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.


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.

Liberalism/Socialism tweaks

I’ve been looking at the political compass part of Democracy 4 while running the first few decent play-tests and it was clear that the compass was not accurately reflecting my policy choices. Some further digging suggested that the problem was that not enough of the choices the player made were affecting the underlying values for global ‘liberalism’ and ‘socialism’.

In the game, every player has a (more or less) random innate level of socialism or liberalism (there are a few voter group and country based adjusters). Initially, this determines the extent to which they identify as socialists/capitalists and liberals/conservatives. The game also models all the effects on the global values of socialism and liberalism and pre-calculates how this will have adjusted voters opinions before the game starts.

I also take those global values to indicate where the country currently lies on the political compass:

It was clear that I had missed out those effects from a whole ton of policies and simulation values, where I might be upsetting liberals, but that didn’t actually make them less liberal. Obviously these are different things.

Some policies in the game (or situations etc…) anger people with a certain view, which is often instantaneous, and some actually change peoples view over time. For example, if you legalize cannabis, then this is likely to upset conservatives and make liberals happy, almost immediately as the change in policy hits the news cycles. The longer term effect though, is likely to be increased liberalism, and people get used to the idea that cannabis is legal. This is a shift in nationwide attitudes.

This has happened a lot in my lifetime. Attitudes in the UK towards homosexuality have definitely changed dramatically since I was a teenager. The idea that a CONSERVATIVE government would be the one to legalize gay marriage would have been ridiculous in the 1980s, for example. Also there have been big changes in the attitudes towards a free press and deference to politicians. (Free press in a driver of liberalism in the game). By the way, gay marriage and also gender transition are policies in the game.

In many ways, what I’m trying to model here is shifts in the overton window, which is a concept that illustrates how political values shift over time:

The way this works in our simulation is that we are effectively moving voters around on the political compass as you change policies (in fact-oh-my-god as I type this I realize I could add a mode that plots them all on there…). The actual policies you implement have to stay within that virtual overton window in which the majority of the voters are contained. In fact, I can plot it as a sort of flexible overton splat :D

I think the last two days of fiddling with this stuff have gone well, and the game is more balanced, more accurate and more fun as a result. I wrote some extra debug mode code that let me dump out a nice list of all of the potential inputs to these values to a spreadsheet so I could check everything looked as it should. Doubtless there will be further tweaks over time, in response to player feedback, but its a step in the right direction.

Anyway, thats enough blogging, I’m going to go add tiny voter dots to the political compass :D

Making a game with real-world issues

My current project is Democracy 4, a game about politics, at a time when politics is…explosive to put it mildly. Right now we are in the middle of a global pandemic, there are riots going on over America, and countries all over the world have problems with fake news, extremism, extreme nationalism, gun violence and many other problems.

Democracy 4 obviously has to reflect the real world. Its a game about politics, so you cant pretend some issues do not exist because they are awkward. In fact, we are hopefully covering all political issues regardless how divisive they may be. Our game lets you outlaw homosexuality, or lets you allow gender-transition on demand. You can outlaw guns or let everyone have machine-guns. You can close all the airports, you can ban abortion, you can legalize prostitution, heroin and much more.

However, one of the topic in the game that I worry about right now, due to the current news cycle is this one:

Race riots are not new to Democracy 4, they were in D3 too, but it feels weird to experience them in-game at the same time as they are actually happening. It reminds me just how *delicate* such topics are. What are the causes of race riots? Not just in the US, or where I live in the UK, but over the whole range of countries that we hope to cover. This is hard to nail down to a few equations in a spreadsheet… Currently the main causes of them are Racial Tension, Unemployment and Violent Crime. Racial Tension itself has a number of causes, but its linked to high levels of immigration. You can mitigate it with a high standard of living, race discrimination acts and a ‘stamp out racism’ week, which is a subtle bit of social engineering.

I’m trying really hard to make a politics game, not a POLITICAL game. There is no magical code buried inside democracy 4 that tries to arrange things to preach a subtle (or not subtle) ‘racism is bad’ message. As an individual, obviously I have my own views, but as I read more and more online political discussion I find it clear that preaching never convinces anybody of anything.

Democracy 4 is supposed to be a fairly accurate simulation. In it, I’m trying to guess what the causes of events are, and the outcomes and then just represent them. You can see that race riots hit GDP, and upset everyone. They should maybe arguably affect tourism too. They will also upset conservatives, who presumably worry that their houses may get looted in riots?

In general I am a believer that logic dictates treating humans fairly and equally, and that if we follow evidence, data and science, we tend to make good decisions. That includes following maths and economics. In Democracy 4, the player will learn that race riots severely affect their re-election chances, hurt the economy, and can be expensive in terms of the policies required to get them under control (rubber bullets, tear gas, water cannons etc). Someone who wants to *win* at Democracy 4 (constant election wins) will learn not to let any one political group get too angry, and that includes ethnic minorities. Its just simple good politics in the real world too.

I think this is self evident to anybody who plays strategy games. There is always a consequence to every decision, and its good to think long term. If you are playing purely as a capitalist, you might see the need for some seemingly socialist policies just to prevent the social-breakdown and expensive consequences of vast inequality. Sure, you can pay people poverty wages, but if that means you need twice the police force to keep you safe as a result, is it really a net win?

I think its also a powerful argument in environmentalism. Sure, you can hate those hippies who hug trees and bang-on about carbon emissions, but have you SEEN the economic costs of extreme temperatures and food riots/wars/sea level rise that are the consequence of inaction? And for that matter have you seen how cheap electric cars are to run?

There is a persistent myth that Henry ford paid his workers a higher than normal salary so they could afford to buy the cars he made. Thats bullshit. I’ve read several books on ford. They were forced to hugely raise wages due to incredibly high staff turnover, but nevertheless its an interesting myth, that makes a lot of sense. Inequality has an ultimate cost, not just in security, but in terms of its negative impact on the economy.

This probably all sounds unfeeling and harsh, but I think of it as pragmatic. I believe in equal pay for women, equality for all races, and fair pay for workers *on principle*, but the most powerful argument is an argument of self interest, and the hardest argument is the ‘you should do the right thing’. There are a LOT of gun-toting, trump-supporting, right wing electric car owners now, because they finally made fast, sexy, affordable ones that people wanted, Appealing to people to buy them out of guilt never worked.

Nobody sums up this school of thought as well as quark from star trek deep space nine when he constructs an argument for ferengi women being allowed to wear clothes. He argues that if they wear clothes they will have pockets, and if they have pockets they will want to put stuff in them, so they will buy more stuff and stimulate the ferengi economy.

Its comedy, but also true.

I write all this to make a point about the style of Democracy 4 and its intentions. We cover a lot of dark, serious topics, and we do so without comment. There is no flashing symbol reminding you that RACIAL TENSION IS BAD. Adding it would be redundant, and change nobody’s opinion. Decisions in the game have consequences, and learning what those consequences are without further comment, or preaching is, I think, the best way to cover issues like this.