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Monday, September 7, 2020

We Believe in Tesla

Folks,

I hope this finds you all doing well. Today, I wanted to take a few moments to share a few thoughts about Tesla Inc (TSLA).


But first, in case you're wondering why Tesla merits a mention on a cyber security company's blog, the reason is simple -

While we undoubtedly are a cyber security company, (possibly one of the most innovative, influential and valuable ones,) our employees and leadership team care equally about the safety, well-being and sustainability of all of humanity's home, our unique planet Earth, and we believe that Tesla has made possible, and is leading a defining once in a hundred year transformation, i.e. a transition to sustainable energy.


Thus, as a company that cares as much about caring for our planet as it does about foundational cyber security, I suppose its okay for us to share a few thoughts concerning a company that could potentially make a real difference for our planet.



Climate Change

Over the last 100 years, human activity, business and economic interests have played a significant role in causing climate change, and our dependence on fossil fuels for transportation and energy have materially contributed to this change; over the past 50 years, global CO2 emissions have almost doubled, exceeding 40 gigatons in 2019, which is very concerning.

Climate change and the negative impact of human activity and trade on the environment are now reaching alarming levels, and unless we humans start taking responsibility for our actions and for protecting our environment, it may be too late.



Almost 50%

According to the Global Carbon Project, Carbon emissions resulting from transportation and electricity and heat production account for almost 50% of all Global Greenhouse Gas (GHG) emissions, and are expected to hit a record high in 2020.


Automobiles and auto companies have been around for over 100 years now, and yet, even today billions of people across the world rely on fossil-fuel burning Internal Combustion Engine (ICE) based automobiles to fulfill transportation needs.

While humans have made such remarkable progress over the last century, unfortunately when it comes to transportation and energy production, even 100 years after the first automobile rolled out, we are still vastly reliant on burning fossil-fuels, and this is not sustainable. We cannot and should continue down this path - we must endeavor to change this situation.

There are numerous traditional automobile companies in the world today, many with substantial financial resources at their disposal, and yet for decades now, they have primarily been focused on refining and building ICE based automobiles. If they wanted to, they could have taken a visionary lead to champion the transformation to and production of substantially more environment-friendly, clean and sustainable energy driven automobiles, yet none seem to have done so.

Then comes along a remarkable company, the very purpose of whose existence is "to accelerate the world's transition to sustainable energy!"  Now that folks, is so refreshing, inspiring and truly commendable, and that one company is Tesla!



Tesla - A Brief History


Tesla was founded in 2003, by Martin Eberhard and Marc Tarpenning, who it is believed were influenced to start the company after GM recalled all its EV1 electric cars and then destroyed them! Ian Wright joined a few months later, and Elon Musk, who contributed $ 6.5 Million of the initial (Series A) US $7.5M investment in 2004, became its Chairman.

In 2006, Musk co-led Tesla's third funding round ($ 40M), which included investments from Sergey Brin and Larry Page.

In 2010, Tesla Motors launched its initial public offering (IPO) on NASDAQ, and they were the first American car company to do so in over half a century, since the Ford Motor Company had its IPO in 1956!

That year, Tesla started the production of its flagship Tesla Model S, of which over 250,000 units of which have been sold worldwide, and which went on to win Automobile Magazine's "Car of the Year" 2012, Time Magazine's "Best 25 Inventions of the Year" 2012, Motor Trend "Car of the Year" 2013, Motor Trend "Ultimate Car of the Year" 2019 and other accolades.

In 2016, Tesla unveiled the Tesla Model 3, Tesla's third-generation car. Within a week of its unveiling, 325,000 Model 3s had been reserved, representing $ 14 Billion in sales. By July 2017, the number of Model 3 reservations crossed 500,000.

By October 2018, Tesla had already successfully delivered over 100,000 Model 3s and the Model 3 went on to top plug-in electric car sales in the U.S., making it the very first time that a plug-in car sold more than a 100,000 units in a single year.

In 2018 alone, Tesla's sales represented about 20% of all the all-electric cars worldwide.

In 2019, Tesla had delivered 367,500 all-electric cars, three times the number of cars it sold in 2017.

By 2020, Tesla's Model 3 was the amongst  the Top-10 (8th) best selling cars in Q1, 2020 in the United States.

By January 10, 2020, before the Covid 10 pandemic had brought the world to a proverbial halt, Tesla had already become the most valuable American automaker to ever exist, with a market capitalization of US $ 86 Billion.


In short, in less than two decades, under the leadership of Elon Musk, Tesla Motors went from concept to being the most valuable American automaker to ever exist. Well before its recent stock price increase, it was already worth $ 86 Billion.

As the CEO of a software company, I can tell you that it is no easy feat to take a hardware-software combination product from concept to trustworthy deployment in just a few years. I can tell you from personal experience that it takes years just to architect, develop, thoroughly test and make available innovative, disruptive, high-quality software, so to then do so on a hardware-software combination product (an electric vehicle), especially one involving human safety, is a remarkable feat.

(In weeks to follow, due to an increase in its stock-price, on July 01, 2020, it was worth over $ 200B, surpassing Toyota to become the world's most valuable automaker by market-cap; on August 31, 2020, it briefly crossed $ 450B in market-cap.)



Real, Disruptive Potential

In 2019 alone, Tesla generated over $ 24 Billion in revenue, and many believe that it may very well be just getting started.


Tesla has managed to accomplish in just a few years, what the entire automobile industry, and their substantial resources put together, have not been able to accomplish - successfully developing and delivering a high-quality, all-electric vehicle.

With a ramped-up production capacity, and technical enhancements based on years of development experience, Tesla could likely easily and substantially accelerate the delivery of millions of affordably-priced, high-quality all-electric vehicles, which could begin to replace millions of traditional, age-old, fossil-fuel powered automobiles, across the world.

Based on facts shared above, its clear that there is already incredible substance to and in Tesla, and that ahead of it lies a substantial amount of market-share that it seems poised to earn and establish a commanding lead in, for years to come.

The likely reason that Tesla crossed an $ 86 Billion valuation back in January 2020 alone may very well be that today Tesla already 1) possesses valuable, formidable and licensable intellectual property (IP) in and over a decade's lead in research and development (R&D) in all-electric vehicle production, 2) has a line-up of proven, high-quality, all-electric vehicles that it has already delivered close to half a million units of, 3) currently has the capability to produce hundreds of thousands of these vehicles today, and 4) is already working to substantially increase production capacity (setting up Giga factories), to meet demand not just in the U.S. but overseas, predominantly in China and the European Union, all likely made possible by laser-focused execution and an unwavering commitment to accelerate the world's transition to sustainable energy.

Most importantly, like us, it clearly has a decade's lead in and over the entire industry, and that is immensely valuable.

Based on our own unique experience, I cannot stress this enough - a thousand things can go wrong when you're trying to accomplish something as innovative and complicated as this, so to then be able to successfully develop and deliver a high-quality, world-class product undoubtedly puts you years ahead of anyone who may even want to try and compete with you.

Given its track record, its balance sheet, its ability to raise capital, and its recent capital raise, it shouldn't have difficulty in ramping-up its ability to produce over a million all-electric vehicles a year, and even if it only sold a million vehicles a year, (considering it sold almost 400K vehicles in 2019,) it could soon start generating over $ 50 Billion in annual revenues.

Speaking of which, in addition to the Model S and Model 3, Tesla also sells a Model X (SUV) and a Model Y, and it recently unveiled a Roadster, a Class 8 semi-trailer truck, and a Cyber Truck, so selling a million units a year seems reasonable.

For a company that already generated $ 24 Billion in revenues last year (400K vehicles sold), and that could generate over $ 50 billion (selling 1 million vehicles) in annual revenues in the next two/three/few years, and possibly even a $ 100 Billion in annual revenues within five years, its recent increase in valuation does not seem that unreasonable, especially considering that today there may be millions of investors, small and large alike, who may very likely want to get in on the opportunity to partake in the potentially massive disruptive potential that seems (to many) to lie ahead of Tesla.

From our perspective, we are not primarily interested in the "business" opportunity that lies ahead of it, or in its current or future market cap. We are primarily interested in Tesla's real potential impact on Earth, which I have described below.





Thoughts on Recent Valuation Concerns 

There appear to be concerns regarding Tesla's recent valuation, esp. after news of its not being included in the S&P 500.


In recent weeks, Tesla's valuation has risen from $ 86 Billion to almost $ 400 Billion, and unfortunately part of it seems to have to reportedly do with a certain entity trying to cause an increase in its share price for purely short-term financial gain.

That said, given Tesla's absolutely unique and enviable position, that is now in full spotlight, the cat's out of the bag, in that the entire world has come to learn more about Tesla, as well as come to learn of and appreciate the incredibly real and immense potential that likely lies ahead of it.

Consequently, in a world where investment opportunities that have the potential to grow considerably are far and few, plausibly, millions of investors, both big and small, would likely want to acquire Tesla stock, and when you have millions of investors wanting in on a fixed amount of outstanding shares, considering just how much potential growth lies ahead, the sheer demand for Tesla's shares could lead to what might seem like an unreasonable increase in its stock price.

Tesla clearly may have the opportunity to sell millions of all-electric vehicles in the near future and beyond, so it likely has a substantial amount of runway ahead of itself, so while the current share price may seem unreasonably high, given the sheer demand for it, and the substantial runway for appreciation ahead of it, it does not seem unreasonable for the stock price to be where it is today. In its case, not just technical fundamentals, the sheer demand for it is likely driving its price.

Some rightly point out that competition may be around the corner. That has been true for years now, and by all means it should be, because competition is healthy, but to date many have tried, and it appears none have succeeded, and again, I can tell you from my own experience in having led the development and delivery of one of the world's most innovative and valuable cyber security solutions, that sometimes (no amount of) money alone can compete with you.

There has also been some concern following Tesla's stock surprisingly not being included in the S&P 500 this quarter.

For those who may have been expecting to benefit from that inclusion, it may come as a disappointment, but for those who are focused on the potential that this incredible company has ahead of itself, inclusion in the S&P 500 isn't that big of a deal, because all Tesla has to do is to continue to do what it is doing, and if it does so, likely, from a continued increase in its stock price to the eventual inclusion in the S&P 500, most such things will come to it, automatically.

I am not a financial expert but it seems to me that Tesla has enough room for growth ahead that its shares do not need an S&P 500 inclusion as a catalyst to realize more gains. As is the case with most successful companies, their shares automatically increase in value as long as the company continues to successfully pursue its mission and fulfill its potential.


Finally, an article on CNBC this weekend, with the headline "Tesla could be the most dangerous stock on Wall Street," in which an investment researcher states that 'A more realistic valuation would be far lower than current levels. I think around a 10th of what it is probably appropriate if you look at, you know, kind of a reasonable level of profits" sounded uninformed.

One doesn't have to be a rocket scientist or an investment researcher to realize that considering the simple facts and reasons shared above, it is almost certain that Tesla's stock will likely NEVER go back to a 10th of where it is today. :-)

Look deeper and you'll find that this investment researcher actually first said this three weeks ago, on August 24rd, 2020 (when TSLA was around $ 1500, subsequent to which it rallied up to $ 2500, only to be back to $ 2100), yet it is being spotlighted in the news this weekend, appearing to be a scare-tactic to scare shareholders into selling Tesla's stock.

On a related, partly humorous note, I came across this comment recently - "Those who like Tesla want the shares to go up, those who really like Tesla want the shares to go down (just so, just enough and just until they themselves can get in.)" ;-)

I've also seen some chatter online suggesting that the S&P 500 may have snubbed Tesla this quarter just so some could get in at a lower price, conveniently before it is accepted into the S&P 500 next quarter. As to how true it is, who knows.

What I do know is that those of us who believe in the company and its potential (and there are many, ) do not worry about short-term fluctuations in its share price, and I can almost say with reasonable confidence that neither does Elon Musk.

Tesla very likely has tremendous opportunity ahead of itself, and millions of investors seem to want in on its stock.




Exemplary Leadership

History is witness that behind every great invention, breakthrough, progress or success story was a passionate individual, who believed in him/herself enough to commit oneself to one's cause for years, and stay laser-focused on accomplishing the objective, no matter how difficult and challenging the journey.


Thomas Edison, Henry Ford, Bill Gates and Steve Jobs are just a few of examples that immediately come to mind.

Elon Musk is one such passionate individual, and again, I speak from my own personal experience in building Paramount Defenses, when I tell you that what he has managed to almost accomplish at Tesla and SpaceX is absolutely remarkable.

In just a few years, he has made possible, that which the entire auto industry put together could not accomplish in half a century, because he had the passion to believe in it, the will to succeed and the grit to continue to persevere and succeed.

The world needs more leaders like Elon Musk, who embrace science, who take on truly big challenges in the interest of improving the lives of billions of people, and who make real and meaningful contributions to society, mankind and Earth.

Yes, he may occasionally tweet something eccentric, but Elon's human too. Speaking of tweeting, Elon Musk's intellect, decency, humility, brilliance, professional and business acumen, and integrity are far, far (and I mean exponentially) greater than some who claim that that they may be the greatest leaders in the world.

Under Elon Musk, Tesla is doing great; it seems to be making all the right decisions and is on track to achieve greatness.





A Simple Picture

Sometimes a simple picture can help us crystalize an idea or an opportunity, so allow me to paint a super, simple picture.


In my perspective, Tesla today is like Apple was a few years ago, just before or around the time it shipped the iPhone.

Like Apple, Tesla's products are essentially a tightly-integrated combination of hardware and software, and it develops them both (almost) itself, with virtually unrivaled attention to quality, detail and workmanship, ultimately resulting in a high-quality, trustworthy product that can compelling fulfill a vast global need, measurably and tangibly improving the lives of millions of people, and in the result creating substantial value for its customers, employees, partners and shareholders.

Apple didn't get where it did, overnight. It took Apple a few years to get there, and I think that Tesla today is at where Apple was a few years ago, i.e. it is on the cusp of greatness, and if it continues to do what its doing right, it too should get there in just a few years.

As for the competition, sure there will always be some who will try to compete, and they absolutely should, but/and in the end, it seems to me that the one with the deepest expertise, the most experience, passion, attention to detail, and the best software-and-hardware integration will ultimately prevail substantially and take the majority of market share, and it seems to me that in that regard, Tesla clearly already has a decade's lead.




Tesla's Real Impact

From our perspective, we are interested in the real value and impact that Tesla has the potential to deliver to mankind, which is to lead and commence, possibly for the first time ever in a hundred years, the macro transformation from the widespread use of fossil-fuel powered ICE based automobiles to all-electric automobiles.

Imagine if over the next few years, we could replace millions of fossil-fuel powered automobiles with zero tail emmision all-electric ones, and augment power in millions of homes with clean solar-energy - this is possible today, thanks to Tesla.


This one single transformation alone could have a substantial impact on our ability as mankind to substantially reduce CO2 and GHG emissions, and allow us to start taking care of the only place in the entire Universe that all of us call home.

In fact, as responsible global citizens, across the world, ideally we must all encourage widespread adoption of clean-energy solutions wherever possible, because this is after all our planet, and it is ours to destroy or protect.

Due to paucity of time, I did not have the opportunity to shed light on all that Tesla is doing in the solar, storage and grid spaces, but you'll get the drift - Tesla is driven to make a real, substantial and lasting difference as mankind goes about fulfilling its colossal energy and transportation needs, and by persevering and innovating to help make the shift to renewable sources, it truly has a unique opportunity to have a real, substantial and lasting impact on the environment, and thus on our planet.

In essence, not everything in life is just about money or business or profits. There's far more to life, and yet, it seems that for far too long, humans have selfishly exploited Earth and its abundant natural resources for financial gain, without much regard to its well-being, whether it be mass deforestation, or the pollution of our atmosphere and water bodies (rivers and oceans,) or the massive use of fossil fuels for over a hundred years to meet our ever-growing, insatiable energy needs.

For then to come along a remarkable company, the very purpose of whose existence is "to accelerate the world's transition to sustainable energy" is truly refreshing, praiseworthy, inspiring and commendable, and for it to have actually successfully accomplished the capability needed to begin to make that difference is praiseworthy, and that one company is Tesla!


Now if you'll excuse me, I need to head back to finish work on a version of Gold Finger that is about to democratize cyber security worldwide by opening the world's eyes on who actually has what privileged access (the Keys to the Kingdom) at 85% of the world's organizations.

Best wishes,
Sanjay.

Chairman and CEO,
Paramount Defenses


Full-disclosure: I am a Tesla shareholder because I believe in Tesla's mission and its real impact, and I penned this because I wanted to point out that there's a little more to Tesla than mere profits and money. Speaking of shareholders, over 50% of Tesla's stock is held by institutions, and of the rest of it, much of it by hard-working folks who believe in Tesla.

Standard Disclaimer: This is not financial advice. This is merely an individual's opinion. Please do not rely solely on this to make any financial decisions. You should obtain professional advice for any financial decisions you may wish to make.

Tuesday, September 1, 2020

Built to Last a Hundred Years

Folks,

I hope this finds you all doing well. Today, I just wanted to take a brief moment to share that when you bear a great onus, as we do, you owe it to the world to ensure that you're going to be around long enough to be able to serve the whole world.

Fourteen years ago, cognizant of that, when I founded Paramount Defenses, I made it a priority to ensure that we built the company in such a way that it could last not just a proverbial but a real century, and its my privilege to share that we can.

We can formidably withstand recessions, pandemics and natural disasters because we plan and operate like the military.


After all, in today's digital age, cyber is the new battleground, and capability and resiliency in cyber security are paramount to organizational, business and national security. We understand this unequivocally, and operate accordingly at all times.


Today we possess the wherewithal to be able to simultaneously fulfill the needs of, serve and empower thousands of business and government organizations across one hundred and ninety countries worldwide, without blinking an eye.

Above all, we care deeply, and strive to represent the best of the United States of America, and the best of humanity.

Sincerely,
Sanjay.
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