Latest / Minds, Bodies, and Terawatts / SpaceX and Tesla Formed Committees to Weigh a $3.5 Trillion Merger. Musk Says It's a Good Idea, He's Not Allowed in the Room, and One 'Independent' Director Sits on Both Boards

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SpaceX and Tesla Formed Committees to Weigh a $3.5 Trillion Merger. Musk Says It's a Good Idea, He's Not Allowed in the Room, and One 'Independent' Director Sits on Both Boards · Minds, Bodies, and Terawatts

• 0:00
  [Host] This is Minds, Bodies, and Terawatts, the show where the biggest deal in history gets negotiated with the owner locked out of the room. NBC News reported yesterday that the boards of SpaceX and Tesla have each formed a special committee to decide whether the two companies should merge, and Elon Musk, who runs both, says he is not allowed in those meetings.
• 0:21
  [Guest] He said it on SpaceX's earnings call: he's a conflicted party, so he can't be in the discussions. He also said a merger is a good idea, that nothing is agreed, and that the whole thing is, his phrase, an odd Kabuki dance.
• 0:36
  [Host] We covered this in July, when Musk told Tesla's earnings call there was more and more overlap between the two companies and handed the merger question to his lawyers. So the lawyers came back with two committees, and how big is the thing they're judging?
• 0:51
  [Guest] Fortune puts the two companies together at about three and a half trillion dollars. Musk says the committees exist because shareholders asked for them.
• 1:00
  [Host] Who's on the committees?
• 1:01
  [Guest] Musk wouldn't name them, only that they're each board's independent directors, and one man, Ira Ehrenpreis, is on both boards.
• 1:08
  [Host] The same person counts as independent on both sides of the same deal?
• 1:12
  [Guest] Both companies say so. Electrek points out he chairs the Tesla committee whose written job includes weighing directors' conflicts of interest, and he isn't the only link, since Elon and his brother Kimbal sit on both boards too.
• 1:26
  [Host] So the Kabuki dance is two groups of people talking, and one of them might be talking to himself. What does he get from merging?
• 1:34
  [Guest] His reason on the call was the superintelligence singularity, the point where the AI outgrows the people building it. Tesla has the robots and the batteries, SpaceX has the models and the data centers, and they're building a chip plant together in Texas.
• 1:49
  [Host] Those are the three things this show is named for, minds, bodies and terawatts, under one roof. Which room is paying the rent?
• 1:57
  [Guest] The minds, as of this quarter. SpaceX's revenue more than doubled from a year ago, and for the first time the AI unit, seven and a half billion dollars of it, earned more than Starlink, the satellite internet business, mostly by renting computers to other AI companies.
• 2:13
  [Host] Renting to who?
• 2:14
  [Guest] NBC says the contracts are with Anthropic and Google, so if you pay for Claude or Gemini, some of that money is rent on Musk's warehouses in Memphis. Payload's write-up of the call says the company keeps those leases short on purpose, so it can charge more at renewal.
• 2:31
  [Host] Say I own some Tesla in a brokerage account. Do I get a say?
• 2:36
  [Guest] You get a vote, and it's heavier than usual. Musk himself called the Tesla side quite a high hurdle, because approval takes a majority of all shares outstanding, not just the ones that show up. If you own Tesla and don't vote, you voted no.
• 2:51
  [Host] And on the SpaceX side?
• 2:53
  [Guest] Fortune says Musk controls about eighty-two percent of the votes there, and a board is chosen by whoever holds the votes. The only real veto belongs to Tesla holders who bother to fill in a ballot.
• 3:05
  [Host] Except Electrek says Tesla is rolling out a button that votes retail shares the board's way automatically. Doesn't that fill in the ballot for them?
• 3:14
  [Guest] It can. Retail holders who opt in give a standing instruction to vote with the board at every meeting until they cancel it, and one of the two versions on offer covers mergers. Tesla sold it to regulators as a fix for low turnout, so the no that silence used to cast can now be switched to yes in advance.
• 3:35
  [Host] Why does he need to own both, though? Couldn't the two companies just keep signing contracts with each other?
• 3:41
  [Guest] Because owning the next link is cheaper than buying from it. Cheaper power from Tesla's batteries makes cheaper compute, cheaper compute makes better robots, and under one owner those savings compound instead of leaking out at every handoff.
• 3:54
  [Host] That sounds like good news for anyone who wants a cheaper robot.
• 3:58
  [Guest] It is, and that's the uncomfortable part. The same wiring that makes the machine efficient makes it a toll booth, since one owner collects the compounding surplus of every layer. The machine itself isn't the problem, the problem is who keeps what it throws off.
• 4:14
  [Host] The question used to be whether he'd really do it. What's the question now?
• 4:19
  [Guest] Whether anyone could say no. He's out of the room, the SpaceX board answers to his votes, one independent sits on both sides, and the Tesla holders who asked for the deal are being handed a button that says yes for them. Raising the rent isn't a worry anymore, it's the plan the company read out loud.
• 4:38
  [Host] So what's the alternative, break it up? Musk is out of the room, and the rest of us were never in it.
• 4:46
  [Guest] A breakup slows the very machine that makes robots and power cheap, so Patrick Deglon's answer keeps the plant and moves the ownership: a Transition Trust, a fund that holds the shares and pays the machine's surplus out to everyone instead of one owner. He even writes the scene with Tesla itself, the stock sitting in a trust and the Fremont factory still humming. For more on who owns the machinery of abundance and who collects its rent, head to unscarcity dot ai. The book is on Amazon, the audiobook is on Spotify. This has been Minds, Bodies, and Terawatts.