  on You” – Ahgasewatchtv
This is intimacy, Korean style

For some reason, you get none of that in kdramas. Maybe Koreans are prudish, or the censors are. Who knows, but also who cares. I’ve got REALLY into a bunch of Korean dramas that are apparently romances, but the main characters don’t even kiss for fourteen episodes. One is about the military, but there has been so far, 2 scenes out of 10 episodes where someone fired a gun. One person has died. Just one. It was not explicit at all. And yet weirdly, it was still exciting and dramatic.

If HBO or Netflix made star trek:TNG now, then there would be multiple explicit scenes where we saw Picard and crusher having athletic zero-G sex. If Worf had to fight someone with his bat-leth there would be blood and limbs scattered all over the place. We would all be tired by now of seeing riker stark naked. Wesley would be snorting cocaine in every other scene…

And it wouldnt be any better a drama series at all.

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This is the ideal male body. You may not like it but this is what peak performance looks like.

KDramas, and older shows like TNG, or even family-rated shows like schitts creek, show that you don’t have to bombard people with sex and violence to entertain them. We live in an age where even the US president is accused of paying off porn-stars, where politicians are often caught taking hard drugs, where the media is packed with the salacious details of celebrities addictions and sex lives and so on. There is enough of this in our lives.

Its still ok for entertainment to be FUN. It doesn’t have to do ANYTHING else than entertain. You don’t have to be making statements about social-justice in every casting decision, and every scene. You can cast people of color in a role without them having to shoehorn in a race-relations plotline (even in space!). We are fine with just enjoying some escapism, munching some popcorn and watching fun things happens and hear people speaking witty dialog. You can have conflict without spraying blood and intestines at the viewer. People can fall for each other without us watching every sexual position in 4K.

Give me more kdramas and less ‘gritty, brutal re-imaginings’. if I want gritty and brutal I’ll watch CNN.