Talent monopolies

The talent monopoly investment thesis is that companies which can exclusively or near exclusively attract the top 0.1% of critical talent will win.

I've been a believer in Tesla since 2014 and have been asked hundreds of times to defend my bullish position. My justification has always been this:

1. Talent disproportionally matters in the car industry.

2. Tesla can hire a significant fraction of the most talented people in the functions that matter.

3. Given enough time, Tesla will create superior products - better factories, better robots, better batteries, better powertrains, better AI capabilities, etc.

Let's break down the first 2 points.

Talent matters in the industry. Talent matters more if you're working on difficult problems. Tesla, of course, is the exemplary example - battery design, chip design, ML, and the dozens of other technical problems they are tackling are hard.

There are industries where talent isn't sufficient – for example, it is near impossible to compete with an established social network because of existing network effects. But in the case of the auto industry, I didn't think in 2014 that the head start that competitors had were insurmountable. Counterintuitively, acquiring capital, building factories, and figuring out supply chains are easier problems than overcoming social network effects.

Tesla can hire a significant fraction of the most talented people in the industry. In 2015, Mark Fields (the CEO of Ford at the time) came to my college to give a talk about Ford and the car industry. I remember thinking that the guy was completely full of shit and lacked a compelling vision about the future of Ford. And my second thought was this:

If you're a person that a car company really wants to hire - an AI PhD grad at Stanford, a Staff engineer at Google, etc - why would you possibly join a company like Ford over Tesla?

My guess is that a tiny minority of the top 0.1% critical talent pool would choose Ford over Tesla (and of course the same is true for GM, Chrysler, etc.).

Predictions

I predict Anduril and Boom Supersonic will similarly absorb the majority of top talent and go on to do extraordinarily well. For Anduril, the best people interested in defense will choose Anduril over incumbents like Northrop Grumman and Raytheon. And for Boom, the best people interested in building planes will choose Boom over incumbents like Airbus and Boeing.