The $1 trillion reason Elon Musk ended Tesla FSD purchases
Reuters
- Tesla shifts its full self-driving service to a subscription-only model.
- Tesla CEO Elon Musk said the company will end outright purchases of FSD in February.
- The lesson: You get what you measure.
"You get what you measure" is one of my favorite concepts in modern business. It means people and organizations tend to focus their behavior on whatever metrics get tracked and rewarded.
This even applies to tech billionaires.
This week, CEO Elon Musk said Tesla will make its FSD service subscription-only and remove the option to buy it outright.
On social media, Elon stans theorized and argued with Elon-haters over the reason for this change. As usual, the debate was devoid of nuance. Fans took this as another sign of the Tesla CEO's genius. Critics argued this proves FSD doesn't work and is doomed.
As usual, the truth lies elsewhere. Here's my theory, which my Business Insider colleague Tom Carter nodded at earlier.
I think Tesla is getting what it measures. Musk's new compensation package, approved by shareholders late last year, has several tough targets the company must hit before he gets $1 trillion.
According to Tesla's proxy filing, there are four product goals. Number 2 on the list is this: "10 Million Active FSD Subscriptions."
One way Tesla can reach this milestone more quickly is to remove the option to buy FSD outright. By mid-February, anyone considering this option will need to subscribe instead.
Why would Tesla's board make this a goal for Musk? Subscriptions are a steadier business. Investors prefer continuous income generated by subscription businesses, versus lumpier operations that rely on large, one-time purchases. A pure FSD subscription also gives Tesla more flexibility to change pricing in the future.
I think this is the main lesson, though: Never underestimate the power of financial incentives.
Tesla didn't respond to a request for comment about the FSD change.
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